Veolia expects compromise over Sheffield incinerator contract

PARIS, July 31 (Reuters) - Veolia expects to reach a compromise with the English city of Sheffield over its waste handling contract in the coming months, the head of the French environmental services company said on Monday, after the council sought to cut the cost.

Sheffield City Council last year threatened to cancel the 2001-2036 contract under which Veolia handles waste for the city, including bin collection, recycling, waste recovery, and waste incineration to generate power and provide warm water for a district heating network.

"Negotiations are continuing with Sheffield, I am rather confident we can find an agreement in the next months," Veolia Chief Executive Antoine Frerot said on an earnings call.

Veolia did not comment on the size of the contract, but a source at Sheffield city management said it costs the city about 30 million pounds per year.

Frerot said a compromise could take the form of a lower price, possibly by extending the contract duration so that the investments are depreciated over a longer period.

He said that treating waste from other areas in the Sheffield facilities could also be a way to reduce costs.

Waste handling costs in Sheffield are among the lowest in Britain, Frerot said, adding that the city wants to reduce the cost of the contract significantly to help ease the presure on its budget.

Frerot said that Veolia had told the city that cancelling the contract would lead to a claim for compensation for the depreciation costs of the investment as well as for earnings on which it missed out.

(Reporting by Geert De Clercq; Editing by Keith Weir)