Page last updated at 13:11 GMT, Monday, 4 August 2008 14:11 UK

Centrica weighs up nuclear move

Nuclear power plant at Dungeness
British Energy is seeking massive investment to build new reactors

Centrica, the owner of British Gas, has said it may consider a merger with nuclear operator British Energy.

Centrica also said it was talking to an unnamed third party about taking a minority stake in British Energy if that firm bought the nuclear operator.

However, should that not happen, Centrica has not ruled out other options including a possible merger.

France's EDF seemed poised to buy British Energy for 12bn on Friday but talks have stalled over the price.

Centrica, which owns British Gas, said it could also play a role in building new nuclear plants in the UK.

Alternative scenarios

An EDF takeover of British Energy was seen as the best way of supporting the UK's plans to build a new generation of nuclear plants over the next 20 years.

The failure of the two firms to reach a deal over price seemingly threw these plans into chaos and cast doubt over the government's future energy policy.

The government owns 35% of British Energy and is keen to kickstart the new nuclear programme as the firm's eight existing plants - which provide 20% of the UK's energy supply - reach the end of their natural lifespan.

Centrica's interest in British Energy could breathe new life into the deal should - as is expected - it be confirmed that EDF is still in talks with British Energy.

In a statement, Centrica said it would only agree to buy a minority stake in British Energy should the takeover be concluded and be approved by regulators.

But in the event this does not happen, Centrica said it may consider a number of other alternatives including:

  • a merger with British Energy
  • participating in British Energy's potential new nuclear partnerships
  • long-term deal to buy power from British Energy

But the firm warned: "There can no be no certainty that an offer for British Energy will be made nor as to the terms of any such offer."

Two of British Energy's largest private shareholders - Invesco and Prudential - are holding out for a higher offer from EDF.

They are reported to be seeking an offer of nearer 10 a share, some way off the 765 pence a share offer EDF has proposed.

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