The 775 pence price would value British Energy at 12.4 billion pounds including a 35 percent stake owned by the government. The company has been in play since the government gave the green light to the building of a series of new nuclear plants in January.

On Thursday, British Energy confirmed it was in "advanced discussions with one party" but said there was no certainty the discussions would lead to an offer being made.

Centrica, British Energy and EDF all declined to comment.

LUDICROUSLY LOW

Analysts said that although the price was significantly higher than an EDF proposal of below 700 pence, which industry sources said was rejected earlier this year, it was still low compared to many ways of valuing the company.

"It’s ludicrously low," Evolution analyst Lakis Athanasiou told Reuters. "Based on $100 a barrel oil until 2012, and $70 a barrel thereafter, we value British Energy’s existing assets at 760 pence," he said.

"That would be a good price for existing assets, but does not include any price for new nuclear," he added.

Valuing British Energy has proven difficult due to the impact of a surge in power prices, which has led British Energy and its shareholders to hold out for a higher price. However, a recent fall in prices may have encouraged the company to secure an agreement.

A separate industry source said talks between EDF and Centrica were continuing. The involvement of Centrica is seen as crucial to winning over the support of the British government, which is reluctant to see the nuclear giant falling entirely into overseas hands.

Once a deal is agreed with EDF, the offer will be put to shareholders including the government, which would then be asked to recommend the price.

However, the deal would immediately raise competition issues due to EDF’s existing presence in the UK wholesale and retail energy markets. British Energy currently supplies nearly a fifth of UK electricity, while EDF had a 7.2 percent share of output last year.

A takeover of British Energy would net over 4 billion pounds for government coffers, although the cash has been earmarked to help clean up after Britain closes nuclear power stations.

(Editing by Dominic Evans, Paul Bolding)