It wasn't clear how much State Grid would pay for the assets or how the business would be structured after the sale. Based on analysts' estimates, the assets could be worth around $1.65 billion.

The deal involves wind power assets with capacity of around 1,100 megawatts (MW) and would give State Grid a roughly 80 percent stake in AES's U.S. wind power business, sources with direct knowledge of the matter told Reuters. It would be State Grid's first foray into the United States.

The sources declined to be named as they were not authorized to speak with the media.

China's cashed up state power groups have been scooping up bargains, with dominant power distributor State Grid establishing a presence in the Philippines, Brazil and Portugal.

The company's president Liu Zhenya visited the United States earlier this month as part of a delegation accompanying Chinese Vice President Xi Jinping. Two of the sources said the companies signed an agreement during that trip, but the third source said a deal is still at the negotiation stage.

"The specific details of the American wind power project are still under negotiation," said that source, who is familiar with the talks.

AES Wind Generation, a wholly-owned part of AES Corp, operates more than 1,800 MW of wind power generation capacity in the United States, China and Europe. Of that, nearly 1,346 MW is in the United States, according to the company's website.

Arlington, Virginia-based AES, which has a market value of $10.5 billion, did not immediately respond to requests for comment, and State Grid's media official declined to comment when reached by phone.

Any deal would need both Chinese and U.S. regulatory approval.

Since the failure of China's state oil firm CNOOC's bid to buy California rival Unocal in 2005, few Chinese companies have tried to buy U.S. conventional energy assets.

There have been some U.S.-China energy deals since then, but a successful deal by State Grid would represent a significant step for China's efforts to enter the U.S. power market.

On February 22, the Chinese company signed a deal to buy a 25 percent stake in Portuguese power grid operator REN (RENE.LS) for around $508 million, and in December 2010, State Grid bought 7 Brazilian power transmission companies with investments totaling nearly $1 billion.

In January 2009, a consortium led by State Grid took over the operation of the Philippine power grid after winning an auction for a 25-year operation license for $3.95 billion.

AES, in which sovereign wealth fund China Investment Corp CIC.UL holds a 15 percent stake, recently kicked off a process to sell all or part of its businesses in China, a deal worth that could raise $300-400 million, sources have told Reuters.

(Editing by Ian Geoghegan)

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