Centrica mulls British Energy bid

A change in UK policy has made British Energy an attractive target

Centrica, the owner of British Gas, is looking at the possibility of launching a solo bid for UK nuclear power company British Energy, the BBC has learnt.

The BBC's business editor Robert Peston said that while Centrica was thought to be interested in a bid, it was expected to have to team up with a larger rival.

However, a lack of bids may now mean it is easier for Centrica to go it alone.

Last week, French-based utility EDF tabled an offer for British Energy after the firm put itself up for sale.

EDF sent its cash offer to British Energy's board on Friday morning, though the company did not disclose the price.

Power protection

British Energy has eight nuclear power stations generating about 20% of the UK's electricity.

The company is attractive to investors as the UK government has said it wants a new generation of nuclear power plants, and British Energy's sites are considered prime locations for the developments.

The government owns a 35% stake in British Energy and has indicated that it is prepared to sell at the right price.

A number of companies had shown an interest including Germany's RWE and Spain's Iberdrola, though they failed to present a bid.

The BBC's business editor said that "as auctions go this one has so far been on the lame side".

As a result, the Treasury may be willing to entertain offers consisting of shares and cash, rather than just cash.

That would let Centrica into the game as a bidder in its own right, he added.

The BBC's business editor explained that there was a strong commercial case for Centrica and the Treasury to create the conditions in which it could make a proper offer for British Energy.

Should it buy British Energy, Centrica would have a stable source of power that would help to protect its margins when wholesale prices are volatile.

And there would be a second benefit, which is that when negotiating with the owners of gas, such as the Norwegians and the Russians, Centrica would no longer be such a needy buyer with no ability to strike a hard bargain, he added.