UPDATE 2-United Utilities may sell assets, faces bill cuts

* Underlying operating profit up 1 pct

* Sees sound FY performance

* Interim dividend rises 5 pct

* Shares down 1.3 percent, after 2-week gain (Recasts, adds analyst reaction, share price, company comments)

By Ben Deighton

LONDON, Nov 25 (Reuters) - Britain's biggest listed water company United Utilities (UU.L) said on Wednesday it might sell off further parts of its business as it faces being told to cut customer bills by the regulator.

It added it was forced to deploy a team of scuba divers and hundreds of engineers last week when its region in the northwest of England was hit by record rainfall, but added that the financial cost to it of the floods was "very small". [ID:nLK661241]

"Inevitably in a five-year cycle in this industry now is the right time to look at how we chose to allocate capital... and if there were opportunities to sell some or all of the (non-regulated) business we would look at those seriously," Chief Executive Philip Green told reporters.

Water companies in Britain have posted good profits for the first half fuelled by price increases to customers, but they are likely to be asked by the UK regulator Ofwat to cut bills when it makes its ruling for the next five-year period on Thursday. [ID:nLK474260]