UPDATE 2-Enel has green light for Europe's biggest 2010 IPO

* Europe's biggest IPO since Iberdrola renewables in 2007

* In touch with M.East, Asia sovereign wealth funds-source

* Specialized funds could also become anchor investors

* Key investors could take stakes of 2-3 pct in IPO (Adds market regulator approval)

MILAN, Oct 13 (Reuters) - Italy's market regulator has cleared Enel's (ENEI.MI) plans to list its Enel Green Power (EGP) renewables unit, paving the way for Europe's biggest initial public offering so far this year.

In a statement on Wednesday, Enel said it received the go-ahead for the publication of its EGP IPO prospectus from market regulator Consob, confirming what a source familiar with the matter had told Reuters earlier.

Enel, Europe's most indebted utility, hopes to raise at least 3 billion euros ($4.18 billion) by selling a minority stake of up to almost a third of its Green Power unit to help cut debt and protect its credit rating.

If it went through, it would be the biggest IPO since Spain's Iberdrola IBR.MC raised 4.1 billion euros from listing its renewable unit in December 2007.

In its statement, Enel said it asked Consob to send the Spanish market regulator (CNMV) an approval certificate stating the prospectus had been drawn up in line with European regulations.

Enel, which controls Spanish utility Endesa (ELE.MC), plans to launch the EGP IPO on the Milan and Madrid stock markets.

Sources have told Reuters that the IPO roadshow is expected to kick off on Oct. 18, with a final price expected to be set around Oct. 29 and a listing at the start of November.

At the beginning of October, a source said the utility had set a pre-marketing price range between 1.9 and 2.4 euros per share for the offering, with a final price range expected after Consob approval. The source said EGP had an overall 5 billion shares. [ID:nLDE6941TA]

ANCHOR INVESTORS

Enel is actively seeking foreign long-term investors for Enel Green Power, and a source close to the deal said on Wednesday it is in touch with Middle Eastern and Asian sovereign wealth funds, hoping they will take stakes of 2 to 3 percent each.

A second source close to the operation had told Reuters in August that the company was sounding out sovereign wealth funds. Before then, Enel CEO Fulvio Conti had excluded talks with sovereign funds.

Enel is considering the possibility of a direct sale to a large investor as an alternative to listing its unit, but time is running out for this option, the two sources said.

"We have still not called off the dual-track approach to the sale, but there is a high probability it will be an IPO," Enel Green Power Executive Vice President Roberto Deambrogio told Reuters last week. [ID:nLDE6941TA]

The IPO is attracting interest among foreign investment funds specializing in renewable energy, which could also become "cornerstone investors" in the IPO, one of the sources said.

"We are very much interested since it is a pure-play renewable energy utility like Iberdrola Renovables," Matthias Fawer, vice president of Sarasin Sustainable Investment at Swiss Sarasin Bank BSAN.S, told Reuters on Wednesday.

A member of the EGP banking syndicate told Reuters at the start of September that a trade sale would likely imply ceding some preferred rights and that Enel would be wary since it could hinder control of one of its fastest-growing units.

Sources had told Reuters on Tuesday that Enel would list up to around 32 percent of EGP in order to keep firm control of the unit. Under Italian law companies need two-thirds support of shareholders to approve extraordinary measures such as mergers and acquisitions. [ID:nLDE69B24H] ($1=.7173 Euro) (Reporting by Stephen Jewkes and Lisa Jucca in Milan. Additional reporting by Christopher Vellacott in London; Editing by Michael Shields and Gerald E. McCormick)