Centrica is in talks with EDF, the French utility giant, to create a new Anglo-French company to mount an £11 billion bid for British Energy (BE).

Sam Laidlaw, chief executive of Centrica, the British power group, has been in negotiations with his counterpart at EDF for several weeks.

Centrica is believed to want a stake of some 25 per cent in the joint venture and EDF would retain the rest. The tie-up would face competition issues.

The attraction for Centrica of teaming up with EDF is a partnership that would give it a guaranteed supply ofpower to feed its large retail operations. A British involvement in the future ownership of BE would also be welcomed within government.

Goldman Sachs is representing Centrica in the talks and Merrill Lynch is acting for EDF.

Talks are still taking place and there is no guarantee they will be successful. Centrica is still holding negotiations with other potential buyers and EDF has reserved the option to submit a solo bid.

Bankers at NM Rothschild, BE’s adviser, have asked for formal bids for the nuclear group to be tabled by Friday.

Analysts believe that EDF and Centrica could pitch an opening offer at 640p a share or less - almost 90pbelow Friday’s closing share price.

It is understood that there are five parties conducting due diligence on a bid for BE. The other three are RWE, Suez and Iberdrola.

Industry sources say most of these are only interested in securing a small number of sites for developing new nuclear reactors.

RWE, the German utility giant, iscoming under pressure from investors over its involvement in the bidding process.

Although it held talks with the Swedish utility Vattenfall about a possible joint bid, these talks have now broken down.

Eon, the rival German power giant, has gone cool on the deal, according to industry sources. Suez, the Frenchutility group, has also indicated that it would not be in a position to bid for the whole of the group until its merger with Gaz de France is completed later this year.

Spain’s Iberdrola, which is being advised by Dresdner Kleinwort, has already stated publicly that it would be unlikely to proceed with a bid for the whole business.

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