France's industrial giant Suez is considering a bid for British Energy (BE), raising the heat in the takeover battle for Britain’s nuclear power operator.

Suez is one of seven firms from across the European utility sector conducting due diligence on BE, which has been put up for sale by the government and could fetch up to £11 billion.

Others looking at BE’s books include: France’s EDF; Germany’s Eon and RWE; Sweden’s Vattenfall; Iberdrola of Spain; and Britain’s Centrica.

Although a number of bidders could eventually team up to satisfy government demands for competition in the market, all are looking at BE separately.

It will come as a surprise that Suez, which has 140,000 employees world-wide, is conducting due diligence. The French company has insisted publicly that it is interested only in an industrial partnership with British Energy rather than any financial investment.

It is thought that if Suez does bid, it will try to do so as part of a consortium because it lacks the financial firepower to compete with some of its European peers. Suez is also still trying to finalise its merger with Gaz de France, which could distract it from putting together an offer.

Despite Suez’s interest, EDF and RWE are seen as the frontrunners to buy the government’s stake. The two have the greater financial power of all bidders while EDF also has the backing of the French government.

Sources close to the negotiations say that it is increasingly likely that BE will eventually end up in foreign hands, which would be a blow to the ambitions of Centrica, which had hoped for “a British solution” to the future of BE.

Centrica, the parent company of British Gas, was keen to bid in its own right because it lacks sufficient power generation to meet the demands of its customers.

However, as The Sunday Times revealed a fortnight ago, Centrica has been held back by a lack of financial muscle, as well as a declining share price. Centrica has since rested its hopes on teaming up with an overseas partner and has held talks with EDF and RWE.

European bidders thought until recently that having Centrica as a partner would help to dilute criticisms of British strategic industries being bought by foreign owners. However, industry sources believe that the government has no qualms about seeing BE sold to a European operator, so the need for a foreign buyer to involve Centrica in the deal has diminished.

Instead, Centrica may have to settle on striking an agreement to buy power from British Energy’s new plants.

BE’s future could be resolved within the next few months. Talks with prospective partners for a construction programme were initiated last year, but these have quickly escalated. Last month BE said it was “in discussions with interested parties in the context of its future . . . these discussions could lead to a business combination or an offer for the company”.

British Energy has enjoyed an impressive revival. Six years ago it had to seek a government bail-out when it was squeezed by a drastic drop in electricity prices.

The nuclear company is now a key player in the government’s plans for a new series of nuclear stations. BE is being advised by NM Rothschild, the investment bank. The government has recruited UBS.

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