UPDATE 1-Dynegy quarterly loss narrows, trims forecast

(Recasts, adds forecast, earnings details, share price)

NEW YORK, Feb 27 (Reuters) - Independent power producer Dynegy Inc (DYN.N) posted a fourth-quarter loss on Wednesday, falling short of Wall Street estimates, and trimmed its earnings forecast for 2008.

The quarterly net loss narrowed to $46 million, or 6 cents per share, from $58 million, or 12 cents per share, a year earlier.

The loss from continuing operations was 8 cents per share, missing analysts' average forecast for a profit of 2 cents per share.

Revenue in the quarter rose to $724 million from $343 million a year earlier, boosted by the addition of LS Power's more than 8,000 megawatts of power generation, which Dynegy bought for $2 billion in 2007.

Interest expense rose to $116 million from $72 million a year earlier, while income taxes cost it $56 million versus a $2 million gain.

The Houston-based company cut its forecast for 2008 earnings before interest, taxes, depreciation and amortization to between $1.0 billion and $1.1 billion. Its previous estimate was $1.1 billion to $1.2 billion.

Dynegy also cut its free cash flow forecast for 2008 to $100 million to $200 million from a previous estimate of $250 million to $350 million. The reduction is due in part to a bookkeeping change and expected increases in spending on environmental upgrades.

Dynegy shares, which had gained more than 11 percent this year through Tuesday's close, were down 3.6 percent to $7.90 in pre-market trading. (Reporting by Matt Daily and Euan Rocha; Editing by Lisa Von Ahn and John Wallace)