ELEVENTH hour talks were being held last night to resolve the future of British Energy, the troubled nuclear power group facing administration.

The generator, which provides a fifth of the UK's electricity needs, had a deadline of midnight to secure the backing of banks and bondholders for a £1.3bn debt-for-equity restructuring.

If successful, it would leave shareholders with a fraction of the East Kilbride-based group, which was privatised in 1996 and owns Hartlepool Power Station.

The deal is expected to pave the way for the Government to assume £3bn of nuclear decommissioning liabilities in return for 65 per cent of cash flow.

However, Trade and Industry Secretary Patricia Hewitt warned earlier this year that British Energy would be pushed into the hands of administrators at KPMG unless a long-awaited restructuring deal was completed by today.

Were the talks to fail, that would effectively bring about the renationalisation of British Energy.

Even if the company does restructure, it still faces the threat of a European Commission investigation into Government state-aid.

The outcome of the inquiry is not due until next summer.

The company was only kept afloat last year by a £650m Government loan, which it has since repaid, after being pushed to the brink of bankruptcy.

A further £200m loan is now in place while its long-term future is decided.