British Energy, which employs more than 500 people at its Hartlepool nuclear power station, has fallen £500m into the red and warned of further weaknesses in the wholesale electricity market in the coming months.

The nuclear power generator said prices could fall as much as ten per cent this year - a further blow for the Edinburgh-based group's shareholders.

Losses in the group's UK business widened tenfold to £41m in the year to March 31 after electricity prices reached an "unprecedented low". And it blamed the poor market conditions for two exceptional charges that ravaged its results for the 12 months period.

The group is taking a £209m hit to cover losses on supply contracts set before the launch of new electricity trading arrangements 14 months ago.

It is also writing down the value of its coal-fired power plant in Eggborough, North Yorkshire by £300m.

British Energy, which runs eight nuclear plants, bought the power station from National Power for £615m but it is currently operating at half capacity.

Its Hartlepool nuclear power station has the capacity to provide power for the whole of Teesside and at least half of Tyneside.

Chairman Robin Jeffrey blamed the "external factors" for casting a shadow over a strong improvement in the group's operational performance in the year.

Profits in North America surged by £59m to £74m after its recent expansion, which saw it snap up Canadian group Bruce Power.

But after the heavy losses in the UK and the exceptional hits, the group made a pre-tax loss of £493m, compared with profits of £57m last year.

Turnover across the group fell from £2.12bn to £2.05bn.

British Energy supplies around a fifth of the UK's electricity and has seen wholesale electricity prices plunge 18 per cent in the past 12 months.

It is trying to absorb part of the fall, caused by increasing capacity, by upping the amount of electricity supplied directly to businesses.