Britain's nuclear plans in chaos as French energy giant EDF pulls out of takeover at last minute

The Government, which holds a 35 per cent stake in the UK nuclear giant, had strongly backed the plan to rejuvenate Britain's ageing atomic power capacity.

EDF had been expected to announce the £12billion deal yesterday morning, raising £4billion for the Treasury.

Sizewell B Nuclear Power Station in Suffolk: EDF's eleventh hour pullout of the British Energy takeover bid has destabilised the Government's nuclear plans

However, it is understood shareholders argued the soaring price of energy meant they should be able to command a higher price.

EDF had offered 765p per share, but Invesco Perpetual and M&G - part of insurers Prudential, who own 22 per cent of British Energy - said the offer was too low.

The rejection is a major setback to the Government's plan to cut greenhouse gases by relying more on nuclear energy.

Ministers also say nuclear power is essential to ensure future energy supplies and that, if new plants are not built, Britain could face blackouts within a decade.

EDF Chairman Pierre Gadonneix announced yesterday that the French state-controlled company had ended discussions with British Energy

Business Secretary John Hutton told Radio 4's Today programme yesterday: 'We are disappointed by the failure to reach an agreement overnight. I think it would have been a good fit.'

He said he was optimistic the drive for nuclear would not be adversely affected despite the breakdown in negotiations.

Currently, 15 per cent of the country's power is supplied by British Energy.

Five of its eight existing nuclear plants are due to be permanently taken out of service by 2018, with a further two by 2023.

Pierre Gadonneix, chief executive of EDF, said France is still committed to building new nuclear plants in Britain.

'The British market will be the number one market for nuclear power plants in the coming decade and we intend to be the leader in the UK,' he added.