French water, waste and transport company Veolia Environnement SA (VIE.FR) Tuesday said its board would like its current chairman and chief executive, Henri Proglio, to retain a chairman's role once he leaves to take the reins of Electricite de France SA (EDF.FR).

Veolia's board also said it would like its next chief executive to come from within the company's ranks, expressing its "preference for an internal solution for the company's general management."

At its meeting late Monday, the board asked its nominations and compensation committee to make recommendations within the next few weeks as to how the company's corporate governance and management team should change in light of Proglio's expected move to EDF.

The board would like Proglio to remain in one of two capacities, Veolia said: either as non-executive chairman of the board of directors, or as chairman of a supervisory board, depending on "which governance framework is chosen."

The French prime minister's office said late Sunday that the government backs Proglio to become the new chairman and chief executive of EDF.

The French state owns 85% of EDF and the term of EDF's current CEO, Pierre Gadonneix, comes to an end on Nov. 22.

In a note to investors, the brokerage CM-CIC said there seem to be "few surprises" in the Veolia board's decisions and that "everything appears to be more or less played out."

Antoine Frerot, the head of Veolia's water division - its largest - has widely been tipped as the favorite to take the reins of the company and there had already been much speculation that Proglio will retain a leading role at Veolia.

A dual role for Proglio spanning two large French companies wouldn't be entirely unprecedented. GDF Suez SA (GSZ.FR) Chief Executive Gerard Mestrallet, for example, also is chairman of Suez Environnement SA (SEV.FR).

But Mestrallet's double position emerged from the 2008 merger of the state-controlled gas company Gaz de France and the utility Suez, in which Suez spun off its environment services business into a separately-listed company. GDF Suez retained a 35% stake in the company.

There has been much speculation that Proglio, who already had a seat on EDF's board, will want to strengthen ties between EDF and Veolia.

Veolia owns 66% of the energy-services company Dalkia, with EDF owning the remainder. EDF itself has a 3.9% stake in Veolia.

One scenario for closer ties, much-discussed as Proglio emerged as favorite to take the EDF hot-seat, is that EDF would swap its stake in Dalkia for a bigger share of Veolia. That could add stability to Veolia's capital structure, fending off potential hostile takeovers.

Proglio's nomination at the head of EDF is slated for shareholder approval on Nov. 5, but this is essentially a formality given that the state owns 85% of the company.

As of 1009 GMT, shares of Veolia traded down 0.8% at EUR26.02 each, against a CAC-40 benchmark index down 0.3%.

Company Web site: www.veolia.com

- By Adam Mitchell, Dow Jones Newswires; +33 1 40171756; adam.mitchell@dowjones.com;