* Finmeccanica selling energy, transportation units
* Siemens and Italy's FSI fund battle for AnsaldoEnergia
* Sales worth 1 bln euros needed to avert credit downgrade
* Finmeccanica says government not an obstacle
By Danilo Masoni and Paolo Biondi
MILAN/ROME, Dec 5 (Reuters) - Political meddling and concern that a foreign owner could cut jobs is hindering the sale of Italian aerospace and defence group Finmeccanica's energy and transport subsidiaries, raising the prospect of a credit downgrade.
The company is in a race to make 1 billion euros ($1.3 billion) of asset disposals to avoid a credit rating downgrade that would undermine its prospects at a time of widespread defence spending cuts.
Finmeccanica's AnsaldoEnergia power engineering business, which employs 3,000 people and is considered one of the crown jewels of the indebted state-controlled group, has attracted a 1.3 billion-euro ($1.7 billion) offer by larger German rival Siemens.
All of the proceeds from disposals will be used to cut Finmeccanica's 4.8 billion euros of debt. Its first large debt payment was to be 800 million euros of bonds maturing in December 2013, but last month it refinanced that debt with 600 million euros of five-year bonds maturing in 2017.
Insiders say that the company views a deal with Siemens as making more sense than selling to state-backed strategic fund FSI, which pledged to buy a minority stake after Siemens emerged as a frontrunner.
However, opposition to foreign bidders by politicians, unions, academics and even the management of AnsaldoEnergia ahead of a critical general election is clouding the issue and increasing the chances that Finmeccanica's credit rating could be cut to "junk" status.
"The uncertainty of the political situation and the absence of government guidelines on strategy and disposals make it very difficult for AnsaldoEnergia to be sold in a short time," a source close to the situation said.
Italy's industry minister Corrado Passera on Wednesday called on domestic companies to throw their hat into the ring. "If Italian players make serious and financially solid proposals, I would view them favourably," he said.
Finmeccanica's chairman and chief executive Giuseppe Orsi was placed at the helm a year ago to return the group to profit, but he has also become embroiled in a continuing corruption probe over an Indian deal. Orsi, who has championed the disposal plan, denies any wrongdoing.
The company had vowed to raise 1 billion euros from asset sales by the end of 2012, with unprofitable train manufacturer AnsaldoBreda and a much-coveted 40 percent stake in rail technology firm Ansaldo STS also up for sale. Ansaldo has a market value of 1.1 billion euros.
Both businesses have attracted Japanese interest, but talks have cooled, financial sources said.
Ratings agency Fitch, which has put the company on negative outlook, said on Nov. 15 that it was concerned about the timeliness of the sale of non-core assets.
"For Finmeccanica to maintain its investment-grade status, asset disposals of the magnitude publically targeted by the company will need to be announced over the coming several months," Fitch said.
Finmeccanica's chief operating officer Alessandro Pansa said in November that the group aimed to secure firm offers by the end of December, with the government supportive of its plans.
"The game is still open," another person familiar with the matter said. "There is no binding offer on the table, only informal candidacies."
Korean industrial group Doosan has also looked at a possible acquisition of AnsaldoEnergia, which is 45 percent owned by U.S. fund First Reserve.
Siemens' offer for AnsaldoEnergia could win favour with investors because it promises an easier exit than a sale to FSI, which has a policy of only buying minority stakes.
But bankers familiar with the situation said that all the political meddling risked derailing a deal. "The process is deadlocked," one banking source said.
Two large deals in the power engineering and transportation sectors have highlighted the pressure to consolidate if companies are to compete globally.
A week ago Japan's Mitsubishi Heavy Industries and Hitachi Ltd announced they were combining their power divisions. And Siemens has struck a 1.7 billion pound ($2.8 billion) deal to buy the rail business of Britain's Invensys .
But supporters of the FSI plan say that AnsaldoEnergia does not need to team up with Siemens because its own technology and a flexible commercial structure will allow it to compete effectively in current market conditions for five to 10 years.
AnsaldoEnergia has been winning market share from rivals such as Siemens thanks to its gas turbine technology. It could pose a bigger threat to Siemens once a non-competition pact in the lucrative gas turbine maintenance business expires in 2015.
No details have yet emerged of Siemens' industrial plan for AnsaldoEnergia. The management of the Italian business has been sidelined from the sale talks yet it remains unclear how Siemens would manage to adress such broad local opposition.
"We fear that if AnsaldoEnergia was to be incorporated into Siemens this would put an end to research and manufacturing activities in Italy," said a researcher who has worked with AnsaldoEnergia. ($1=0.7642 euros) ($1=0.6209 British pounds) ($1 =0.7652 euros) (Additional reporting by Stephen Jewkes and Lisa Jucca; Editing by David Goodman, Greg Mahlich)