Gordon Brown's energy policy was in tatters today after a deal to sell Britain's nuclear power plants to a French company collapsed at the last minute.

The deal to offload British Energy to EDF was on the verge of being announced officially when it was scuppered by two major shareholders.

The sale of the public-private venturewas supposed to be the first step in a programme to build a new generation of nuclear power facilities.

Analysts said the Government's policy for meeting future energy needs was "back at square one".

British Energy thought it had signed the deal of a lifetime - which would salvage its reputation, secure Britain's energy future and land the Government a much-needed £4 billion windfall.

Out of courtesy, top brass at the company - some of the grandest names in finance - called a couple of shareholders to give them the good news.

The message was: "All set for tomorrow chaps? Get the champagne ready."

But to their horror, Neil Woodford of Invesco Perpetual and then Prudential snubbed the deal.

The two together own 22 per cent of British Energy and are among the most powerful institutions in the City.

The investors said the money was no longer enough, with electricity going to cost ever more - and the French would have to have to pay more.

British Energy chairman Sir Adrian Montague, the Treasury's favourite business fixer, called Pierre Gadonneix, the head of EDF, with the news.

Mr Gadonneix was said to be furious with months of work going out the window.

Today he ruled out a new bid, saying EDF would only invest "in a country where it was welcome".

British Energy was advised by Rothschild, the City firm that the Government prefers to use on corporate work.

Its reputation, while stronger than British Energy, is also now tarnished. EDF's advisers were the upmarket American investment bank Merrill Lynch, where bankers were said to be fuming.

There will have been extreme tensions between Sir Adrian and his chief

executive, the American energy veteran Bill Coley.

The chairman had been instructed by the Treasury to secure the cash deal with EDF, which would bring a vital windfall to government coffers. Mr

Coley's favoured plan was for British Energy to retain its independence. For the moment, it has.