Veolia May Win Marseille Contract Renewal With Lower Water Rates

Veolia Environnement SA (VIE), France’s biggest water company by market value, moved closer to getting a contract renewed in Marseille that includes a drop in water prices of about 20 percent, the southern French city said.

The 15-year deal will probably also include 110 million euros ($149 million) of investment in water and waste installations, the Marseille Provence Metropole, which represents 18 communities including Marseille, said in a statement posted on its website. The contract was approved by Eugene Caselli, the head of the municipal grouping, and has to be made official by a vote.

Veolia and rival Suez Environnement (SEV) are facing municipal contract renewals across France that are sometimes resulting in price reductions. Veolia Chief Executive Officer Antoine Frerot said in January the utility could lose half its margins on the many contracts being reviewed by 2015 if it doesn’t boost productivity.

The terms of the new Marseille contract include a decrease in water prices to 1.51 euros a cubic meter, compared with the current 1.82 euros for households using an average annual volume of 120 cubic meters a year, according to the statement. For those using 80 cubic meters a year, the price will drop to 1.44 euros a cubic meter.

The Marseille contract is held through Veolia Eau’s Societe des Eaux de Marseille, which has provided water distribution to the city since 1943.

Frerot is seeking to make Veolia less reliant on municipal water contracts in favor of services to industry. The company has a goal of selling 6 billion euros of assets in 2012 and 2013 to lower debt, and intends to lower costs by 170 million euros this year as part of a plan to save 750 million euros by 2015.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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