Electricité de France is drawing up plans for a full offer for British Energy of more than 700p per share as the deadline for formal bids draws closer.

EDF is vying for control with the German power giant RWE, which informally submitted an indicative all-cash offer of nearly 700p per share several weeks ago, valuing it at £11 billion.

The steep rally in British Energy’s share price in recent weeks has prompted hesitation among potential bidders as the bidding battle heats up.

NM Rothschild, the investment bank handling the sale, is preparing to set a deadline for final bids that is due to fall “within weeks”. One source said the process was “well advanced”, with detailed due diligence under way. He said a sale could be wrapped up by July.

Both EDF, which had previously signalled an interest in buying only part of British Energy, and RWE are now interested in acquiring the entire business, whose eight nuclear and one coal-fired plants produce about one sixth of the UK’s electricity.

The generator, which is 35 per cent-owned by the Government, is viewed as a key player in the drive to build a new fleet of UK reactors through its ownership of the preferred sites – including Dungeness, Hinkley Point, Sizewell and Bradwell.

Centrica, the owner of British Gas, is also keen to get involved but lacks nuclear expertise and is viewed as a likely junior partner in an approach from either RWE or EDF. It also lacks the fire-power to mount a full bid, although Centrica has informally proposed an all-share offer of about 700p per share that would amount to a merger.

Centrica is lacking generating capacity so could be offered specific assets or contracts with either company. Other possible bidders are Iberdola of Spain, which owns Scottish Power, E.ON of Germany, which controls Powergen, and Vattenfall of Sweden. The last two are unlikely to bid alone.

EDF is the world’s biggest nuclear operator with 58 reactors. It had revenues of nearly €59 billion (£47 billion) in 2006 and its market valuation is about €110 billion. RWE, the owner of npower, has been operating nuclear plants in Germany since the 1960s. It had revenues of more than €44 billion in 2006 and is valued at €42 billion.

However, the sale of British Energy, which employs 6,000 people, is complex. The Government says its 35 per cent stake is under review and it would not oppose foreign ownership. But it would not tolerate a single, monopoly player. Building a new generation of reactors will cost tens of billions of pounds and take decades. It is a crucial part of the Government’s plans to cut carbon dioxide omissions. Any succesful bid, from either RWE or EDF, would raise competition issues by concentrating a high proportion of generating capacity in a single company.

The combination of RWE and British Energy, for example, would represent over one third of UK generating capacity. Such a scenario would, therefore, be likely to force the disposal of a string of assets to other companies.

While British Energy generates about 10gW of electrical power – a big chunk of the UK’s capacity – most of its reactors are due to be retired within a decade. Several have technical problems, including cracks in boilers and pipes. The bulk of the company’s value to a new bidder is tied up in the sites for new power plants.

Shares in British Energy have risen almost 40 per cent from 533p to 741p since The Times reported in February that its board was considering a variety of options, including break-up or sale.

EDF, Centrica, RWE and British Energy all declined to comment.

Explore Industry Sectors

• Banking & Finance

• Construction & Property

• Consumer Goods

• Engineering

• Health

• Industrials

• Leisure

• Media

• Natural Resources

• Retailing

• Support Services

• Technology

• Telecoms

• Transport

• Utilities

Times Recommends

• Bank on the brink as recession fears worsen
• Persimmon takes housing sector job cuts to 4,500
• Savills hit as London house prices down 7.5%