UPDATE 2-US kills Northrop Grumman missile-defense program

(Adds quotes from termination letter)

By Jim Wolf

WASHINGTON, June 11 (Reuters) - The Pentagon's Missile Defense Agency has formally ended Northrop Grumman Corp's (NOC.N) Kinetic Energy Interceptor program, once valued at $6.3 billion, despite the company's push to carry out what would have been a key test in September of the missile-defense technology.

Northrop was notified on Wednesday of the termination, which was "for the convenience of the government," not because of any company performance shortfall, according to a copy of the notice obtained by Reuters.

Northrop had carried out about $1.2 billion of work under its contract for the kinetic energy interceptor, or KEI, which was designed to shoot down missiles soon after their launch.

Termination fees, if there are any, are the product of negotiations between the government and a contractor when a deal is canceled for the government's convenience.

Northrop Grumman and the Missile Defense Agency had no immediate statements on the formal termination.

Defense Secretary Robert Gates had announced plans to cancel the KEI as part of a restructuring of U.S. missile-defense efforts under the proposed fiscal 2010 budget.

Gates and the Missile Defense Agency said the system had limited capability, would have been difficult to fire from ships because of its large size, cost too much and would have to have been launched from close to the target.