Power firms Centrica and EDF are in talks about creating a new Anglo-French company to mount an £11 billion bid for British Energy, it was reported today.

Centrica is believed to want a 25% stake in the joint venture, which would give it guaranteed supply to feed its British Gas retail operation.

A Sunday newspaper said talks involving Centrica chief executive Sam Laidlaw and EDF have been taking place for several weeks, although Centrica has remained in discussions with other interested parties and EDF has reserved the right to go it alone with a solo bid for Livingston-based British Energy.

The Centrica and EDF proposed tie-up may attract competition concerns, but at the same time any British involvement in the future ownership of British Energy is likely to be welcomed within government.

British Energy operates all eight of Britain's nuclear power stations and should play a major role in the proposed development of the next generation of nuclear power supply.

It said in March it had received takeover approaches, reportedly prompting due diligence interest from five parties in all. The other three are believed to be German energy firm RWE, France's Suez and Iberdrola, the Spanish owner of Scottish Power. The UK Government is considering the future of its 36% stake in the firm, having sold a 25% stake in the company last year for £2.08 billion.

It is thought that bankers at NM Rothschild, British Energy's adviser, have asked for formal bids to be tabled by Friday. The Sunday Times said EDF and Centrica could pitch their offer at 640p a share - well below Friday's closing share price - as EDF highlights the value of its expertise in nuclear power.

The company already operates 19 nuclear sites in France, where it supplies more than 80% of the country's power needs. The group also has extensive operations across Europe, with UK arm EDF Energy boasting 5.1 million gas and electricity customers.

British Energy has 6,000 staff and produces around one-sixth of the UK's electricity. Its eight nuclear power stations are Dungeness B in Kent, Hartlepool, Heysham 1 and 2 in Lancashire, Hinkley Point B in Somerset, Hunterston B in Ayrshire, Sizewell B in Suffolk and Torness in East Lothian. It also owns a coal-fired power station at Eggborough, East Yorkshire.