The government aims to rise about AU$20 billion from a 99-year lease on 49% of the government-owned electricity distribution and transmission businesses.
The transaction could exclude Essential Energy and Transgrid which have large regional footprints.
The privatization notice comes as NSW residents are having rising power costs.
It is understood that the NSWG could use the funds to finance other needed infrastructure projects in Australia including WestConnex road project, a major highway in Sydney, and a new rail crossing under Sydney harbour.
New South Wales will soon hire advisers to conduct a study about how the lease should be executed.
The government said that the remaining 51% stake in the power grid will be held by the NSW Future Fund, which manages investments on behalf of the state.