Siemens is readying a formal offer for Alstom under which it would transfer its rail activities and less than €7 billion in cash to its French rival in exchange for its power assets.
This is according to sources familiar with the German firm's thinking.
The sources told Reuters on condition of anonymity that the offer under consideration put a slightly higher value on Alstom's energy activities than a rival bid from US giant General Electric.
But the cash component is expected to be only a little more than half of what GE is offering.
This reflects the fact that Siemens would be transferring its trains business to Alstom, allowing the French government to boost the creation of a new European rail champion.
It also follows a decision by Siemens to exclude some Alstom energy activities - nuclear, wind energy, and transmission and distribution (T&D) - from its bid, two sources said.
Both Siemens and Alstom declined to comment.
Alstom is already in talks with GE over a €12.35 billion all-cash offer for its power arm, which has been extended until June 23.
Under strong political pressure, it has opened its books to Siemens so the German firm can propose its own deal if it wants to.
Excluding Alstom's nuclear and wind businesses from its bid could allow the the French group to sell them directly to state-controlled energy firm Areva.
But it could also create problems as one source close to the French camp said it would be difficult to separate the nuclear side of the turbine business from non-nuclear activities.
As for the T&D business, valued at €1.5-2 billion, sources said Siemens was worried that acquiring Alstom's assets in this area would create formidable regulatory hurdles given the dominant position Siemens already enjoys in the sector.
Therefore, the German firm has decided to also exclude T&D - a business that makes technology for transporting electricity from power plants to consumers - from its offer.
As previously reported by Reuters, Siemens would be offering its rail activities and would propose creating a joint venture with Alstom in rail signalling.