The Chinese group, which operates the world's largest hydropower plant on China's Yangtze river but is having to contend with an increasingly saturated domestic hydro market, is negotiating final terms of a Meerwind buyout with owner Blackstone (>> Blackstone Group LP), two sources said on Thursday.

The negotiations are sure to add fuel to political debate over such deals in Germany, sparked by Midea's (>> Midea Group Co Ltd) 4.5 billion euro (£3.5 billion) buyout offer for robotics group Kuka (>> KUKA AG).

Economy minister Sigmar Gabriel this week expressed concern over rising Chinese interest in German companies, calling for a "level playing field" in foreign investment and a European-wide safeguard clause that could stop foreign takeovers of strategic assets deemed key to the future economic success of the region.

People familiar with the 288 megawatt Meerwind wind park, which is 23km north of the German island of Helgoland and provides electricity for up to 360,000 households, have said they expect it to be valued at about 1.6 billion euros.

Meerwind is owned by WindMW, in which Blackstone owns an 80 percent stake, with the remainder held by German wind project developer Windland Energieerzeugung.

Representatives of Blackstone and Windland were not immediately available for comment and China Three Gorges was unable to provide comment outside business hours. Thursday and Friday are national holidays in China.

The potential deal is the latest in a flurry of activity in Europe's offshore wind industry as risk-averse investors seek regulated energy infrastructure with guaranteed returns.

German industrial groups have been in Chinese buyers' sights as the world's second-largest economy tries to make the transition from low-cost factory location into a high-tech industrial hub in tandem with a push to reduce dependence on fossil fuels.

Since January Chinese groups have announced plans to spend more than 8 billion euros on German acquisitions, according to Reuters calculations.

($1 = 0.8829 euros)

(Additional reporting by Ben Blanchard; Editing by Tina Bellon and David Goodman)

By Arno Schuetze and Freya Berry