LONDON, July 8: British engineering giant General Electric Co Plc (GEC) said on Tuesday it was considering the possible flotation of its 50-50 rail and power joint venture GEC-Alsthom.

GEC managing director George Simpson said in an interview with Reuters that GEC and its French partner Alcatel Alsthom were considering a London and Paris flotation under a range of options.

He said a decision could be made in the next few months.

On separate issues, Simpson said GEC was willing to gear up to invest in other parts of the group and warned that sterling strength could cost GEC 45 to 50 million pounds in profit this year.

Commenting on the future of the GEC-Alsthom joint venture, Simpson told Reuters: "That business has become very large. It is beginning to outgrow its parent and has developed its own identity and it needs to move on now.

"We have looked at whether to demerge or float the business and that is the subject of discussion," said Simpson. "On a personal basis, I think it is best."

He said such a route would be "very tax efficient" and good for shareholder value. The decision is expected within the next three months. But if the decision is in favour of demerger, that could take another six to nine months to implement.

Commenting on plans for acquisition, he said the group was now willing to gear up if the right deal came along.

"We are not averse to gearing up GEC. The mere fact that I will now do that is a very significant change in GEC's policy," he said. But Simpson was unwilling to say how high he was prepared to raise the gearing level. It is zero per cent at present.

On GPT, the joint telecoms joint venture which is 60 per cent-owned by GEC and 40 per cent by Siemens AG, Simpson told Reuters: "We examined all the possibilities. Clearly one option was to sell out the stake to Siemens. But I am driven by shareholder value."

He said telecoms remained a fast growing and promising sector.

"We will monitor the business and re-write the charter for that business as telecoms is a high growth area which GEC should remain in."

He said that in the telecoms sectors GPT operated in, growth was running at 15 to 16 per cent per annum.

Turning to the the impact of the strong pound on GEC's profits Simpson said: "It is starting to have a significant impact."

In the last financial year it wiped 19 million pounds off profits based on average exchange rates.

But Simpson said if the year-end exchange rate had been used the hit would have been 35 million and if the current rate was used the hit would be 45 million.

In the year ahead, GEC sees sterling wiping between 45 and 50 million off its profits.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.