* H1 recurrent net profit 1.67 bln euros, vs 1.71 bln poll
* Results come after RWE cut 2011 outlook, named new CEO
* Shares fall 5.7 percent, underperform sector
(Adds CFO comment, dividend plans, further detail)
By Maria Sheahan and Vera Eckert
FRANKFURT, Aug 9 RWE's first-half core net profit fell 40 percent, hit by a government decision to phase out nuclear power and unprofitable gas sales, highlighting the problems faced by the German utility's new CEO-designate.
Germany's largest power producer said on Tuesday first-half profit took a 900 million euro ($845 million) hit from provisions to decommission nuclear power plants, the write-off of nuclear fuel rods and a nuclear fuel tax.
RWE, which prepared for a strategy revamp on Monday when naming Dutch accountant Peter Terium as chief executive from next year, said on Tuesday he would take charge of political talks immediately.
Germany shut eight nuclear power plants following Japan's nuclear disaster. The government also decided to phase out nuclear power completely by 2022, overturning legislation that had extended the lifespan of 17 plants.
RWE, whose incumbent CEO Juergen Grossmann has the moniker "nuclear Rambo" in Berlin, is especially vulnerable to the nuclear exit because it relies heavily on nuclear and coal-fired power generation and the company would need to invest heavily to bolster its gas and renewable energy business.
Also, investments RWE made in recent years have laden its balance sheet with about 30 billion euros debt, and long-term contracts with suppliers such as Russian monopoly Gazprom squeeze margins in the gas business.
RWE, which has been in talks to secure better conditions from suppliers, said it expected burdens to increase over the next year since new terms would not take effect until 2012/13.
First-half recurrent net profit fell to 1.67 billion euros, compared with a forecast for 1.71 billion in a Reuters poll.
RWE shares were down 5.7 percent by 0945 GMT, underperforming a 3.2 percent lower European utilities index .
Silvia Quandt analyst Sebastian Zank said RWE's plans to divest assets indicated limited growth in coming years, adding the stock no longer offered a safe haven. "For the time being we would refrain from an investment in the company's stock."
RWE has cut its 2011 outlook, citing the nuclear exit, saying recurrent net profit will fall 35 percent, less than the 42 percent drop forecast in a Reuters poll. It has vowed to still pay 50-60 percent of profit as a dividend.
Smaller peers EnBW and Vattenfall have also published results hit by the nuclear exit. Bigger rival E.ON (EONGn.DE) will report earnings Wednesday.
Tokyo Electric Power , the operator of Japan's crippled Fukushima plant, reported a $7.4 billion quarterly loss on Tuesday, due partly to massive provisions to compensate victims of the nuclear disaster.
In the medium term, higher power prices are expected to offset German utilities' lost income from nuclear power, and RWE has raised its outlook for 2013, saying recurrent net profit will come to about 2.5 billion euros.
Nevertheless, Terium has his work cut out for him as RWE plans to sell 11 billion euros of assets, cut costs, raise capital and sell treasury shares to avert further credit rating downgrades.
"Even though we do not know Peter Terium and are not able to assess his strategy for the group, we think that it is quite important for the company to focus again on the operational development," DZ Bank analyst Marc Nettelbeck said.
RWE stock has declined more than 40 percent over the past six months as investors lost faith in current CEO Grossmann having the will to overhaul the company's strategy. (Editing by David Cowell and Dan Lalor) ($1 0=.7099 euro)