UPDATE 1-Italian railways says to bid for Veolia Cargo

(Recasts)

PARIS/ROME May 18 (Reuters) - Italian railways Ferrovie dello Stato said on Monday it would bid for Veolia Cargo (VIE.PA), which competes on freight transport with French state-owned railway company SNCF.

"We are reasonably optimistic, we will participate to win and not lose," Ferrovie dello Stato CEO Mauro Moretti told reporters in Rome. "We are looking at France as part of a strong policy of internationalisation. France is the last to open its borders, we want to enter that market."

French water company Veolia Environnement wants to sell assets worth 1 billion euros ($1.35 billion) this year, and selling its Veolia Cargo freight subsidiary, which had sales of 188 million euros in 2008, may be a solution to reduce its debt, Les Echos newspaper reported on Monday.

"Veolia is thinking of several scenarios to sell non-strategic assets that may involve Veolia Cargo," a spokeswoman for Veolia said.

LES Echos also said Deutsche Bahn [DBN.UL] was not interested in bidding.

Guillaume Pepy, President of the SNCF, said last month Trenitalia may be a potential rival for French trains as soon as next December on routes between Milan and Paris. (Reporting by Michel Rose, Giuseppe Fonte and Matthias Blamont; editing by Simon Jessop and Dan Lalor) ($1 = 0.7422 euro)