British Energy Group (BGY.L: Quote, Profile, Research) said on Monday it was in talks which could lead to a tie-up or an offer for the 6.7 billion pound company, boosting its shares.British Energy has been talking to several international power firms in recent months about partnerships to build new reactors after the UK government gave the go-ahead to a nuclear renaissance.
It was from these talks that the possibility of a closer tie-up developed, a source close to the situation said.Shares in British Energy, which generates about a sixth of the country's electricity, shot up nearly 19 percent to an 18-month high of 680 pence and was up 11.9 percent at 639-1/2p by 9:39 a.m., valuing the group at around 6.7 billion pounds.
"The board announces that the company is in discussions with interested parties in the context of its future and its plans to take a pivotal role in any new nuclear programme," British Energy, which is 35-percent owned by the UK government, said in a statement.British Energy, which runs eight of the country's ten reactors, nearly collapsed in 2002 due to weak power prices, but was bailed out by government and its shares were relisted on the stock exchange in 2005.
The current Labour government considered nuclear power unattractive as recently as 2003 but now says it will help Britain meet its climate change goals and avoid overdependence on imported energy as North Sea oil and gas supplies dwindle.
"This will take a long time," the source said.
"There is a whole range of possibilities here. It could be some form of co-investment, joint venture, through to including the possibility of an offer," the source added.
EUROPEAN INTEREST
A second source familiar with the situation said Centrica (CNA.L: Quote, Profile, Research), Germany's E.ON AG (EONG.DE: Quote, Profile, Research) and RWE (RWEG.DE: Quote, Profile, Research), France's EDF (EDF.PA: Quote, Profile, Research) and Iberdrola (IBE.MC: Quote, Profile, Research) of Spain are currently frontrunners for the government's 35.2 percent stake in British Energy.
This could change as British Energy is talking to others as well, the source added.
On Saturday the Financial Times said that the UK government had approached energy suppliers to see if they were interested in the stake, worth at least 2 billion pounds.
Analyst Lakis Athanasiou at Evolution securities said it was most likely the government's stake would be split between British Energy's partners in new nuclear reactors.
"It is difficult to see government wanting to face the political difficulties of placing the entire UK nuclear industry in the hands of a single foreign company," Athanasiou added.
The government is keeping its stake in British Energy under review, a spokesman said on Saturday, adding that UBS (UBSN.VX: Quote, Profile, Research) had been appointed to advise on commercial and financial aspects of nuclear new build in Britain.
"This may include advice on any proposals coming forward from British Energy following the company's call for new-build partners, but UBS is not touting the government's stake on the market as is suggested," the spokesman had added.
RWE declined to comment on Saturday, while a Paris-based spokeswoman for EDF also declined to comment. Centrica could not immediately be reached for comment on Monday.
