UPDATE 4-RWE names Peter Terium as chief executive

* Terium to become CEO on July 1, 2012

* Schmitz to be deputy CEO

* To raise 2.5 bln eur via capital hike, treasury shares sale

* RWE shares down 2.4 percent, below sector (Recasts with RWE comments, adds planned capital measures)

By Tom Kaeckenhoff and Matthias Inverardi

DUESSELDORF, Germany, Aug 8 (Reuters) - RWE named Peter Terium as chief executive from next year and said it aimed to raise 2.5 billion euros ($3.5 billion) by increasing its capital and selling treasury shares.

Terium will replace Juergen Grossmann from July 1, 2012, taking over a lumbering ship laden with more than 27 billion euros of debt and an uncertain future strategy.

RWE's supervisory board also named Rolf Martin Schmitz, another top candidate for the No.1 job, as deputy CEO, ending an internal row over who should lead the company.

Terium, a 47-year-old Dutchman, has been with RWE since 2003 and has been CEO of Essent since he led RWE's acquisition of the Dutch utility two years ago.

In preparation for his new job, he will move to RWE's management board and become deputy CEO from Sept. 1.

Taking the helm at a time of turmoil in the German energy industry, Grossmann's successor will face the unenviable task of setting a new course for overstretched RWE.

The German government permanently shut eight nuclear power plants, spurred by the Fukushima nuclear crisis in Japan, and decided to phase out nuclear power by 2022.

Analysts say RWE could be one of the hardest hit by Germany's nuclear exit because it is less active in other markets than main rival E.ON, and relies heavily on nuclear and coal-fired power generation.

RWE is due to publish first-half financial results on Thursday, a day after bigger rival E.ON (EONGn.DE). According to a Reuters poll, RWE is expected to report a 24-percent decline in core operating profit.

Smaller peers EnBW and Vattenfall have published financial results that were hit by writedowns and provisions related to the nuclear exit.

BIG JOB

RWE is relatively weak in gas and renewable production, but investing in expansion there would require a lot of cash.

The company has been hit by credit rating downgrades and has said a capital increase, a merger with a peer and more divestments were among its options to avert further cuts.

It said on Monday it would issue some capital and sell treasury shares to raise money, adding the volume and price of its measures would depend on the market environment.

Shares of RWE slid after it announced the capital measures, falling 2.4 percent to 31.72 euros by 1329 GMT, underperforming the STOXX Europe 600 Utilities index , which was down 0.9 percent.

Analysts estimate it needs to raise about 4 billion euros in addition to an 8 billion euro disposal programme it had already announced.

Terium will also have to fix RWE's image after Grossmann, called "nuclear Rambo" by some critics, stubbornly fought the German government's push for a nuclear exit.

He argued a quick shutdown would cost energy-intensive industry dearly and could threaten Germany's industrial base, even when he was hit with harsh criticism at the company's annual shareholders' meeting in April.

RWE said on Monday its supervisory board and Grossmann had amicably agreed he will leave the board on June 30, 2012, three months before his contract is due to end.

($1 = 0.705 Euros)

(Writing by Maria Sheahan; Editing by David Hulmes)