NATIXIS Ardian has hired Natixis to advise on the sale and is expecting to launch an auction for the stake in the summer which may fetch a price of about 300 million euros (262 million pounds), they added.
Ardian and Encevo declined to comment, while Natixis was not immediately available to comment.
Encevo comprises grid operator Creos and energy provider Enovos. It was formerly known as Enovos.
The private equity firm had bought the stake from German utilities E.ON and RWE in 2015 with a view to using Encevo as a platform for additional investments in grids, which account for the bulk of the company's business.
But the expansion fell short of Ardian's expectations even though it had taken part in various auctions for grid assets and this eventually prompted the decision to sell.
Encevo's sales fell 20 percent year-on-year to 1.9 billion euros in 2016 and are down a third from 2013 levels. Earnings before interest, tax, depreciation and amortisation rose 13 percent to 262 million euros in 2016, benefiting from one-offs.
Any buyer of the Ardian stake, which comes with three board seats, will get less than a blocking minority, which stands at 33 percent in Luxembourg.
Pension funds and insurance groups, which are tipped as most likely buyers of the stake will make their bids dependent on governance rights as well as the group's future dividend strategy, one of the people said.
The Luxembourg State owns 28 percent of Encevo directly, while state banks SNCI and BCEE hold a combined 26.2 percent and the City of Luxembourgas 15.6 percent. Luxembourg has a right of first refusal.
(Reporting by Clara Denina, Andres Gonzalez and Arno Schuetze. Editing by Jane Merriman)
