28 jun: UPDATE: Shell Bides Time On Cove, Extends Offer To July 11
28 jun: Germany to Require Licenses for High-frequency Trade Brokers
28-06-2012 11:45:00

Veolia Sells UK Water, Says On Track for Other Sales

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PARIS--French waste and water utility Veolia Environnement SA (VE) Thursday completed the first leg of a substantial disposal plan by selling its U.K. regulated water business for 1.24 billion pounds ($1.94 billion), with most of the proceeds going towards cutting its huge debt pile.

Paris-listed Veolia, the world's largest environmental utility by revenue, has sold the business to Rift Acquisitions Ltd.--an entity formed by Prudential PLC's (PUK) Infracapital Partners and Morgan Stanley Infrastructure Partners, a unit of Morgan Stanley (MS). The sale, expected to be finalized as of Thursday as it isn't subject to conditions, should allow Veolia to cut its EUR15 billion net debt by EUR1.45 billion, it said.

The move is the first of a series of planned asset sales worth EUR5 billion, as Veolia battles to restore profitability and its financial room for maneuver following an accounting fraud in the U.S. and substantial write-offs last year due to poor performances in southern Europe and northern Africa. The downsizing is all the more crucial as the economic crisis deepens in Europe and municipalities, troubled by financing issues, question contracts to handle their water networks and even their waste.

Veolia said that it will retain a 10% equity interest in the regulated business through Veolia Water UK for at least five years. Its non-regulated U.K. water operations aren't involved.

The news sent Veolia's shares higher at open. At 0905 GMT, shares were trading up 1.4% to EUR10.36 while the CAC-40 benchmark index was down 0.8%.

A Paris-based trader said the sale was positive.

"The deal allows the company to reduce its debt which is encouraging," he said, adding that the move "comes as good news after the Transdev issues," in reference to Veolia's transport unit division, which it is also seeking to sell.

"This first significant divestment shows that we are moving in the right direction regarding the implementation of our strategic plan and that the transformation of Veolia is progressing at a good pace," Veolia's Chairman and Chief Executive Antoine Frerot said in a statement.

Veolia also hopes to sell its U.S. solid waste business this summer and has already lined up "more than three buyers," comprising industrial companies as well as financial funds, a person familiar with the matter said without elaborating on the identity of the suitors. A deal is expected to be signed in late July and close before the fall, the person said.

The disposal of part of Veolia's stake in Transdev is proceeding less smoothly. French state-owned financial firm Caisse des Depots et Consignations, which owns half of Transdev, is reported to have turned down a proposal by investment fund Cube, a unit of French bank Natixis (KN.FR). It is also reported to have rejected the possibility of increasing its own stake by buying some of Veolia's shares.

Veolia has initiated discussions with an industrial group as a contingency plan, the person said.

Write to Geraldine Amiel at geraldine.amiel@dowjones.com

(END) Dow Jones Newswires

June 28, 2012 05:45 ET (09:45 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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