Shares in British Energy soared by more than 7% to a 20-month high today as speculation mounted that French firm EDF was poised to launch a £9 billion takeover offer.

The stock rose 46½p to 709p, valuing British Energy at £7.33 billion, after reports on the continent said the EDF board has given the go-ahead for a bid.

Nuclear power generator British Energy last month said it was in talks with a number of suitors, having effectively put itself up for sale.

It refused to comment on a possible approach from EDF today but a source said: "It makes sense for the French to do this."

EDF, a major electricity supplier in London, said it was looking at moving into the nuclear power market in Britain.

"The UK is one of four countries EDF is targeting as it takes part in nuclear power development," it said. "In this context EDF is in contact with the UK's players in the area to deliver on this objective."

British Energy shares have fluctuated violently in recent weeks as investors gambled on a bidding war breaking out.

One City trader today said: "This is the biggest move they've had on the back of a takeover story, which does suggest there is some substance to it."

The UK Government is keen to sell its 35% stake in British Energy to the highest bidder but it is not clear if it would be happy to see the whole group fall into foreign hands. Stockbroker Evolution Securities said if a full bidder emerged the Government would require it to develop new nuclear power.

EDF is likely to face competition from RWE and E.ON of Germany and Iberdrola of Spain. British Gas owner Centrica has also been talking to British Energy about working on new nuclear power stations and could also be in the running.

Analysts at Evolution Securities said it would take a bid of around 900p a share, or £9 billion, to win the backing of the Government and other shareholders.

British Energy will be at the heart of future nuclear power supply in Britain because it owns the sites where the new power stations are most likely to be built.

Nuclear power is becoming an increasingly popular option among ministers amid fears over the reliability and cost of gas supplies from over-seas.

It is politically risky but there are growing signs the public will accept it as households struggle to pay soaring gas and electricity bills.