Aug. 1 (Bloomberg) -- British Energy Group Plc, the U.K.'s biggest nuclear power producer, rejected a 12 billion-pound ($23.8 billion) takeover offer from Electricite de France SA, two people with knowledge of the talks said.

British Energy wouldn't back yesterday's offer of 765 pence a share from the Paris-based company, Europe's largest power generator, because some of its largest investors would have turned down the approach at that price, said the people, who declined to be identified because the negotiations are private. The U.K. government endorsed the French utility's approach.

Both companies left the door open for talks. The U.K. government wants to boost the share of nuclear-generated electricity from its power stations to reduce dependence on imported oil. Electricite de France, which reported a 12 percent decline in profit today, is the dominant utility in France, where 77 percent of electricity is generated by nuclear power.

``It all hinged on their major shareholders,'' Lakis Athanasiou, an analyst at Evolution Securities Ltd. in London, said by phone today. ``There wasn't sufficient upside.''

British Energy's biggest shareholders, apart from the U.K. government, which owns a 35.6 percent stake, are Invesco Ltd., Deutsche Bank AG and Prudential Plc, according to data compiled by Bloomberg. Other investors include M&G Investment Management Ltd. and Franklin Resources Inc. Beth Wood of Invesco declined to comment and a call to Prudential wasn't immediately returned.

`No Certainty'

The two utilities said discussions are still continuing, with ``no certainty'' there'll be another offer. British Energy dropped as much as 54.5 pence, or 7.5 percent, to 675 pence, the largest one-day decline since Oct. 22. It closed down 29.5 pence, or 4 percent, at 700 pence. Electricite de France fell 3.1 percent to 54.20 euros.

Centrica Plc, the U.K.'s biggest energy supplier that may have acquired a 25-percent stake in British Energy as part of the arrangement, fell 5.6 percent to 297 pence. Centrica spokesman Andrew Turpin declined to comment.

Paris-based Electricite de France, which already has 7.9 million customers in the U.K., would have won control of eight U.K. atomic plant sites with potential for building new reactors if it had reached agreement on a deal yesterday. The U.K. government wants investment in new nuclear plants and is identifying sites for reactors.

Price Difference

The U.K. government is disappointed by the failure to reach a deal overnight, Business Secretary John Hutton said today in a radio interview with the British Broadcasting Corp. It was a reasonable offer that the government was prepared to accept, Hutton said. There was a big difference between the offer price and the price some shareholders wanted, he said.

``It's simply down to price,'' Athanasiou said in an interview with Bloomberg Television.

If this deal is not able to go through, the government will look at alternatives to ensure new nuclear stations are built, Hutton told the BBC.

``As we indicated last night after detailed discussion we have concluded that the conditions, notably financial, are not in place today,'' EDF Chief Executive Officer Pierre Gadonneix told reporters in Paris. ``This does not put into question our investment projects internationally, and in particular in the U.K. We have the intention to be a major actor in the U.K. nuclear market. We have been working on this for three years.''

Nuclear Reactors

Prime Minister Gordon Brown said on June 22 that he backs new atomic plants. In 2007 nuclear reactors produced 19 percent of the U.K.'s power. While Brown favors the technology because it emits less carbon dioxide, the gas blamed for global warming, than natural gas and coal-fed stations, he hasn't set a growth target for the industry.

U.K. Energy Minister Malcolm Wicks said in a Bloomberg Television interview on April 17 that Britain is wary of a monopoly company or business group having control of all new nuclear power stations in Britain.

A report produced for the government by Jackson Consulting recommended that any new capacity should be developed first at one of the country's existing nuclear sites. Those are owned by British Energy and the U.K. Nuclear Decommissioning Authority, an agency set up to run and clean up older plants.

EDF recently bought land adjacent to the Wylfa power station, owned by the NDA, as a backup plan in case it misses out on British Energy. The French power producer has said it wants to build as many as five nuclear reactors in the U.K.

U.K. Market

Gadonneix said today Electricite de France can expand in the U.K. without acquisitions, adding he wants a leading presence in the country's nuclear market.

He said British Energy, Electricite de France and the NDA between them own about 10 sites suitable for new nuclear reactors. ``Our ambition is to build four EPRs as quickly as possible'' in the U.K., he said, in a reference to new- generation European Pressurized Reactors developed by Areva SA.

``The U.K. will be the biggest builder of reactors in the world over the next decade and EDF wants to be a leader in this market,'' he said, adding EDF is ``welcomed'' by the U.K. government.

``The British Energy takeover saga looks set to continue due to a lack of agreement on price,'' Angelos Anastasiou, an analyst at Pali International Ltd. in London, said today in a note to investors. ``We don't believe that the takeover deal is dead, but the end game has not yet been reached and has been pushed to September at the earliest.''

EDF, which operates France's 58 nuclear power plants, today reported net income fell to 3.09 billion euros ($4.8 billion) in the first half from 3.51 billion euros a year earlier. That was in line with the 3.13 billion-euro median estimate of seven analysts surveyed by Bloomberg News.

Earnings before interest, tax, depreciation and amortization increased to 9.04 billion euros from 8.87 billion euros in the previous year, higher than the median forecast of 8.99 billion euros. Calling the first half ``better than expected,'' the company raised its outlook for the year.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net Tara Patel in Paris at tpatel2@bloomberg.net;

Last Updated: August 1, 2008 13:16 EDT