ELECTRICITY COMPANIES WOULD BE MAD to go ahead with their £7 billion-plus takeover of British Energy, according to two leading industry authorities.

With the preliminary bidding deadline for the goverment's 35% stake in the East Kilbride-based nuclear power company having passed on Friday, Professor Steve Thomas of Greenwich Business School in London told the Sunday Herald that it was being made to look more attractive by high electricity prices. He believed that the bidders were in danger of buying at the top of the market.

He said: "The prices are insane. It's based on an assumption that fossil fuel prices will stay high forever, but there could be a collapse in prices in a surprisingly short time.

"With oil prices at $120 a barrel, a lot of producers are going to start finding a lot more oil and gas. You just need a hiccup in the world economy, say 5% more gas and 5% less demand, and you have got a collapse."

A 75%-25% consortium of French nuclear specialist EDF and Britain's Centrica reportedly tabled the only indicative offer in time for the deadline, although the government is still expected to consider late offers.

The two companies will be feeling the pressure after German electricity group RWE officially bowed out on Friday. RWE shareholders were reportedly uneasy that its planned indicative offer of just under 700p per share - valuing British Energy at about £7.2bn - was too high. Germany's E.ON is also said to have been put off by British Energy's high share price, while Scottish Power owner Iberdrola's position is unclear.

Thomas said that British Energy's eight reactors, which make up most of the national fleet, are ageing and unstable. He said that operating costs were also rising all the time.

"These plants could go wrong at any time. They are near the end of their lives and every one is different Any company would be mad to buy British Energy when they could get land suitable for nuclear sites by going to the Nuclear Decommissioning Authority," he said.

Mycle Schneider of Paris-based energy consultancy Mycle Schneider Consulting, said that another issue was that the UK's advanced gas-cooled reactors (AGRs) are unlike any other nuclear reactors in the world. In his view this means that none of the potential bidders fully understand what they are bidding for.

A spokeswoman for British Energy agreed that operating costs were rising, but said it was impossible to predict what would happen to the price of energy. She said the company was in a completely different position to when it ran into financial difficulties in 2002 and had to be bailed out by the govermnent.