Business Secretary Kwasi Kwarteng decided to dismiss Aquind’s plans to provide a new electricity link between Portsmouth and Normandy in France.
The company said it was “disappointed” with the decision and that it was considering a potential legal challenge.
The proposal was controversial, with both Portsmouth MPs objecting to it and a former energy minister having to recuse herself from the process over funding from one of the company’s owners.
Aquind Limited, part-owned by Russian-born former oil tycoon Victor Fedotov, has donated at least £430,000 to the Tory Party and MPs, while Alexander Temerko, a British citizen who was born in the former Soviet Union and who is listed as a director of the company, has given more than £730,000.
A letter published on the Planning Inspectorate website showed Mr Kwarteng decided to “refuse development consent” having considered his obligations under the energy National Policy Statement.
Mr Kwarteng was said not to be satisfied that “appropriate alternatives to the proposed route” had been sufficiently considered, raising particular concerns of “the proposed landfall in an urban location”.
Portsmouth North MP Penny Mordaunt a Conservative trade minister, celebrated the decision, tweeting “we did it”.
“We won. Thank you to everyone who campaigned against Aquind and this ridiculous proposal that would have damaged our city and it would have damaged the country,” she said.
Portsmouth South MP Stephen Morgan, a Labour frontbencher, said: “The Government have finally seen sense and stopped the disastrous Aquind project.
“This is a victory for the people of Portsmouth over years of uncertainty and Tory cronyism.”
Aquind said it disagreed with Mr Kwarteng’s decision and the “rationale behind it”, arguing that the interconnector would be able to supply up to 5% of Great Britain’s energy needs, enough to power five million homes, and “help reduce the impact of volatile gas and coal prices”.
A spokeswoman for the company said: “We are naturally disappointed that our application has been refused, despite the existing Government policy promoting development of new interconnectors and the benefits the project would bring, which are acknowledged in the decision of the Secretary of State.
“We are considering the decision, the grounds for the refusal, and a potential legal challenge (judicial review).”
Berwick-upon-Tweed MP Anne-Marie Trevelyan, now the International Trade Secretary, removed herself from the process in July over funding received by Northumberland Conservatives.
In 2020, Mr Temerko told MPs that Russian-linked businessmen had “zero” political influence.
His remarks came amid concerns about the influence of Russian-linked oligarchs in the highest echelons of British business and politics.
Britain already has several cables which connect it to its European neighbours, allowing it to buy and sell electricity from and to the continent.
Two of the cables already run to France and largely import French nuclear power when Britain needs it.
There are another four cables, one to the Netherlands, one to Belgium, one to Northern Ireland and one to the Republic of Ireland.
Between them they have a capacity of six gigawatts, enough to power around six million homes.
On Wednesday they supplied 6.2% of the UK’s electricity needs, according to figures from National Grid.
Cables to Norway and Denmark are also being developed.