Centrica, the owner of British Gas, is hammering out last-minute details of a joint venture with EDF, the European energy giant, which will see the British owner join EDF's bid for British Energy.

The British Gas owner has struck a side-deal with EDF, Europe's biggest power company, to set up a joint venture vehicle to bid for the UK's biggest nuclear generator. The French company will hold 75 per cent of the joint venture and Centrica will have 25 per cent.

The deal, details of which are still being resolved, will see British Gas receive long-term electricity supply contracts for its 17 million customers.

Today sees the deadline for bids for the Government's 35.2 per cent stake in British Energy and EDF is already understood to have submitted its bid, indicating that it will be partnered by Centrica.

There are hopes in the French and British camps that the two companies will have a clear run at British Energy, as other European utilities appear to be have lost interest after months of jockeying for position between the rivals.

RWE, the German power giant which has already made an indicative offer for the company, could also bid but its interest is thought to be waning since a potential partner, the Swedish company Vattenfall, pulled out.

Initial bids for British Energy are expected to be pitched between 600p and 700p a share, even though the shares are currently trading at 715p and some analysts have said that the company could be worth more than 800p a share.

Despite huge initial interest in the nuclear group from foreign and home grown utilities, the auction appears to have become a damp squib partly because of concerns over the poor operational performance of British Energy's aging and increasingly unreliable plant.

Only one buyer with the financial muscle to swallow up British Energy — EDF — appears to be single minded about bidding. Rival German and Spanish energy giants RWE, E.on and Iberdrola have been nervous about committing to British Energy.

Iberdrola of Spain, which owns ScottishPower, said this week that it would not launch an independent bid, although it may be interested in sharing as a junior partner in another company's bid, or picking up assets that may become available.

Sources close to the negotiations said that today's deadline is only a preliminary one for bidders to provide details of financing arrangements. The Government's advisers, NM Rothschild, have said that they will consider new bids after today, if they are materially better.

EDF and Centrica declined to comment.

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

British Energy, whose eight ageing reactors generate roughly a fifth of the UK's electricity, is viewed as a key player in the race to build a new generation of reactors because it owns access to most of the key sites. However, bidders are wary of paying over the odds for the sites, because that could jeopardise the financial viability of new nuclear power stations. It could even end up cheaper to build on greenfield sites.

The Government has said that no bid would be blocked on the ground of nationality. However, it is understood that ministers are keen for whoever wins the auction to sell some sites to a rival to ensure that the future of Britain's nuclear industry does not lie in the hands of one company.

Separately, in a sign of EDF's determination to begin developing nuclear power stations in Britain, it is understood to have bought land in Somerset and Anglesey, next to existing power stations at Wylfa and Hinkley Point, which is large enough to provide space for one of its European pressurised reactors.

Wylfa, on the island of Anglesey, is owned by the Nuclear Decommissioning Authority (NDA) and has already attracted interest for a potential new reactor from other energy groups. Hinkley Point, in the South West of England is owned by the NDA and British Energy.

It is thought that EDF has not yet started applying for planning permission to build reactors on the land.

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