Updated from 8:30 a.m.

The U.K.'s National Grid ( NGG) appears to be the leading bidder to acquire KeySpan ( KSE), the New York-based gas and electricity distributor.

In a statement Friday, National Grid confirmed it was holding discussions with KeySpan about an all-cash offer but added that the talks won't necessarily lead to a deal.

"The Directors of National Grid confirm that they are in discussions concerning a potential transaction with KeySpan but emphasise that these discussions are yet to be concluded and that there is no certainty that they will lead to any definitive agreement," the release said. "If agreed, any transaction would be on an all cash basis, satisfied wholly from borrowings."

Shares in KeySpan rose 31 cents to $41.40 during trading Friday. National Grid rose $1.57 to $53.62.

The Wall Street Journal first reported on the development Friday, citing sources who had knowledge of the situation. The report indicated that National Grid would offer $42 a share for KeySpan, making the proposal worth about $7.3 billion.

National Grid would also assume around $4.25 billion in KeySpan debt, according to the Journal.

Reports also said that Consolidated Edison ( ED), the New York utility run by CEO Kevin Burke, has been a contender for KeySpan but is now lagging behind in the negotiations. Con Edison's bid was in cash and stock, according to reports. Shares of the company were up 37 cents to $46.23.

National Grid has been gradually increasing in presence in the U.S., and just last week the company agreed to buy Rhode Island assets of the New England Gas from Southern Union ( SUG).