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19-07-2012 10:14:00

UPDATE: Veolia Sells US Assets, As Part Of Planned Disposals

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By Christopher Emsden ROME--The chief executive of Ital..

-- Veolia to cut its net debt by $1.82 billion following the transaction

-- The sale of the U.S. business and U.K. water activities represent two-third of the planned EUR5 billion disposals

-- Veolia makes no comment on the planned sale of part of its transport business

(Adds detail, background, comment, share price.)

By Geraldine Amiel

PARIS--Veolia Environnement SA (VE) has sold its U.S. waste business for 1.91 billion dollars to Star Atlantic Waste Holdings LP, making another significant step towards its planned streamlining and transformation to address its deteriorated profitability and cut its substantial debt, after the sale of some U.K. activities late June.

The transaction with Star Atlantic Waste, a portfolio company of U.S.-based infrastructure fund manager Highstar Capital, will allow Veolia to reduce its net debt by around 1.82 billion dollars, the company said.

The disposal follows that of its U.K. regulated water activities in late June, as the group has been seeking to sell around 5 billion euros (6.15 billion dollars) worth of assets to restore its 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 waste.

"It was more or less expected but this is nevertheless very positive for Veolia," a Paris-based trader said. Shares closed Wednesday at 9.22 euros (11.33 dollars) after having lost nearly half of its value over the past year on worries related to the debt and the drop in profitability as well as the economic headwinds.

"The transformation of Veolia is progressing as planned," Veolia Chairman Antoine Frerot said in a statement.

Besides its U.K. water activities and the U.S. solid waste business, which both represent 60% of the 5 billion euros worth of assets Veolia committed to sell by the end of next year, the French group plans to sell part of its stake into public transport group Transdev.

But the disposal seems to be proceeding less smoothly as French state-owned financial firm Caisse des Depots et Consignations, which owns half of Transdev, has 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 as it has no ambition to play a key role in developing large urban transportation networks.

Veolia has initiated discussions with an industrial group as a contingency plan, a person familiar with the matter has told Dow Jones Newswires in June.

In the meantime, Veolia could well dispose of its stake in Berliner Wasserbetriebe, or BWB, a German water utility which is now majority-owned by the city state of Berlin, since German utility RWE AG (RWE.XE) signed an agreement to sell to Berlin its minority stake. Veolia, which owns 24.95% of BWB, previously said it was also willing to sell its stake in the water utility as it doesn't have the control over the utility strategy anymore.

In 2011, Veolia's U.S. solid waste businesses had revenue of $818 million, operating cash flow of $212 million and operating income of $110 million. In the U.S., the group intends to continue its activities in hazardous waste and industrial services following the disposal.

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

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

July 19, 2012 04:14 ET (08:14 GMT)

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

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