The sale is expected to raise up to pounds 1.9bn, compared with the pounds 1.5bn New Orleans-based Entergy paid for London Electricity 18 months ago.
Bidders may include owners of other regional electricity companies (Recs), rivals such as Centrica and financial buyers such as the Japanese bank, Nomura. PacifiCorp, which lost the battle for Eastern, is another likely bidder.
Mike Bemis, the chief executive of London Electricity, indicated that the company had already received about 20 expressions of interest and more were likely to surface.
A memorandum of sale is due to be issued towards the end of this month by Entergy's financial advisers, Morgan Stanley Dean Witter, with the aim of completing the sale by early next year.
Entergy is also selling its Australian electricity business CitiPower and some US telecoms and energy management businesses. The group is aiming to raise $4bn (pounds 2.5bn), the bulk of which will be used to reduce debts standing at $10bn.
London Electricity has been seeking a merger with another Rec for some time and held talks with Seeboard and Northern Electric.
The decision to sell the business altogether follows a change of management at Entergy in May, which saw the abrupt departure of its chairman and chief executive, Ed Lupberger, who negotiated the original purchase in 1996.
Entergy said it would now concentrate on its US electricity business, nuclear power and international power generation. It said the sale of London Electricity would not affect its investments in UK power generation, adding that Entergy could be interested in bidding for power stations being sold off by PowerGen and National Power.
The decision to sell London Electricity follows the pounds 1.9bn sale last month of East Midlands Electricity to PowerGen by another US utility, Dominion Resources. PowerGen has completed the purchase and is waiting to see whether it will escape referral to the Monopolies and Mergers Commission.
London Electricity is one of seven UK Recs taken over by US utilities since mid-1995. The others are Yorkshire, Midlands Electricity, Northern, Seeboard and Eastern.
A sale to one of these companies is possible, but Mr Bemis said there were also a number of other leading US utilities without a UK presence that could be interested.
The candidate most likely to launch a financially-structured bid is Nomura's principal finance group, run by Guy Hands. Nomura considered making a bid for Eastern, part of the Energy Group, but pulled out claiming the price was too high. The company was eventually bought by Texas Utilities for pounds 4.45bn earlier this year.
London Electricity has 2 million customers and 4,000 employees. Before its sale to Entergy a number of US utilities were deterred from bidding by the fact that it supplies the capital, leaving its owner vulnerable to adverse publicity in the event of power failures.
In the second quarter London Electricity contributed $65m to Entergy's improved financial performance, although $44m related to tax benefits.
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