UPDATE 3-Spain's Gas Natural raises Q1 profit 10 pct

(Adds CEO quotes, updates shares)

By Joe Ortiz

MADRID, May 9 (Reuters) - Spanish energy company Gas Natural (GAS.MC) said on Friday first-quarter net profit rose 10.2 percent to 335.8 million euros ($515 million), matching market forecasts and boosted by its domestic electricity business.

The company also repeated it is not looking at any takeover proposals despite widespread market rumours to the contrary.

"It's possible that an opportunity will present itself and in that case the company will study it," Chief Executive Rafael Villaseca told analysts in a conference call. "Right now, we are not considering any corporate deal."

The shares opened lower after the results and by 0945 GMT had extended losses to 2.8 percent at 36.92 euros, against a 1.3 percent fall in the DJ Stoxx European utilities index .SX6P.

Gas Natural's earnings before interest, tax, depreciation and amortisation (EBITDA) were slightly ahead of expectations, rising 15.4 percent to 725.9 million euros.

A Reuters poll of seven analysts had forecast, on average, a net profit of 333.7 million euros and EBITDA of 712.7 million.

Profits benefited from a continued sharp improvement in its Spanish electricity business where core profit rose 124 percent to 137.1 million euros, Gas Natural said.

Electricity generated 23.4 percent of the company's core profit, helped by the purchase of power stations in Mexico which came into the results for the first time.

This more than offset lower growth in regulated gas distribution in Spain and Latin America, although in Spain, 89 percent of gas sales are now in the liberalised market.

"We think these good results, as expected, could act as a catalyst for the shares on top of the speculative attraction they have," said Banesto Bolsa analyst Antonio Cruz in a note to clients, adding the shares could have upside potential of 24 percent on fundamentals. Analysts are focusing more on Gas Natural's core business now merger speculation linking it with Spain's biggest power company, Iberdrola (IBE.MC), has cooled.

Such a deal was seen as a way of frustrating Electricite de France (EDF.PA), also seen keen on Iberdrola.

EDF admitted holding talks with construction and services group ACS (ACS.MC) which controls some 13 percent of Iberdrola.

Gas Natural shares have fallen 5.6 percent in the year to date compared to a 12.5 percent fall for the DJ Stoxx European utilities index.

The shares trade on a price to 2008 estimated earnings multiple of about 16.5 times, against 15.1 times for the index.