British Energy, the country's biggest nuclear electricity generator, warned last night it was likely to go bust unless the Government agreed to an immediate cash injection.
The shock announcement means that ministers may have another Railtrack on their hands and could be forced to take the privatised company back into public ownership, with its huge nuclear liabilities.
A government statement, issued after 24 hours of talks, confirmed that it had initiated discussions with British Energy about "immediate financial support" and the possibility of long-term restructuring. Both the Government and British Energy, which supplies about a fifth of the country's electricity, stressed that safety and security of supply would be paramount.
The announcement came after British Energy requested a suspension of its shares and told the Stock Exchange that without a cash injection it "may be unable to meet its financial obligations ... and therefore may have to take appropriate insolvency proceedings".
The company said it had grounds for believing the discussions would be successful, but warned there was no guarantee that this would "preserve value for investors".
British Energy has £1bn in borrowings and nuclear liabilities of £14.1bn, of which £3.2bn has been accrued in its accounts. The crunch appears to have come after British Nuclear Fuels refused to agree a new deal for reprocessing British Energy's spent fuel, which is currently costing it £300m a year.
The company was privatised in 1996 by the Conservatives for £1.3bn. At its peak, the business was worth £4.6bn, but it has lost 90 per cent of its value and is now worth £496m. Last year it lost £518m.
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