Agbar eyes profits in Spain's property slowdown

MADRID Mon Feb 18, 2008 8:02am EST

MADRID Feb 18 (Reuters) - Spanish water company Agbar AGS.MC said on Monday it anticipated a rise in business as towns privatise water systems to gain a new source of income to compensate for the end of a residential construction boom.

Agbar hopes to pick up water management contracts as towns sell off municipally run systems to compensate for a fall in value-added tax income from house construction and sales.

"Towns are going to face a financing problem, and this is a good argument for them to seek help and turn to privatisation as a financing formula," Agbar Director General Jose Vila Bassas said during a conference call after the firm reported a 111 percent rise in 2007 net profit after a unit sale.

Spain's central and regional governments could see tax income from construction and property activity cut by a third as tighter credit conditions and oversupply cool the sector, Spain's Cinco Dias newspaper reported on Monday, citing a government study.

Agbar, which is over 90 percent controlled by holding company Criteria CRIT.MC and French utility Suez LYOE.PA, gained more than half its 2.86 billion euros ($4.18 billion) in 2007 sales from water management contracts.

Commenting on Criteria and Suez, Vila said the firms planned to cut their stake in the company to 70 percent and would unveil details of the sale before August of this year. (Reporting by Clara Vilar, editing by Will Waterman)

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