Struggling nuclear power firm British Energy has appointed a firm of City of London head-hunters to find a new chief executive.

A spokesman for British Energy has confirmed it has taken on Heidrick & Struggles to find a replacement for Richard Jeffrey, who will become chairman, Reuters reported.

The UK government is believed to have been pressing for management changes at British Energy in return for rescuing the firm with an emergency loan in September.

British Energy is also facing a threat of legal action from BNFL over unpaid bills for reprocessing nuclear fuel, according to weekend press reports.

Tense talks

It owes �100m ($155m) for reprocessing costs to BNFL, which is considering whether to sue to obtain the money, according to the Sunday Telegraph newspaper.

Both companies have refused to comment on the report.

The UK government gave British Energy a �650m temporary lifeline in September to help protect the jobs of the firm's 5,000 workers after it warned it could go bust.

British Energy has until 29 November, when the temporary loan expires, to reach agreement with its creditors, including BNFL, and come up with a long term plan.

Tensions are thought to have arisen with BNFL as British Energy is trying to renegotiate its contract with the supplier as part of efforts to tackle its financial problems.

"There's a short-term issue, which is the �100m, and there's a long-term issue, which is the nature of the reprocessing contract between BNFL and British Energy," Reuters news agency quoted an unnamed industry source as saying.

"The two things have got rather caught up together which is why the money hasn't been paid," the source said.

British Energy's spokesman denied that the firm's board had called an emergency weekend meeting to discuss the risk of a lawsuit.

Restructuring talks

British Energy is also in talks with the UK government over the fall out from a major shake-up of the country's wholesale electricity market.

British Energy says it was particularly hard hit by the shake up and is pressing the government for exemption from the climate change levy and a cut in its business rates.

British Energy's spokesman said Mr Jeffrey intends to concentrate on the role of company chairman.

But City analysts think he is unlikely to last long in that job because of government anger at British Energy's failure to own up sooner to the extent of its financial difficulties.

"It is clear there have to be management changes...They are diddling around instead of doing serious work on a restructuring and they have only a few weeks in which to present something pretty robust to the government," the Sunday Telegraph quoted a City source as saying.