THE future of Britain's biggest power station, Drax, hangs in the balance after its owner abandoned debt restructuring plans.

American energy group AES walked away from the plant when creditors failed to agree a deal which would have returned less than half the money it was owed.

AES set a deadline of midnight on Tuesday for a compromise to be reached, but left the station in the hands of independent directors who will run it until another owner can be found.

Banks and bondholders are owed £1.3bn but were offered 47p for every £1 debt by AES.

The US group has withdrawn four of its executives.

The debt-laden plant, near Selby, North Yorkshire, plunged into crisis last year when its biggest customer, the electricity supplier TXU Europe, failed to pay a £50m bill, and went into administration.

Under the terms of the deal, TXU bought 60 per cent of Drax's output at rates significantly above current market prices, which have fallen 40 per cent since 1998 because of increased competition and over-capacity.

Last month, former National Power unit International Power offered to buy a stake in Drax, take on some of its debt and manage the plant. Its offer expires on August 22 .

Former PricewaterhouseCoopers director of operations Gordon Horsfield and former London Electricity finance director Gerald Wingrove have been left to run the plant. Mr Horsfield said it would be business as usual.

"Customers and suppliers should be assured that contracts will be honoured and Ofgem, the grid operator and UK Coal, the plant's major feedstock supplier, have been advised."

Only four of the plant's 480 staff are employed by AES.

AES acquired the 4,000 megawatt Drax plant in 1999 for £1.9bn, but wrote down the value of the plant in its accounts to zero after TXU went into administration.

Mr Horsfield said AES's creditors remained fully supportive of the efforts to continue with the proposed restructuring and to allow the time to evaluate alternatives to AES' plan.

Creditors will assess International Power's offer to buy a stake in Drax valued at about £80m, as well as any other approaches.

AES could not be reached for comment.