The Government’s plans for a rebirth of its nuclear industry were in jeopardy last night after France’s biggest energy company said at the eleventh hour that it was pulling out of a deal to take control of the sector.

EDF, the French state-controlled electricity company, had been widely expected to announce a £12 billion takeover of British Energy, the nuclear generator, this morning.

But shortly before midnight it released a statement saying that conditions were not right for “a major development in Great Britain”.

The takeover of British Energy, which operates eight ageing nuclear power stations and produces one sixth of Britain’s electricity, was seen as critical to the Government’s plans to replace the country’s reactors. It owns 35 per cent of British Energy. EDF had proposed building four nuclear power stations using French technology.

Centrica, the owner of British Gas, had also been expected to take part in the deal by acquiring a 25 per cent stake in British Energy from EDF.

The surprise announcement by EDF — it had been reported earlier in the evening that its board had agreed the deal — leaves the Government facing the prospect of its nuclear plans being delayed by years.

It was unclear last night what had prompted the decision to withdraw, other than last-minute wrangling over the terms of the deal. A government source said last night that British Energy emerged from a board meeting to say that the deal was off. Another source close to the deal said that the company had last-minute reservations about the terms.

The Government had pinned its hopes on the sale as a way of encouraging a building programme to replace ageing reactors. Many of its nuclear and other power plants are due to be retired from service.

If the deal cannot be revived with EDF, or another bidder be persuaded to enter the frame then the Government could be forced to create a series of smaller deals to build individual stations, which is likely to be highly complicated, expensive and drawn-out. John Hutton, the Business Secretary, said in March that nuclear power could be Britain’s biggest energy asset since North Sea oil and gas.

The Department for Business, Enterprise and Regulatory Reform had said last night that it was “watching events closely”, adding that the Government’s commitment to nuclear power was unswerving.

A spokeswoman said: “Our commitment to nuclear power is clear. The go-ahead for new nuclear power, alongside our action to promote energy saving and renewables is in Britain’s long-term national interest.

“The level of interest in nuclear new build remains high and recent months have shown there are strong signals of an appetite for this from the market. Recent developments in energy markets underline the need for nuclear build to combat high fossil fuel prices, climate change and security of supply.

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