Germany's RWE and Britain's Centrica have made indicative bids for British Energy, valuing the nuclear power firm at up to 11 billion pounds ($22 billion), sources close to the matter said.
One source said on Thursday that RWE, Europe's third-biggest utility and the owner of British energy supplier power, made an all-cash proposal of just under 700 pence a share a few weeks ago.
Another source said Centrica, which owns British Gas, had tabled an all-share bid pitched below 700 pence a share.
Utilities across Europe are stalking British Energy, which is 35 percent owned by the British government, in a bid to take advantage of the country's new drive towards nuclear power.
Shares in British Energy, the country's biggest electricity producer, leapt by up to 5.6 percent to 741 pence on speculation of a bidding war and hopes that other potential suitors, such as Electricite de France (EDF), might enter the fray.
"RWE has set a benchmark, so that puts the pressure on other potentially interested parties," said Charles Stanley analyst Tina Cook.
RWE, Centrica, British Energy and EDF all declined to comment.
Eager to reduce its exposure to energy imports and to diversify its sources of power, Britain has committed to building a new generation of nuclear power plants.
Analysts believe the sites of British Energy's existing, but ageing, power stations will play a key role in the expansion.
British Energy shares have risen around a third in value this year on speculation of a bid battle, despite continued problems at the company's existing power plants.
The stock was up 4.3 percent at 731.5 pence.
Shares in RWE, which had said it was looking east for acquisitions, were down 2 percent at 79.37 euros.
EDF was up 0.2 percent at 58.94 euros and Centrica was up 0.2 percent at 312.25 pence.
A source close to the matter told Reuters on Monday that EDF and RWE had approached Centrica about a possible joint bid for British Energy, which operates eight nuclear power stations and one coal-fired power plant.
Charles Stanley's Cook said some analysts were forecasting a bid of up to 900 pence a share for British Energy, but she said around 700 pence was more appropriate.
"Although British Energy is sitting on these coveted sites, and obviously will be a key player in the new British nuclear build program, they have had operational difficulties and their ageing reactors are not necessarily attractive," she said.
British Energy said on Thursday its nuclear output for the year ended March 31 was 50.3 TWh (terrawatt hours), marginally ahead of analysts' current expectations.
However, it also said the reduction in output from planned refueling operations in 2008-09 was now expected to be around 4TWh, up from 3TWh.
British Energy was privatized in 1996 and rescued by the government from the brink of collapse in 2002 amid plunging power prices.
The government is set to make around 4 billion pounds from a sale, which it is expected to use to pay for the clear-up of reactor sites.
The Financial Times said RWE's proposal was tabled before March 17, when British Energy confirmed it was in talks that could lead to a takeover or partnerships.
It said EDF was also looking at British Energy's books, but that it had initially planned only to buy part of it.
All parties were likely to revise their offers after examining British Energy's books, the newspaper said.
Britain has said it is open to a foreign buyer, but that it wants to ensure a competitive market for developing new nuclear power stations, signaling it might prefer a joint bid.