This year Roger Carr, chairman of Centrica, and Sam Laidlaw, chief executive, made their way to an appointment in Whitehall. On the agenda was a potential takeover of British Energy, the UK’s nuclear operator.

The two men approached the government to see if it would give preferential treatment to a British bidder.

An announcement by the government in January to allow a new generation of nuclear power plants had sparked interest in British Energy from several utilities. As the owner of most of the sites for new reactors, British Energy is key to government plans for a nuclear renaissance.

Mr Carr and Mr Laidlaw wanted to make sure Centrica would have a part to play. Since taking the helm in 2006, Mr Laidlaw has promised to increase the group’s supplies of gas and electricity generation so it is less exposed to volatile wholesale gas and electricity markets.

Centrica has the lowest generation capacity of all major energy suppliers and its fleet of power stations meets only about half of its electricity demand. Any involvement in a takeover of British Energy could take this to a level similar to that of its competitors.

The company has stressed its “Britishness” and the importance of safeguarding nuclear skills and security of energy supply, though some in the government remain sceptical about that argument.

Centrica’s plans to launch a lone bid have been thwarted, in part, by the poor performance of its share price in recent weeks. Fears about a windfall tax on the industry (which did not materialise) have helped push the share price down, making it more difficult to fund acquisitions.

The company lacks the financial firepower of its larger European rivals – and their nuclear record.

But the setback may have been short-lived. Centrica may yet emerge as kingmaker in discussions over British Energy’s future.

It emerged at the weekend that foreign utilities, including France’s EDF and RWE of Germany, have approached the company about a possible joint bid for British Energy.

For EDF or RWE a joint bid with Centrica would help them play the British card and allay concerns about most of Britain’s nuclear generating capacity and skills passing into foreign hands.

For Centrica, which owns British Gas, a deal would give it vital access to a low-carbon source of electricity for customers. The company supplies about a 10th of the UK electricity market and is one of the biggest residential suppliers, yet it controls just 5 per cent of the country’s generation capacity and has to buy power on the wholesale markets.

Centrica declined to comment but industry experts say a deal would make sense.

“In terms of generation, Centrica is heavily dominated by gas and wind power. For the company to be looking to get a degree of exposure to nuclear is a positive thing,” says Tony Ward, director in the utilities practice at Ernst & Young. “No utility wants to be at a significant difference to their competitors.”

It is, however, a high-stakes game and whether Centrica manages to appeal to national sentiment remains to be seen.

In meetings with the government, the company has outlined the importance of British involvement in maintaining domestic skills. Industry sources highlight a speech last month by John Hutton, the business secretary, in which he outlined the economic benefits of a new generation of nuclear power stations.

A fleet of reactors could create up to 100,000 jobs and represent about £20bn ($40bn) of business for UK companies.

“Nuclear is a strategic industry with implications for energy security,” a person in the industry says. “Where would those 100,000 jobs be if British Energy is taken over by a foreign player?”

The national issue may not be decisive and the government, which controls a 35 per cent stake, has said it wants to ensure an open contest.

A likely concern for the government is whether a single bidder should be allowed to buy British Energy, giving it control of the most attractive sites for building reactors. Even if British Energy is taken over, the government will probably want at least two companies involved in any building programme.

One scenario, says a government adviser, could be for a new owner to be asked to sell some of the company’s sites. Equally, the government needs to make sure sites owned by the Nuclear Decommissioning Authority will be attractive to a possible buyer.

“You would probably end up with at least two operators, with two sets of technologies,” the adviser says.

Sources close to the talks say discussions between Centrica and European counterparts are at a very early stage and no detailed plans have been discussed. The most obvious scenario is for Centrica to take a minority stake in British Energy.

Whatever happens, if Mr Laidlaw is to fulfil his pledge, he needs to keep Centrica in the nuclear game.

Big premium
At a closing price of 713½p on Monday, British Energy shares reflect a healthy premium for takeover speculation, writes Ed Crooks.

If a full bid for the company fails to materialise – a strong possibility – they are likely to fall back to the 500p-600p range, where they began the year.

Relative to other utilities, British Energy’s valuation looks stretched. It trades at 17.5 times next year’s earnings, according to analysts at Dresdner Kleinwort, compared with a utilities sector average of 13.1 times.

As a generator, rather than supplier, British Energy arguably deserves a higher rating to reflect growth prospects, but International Power, another generator, trades at 13.9 times next year’s earnings.

British Energy’s putative growth potential is restricted by an ageing fleet of advanced gas-cooled reactors.

To believe it is worth more than 700p a share, you have to put a high price on its unique position as the generator of almost all Britain’s nuclear electricity and the owner of most of the best sites for new nuclear power stations.

The bidding process may reveal exactly how much that is worth. But investors should not forget that a single buyer may be rejected on competition grounds.

Another factor could justify a high valuation. Power prices are linked to gas, which is linked to oil. If the oil price stays high, creating high margins for British Energy’s relatively low-cost generation, Tuesday’s share price will seem more reasonable.