* Sale to cut Veolia debt by 1.45 bln euros
* Buyer is Rift Acquisitions
* Veolia to keep 10 pct stake in UK regulated water
* Shares up 1 pct
PARIS, June 28 (Reuters) - French utility Veolia Environnement has sold a majority stake in its regulated UK water business for 1.24 billion pounds ($1.92 billion) including debt, notching a milestone in its overhaul aimed at returning to profitability and cutting debt.
It is the first significant divestment since Chairman and Chief Executive Antoine Frerot announced a reorganisation in December to cut debt that had piled up under an acquisition spree by Veolia's founder and head Henri Proglio.
The sale will shave 1.45 billion euros off the 14.7 billion euros debt Veolia had at the end of last year and help it to meet its goal to cut debt to below 12 billion euros by the end of 2013 by selling assets worth 5 billion euros.
Analysts said that the price Veolia will receive for the unit, which is widely seen as the most attractive it has put up for sale, beat expectations and the strength of the pound against the euro had helped prop up the deal's value in euros.
"In the current context, regulated assets are very coveted, they are very defensive and not exposed to economic growth," said Exane BNP Paribas analyst Yohann Terry.
Shares in the waste, water and energy group, which have lost 46 percent of their value in the last 12 months, were up nearly 1 percent at 10.29 euros by 1109 GMT, outperforming a 0.2 percent rise in the wider utilities index.
"The timing and the exit price exceeded our expectations by a couple of months and by about 150 million euros respectively," Citibank's head of utilities research Sofia Savvantidou wrote in a research note.
Under the agreement with the asset's buyer, Rift Acquisitions, Veolia will keep a 10 percent stake in the regulated water business for at least 5 years. It will also keep its non-regulated water business, Veolia said in a statement.
Keeping a toehold in the regulated water business will enable Veolia to keep synergies and co-operation agreements with its non-regulated water business, analysts pointed out.
Rift Acquisitions Ltd is a joint venture of a Prudential Plc managed infrastructure investment fund and Morgan Stanley Infrastructure partners.
The sale of Veolia's UK regulated water business is one of several assets on the block, such as its 50 percent stake in Veolia Transdev transport joint venture with French state bank Caisse des Depots and its U.S. solid waste business.
Veolia's restructuring also includes exiting roughly half of the 70 countries where it is present.
Rating agencies like Moody's and Fitch have been cutting Veolia's debt rating over the past months to Baa1 and BBB+ respectively, making it harder for the company to borrow money and making it the worst rated of French utilities like EDF , GDF Suez and Suez Environnement.
Veolia's aggressive past expansion shows in its long-term debt which stands at 2.36 times its equity compared to 1.61 at its direct rival Suez Environnement, 1.37 at EDF and 0.69 times at GDF Suez.
Frerot has come under fire from Proglio, who is now head of state-controlled power company EDF, and from its main shareholder Caisse des Depots, for his restructuring plans.
Although Frerot, once Proglio's right hand man, managed to survive a board coup the UK asset sale is seen as merely one step that could help him stay in the seat.
"Frerot will not so much be judged on this but more on Transdev and on the earnings," Exane BNP Paribas's Terry said.
"This transaction shows that management is committed on delivery and at least the disposal program should become fully reflected in the trading price," Citi's Savvantidou wrote, rating the stock "buy" with a share target of 15.5 euros.
International law firm Simmons & Simmons advised Veolia on the deal and Lovells advised Rift Acquisitions.