Veolia Divests to Repay Debt - Analyst BlogFriday, November 23, 2012
Waste management service provider Veolia Environnement (VE) continues to reshuffle its business by hiving its small and medium sized assets. The funds generated from these divestitures will go to minimize the debt burden of the company. The monetization program created enough funds to lower debts worth $446 million (€350 million) since August 2012.
We note that the decision to trim the non-productive assets was taken in December 2011. The objective was to concentrate more on the highly productive growth regions. Besides, using funds generated from divestitures will increase the company’s financial flexibility and allow Veolia to refocus on its organic growth projects.
Veolia’s assets divested thus far in the second half include the sale of Ridgeline, a U.S. subsidiary specialized in wind power, to Atlantic Power Corporation (ATP). The company also shed a portion of its Environmental Services operations in Switzerland and a waste-to-energy facility in Italy. Veolia divested all of Veolia Environmental Services operations in Estonia and Lithuania, and its Dalkia operations in Switzerland and Estonia.
These were in addition to the $3.86 billion (€3 billion) generated from the divestiture of its U.K. regulated Water activities and the U.S. Solid Waste business. The on track asset sale program has thus encouraged the company to complete the targeted $6.43 billion (€ 5 billion) of divestiture in the 2012-2013 period.
We believe the paring of unwanted, non-core assets will make Veolia a more competitive unit with adequate financial flexibility for the smooth running of the business besides sharing the benefits with its stake holders.
The company has presently undertaken other initiatives, including the appointment of a Chief Operating Officer effective December 1, 2012. Though the company has just begun to realize the benefits of restructuring, we need a few more quarters to measure the full impact of these actions.
Veolia Environnement retains a short-term Zacks #3 Rank (Hold rating). Presently, we prefer its Zacks #2 Rank (Buy rating) peers Connecticut Water Service Inc. (CTWS) and American Water Works Company, Inc. (AWK).
Based in France, Veolia Environnement is a provider of environmental management services to its worldwide consumers.
(ATP): ETF Research Reports
AMER WATER WORK (AWK): Free Stock Analysis Report
CONN WATER SVC (CTWS): Free Stock Analysis Report
VEOLIA ENVIRON (VE): Free Stock Analysis Report
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