British Energy bid reflects high risk

By Daniel Fineren - Analysis

LONDON (Reuters) - It might be brinkmanship which caused key shareholders to reject EDF's bid for British Energy at the last minute, but the move also highlights the difficulty seen in valuing the future of the nuclear power industry.

After months of talks EDF's board agreed on Thursday to make a full cash offer of around 765-775 pence a share, valuing the owner of most of Britain's existing nuclear power plants at around 12 billion pounds.

The offer was welcomed by a government desperate to kick off a nuclear new-build programme with EDF's help but rejected for being too low by institutional investors.

Talks are continuing, with investors thought to be holding out for a better offer because they expect energy prices to continue rising, while EDF said it still sees Britain as a key part of its international expansion plan.

But some analysts say EDF's spurned offer reflects huge uncertainty about ageing nuclear reactors and which way energy prices will go over the next few years.

"It's quite a risky undertaking to buy a company like that," Matt Brown, director of European power at Cambridge Energy Research Associates said.

"They have historically been fairly poor performing nuclear plants in the UK."

Half of British Energy's 16 nuclear reactors have produced no electricity this week and four have been closed since last year due to age-related problems.