UPDATE 2-Utility Engie's shares rise on dividend delight

* Engie shares rise, among top performers in Paris market

* Proposes 0.75 euros dividend for 2018 earnings

* Engie swings into profit after two years of losses

* Engie happy with Suez stake - Kocher (Adds share price reaction, further comment)

PARIS, March 8 (Reuters) - French gas and power group Engie surprised the market with a higher than expected dividend as it said a three-year transformation plan was completed earlier than expected and it returned to profit after two years of losses.

Engie committed to pay a 0.75 euro dividend for its current 2018 fiscal year, up from 0.70 euros for 2017 and beating forecasts for an unchanged 2018 dividend - causing Engie shares to surge 4.4 percent in early session trading.

Utilities' dividends are closely watched by investors who typically buy these stocks because of their relatively high and steady returns, and high cash flows.

Engie has been moving away from fossil-fuel based power generation assets and into renewables, grids and energy services, and company head Isabelle Kocher said its transformation plan was ahead of schedule.

"We have completed our three-year transformation plan faster than expected, therefore we will boost our dividend," she said.

Engie's 2017 revenue was 65 billion euros ($80.6 billion), up 0.3 percent, although the revenue figure was below the equivalent number from almost a decade earlier.

Engie's revenue had been high as 97 billion euros in 2012, but it has since shrunk due to various restructuring plans.

The first came in a wave of asset sales to reduce its debt, and its revenues then declined again as Engie embarked on moving away from fossil-fuel based power generation assets and into renewables, grids and energy services.


Kocher said that the shift had turned Engie into a less risky, cleaner and more profitable company, with 89 percent of core earnings contracted or regulated, rather than exposed to commodity prices, and 90 percent from low-carbon activities.

Kocher added that Engie was confident over its current portfolio of businesses, and that Engie was not looking at any "big-size" merger or acquisition deal. She added Engie was comfortable with its current 33 percent stake in peer utility company Suez.

She said Engie is now also more profitable as return on capital employed now reaches 7.2 percent, up 70 basis points compared to 2015.

Engie swung into a 2017 net profit of 1.4 billion euros, reversing a 400 million euro loss in 2016. Between 2008 and 2012 Engie had four years when net earnings stood at more than four billion euros.

For 2018, Engie is targeting net recurring income of between 2.45-2.65 billion euros, based on core earnings before interest, tax, depreciation and amortisation (EBITDA) of 9.3-9.7 billion. ($1 = 0.8066 euros) (Reporting by Geert De Clercq; Editing by Sudip Kar-Gupta/Keith Weir)