The deal would see Ardian take a minority stake in the venture which would include A2A's thermal and renewable power plants and possibly Ardian's wind power portfolio in Italy, the sources said.
Ardian is being advised by Nomura while A2A is working with Citi, one of the sources said.
A2A and Ardian declined to comment. Citi and Nomura were not immediately available for comment.
Italian daily Il Sole 24 Ore reported earlier on Tuesday the two groups had agreed to set up a joint venture to manage power generation plants and clients that could be worth several billions of euros.
In a statement on Tuesday A2A confirmed it was in talks with Ardian but said no agreement had as yet been reached.
Last year A2A and Ardian agreed to work together to develop green hydrogen projects using renewable energy sources.
A2A, controlled by the cities of Milan and Brescia, has pledged to spend 16 billion euros between now and 2030 to cut its carbon footprint.
It aims to triple its renewable capacity to 5.7 gigawatts through more than 4 billion euros ($4.87 billion) of investments and acquisitions.
($1 = 0.8216 euros)
(Reporting by Stephen Jewkes, editing by Louise Heavens)