The Government is expected to put intense pressure on EDF, the French state-backed energy group, to table an improved offer to buy British Energy after its £12 billion bid for the nuclear-power company was snubbed by shareholders at the last minute.

A spate of lobbying by the Department for Business could help to bring together EDF and Centrica, the owner of British Gas, which has reignited its interest in a potential bid for British Energy over the weekend.

The Government, which holds a 36 per cent stake in British Energy, also hopes that potential counter-bidders could return to the fray.

The interest of RWE and E.ON, both of Germany, and Iberdrola, of Spain, in a possible bid for the nuclear-power generator was described by government sources last night as “live”.

A source familiar with the thinking of the Department for Business said: “We are really at the situation where all parties are agreed that EDF would be the best purchaser of BE. It is the best and most straightforward way of getting the nuclear new-build that we are looking for.”

In conjunction with the Shareholder Executive, a government body, the department is in charge of decision-making over the sale of the state holding in British Energy. “You don't stand back totally when you have a 36 per cent stake,” the source said.

The auction of British Energy was thrown into disarray late last week after the group's two leading City shareholders rejected EDF's offer, thought to have been pitched at about 775p a share, on price grounds.

Invesco and M&G, which between them hold just over 22 per cent of British Energy, were also unhappy about a “contingent value rights” (CVR) component designed to give them the chance to benefit from future success of the energy group.

Shareholders complained that the CVR element, introduced very late in the negotiations, was unclear and might have locked out some investors.

John Hutton, the Business Secretary, said on Friday that he was disappointed that talks between British Energy and EDF, the world's largest nuclear operator, had not yet resulted in agreement.

He said that it was for the boards of the two companies to decide whether an agreement could be reached. However, the Government is expected to act behind the scenes over the coming weeks to clarify its position in the sale and act as a facilitator between the parties where necessary.

Sources close to British Energy's leading shareholders said that they were determined to secure the best price for the group, particularly given the Government's commitment to a renewed nuclear programme. They were also prepared to see the energy group break itself up and pursue partnership deals over individual reactors.

EDF is understood to remain interested in a bid for British Energy, but is unhappy about the surprise rejection and the prospect of having to bid more.

The French group, which has committed itself to building four power stations, is also exploring alternative options, including buying land next to existing nuclear sites.

It emerged yesterday that Centrica, which had joined forces with EDF in the early stages of the auction, has renewed its interest in a consortium deal. The group is prepared to proceed only if it has the support of its shareholders and is likely to discuss the issue at post-results meetings with its leading investors in the coming days.

The renewed strength of Centrica's share price in recent weeks is thought to have spurred its interest.

All parties declined to comment.

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