UPDATE 1-NZ's Fonterra to explore alternative capital options

(Adds details, background)

WELLINGTON, April 3 (Reuters) - New Zealand dairy firm Fonterra Co-operative Group Ltd said on Thursday it would put alternative restructuring options to members, after a proposed NZ$2 billion ($1.6 billion) partial float ran into opposition. Fonterra, the world's largest dairy exporter and generator of around one-fifth of New Zealand's exports and 7 percent of gross domestic product, needs to address the question of its structure or risk losing out on growth opportunities, chairman Henry van der Heyden said. "Going forward, the board's job is to put other options in front of shareholders along with the associated trade-offs," van der Heyden said in speech notes to a dairy industry conference.

He did not give details of what the other options may be.

In February, Fonterra postponed a vote scheduled for May on a plan to list 20 percent of the company, citing concern from some of its 11,000 farmer shareholders. It has not said when or if the vote will be held.

Fonterra had previously given alternatives to the partial float, including a full or partial sale of its consumer businesses, creating a class of non-voting or "B" shares, and issuing hybrid debt through earnings-linked securities.

However it had discarded those options. It said that its preferred second option, the sale of the consumer businesses, would destroy value by splitting the group up.

Any change to its capital structure needs the support of at least 75 percent of shareholders.

Van der Heyden told the conference Fonterra still needed to raise capital to pursue growth opportunities and to ensure it can fight off larger competitors.

Fonterra competes on world markets against food conglomerates such as Nestle (NESN.VX), Kraft Foods Inc (KFT.N) and Danone (DANO.PA).

The company is also concerned about the large number of farmers near retirement age, which could cause a run on its balance sheet if they all seek to cash in their shares.

New Zealand dairy farmers currently own shares in the co-operative based on their milk production, although incomes are based on world prices and the sale of value added products.

Fonterra, formed in 2001 from the merger of two large dairy co-operatives and the industry marketing body, has forecast a record payout of NZ$7.00 a kilogram of milk solid for the 2007/08 season. (NZ$1=$1.27) (Reporting by Adrian Bathgate)