The UK Government has not ruled out administration for British Energy, the crisis-hit nuclear power firm, an adviser to the Secretary of State for Trade & Industry has been reported as saying.

Jim Godfrey's comment came the day after the government loaned the company �410m in emergency funding.

When asked if a long-term solution to British Energy's problems could be found before the funds run out, Mr Godfrey said: "We have acted swiftly when the full extent of financial difficulties became clear to us, but it is too early to say."

"The government is not ruling out administration for the company."

Shares drop

British Energy, which provides a fifth of the UK's power, has been hit by a drop in the wholesale price of electricity and by a shutdown at one of its power stations.

Trading in British Energy shares restarted after the bailout was announced, but they closed 65% lower at 28 pence.

The shares continued to fall on Tuesday, reaching 20p.

Wholesale electricity prices have dropped sharply

Trade & Industry Secretary Patricia Hewitt had herself told the BBC on Monday that her priority was securing energy supplies.

"It's not securing British Energy as a company," she said.

Insolvency threat remains

The Department of Trade and Industry (DTI) said that the support package would last until 27 September "pending clarification of the company's full financial position".

We now need a complete rethink of the role of the private sector in major UK utilities

John Edmonds, GMB Union

"No decisions have been taken, and no commitments have been given about support beyond this period," the DTI said in a statement.

British Energy said the loan would enable it to continue trading, and added that talks on a long-term restructuring of the business would start soon.

While the company said there were "reasonable" grounds for believing that the talks would succeed, it warned that "there can be no certainty that this will preserve value for investors".

And it said if the talks failed "the company may have to take appropriate insolvency proceedings".

'Rethink' needed

Unions welcomed the move, which they hoped would protect the 5,200 people employed by British Energy in the UK.

British Energy's UK Nuclear Power Stations

Hinkley Point B Hunterston B Dungeness B Hartlepool Heysham 1 Heysham 2 Torness Sizewell B

"This is a welcome announcement to provide a short-term lifeline for the industry," said the general secretary of the GMB, John Edmonds.

"But we now need a complete rethink of the role of the private sector in major UK utilities.

"We cannot continue to gamble the future of such an important sector on the roulette wheel of the Stock Exchange."

Doug Rooney, national officer at Amicus, said the government should think about renationalising the company.

"If we get to the end of the month and the company has not secured a long-term financial settlement, we will be saying that rather than put the company into voluntary liquidation the government should put it back into public ownership."

Under investigation

On Friday the UK's financial watchdog said it had launched an investigation into the company's finances.

The Financial Services Authority (FSA) is concerned that British Energy may not have kept investors properly informed of its worsening financial position.

News of the company's dire situation came as a shock to many analysts, who say they had little warning of the extent of the company's problems.

But British Energy said its financial situation rapidly deteriorated after negotiations with state-owned British Nuclear Fuel failed.

It had hoped to take over the running of six of BNFL's reactors in return for a management fee.