Scottish Power is a major player in the UK energy market

E.ON, which already owns Powergen in the UK, said any possible offer for Britain's fifth-biggest energy group would be made entirely in cash.

Scottish Power supplies energy to 5.2 million users in the UK.

Shares in the group jumped on news of a possible bid from E.ON, closing up 4.1% at 546.5p on the London Stock Exchange, and valuing the firm at �10bn ($18bn).

US sell-off

E.ON said it was "considering its options" regarding a possible takeover for Scottish Power.

"No approach has been made to the board of Scottish Power and there can be no assurance that a transaction will be forthcoming. Any offer, if made, is likely to be solely in cash," the German company said.

Weekend newspaper reports suggested that E.ON had hired investment bank Lazard to advise it on a possible bid for Scottish Power.

Rival German utility group RWE and UK operator Scottish and Southern have also been reported as potential suitors for Scottish Power.

The Glasgow-based company has been refocusing its efforts on the domestic UK market in recent months.

Scottish Power is in the process of selling its PacifiCorp business in the US to energy firm MidAmerican.