(Adds details, background, Q2 results, shares)
July 29 (Reuters) - Waste Management Inc said it would sell its waste-to-energy unit to private equity firm Energy Capital Partners for $1.94 billion in cash, to focus on its larger solid waste business.
The company, which also reported a better-than-expected quarterly profit, said it would use proceeds from the sale of Wheelabrator Technologies Inc to acquire other businesses, buy back shares and repay debt.
Waste Management shares were up 1.8 percent at $44.69 in premarket trading.
Wheelabrator Technologies Inc - which operates waste combustion plants to produce clean, renewable energy - generated only about $845 million of Waste Management's total revenue of $13.98 billion in 2013.
The company expects earnings to rise by up to 2 cents per share if it uses the deal's proceeds only for share repurchase and debt repayment, Chief Executive David Steiner said.
"If we can identify core business acquisitions that would be more accretive than buying back shares, we will pursue those opportunities."
The deal will also help reduce earnings volatility related to electricity sales, Steiner said.
Wheelabrator Technologies' 17 waste-to-energy plants and four power-producing facilities in the United States process more than 7.5 million tons waste and can generate up to 853 megawatts electricity.
Waste Management's larger solid waste business provides collection, transfer, recycling and resource recovery, and disposal services to commercial, residential and industrial customers.
Net income attributable to Waste Management fell to $210 million, or 45 cents per share, for the second quarter ended June 30 from $244 million, or 52 cents, a year earlier.
Excluding items, the company earned 60 cents per share.
Revenue rose 1 percent to $3.56 billion.
Analysts on average had expected earnings of 59 cents per share, on revenue $3.61 billion, according to Thomson Reuters I/B/E/S.
Waste Management said it expects adjusted earnings of $2.30-$2.35 per share in 2014, compared with analysts' average estimates of $2.36.
Barclays and Centerview Partners served as financial advisors to Waste Management on the deal, expected to close later this year. (Reporting by Ankit Ajmera in Bangalore; Editing by Saumyadeb Chakrabarty and Joyjeet Das)