(Fixes typo in sixth paragraph)
* CEO says security of supply under threat
* Germany should follow Britain, France in plant support scheme
* H1 operating profit 2.27 bln eur vs 2.29 bln in Reuters poll
* H1 recurrent net income 749 mln eur vs 786 mln in Reuters poll
* Keeps 2014 outlook
* Shares fall 2.7 percent at market open
By Christoph Steitz
FRANKFURT, Aug 14 Germany's RWE reported a 40-percent plunge in first-half profits, blaming loss-making power plants and warning that power supplies were under threat unless a European energy sector crisis was fixed.
German power producers are facing a crisis caused by weak demand for energy in Europe, low wholesale power prices and a surge in intermittent renewable energy sources, which continue to replace gas-fired and coal-fired power plants.
Earlier this week, RWE, Germany's largest power producer, said it was considering mothballing 1,000 megawatts (MW) of power plants that are unable to recuperate their costs as they only run a fraction of the time needed to be profitable.
"This does not bode well for security of supply, to which wind turbines and solar panels cannot make a large contribution," Chief Executive Peter Terium wrote in a letter to shareholders.
Shares in the group fell 2.7 percent at the market open and were at the bottom of Germany's top-30 DAX index.
The energy sector's imbalance has sparked a debate among European governments and utilities companies about creating so-called capacity mechanisms.
The idea is to reimburse energy firms for power plants that no longer cover their costs but are needed to secure supply of gas and electricity when intermittent renewable power supplies cannot.
Britain and France are pressing ahead with such plans, while talks between the German government and the country's energy groups about a solution are planned for the second half of 2014.
"Now the ball is in the policymakers' court," Terium said, adding that Germany should follow Britain and France's example.
RWE said in March that 20-30 percent of its power stations could not cover their operating costs, after posting its first annual net loss in more than six decades.
Since the start of 2013, the company has closed 12,600 MW of capacity, nearly a quarter of its European portfolio.
In the first half of its financial year, the group said operating profit fell 40 percent to 2.27 billion euros ($3 billion), slightly lower than the 2.29 billion average forecast in a Reuters poll of banks and brokerages.
Like larger French peer GDF Suez, RWE's results were also hit by a mild winter.
Recurrent net income declined by nearly two-thirds in the period to 749 million euros, also lower than the 786 million average forecast.
RWE kept its outlook for the current financial year and still expects operating profit of 3.9-4.3 billion euros and recurrent net income of 1.2-1.4 billion.
The outlook excludes contributions from RWE's oil and gas exploration and production unit DEA, which it sold to a group of investors led by Russia's Mikhail Fridman earlier this year. RWE expects the deal to close by the end of 2014. ($1 = 0.7482 euro) (Editing by David Clarke)