UPDATE 1-E.ON looking to sell U.S. utility-sources

* E.ON looking to sell U.S. regulated utility

* Goldman Sachs is among E.ON's advisers (Adds background, details about potential bidders, comment from E.ON)

By Michael Erman

NEW YORK, March 1 (Reuters) - German power and gas company E.ON (EONGn.DE) is looking to sell its U.S. regulated utility unit, formerly known as LG&E, according to sources familiar with the matter.

Goldman Sachs is advising E.ON on the possible sale, the sources said.

Potential bidders for the unit could include Duke Energy Corp (DUK.N), Southern Co (SO.N), American Electric Power Co Inc (AEP.N) and PPL Corp (PPL.N), the sources said.

According to the company's website, E.ON U.S. owns and operates Louisville Gas and Electric Company, a regulated utility that serves 318,000 natural gas and 390,000 electric customers, and Kentucky Utilities Company, an electric utility that serves 518,000 customers in Kentucky and Virginia.

E.ON picked up LG&E, now known as E.ON U.S., as part of its acquisition of British power company Powergen in 2002. Powergen paid about $3.2 billion for LG&E in 2000.

If completed, the sale would be the second large utility deal in the U.S. this year. Last month, Ohio's FirstEnergy Corp (FE.N) agreed to buy Pennsylvania's Allegheny Energy Inc AYE.N in a deal currently valued at about $4.4 billion in stock.

But utility deals are notoriously difficult to complete, as they often face tough scrutiny by state regulators and other politicians.

In recent years, planned mergers of FPL Group FPL.N and Constellation Energy Group (CEG.N) as well as Exelon (EXC.N) and Public Service Enterprise Group (PEG.N) have fallen apart after regulatory problems arose.

A spokeswoman for E.ON U.S. said she could neither confirm nor deny "rumors or speculation about mergers or acquisitions." Southern, AEP, and PPL also said they could not comment on speculation, while Duke could not be reached for comment.

Goldman Sachs declined to comment. (Reporting by Michael Erman; editing by Carol Bishopric and Gunna Dickson)