RWE, the German power giant that owns npower in the UK, has tabled an £11 billion indicative cash offer for British Energy, the nuclear generator.

The German giant made its approach to British Energy several weeks ago, offering 700p a share, according to sources familiar with the matter.

At this price, a deal would raise almost £4 billion for the Government which is considering selling its 35 per cent stake in the company. Shares in British Energy surged 4 per cent to 730p in early trading on news of the approach.

The German company, which has nuclear experience in its home turf, is now one of several European and British energy giants conducting due diligence on British Energy, although a formal auction for the nuclear group that was bailed out by the Government six years ago has yet to start.

RWE's move would put it in poll position to snap up the nuclear generator, as EDF the French energy group which has also expressed an interest, is understood to have made an approach for just part of the group.

While RWE's all cash offer for the whole group looks superficially better than EDF's, the French giant could yet have the edge as it is understood to be considering a joint bid with Centrica, the owner of British Gas.

Earlier this week, Malcolm Wicks, the Energy minister, said that the Government was mindful of the need to ensure a variety of companies were involved in the programme to build new nuclear power stations. “We wouldn’t be happy, we wouldn’t really allow just one company to have a monopoly of nuclear in Britain,” he said on a visit to his counterpart in Washington.

Analysts and British power companies have expressed concerns that the purchase of British Energy by either RWE or EDF, which have large retail energy businesses in the UK, could lead to a squeeze in liquidity in the wholesale electricity market, eventually pushing up power prices for consumers.

British Energy's share price has climbed 30 per cent in the last month, but there are also concerns that the price has risen higher than the ageing power stations it owns are worth.

The value in British Energy is in the sites it owns, which are the favoured locations for new nuclear power stations. However, a bid pitched between 700p and 900p, as analysts have forecast, would see the competing energy companies paying a huge premium to ensure first choice of locations for new power stations.

British Energy would not comment on takeover talks today. The nuclear giant released a year-end trading update in which it said that its nuclear output for the full year to the end of March was 50.3 terawatt hours (TWh), down slightly on last year’s 51.2 TWh.

The nuclear group also said the reduction in output from planned refuelling operations in the next year would increase from about to 3 TWh to about 4 TWh. “Increased refuelling losses are largely due to a slower than expected recovery to normal refuelling operations of the Dungeness B power station,” British Energy said.

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