British Gas group Centrica today hailed a new role in the future of nuclear energy in the UK as it said it is close to taking a 25% stake in the £12.5 billion takeover of British Energy by EDF.

While Centrica said the deal could mean cheaper electricity prices for its British Gas customers, City sources cautioned that its involvement is not yet signed. EDF admitted there is "no certainty" it will yet sell on the 25% stake.

The state-backed French electricity giant today confirmed that its upped 774p-a-share offer for nuclear generator British Energy has been recommended, and is backed by the UK's group's biggest shareholder Invesco Perpetual, which had previously rejected a 765p and had been holding out for 800p.

EDF, led by Pierre Gadonneix, today said it has instructed seven banks, including and Royal Bank of Scotland, to raise £11 billion to finance the takeover.

The deal has been approved by the British Government, which stands to cash in £4.4 billion from its 35% stake in British Energy — a legacy of its rescue and bailout five years ago.

However, negotiations have not yet closed on Centrica's 25% holding, a role seen as making the French-led takeover more politically palatable.

Centrica chief executive Sam Laidlaw had originally shied away from the nuclear industry but when the break-up of British Energy became more of a certainty, it last year joined in the battle of shifting alliances aimed at forming consortiums to launch a takeover of the company.

Laidlaw today heralded the putative deal as "unique opportunity for our shareholders".

He said Centrica would be a passive investment partner.

"It is like in the North Sea where we invest in various gasfields," he added.

"We make the investment, and we take our share of the energy and of the revenues and the profits but we let the experts get on with operating the field.

"In the North Sea, that would be, say, BP or Shell, and in the case of nuclear energy, it is EDF.

"EDF are the world leaders in operating nuclear power stations, running 58 of them. Why would we not want to be alongside them with their capabilities and their skills?"

The guaranteed 25% of the nuclear output from British Energy's eight power stations around the country will mean that Centrica will now buy less electricity on the open market for its British Gas customers.

"The deal means the amount of gas and power we produce ourselves goes up from 32% to somewhere in the mid-40s," he said.

"It also takes out some volatility in sourcing power, and that should help our cost base become more competitive."

Laidlaw added that Centrica will finance its £3.1 billion part of the takeover through a mixture of new debt and the issue of new shares.

It also has options to invest in EDF's programme of building four new reactors in Suffolk and Somerset, which could see Centrica needing to find a further £2.6 billion.

Alternative with a new name to UK

Today's deal has introduced a new term to the lexicon of British takeover-speak: the CVR.
British Energy investors are being offered an alternative to EDF's 774p a share in cash — 700p in cash plus one "contingent value right".

The CVR allows investors to cash in on the continued revenues of British Energy's existing power stations — a bet that its operating performance will be better in future and that its shares are undervalued at 774p each.

Over a 10-year term, the CVRs will make annual payments based on output and prices. They will be quoted and tradeable on Plus Quoted, the small London stock exchange.

If British Energy hits targets every year for the next 10, shareholders should get a total of 575p per share on top of the 700p.

Big doubts over delivery

The ability of EDF and its French nuclear design partner Areva to deliver on its plans for four new nuclear reactors on time and on budget came into question today.

Doubts arose after environmental campaigners cited problems at the pair's state-of-the-art plant being built in Normandy.

A so-called third generation EPR pressurised reactor at Flamanville has been dogged by construction problems, health and safety fears, delays and cost overruns.

Similar problems at a new plant being built by Areva in Finland is reckoned to cost €4.5 billion (£3.6 billion) per reactor against a budgeted €3 billion.

The same technology will be used in the planned UK plants due for construction from 2012.

Fears over the policing of campaigns to prevent construction have been raised after Kent police spent £6 million in one week policing the "climate camp" around the Kingsnorth coal-fired plant.

Amec, Rolls are winners

Amec and Rolls-Royce are two of the British winners from the green light for EDF to build nuclear reactors in the UK.

But there are fears the big construction contracts for the four EDF reactors, set to cost at least £10.5 billion, could go to foreign firms.

Amec, the energy industry services group, has already signed up with EDF and its reactor designer Areva to work on the strategic siting assessments to ensure its Suffolk and Somerset plants get the Government go-ahead and the licences for the third-generation EPR technology are in order.

Rolls-Royce, best known for making aero-engines, is also working with EDF on quality assurance projects on the plans.

There is no news yet on who will get the big construction contracts.

Insiders said the two reactors in Europe being built by Areva are being constructed by French firm Bouygues.