Spanish utility Iberdrola intends to sell its smart meter business in the UK and has hired advisors, according to three sources familiar with the situation, in a bid to take advantage of growing investor interest in the sector.

Iberdrola is seeking to raise about £1 billion ($1.27 billion), one of the people said.

The sources, who spoke on condition of anonymity as it is a private transaction, cautioned that the sale process is at an early stage and no deal is guaranteed. They also said Iberdrola is working with RBC as an advisor on the deal.

Iberdrola and RBC declined to comment.

The company in October made public a £24 billion investment plan for its British subsidiary Scottish Power through 2028, about two-thirds of which would be spent on power transmission and distribution networks.

One of the three sources said that proceeds from the sale of the smart meter business would help fund the investment plan.

According to the 2023 accounts published on its website, ScottishPower manages more than 2.5 million smart meters through its subsidiary SP Smart Meter Assets Limited.

By the end of September, 37 million smart and advanced meters had been installed in homes and small businesses across the UK, according to the UK Department for Energy Security and Net Zero.

As smart meter adoption increases, infrastructure funds' interest in the sector is growing.

Earlier this month, private equity firm EQT and Singapore sovereign wealth fund GIC acquired a majority stake in smart meter provider Calisen, while Arcus' Horizon Energy Infrastructure merged with KKR's Smart Metering Systems (SMS).

Smart meters provide real-time information on electricity consumption to households and suppliers, helping them to save money.

In August, Iberdrola agreed to buy a majority stake in the British electricity grid Electricity North West (ENWL), in a deal that valued the company at around €5 billion, expanding the Spanish group's operations in the UK.

At a time when the renewables sector has had to contend with high interest rates and the associated costs of debt, Iberdrola has focused on improving and expanding power grids, such as those controlled by ENWL, which offer stable and predictable returns.

(1 dollar = 0.7845 pounds)

(Reporting by Andres Gonzalez, editing by Anousha Sakoui, Elaine Hardcastle and Barbara Lewis; Spanish edition by Tomas Cobos)