ANALYSIS-Centrica needs tie-up to take over British Energy

By John Bowker and Mathieu Robbins

LONDON, April 10 (Reuters) - UK utility Centrica (CNA.L: Quote, Profile, Research) needs to partner up with EDF (EDF.PA: Quote, Profile, Research) or RWE (RWEG.DE: Quote, Profile, Research) to buy British Energy (BGY.L: Quote, Profile, Research) far more than either of the much bigger foreign utility giants need it on their team.

Germany's RWE kicked off the bid battle with an all-cash proposal of just under 700 pence a share or 11 billion pounds for British Energy, while Centrica opened with an all-share bid pitched around the same level, sources said on Thursday.

Centrica, which owns the British Gas brand in the UK, is also talking to RWE and Electricite de France (EDF) (EDF.PA: Quote, Profile, Research) about partnering up in a bid for the operator of all the UK's nuclear power plants, the sources said.

The winner or winners will play a big part in developing the UK's next generation of nuclear power stations.

The Windsor-based company's market value of about 11 billion pounds ($21.75 billion) is less than a third that of RWE or Iberdola (IBE.MC: Quote, Profile, Research) and is even smaller when compared to E.ON EONG.DE or EDF's massive 110 billion euro ($174.3 billion) valuation.

"We believe Centrica could not afford British Energy outright for cash at current trading levels and would require a rights issue in a difficult market," Credit Suisse analyst Colin Pollock wrote in a recent note.

Pollock would not rule out a straight share-based merger between the two -- a proposal already informally made by Centrica, according to a source -- but warned the potential tie-up would fail to create a credible nuclear operator to lead the renaissance of the British industry.

Centrica, a big buyer of British Energy's output, may be too inexperienced as a nuclear plant operator. RWE and EDF both have extensive experience of nuclear power plant operation.