British Energy gets three bids from continental firms

The probability that British Energy will fall into foreign hands increased yesterday after the country's biggest electricity generator said that it had received two takeover bids worth at least £10.8bn and an unpriced third offer.

The company did not reveal the identities of its suitors, though they are understood to include a pair of French groups, EDF, the state-owned utility, and Suez, which are bidding separately. The third offer is understood to be a joint bid from RWE of Germany and Spain's Iberdrola, the owner of ScottishPower.

British Energy warned yesterday that the process was still far from completion as the bidders needed time to carry out further due diligence before tabling firm, fully financed offers. The company said all of the offers were tabled within the last week, but that each "requires further development and that the process is ...likely to continue for a number of weeks". British Energy said all three offers contemplated paying at least 680p per share.

The expressions of interest will hearten the Government, which is hoping to pocket up to £4bn from its 35 per cent stake in the owner of all eight of the UK's nuclear power stations. The price range, however, may be disappointing, as it is well below previously suggested prices of around £12bn. British Energy shares surged 5.2 per cent on the announcement to 715.5p, well off the high of 785p it reached last month when hopes of a bidding war peaked.

EDF, one of the biggest nuclear power groups in the world and the only bidder to have tabled an offer by the 9 May deadline, is seen as the frontrunner. British Energy is attractive to companies keen on increasing their exposure to nuclear generation in the UK because it owns the sites where all of the country's active nuclear reactors are now located, sites seen as the most desirable for newly built reactors.

The Government has expressed its desire for a new generation of nuclear reactors to be built, the first European government in years to do so. The UK is thus seen by the nuclear industry as a proving ground that will help position them for expected nuclear revivals in other countries.

The Government has also made it clear that if one company wins the auction for British Energy, it would be forced to divest some sites to ensure that there is more than one provider of new nuclear energy. Centrica, owner of British Gas, is keen to take an equity stake with another bidder and has held talks with EDF in the past.