STRUGGLING nuclear power group British Energy warned that full year pre-tax profits would be likely to come in below expectations.

British Energy said operating profits for the year to March 31 would be consistent with its expectations, despite outages at the group's Heysham 1 and Sizewell B power stations and higher electricity generation prices.

But it said the impact of revised valuation of the business would probably leave profits below the board's expectations.

The group said it had substantially reduced pre-tax losses at the half year stage to £71m, from £337m the year before.

British Energy said it had taken steps to improve the working capital position of the group, agreeing a temporary £75m increase in its £200m Government loan and examining longer term measures to reduce demand for trading collateral.

It said it had made significant progress in taking forward its proposed restructuring.

But the group added: "It remains subject to a large number of significant uncertainties and important conditions."

The company was kept afloat last year by a £650m Government loan, which was subsequently replaced with the £200m facility in March.

The generator, which supplies a fifth of the UK's power, narrowly escaped being placed into administration in October before it secured the agreement of banks and bondholders to write off £1.3bn of debt.

As part of the proposed deal, the Government will meet some of the company's future nuclear decommissioning liabilities.

In June, the group announced losses of £4.3bn after slashing the value of its power plants.