Veolia Water UK has agreed to sell the UK-regulated water activities of the French utility Veolia Environnement to Rift Acquisitions, for a total transaction value of £1.24bn.

The divested assets' adjusted operating cash flow and adjusted operating income for 2011 were £105.5m and £74.9m, respectively.

In addition to its non-regulated water business, Veolia Environnement will retain an interest in the UK-regulated water business through Veolia Water UK’s 10 per cent equity interest in the divested business for at least five years.

After this transaction closes, Veolia Environnement’s net debt will be reduced by around £1.16bn.

Antoine Frerot, chairman and CEO of Veolia Environnement, said:

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 Water UK is the wholly owned subsidiary of Veolia Environnement. Rift Acquisitions is an acquisition entity formed by Infracapital Partners, the infrastructure investment fund managed by Prudential’s M&G and Morgan Stanley Infrastructure Partners.