The future of Europe's biggest coal-fired power station will be secured before the end of the year, sources have revealed.

The management team running the debt-laden Drax power station, near Selby, North Yorkshire, has entered exclusive talks with International Power about the future of the site.

Sources close to the negotiations believe the talks will result in a restructuring deal being completed within the next three months, that will safeguard 500 jobs and put the power plant on a sound financial footing.

The talks with International Power follow negotiations with a number of interested parties, including investment bank Goldman Sachs and mining group BHP Billiton.

David Crane, chief executive of International Power, said: "We are pleased to have advanced to this very important stage in the restructuring process and we look forward to a successful conclusion of negotiations."