The future of Britain's nuclear industry could be settled this week with the boards of British Energy and EDF, its French suitor, scheduled to meet to consider a sweetened £12 billion-plus bid for the UK generator.

British Energy's board, led by Sir Adrian Montague, will hold the first meeting today to discuss a new, provisional offer from EDF, which had an earlier approach rejected in July.

The new proposal is expected to include a slightly higher cash offer of about 775p a share, plus a boost in the potential payout from financial instruments designed to offer shareholders a slice of future profits, known as contingent value rights (CVRs).

If the board recommends the offer, the deal could get the green light at an EDF board meeting in Paris tomorrow. A deal could be announced within days.

EDF insists that it wants a recommended offer from the board of British Energy and is eager to avoid a repeat of the embarrassing, eleventh-hour rejection of its earlier approach. That offer, pitched at either 765p a share in cash or 700p plus a share of future profits through the CVRs, was unexpectedly torpedoed by Invesco Perpetual and M&G, two rebel shareholders, which said that it undervalued Britain's biggest wholesale electricity generator.

Invesco and M&G had argued that high wholesale energy prices justified a higher valuation, but a subsequent collapse in energy prices has served to weaken their argument, sources say.

Since August 1, EDF is believed to have won tentative support for a deal from Invesco Perpetual, which owns 15 per cent of the shares.

Questions remain whether M&G, which has a 7 per cent holding, can be persuaded to back the deal or whether its support will be necessary for EDF to take control.

The Government, which owns 35 per cent of the shares in British Energy, has made clear its preference for a French-backed takeover.

EDF appears to have the support of more than half of shareholders, giving it a powerful platform from which to seize control of the group.

Nevertheless, some EDF board members have expressed mounting frustration at the group's failure to secure a deal, despite strong support from the Government.

The support of the French Government will also be needed for the deal because the State owns almost 85 per cent of EDF.

The sliding pound has also strengthened the likelihood of a deal by making British Energy a cheaper acquisition in euro terms than it was at the start of the year.

EDF confirmed yesterday that a scheduled board meeting would take place tomorrow, but it declined to comment on the agenda. British Energy declined to make any comment.

A successful takeover of British Energy by EDF would place the French group at the heart of the Government's plans for a renaissance of nuclear power generation in Britain. British Energy, which employs 6,000 people, operates one coal-fired and eight nuclear power stations, producing about one sixth of the

UK's electricity. However, it is the company's ownership of the preferred sites for new nuclear power stations that makes it of particular interest to EDF.

EDF has said that it wants to build at least four new nuclear plants in Britain using technology from Areva, another French company.

To satisfy competition concerns and to help to meet the costs of the takeover, EDF is considering selling a 25 per cent equity stake in British Energy to Centrica, the owner of British Gas.

If British Energy rejects the new offer, the likelihood is that EDF will withdraw and seek alternative ways of building the new power stations. The most likely scenario would be for British Energy to form a series of joint ventures to construct individual stations.

While several other energy giants expressed an interest in buying British Energy, EDF was the only one to submit a fully financed offer before a May deadline. Detailed talks have been under way ever since.

The Government is eager to resolve the ownership issue quickly to ensure that its programme of building new nuclear power stations remains on track.

Road to a takeover

Jan 10 The Government declares its support for a new generation of UK nuclear power stations

Feb 14 The Times reports that British Energy is considering various options, which include a sale or break-up of the company

March 17 British Energy announces that it is considering takeover offers for the company

May 16 British Energy says that it has received a “range of proposals” from different groups

July 24 British Energy admits that it is in advanced discussions with EDF, the French group

July 31/Aug 1 Plans for a takeover by EDF are scrapped at the eleventh hour after rebel shareholders torpedo the deal

Sept 16 British Energy board meets to consider revised offer

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