Embattled nuclear power firm British Energy is set to ask the government for more time to fight off bankruptcy, according to a press report.

The company, which earlier this month negotiated a temporary loan facility designed to keep it going long enough to draw up a restructuring plan, is expected to ask for the 27 September deadline to be extended, the Financial Times reported.

The firm is also set to choose a restructuring adviser from a shortlist comprising the investment banks ABN Amro, Merrill Lynch, UBS Warburg, and Schroder Salomon Smith Barney, the FT said.

British Energy, which provides a fifth of the UK's power, has been hit by lower electricity prices since the wholesale power market was liberalised last year, and by a shutdown at one of its facilities.

Bail out

Other power firms have been able to offset the weak wholesale market by maintaining higher retail prices, but this strategy is not available to British Energy, which does not have a retail arm.

The firm, which was privatised in 1996, is thought to need about £300m this year to pay off debts and cover losses.

Possible solutions under discussion include exempting British Energy from the climate change levy, and cutting the fees that state-owned British Nuclear Fuels charges the firm for reprocessing nuclear fuel.

At the weekend, it was reported that the government was considering taking a majority stake in the firm as a means of saving it from collapse.

But moves to ease British Energy's financial burden have drawn strong criticism from its competitors.

The affair, which comes less than a year after the Railtrack bail-out, has proved a further embarrassment for the government.

In the City, British Energy shares ended down 3p at 18p, their lowest closing price for at least five years.