CORRECTED - UPDATE 2-British Energy shares drop as auction hopes fade

(Corrects current value of government stake in paragraph 13) (Releads, adds Centrica comment, detail, shares)

By John Bowker and Mathieu Robbins

LONDON, May 9 (Reuters) - Shares in nuclear power generator British Energy Plc (BGY.L: Quote, Profile, Research, Stock Buzz) fell over 3 percent on Friday on fading hopes that a bidding war would push up the price for the stake being sold by the UK government.

As a bid deadline approached on Friday, no bidder seemed poised to offer a premium to British Energy's closing share price on Thursday of 715 pence.

France's EDF will offer "substantially" less than 700 pence per share, according to a source familiar with the matter, and a separate source said Spain's Iberdrola (IBE.MC: Quote, Profile, Research, Stock Buzz) wanted to link up with a rival to bid, rather than make its own offer.

RWE (RWEG.DE: Quote, Profile, Research, Stock Buzz), another touted bidder, is also expected to offer less than 700 pence a share, according to sources familiar with the matter, while Handelsblatt newspaper said the Essen-based utility might not bid at all.

The owner of Britain's nPower had previously been expected to team up with Sweden's Vattenfall [VATN.UL], but the Swedù