British Energy 'will be foreign owned'

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The Independent Online

Utility group Centrica all but conceded hopes of keeping nuclear power generator British Energy in UK hands over the weekend when details emerged of the firm's preliminary discussions with foreign companies about taking a minority role in any takeover deal.

Centrica, which owns British Gas, now sees its function as making a majority bid for British Energy by a foreign group, "more palatable from a British perspective," according to industry sources, who suggest that the firm would be looking to take a 10 to 20 per cent share in any consortium. It is understood that meetings between Centrica, EDF of France and, separately, Germany's RWE have already taken place to work out the make-up of a combined bid that could value British Energy at as much as £10bn.

"The discussions are at a very early stage," said one source. "At the moment the parties are exploring opportunities and there is no definite plan in place. It is still a matter of if, rather than when." Centrica, RWE and EDF declined to comment.

Centrica had been keen to lead a takeover of British Energy, after the board, led by chief executive Sam Laidlow, hired Goldman Sachs to advise on the viability of such a move. Senior officials at Centrica are thought to be annoyed that the Government, which owns 35 per cent of British Energy, did not give preferential treatment to a domestic takeover: a move which added insult to the injury of the Government's decision to levy a windfall tax on gas and electricity profits.

Centrica's ability to bid has also been limited by a fall in the group's share price, which has dropped from nearly 350p at the start of the year to 303.5p on Friday.

Meetings have already been held with representatives from EDF and RWE after those companies made initial contact. Centrica is understood to be expecting approaches from other European utility firms, including Germany's EON and the Spanish owners of Scottish Power, Iberdrola. While the Government wants to secure a good price for its share of British Energy, it is believed Centrica has urged officials not to rely solely on an overseas blueprint for the UK's future nuclear energy needs. British Energy, which asked for state aid in 2002 after a fall in energy prices, is being advised by NM Rothschild, with UBS mandated to counsel the Government.