Whitehall to urge EDF to make fresh offer for British Energy

THE UK Government is expected to urge French power giant EDF to resume talks on a revised offer for British Energy to ensure its nuclear power programme remains on course.

British Energy pulled out of the £12bn deal with EDF late on Thursday after two of its major institutional shareholders – Invesco and M&G – said the 765p-a-share offer undervalued the company.

Sources said that negotiations between EDF and British Energy are ongoing, but no imminent resolution is expected.

EDF said that it remains committed to building nuclear plants in the UK at sites including Somerset and Anglesey, and that talks with British Energy had not ended.

Pierre Gadonneix, chairman of EDF, said: "I confirm our ambition is to be a major actor in the nuclear renaissance in the UK."

John Hutton, the UK Government's business secretary, said he was disappointed that talks between British Energy and EDF had broken down. "We thought it was a good deal and were ready to accept," he said.

Analysts said that price is the key stumbling block, and Invesco and M&G may be expecting EDF to come back with a revised offer, with some arguing the company is worth more than £10 a share.

Tina Cook, an energy analyst with Charles Stanley, said: "I do think it all came down to price. The Government was positive about EDF's offer, but a few of the major shareholders rejected it because they thought it was too low."

She added that the value of British Energy could be placed at any level between 550p and 1,050p per share, depending on what measurement was used, and that the price was highly volatile in today's markets.

She said: "I think the door has been left open for negotiation. The likelihood is that if British Energy isn't able to resurrect the deal, it will look to push ahead with its power programme with other parties, such as Centrica or Ineos."

British Energy is aiming to build new power plants, as its existing eight sites, including Hunterston B and Torness in Scotland, are approaching the end of their lives.

While there are other potential suitors for British Energy, the UK Government will be hoping to move quickly on any deal to avoid a power crisis.

David Hunter, international business manager with McKinnon & Clarke, said: "While the Government's power strategy is not quite in tatters, it has been dealt a major blow. The Government does not have the luxury of time on its hands, as the problem should have been tackled 10 years ago. The power cuts in the UK in May showed that the system can't cope and served as a wake-up call."

He said that EDF is not British Energy's only hope, with Vattenfall, a Swedish energy company, RWE and Eon being among other potential suitors.