British Energy’s proposed takeover from French-owned EDF is on the rocks, putting the government’s energy policy in peril.

The nuclear generating firm has been in talks with EDF, but today British Energy announced there was now “no certainty” in the discussions.

A £12bn deal for the firm was expected, but recent energy price rises have seen shareholders demand a greater price.

A short statement read: “Further to the announcement made on July 24th 2008, advanced discussions with a party have continued but without agreement to date. A further announcement will be made in due course.

“There can be no certainty that the discussions will lead to an offer being made for British Energy Group.”

Last week the firm said the talks were at an “advanced” stage.

The government currently owns 35 per cent of British Energy and a sale could have raised some £4 billion for the Treasury.

The deal was also central to the government’s energy plans for the nation, with the hope a sale would lead to the creation of new nuclear power stations.

The Department for Business for Enterprise & Regulatory Reform (BERR) stated the deal was a matter for the private sector.

An EDF statement read: “After in depth discussions, EDF considers that the conditions for a major development in Great Britain are not met to date.”

The firm – 85 per cent owned by the French state – also announced a 3.9 per cent rise in profits for the year.

At 8:34 BST the British Energy share price fell 5.89 per cent to 686.50p