UPDATE 1-French Veolia upbeat on growth potential of 2020-23 plan

* Veolia shares up 2.7 pct, top gainers in CAC40

* 2020-23 strategy plan to focus on new activities

* Says Q4 was strong in line with first nine months (Adds stock move, M&A comments, new strategy plan)

PARIS, Feb 7 (Reuters) - French water and waste group Veolia said its earnings outlook was strong thanks to a string of new contracts and a good contract renewal rate, as it prepares a new four-year plan that will focus on profitable new activities.

Shares in Veolia climbed 2.7 percent, outperforming the CAC40 index which lost 1.1 percent.

In late 2015, the company targeted 2-3 percent annual revenue growth at constant exchange rates, core earnings growth of 4-5 percent per year and financial debt stable between 8-9 billion euros.

“Our 2016-19 performance will be in line with or better than the targets we set at the end of 2015,” CEO Antoine Frerot told reporters.

Ahead of full-year earnings due on Feb. 21, Frerot said that the fourth quarter had seen a continuation of the strong earnings trend of the first nine months of the year.

“2018 was a very strong year,” he said.

In November, Veolia posted the best quarterly earnings growth since 2014, thanks to strong waste volumes in Europe, continued cost cutting and several new contracts, with core earnings up by 5.1 percent to 2.42 billion euros ($2.75 billion).

Frerot said he was confident about the future, as Veolia was winning lots of new contracts and seeing good contract renewal rates. He said half of last year’s revenue had come from new activities such as energy efficiency.

This year, the firm will start preparing a new 2020-23 strategy plan, which will focus is resources on activities with strong potential in terms of growth and profitability.

“The least profitable activities will be sold,” he added.

He said the company would aim to add new geographies and buy new technologies and would target new business areas such as recycling used oil, plastic and solvents.

“All these business lines have strong potential, as they neutralise toxic waste as well as creating new raw materials that are usable in industry,” he said.

Other growth areas are the handling of low-radioactivity nuclear waste and micro pollutants in water.

$1 = 0.8815 euros Reporting by Geert De Clercq; Editing by Sudip Kar-Gupta and Elaine Hardcastle