DEBT-laden nuclear power group British Energy has been rescued from collapse by a last-ditch restructuring deal.

The generator, which supplies one-fifth of the UK's electricity needs and operates Hartlepool Power Station, escaped being placed into administration after securing the agreement of banks and bondholders to write off most of its £1.3bn in debt.

In exchange, the creditors will get 97.5 per cent of the company while embattled shareholders, including many private investors, are left with only 2.5 per cent.

As part of the deal, the Government will meet some of the company's future nuclear decommissioning liabilities - thought to amount to about £3bn - in return for 65 per cent of cash flow.

The agreement still requires the backing of the European Commission, which is looking into whether the Government's involvement constitutes illegal state aid.

The verdict, which is not expected until next summer, could yet derail the deal.

Despite lawyers finalising the rescue only hours after a midnight deadline, Trade Secretary Patricia Hewitt warned that contingency plans for administration remain in place in case conditions for the deal are not met.

Environmental groups attacked the proposals for committing taxpayers' money to prop up the nuclear industry.

Greenpeace said: "Instead of pouring vast financial and political capital into this failed nuclear operator, the Government should allow British Energy to go in to administration and organise the orderly shutdown of its loss-making plants."

The company was kept afloat last year by a £650m Government loan, which it has since repaid, while a further £200m loan is still in place.

British Energy, which employs about 5,000 people, got into trouble because of the high fixed costs of nuclear generation and a decline in electricity prices.