Gelsenwasser is 95-percent controlled by the local utilities or Stadtwerke of Bochum and Dortmund, which acquired a stake of 80.5 percent from E.ON, Germany's number one power giant, last July for a sum of 835 million euros.

But the Stadtwerke said they intended to re-sell part of their stakes to reduce their shareholdings to 51 percent.

A total five candidates had emerged as bidders for stakes, sources told AFP's financial news subsidiary AFX on Wednesday.

According to a report in the business daily Handelsblatt, Veolia is looking to acquire a "strategic stake" in Wasser und Gas Westfalen, the holding company for the stakes in Gelsenwasser held by the utilities of Bochum and Dortmund.

In exchange, the two German Stadtwerke could take stakes in some of Veolia's German or foreign subsidiaries, the report suggested.

A separate report in the Financial Times Deutschland said that German services group Rethmann, other municipal Stadtwerke and a private investor were also eyeing stakes in Gelsenwasser.

With 5.3 million customers and sales of 381.8 million euros, Gelsenwasser is the second biggest water utility in Germany after the Berlin water authority.

TERRA.WIRE