Blow to $1 bln Trafford gas plant as Britain withdraws subsidy

* Only large gas plant to secure government subsidy

* Developers hope to extend deadline

* Plant could power over 2 million homes

* Subsidy worth around 30 mln a year for 15 years

By Susanna Twidale

LONDON, July 5 (Reuters) - Britain's government has withdrawn a subsidy for an 800 million pound ($1.04 billion) gas plant project in Manchester, its developers said on Tuesday, following its failure to secure investment needed to build the plant.

Carlton Power's Trafford gas-fired power station was the only new large-scale gas plant to secure financing under the government's capacity market scheme, designed to secure the country's electricity supplies. Once completed, the plant would have the capacity to provide power to more than 2 million homes.

Carlton Power missed certain deadlines for obtaining investment for the project. A company spokesman said discussions were still ongoing with potential investors.

The spokesman also said discussions were still taking place with the government and the electricity market reform delivery body to see if the deadline could be extended.

"Carlton Power has not achieved the Financial Commitment Milestone by the initial deadline set out in the Capacity Market Rules and has received a Termination Notice from the Delivery Body," a spokesman for the company said via email.

Britain's National Grid (LSE: NG.L - news) - which runs the Delivery Body - said it was unable to comment on individual cases.

The contract secured by Carlton Power for the Trafford plant was worth around 30 million pounds a year for 15 years and would be paid on top of revenues generated from selling electricity.

Britain introduced the so-called capacity market to help to promote investment in the electricity sector and ensure the country has enough power during times of high demand. It pays the owners of power plants to make sure they are available over the winter months.

Plans to close coal-fired power plants in Britain by 2025, plus declines in oil and gas production, have created concerns about power supply shortages in the country.

But a drop in electricity demand and prices in Britain have meant developers such as Carlton Power have struggled to find investors for new power plant projects.

($1 = 0.7672 pounds) (Editing by Jane Merriman)