Rolls-Royce Holdings PLC (RR) said it is in talks with Siemens AG (SI) over the sale of its commercial energy production assets.

"These talks have not concluded and we will make a further announcement in due course," the London-based company said in a statement. The transaction involves gas turbine and compressor activities in Rolls-Royce's energy unit, which also includes civil nuclear activities.

A deal would expand Siemens's hold on Europe's energy business and provide Rolls-Royce with funds to make an acquisition of its own or reward investors in a year of no growth.

Talks between Siemens and Rolls-Royce predate the German company's recent interest in acquiring energy assets also from France's Alstom SA, said a person familiar with the talks.

Siemens, which is preparing a bid to rival General Electric Co.'s possible offer for Alstom, didn't discuss the Rolls-Royce transaction at a board meeting Tuesday, according to a another person familiar with the talks. Siemens has planned another board meeting for May 6.

Terms of the potential deal between Rolls-Royce and Siemens, first reported by Bloomberg News, haven't been finalized, one of the people said.

Rolls-Royce generated about 1 billion British pounds ($1.7 billion) in underlying sales from its energy unit, which uses gas turbines derived from its core commercial airplane activities. The company has struggled to lift profitability at the energy unit, which delivered a 2.5% return on sales last year. It was the only segment at Rolls-Royce that failed to deliver a double-digit return.

"Energy has been an unnecessary distraction that's margin dilutive," RBC Capital Markets analyst Robert Stallard said in a note Tuesday. "We wouldn't be surprised to see some future agreement include a provision for Rolls to keep injecting technology into a Siemens-owned business."

The British turbine maker sees a more than $60 billion 20-year market for the type of gas turbines and compressors it is in talks to sell, with another $60 billion in services, it said in its annual report.

Rolls-Royce Chief Executive John Rishton said in February the company was interested in strengthening its medium-speed marine diesel engine portfolio.

Shares in Rolls-Royce have declined 19% this year, while Siemens stock has slumped 5.2% during the same period.