Osborne's 'boost' fails to re-energise Battersea

Battersea Power Station is set to be seized by creditors owed hundreds of millions of pounds by its owners, putting a £5.5bn redevelopment project in jeopardy just days after the area was told it would be getting a new London Underground station.

Planning permission was granted earlier this year for the Grade II-listed structure on the south bank of the Thames to be converted into a vast residential and commercial complex.

Finding investors with the level of capital necessary to turn the redevelopment plans in to reality, however, has proved harder.

Now lenders, Lloyd's and Ireland's National Asset Management Agency – owed £505m by the firm Real Estate Opportunities (REO), dating from its 2006 purchase of the famous long-derelict site and surrounding 38 acres of land – have lost patience and called in their loans.

They have secured a court hearing to appoint administrators for the site, ousting REO and its Irish tycoons John Ronan and Richard Barrett. REO yesterday confirmed its subsidiary was "currently not in a position to satisfy these demands for repayments".

Not only are the planned 3,400 homes and 900,000sqm of retail space now in question, but the news could also become an embarrassing blow to the Government.

George Osborne, the Chancellor, visited the site on Monday with London Mayor, Boris Johnson, using a potential extension of the Tube's Northern Line to Battersea to showcase the Government's infrastructure investment programme.