* Deal could be announced in coming days
* Alstom would be reduced to transport assets
* French government says it's working on "other solutions" (Adds meeting details, context on regulatory history)
By Benjamin Mallet and Matthieu Protard
PARIS, April 25 U.S. industrial conglomerate General Electric Co is in advanced talks to buy the global power division of struggling French engineering group Alstom SA for about $13 billion, sources familiar with the matter said on Friday.
Sources said a deal was backed by Alstom's main shareholder, French conglomerate Bouygues with 29 percent, and could be announced in the coming days after an Alstom board meeting on Friday afternoon. The board was due to meet again on Sunday to discuss the transaction, French daily Le Figaro said.
"Talks are going ahead swiftly, the deal's structure is defined and everything is almost ready," one of the sources said. "It would be a very big asset sale, enclosing the entire energy business."
Alstom Chief Executive Patrick Kron confirmed to union representatives there were talks about an "industrial deal," but did not name GE.
Alstom, Bouygues and General Electric declined to comment.
A deal to sell Alstom's power assets, which account for about 70 percent of total group revenue, would effectively break up the engineering group and leave Alstom as a pure transport business, already known for its high-speed TGV trains.
It could, however, be less politically sensitive than a full takeover offer for the company, talk of which caused Alstom shares to soar on Thursday.
"By separating Alstom Transport, which may remain an independent French company and national champion, resistance could stay muted," Berenberg's William Mackie wrote in a note.
The French government weighed into the issue anyway on Friday. French Economy Minister Arnaud Montebourg promised to protect the national interest and to study "other solutions and scenarios" for Alstom, one of France's top private-sector employers. He said he had already met Kron on Thursday and would meet GE Chief Executive Jeff Immelt "shortly."
Immelt was set to meet with French prime minister Manuel Valls and Montebourg on Sunday, according to news agency AFP.
The French government has a history of blocking takeovers by foreign companies. Last year, Yahoo Inc abandoned its plan to acquire a majority stake in online video website Dailymotion, owned by France-Telecom Orange, because of objections by the French government. In the energy sector, the government in 2006 brokered a deal to merge Gaz de France and Suez to block a bid for Suez by Italy's Enel SpA.
GE has had its acquisition desires squelched by European regulators before. In 2001, the European Commission blocked GE's $42 billion purchase of rival diversified manufacturer Honeywell International Inc.
Analysts have speculated that a potential Alstom deal could allow GE to wring out a lot of cost savings, including through job cuts. But they said GE might not be able to fully realize the potential savings because the company will have to moderate any cuts to satisfy French authorities.
Alstom was bailed out by the French state in 2004 and relies heavily on orders from national rail operator SNCF and utility EDF. It employs 18,000 people in France, half of them in the power business, out of 93,000 worldwide.
Alstom's power assets include turbines for coal, gas and nuclear power plants, wind farms and systems for power transmission and distribution.
The trading of Alstom shares was suspended on Friday pending a statement from the company. The shares closed up 10.9 percent on Thursday after Bloomberg reported GE was in talks about a $13 billion full takeover bid for Alstom.
Before that report, Alstom shares slumped 20 percent in 12 months on concerns over its cash flow, and its weakening prospects prompted Bouygues to take a $1.9 billion writedown on its stake in February.
Alstom is much smaller than its other main rival, German group Siemens AG, and its orders have slumped since the 2008 economic crisis depressed demand for power equipment.
In need to raise cash, Alstom reached out to GE, two industry sources said. Bouygues has declined to comment beyond saying it supported the company's strategy.
Bouygues shares closed up 4.17 percent on speculation a deal would enable Alstom to return cash to shareholders, either via an exceptional dividend or a share buyback. Shares of GE, which has a market capitalization of $265 billion, closed up 0.5 percent on Friday.
Industry sources said Alstom was strong in steam turbines used by the nuclear industry, while GE is a top player in gas turbines and not so strong in steam. A deal would also enable GE to expand into wind power and grid technology, they added.
The deal would let GE "materially strengthen their competitive position in the global power market," said Brian Langenberg, an analyst with Langenberg & Co.
GE, which already employs over 10,000 people in France, has said it wants to increase its earnings contribution from industrial operations relative to its financial activities.
Ten years ago, when France was negotiating a bailout for Alstom with European Competition Commissioner Mario Monti, Siemens was a potential buyer of its power arm. In the end, then French president Nicolas Sarkozy balked at the prospect of German ownership and Alstom remained intact.
A report in Friday's Le Figaro said Alstom had looked at a similar asset swap with Siemens more recently, whereby Alstom would have exchanged its power business against Siemens' rail business. Siemens declined to comment. (Additional reporting by Natalie Huet, Gilles Guillaume, Elizabeth Pineau and Dominique Vidalon in Paris, Anjuli Davies in London and Lewis Krauskopf in New York; Writing by Natalie Huet and Andrew Callus; Editing by Andrew Roche)