French utility Veolia Environnement (VE) has lined up bidders in the auction of a stake in its U.K. water business as it seeks to cut a massive debt load, a person familiar with the situation told Dow Jones Newswires Tuesday.

Buyout companies Blackstone Group (BX) and Goldman Sachs Infrastructure Partners, along with Japanese trading companies Marubeni Corp. (8002.TO) and Japanese Mitsui & Co. (8031.TO) are through to the second round for a stake of up to 49%, according to recent press reports.

The sale, which is being run by HSBC Holdings PLC (HBC) and Morgan Stanley (MS), is just part of the disposal plan announced by Veolia in March when it said it planned to raise some EUR1 billion by selling assets during the year.

A representative for Veolia declined to comment.

Earlier this month the world's largest water company by market capitalization posted a 56% drop in first-half net profit to EUR220.3 million, some EUR387 million lower than analysts' expectations. Veolia also posted a widening of net debt to EUR16.8 billion from EUR16.3 billion a year earlier.

The company said a combination of a weak waste market, because lower economic activity reduced the amount of trash to process and the prices of recyclable materials, and falling asset values were behind the profit decline.

Reporting on its disposal program, Veolia said it had already booked EUR268 million of asset-sales in the first half and had committed to, but not yet booked, a further EUR545 million of disposals.

Last month the company agreed to sell Montenay International, its North American portfolio of waste-to-energy contracts, to Covanta Holding Corporation (CVA) for $450 million and also said it was in talks with French railway operator Societe National des Chemins de Fer and Channel Tunnel operator Groupe Eurotunnel SA (GET.FR) over the sale of its cargo unit.

-By Marietta Cauchi, Adam Mitchell and Carol Dean; Dow Jones Newswires; +44 207 842 9241; marietta.cauchi@dowjones.com