SHARES in Northern Electric owner Innogy surged yesterday after it emerged Britain's biggest electricity supplier was on the brink of being taken over.

Swindon-based Innogy confirmed it had received takeover offers, but refused to disclose the identities of the companies.

Energy companies from the continent, attracted by the more advanced state of the deregulated UK market, are believed to be leading the chase for Innogy.

German utility group RWE, which owns Thames Water, is thought to be in the frame, although another company closer to home, Scottish Power, has already ruled out an immediate offer for Innogy.

Innogy added about £500m to its stock market value during morning trading as investors eyed a lucrative takeover struggle.

Andrew Fisher, analyst at fund manager Gerrard, said: "People are talking about there being a bidding war if some of the other European players get involved.

"We do know that some of these firms have been prepared to pay at a premium."

Continental interest in the UK energy sector has already seen German company E.ON snap up Innogy's rival Powergen for £9.6bn in a deal due to be completed in April.

Electricite de France also bought London Electricity, which has a call centre operation in Sunderland, in 1998.

As well as the prospect of geographical expansion, continental firms are attracted to the UK because the market is more open to competition.

RWE was reported to have approached Innogy to discuss a friendly takeover in a possible £2.9bn deal at the end of last year.

However, reports said a deal was rejected by Innogy chief executive Brian Count because it undervalued his company. The firm is currently valued at £2.85bn.

However, Scottish Power will not see through its interest after earlier engaging Innogy in talks over a possible combination.

Innogy was created in October 2000 when National Power split its domestic and international operations.

It raised its customer base to more than seven million with the acquisition of Northern Electric and Yorkshire Power's domestic supply businesses. Innogy also owns power plants, energy storage business Regenesys, and National Wind Power.

Shares in Innogy closed up 41p at 251p.