Centrica - the owner of British Gas - yesterday saw its market value rocket by around £1 billion amid reports of an approach from state-owned Russian energy giant Gazprom.
Centrica shares hit a high of 337.5p shortly after the report, before closing up 30p at 300p.
Speculation has mounted in recent weeks that Gazprom would make a bid for a UK power supplier to secure 20 per cent of the domestic gas market.
A spokesman for Centrica said he was not aware of any approach, but Interfax news agency quoted Gazprom's deputy general director, Alexander Shkuta, as saying: "We are now analysing and reviewing this question. No decision has been taken."
The Government said any approach for Centrica from Gazprom would face "robust scrutiny".
A spokesman for the Department of Trade and Industry said: "We are aware of speculation about possible Gazprom interest in Centrica. Security of energy supply to the UK's consumers is paramount."
Centrica is the largest utility in Britain with 17 million customers. It has 58 per cent of the country's residential gas market and 23 per cent of the power market. It also has operations in Spain, Belgium, Canada and the United States.
Gazprom, which supplies a quarter of Europe's gas, has been seen as a likely suitor due to its vast reservoir of Siberian gas, which would be able to compensate for Centrica's diminishing North Sea reserves.
Analysts said the attraction of the UK market to Gazprom was the fact that it was more open to overseas investment than Europe, where power supplies are largely controlled by governments.
Henk Potts, of Barclays Stockbrokers, rated Centrica as "a key takeover target" last year and said Gazprom was among a number of suitors.
"There have been rumours for some time that Centrica is a takeover target and that Gazprom might be interested," he said.
It remains to be seen whether regulators would be prepared to accept a combination of Gazprom and Centrica considering the sensitivity around energy security in the UK.
But analysts said the industrial logic of a tie-up was sound because of the Russian firm's strength in gas exploration and production and the leading position held by British Gas in selling gas to UK consumers.
Gazprom, which last year agreed to buy Russian oil company Sibneft for £7.36 billion from Chelsea FC owner Roman Abramovich, produces a fifth of the world's gas and accounted for a quarter of Europe's supplies in 2004.
But the Russian company caused consternation last month when its gas deliveries to Europe fell sharply because of a price dispute with the Ukraine, whose pipeline network transits gas supplies to the rest of the continent.
It reduced supplies again to Europe soon afterwards after Moscow was hit by an excessively cold winter.
Meanwhile, Centrica said Direct Energy, its North American subsidiary, had acquired 100 per cent of the partnership interests in Tenaska III Texas Partners in a cash deal worth $47.5 million (£26.6 million).
Tenaska owns the Paris Energy Centre, a major power station in Texas, where Centrica already owns two other power plants.
Sir Roy Gardner, chief executive of Centrica, said: "This acquisition provides further evidence of our commitment to increase the proportion of our energy requirements that we can meet from our own assets and it supports our growth plans for the Texas market."