British nuclear plan in disarray as EDF pulls back

Britain's plans to build a string of new nuclear power stations have been dealt a huge blow after French power giant EDF scratched plans at the last minute for a £12 billion deal to buy British Energy.

EDF yesterday said it had failed to reach agreement on taking over the nuclear power operator, which according to a source close to the matter came after leading private shareholders in British Energy said the deal was too low. Shares in the British company slumped five per cent to 695 pence by 0846 GMT, although the source said talks between the pair were ongoing.

The shock announcement, which could throw Britain's plans to re-launch its nuclear programme into disarray, came after a separate source briefed on the matter said the EDF board agreed a bid on Thursday night.

EDF had all but secured approval from British Energy for a full cash offer in the region of 775 pence a share, with the potential of future payments based on electricity prices, the source told Reuters, but some investors then rejected the offer.

The deal would have netted the British government, a 35 per cent stakeholder in British Energy, around £4.6 billion - officially to go towards the clean-up of Britain's declining nuclear power sector.

Business Minister John Hutton said he was disappointed the deal did not go through as the government had been keen to accept it. "We thought it was a good deal, we were ready to accept the deal," he told BBC Radio. The government gave the green light for new nuclear power stations in January, but British Energy is seen as too small and unskilled to build them on its own.

An auction for the company was then triggered, but the hugely experienced EDF quickly emerged as the only serious bidder.

EDF CEO Pierre Gadonneix told a joint news and analyst conference that "financial conditions" were not currently there for a move into Britain, which would have been the company's biggest foreign expansion to date.

"I confirm our ambition to be a major actor of the nuclear rebirth in Britain. We have been working on that for three years and we have taken measures to reach this target," he said.