* Q1 EBITDA 3.04 bln euros vs 3.02 bln forecast in Rtrs poll
* Sees boost from gas price deal with Gazprom in mid-2013
* Keeps 2013 outlook for about 9 bln euros of EBITDA
* Says does not expect to sell DEA unit this year (Adds analyst, details on negotiations with Gazprom, CO2)
By Christoph Steitz and Vera Eckert
FRANKFURT, May 15 (Reuters) - Reduced losses at its gas trading business helped RWE to post a smaller-than-expected fall in quarterly earnings and Germany's No.2 utility predicted "significant" benefits from a new deal with main supplier Gazprom by mid-year.
The group, Europe's biggest polluter thanks to its extensive use of lignite, or brown coal, said quarterly earnings before interest, tax, depreciation and amortisation (EBITDA) fell 3 percent to 3.04 billion euros ($3.95 billion), hit by sluggish energy prices and falling margins in power generation.
That was just ahead of analysts' average forecast of 3.02 billion euros, and RWE confirmed its expectation for EBITDA of about 9 billion euros this year.
Gas contracts have been a major problem for European utilities which are being squeezed as they buy gas under long-term deals concluded with companies such as Gazprom and Statoil when prices were firmer, while having to sell it to customers at lower prices.
Following the renegotiation of some gas contracts, RWE's Supply & Trading unit narrowed its operating loss to 47 million euros in the first quarter, compared with 220 million last year.
The group confirmed it still expects to strike a deal with Gazprom by mid-year, which Chief Financial Officer Bernhard Guenther said would result in a "significant" financial effect for the group.
"We forecast a 300 million euros compensation payment," said RBC Capital Markets analyst John Musk.
RWE declined to put a figure on the expected benefit.
Along with its peers E.ON and EnBW, RWE is suffering from falling wholesale power prices in Europe, its core market, due to weaker appetite for energy on the recession-hit continent and energy savings measures.
The International Energy Agency (IEA) expects primary energy demand in the European Union to decline by 2 percent in the 2010-2015 period, compared with a 10 percent rise globally.
Prices have also come under pressure from the massive expansion of renewable energy in Germany, as energy from solar and wind sources takes priority in being fed into the electricity grid, reducing the hours gas plants can run and hurting the profitability of conventional power plants.
To streamline their businesses, German utilities have been shedding non-core assets worth billions of euros. This includes RWE's oil and gas exploration and production unit DEA , which it said was not expected to be sold this year.
RWE has felt relatively little impact from Germany's decision to completely pull out of nuclear power by 2022, as only 13.5 percent of its power comes from the source. That compares with more than a fifth at its main peer E.ON.
RWE's exposure to profitable lignite, or brown coal, has boosted its earnings vis-a-vis E.ON. RWE gets more than a third of its power from the highly polluting material, compared with E.ON's 6 percent.
Guenther said RWE emitted 2.7 percent less CO2 in the first quarter, partly due to the closure of old brown coal generation units at the end of 2012. But he declined to forecast CO2 output for full 2013.
At 1030 GMT, RWE's shares were little changed at 27.525 euros.
$1 = 0.7705 euros Editing by Harro ten Wolde and Stephen Coates; Editing by Mark Potter