UPDATE 1-Italy utilities gain on possible stake sale delay

* Utilties affected by draft law outperform

* Acea would be most affected, analysts say

ROME, Oct 12 (Reuters) - Italian municipal utilities benefited on Monday from hopes that a proposed law would be changed to give public shareholders more time to reduce their stakes and avoid sales in a depressed market.

The amendment, proposed by a senator tasked with overseeing the liberalisation of the sector, would give public shareholders in utilities with water and environmental operations until 2015 to cut stakes to 30 percent from an earlier proposal of 2012.

At 1511 GMT shares in Acea, the utility 51 percent controlled by Rome city which has a large water business, were up 0.69 percent at 8.75 euros while the DJ Stoxx utilities index .SX6P was 0.51 percent weaker.

"It's a good compromise since the original draft was too punitive. It takes time to organise the sale of shares at a time when the market is depressed," a Milan-based analyst said.

He added Acea was the most affected since its water business accounts for around 45 percent of earnings before interest, tax, depreciation and amortisation (EBITDA). Other utilities potentially affected were Iride (IRD.MI), Enia (EN.MI) and Hera (HRA.MI), he said.

Enia was up 2.15 percent at 5.47 euros, Hera was up 2.78 percent while Iride was down 0.65 percent.

The proposed amendment, obtained by Reuters on Monday, also calls for an interim deadline of June 30, 2013 for public shareholders to cut holdings in these companies to 40 percent.

If the legislation becomes law, utilities will have to put up their water and environmental concessionary businesses to public tender should they choose not to reduce their stakes.

Another analyst said the issue was less important for Italy's biggest municipally-owned utility A2A (A2.MI) since it had little exposure to water while its environmental business offered only low margins.

"If the bill becomes law, and there's no saying in what form that will be, A2A will probably opt to simply tender these businesses," he said.

(Reporting by Stefano Bernabei, writing by Stephen Jewkes; Editing by David Cowell)