The government rescue package for nuclear power group British Energy will almost wipe out the value of investors' shareholdings.

Analysts have estimated that shareholders could end up with between 5% and 10% of the nuclear generator following rescue plans, sending shares down to a new low of just 6.5pence.

A year ago, the shares were worth 250p each.

The rescue package includes an extension of emergency aid from the government, and a renegotiation of its contracts with fellow nuclear power firm BNFL.

Chairman Robin Jeffrey is to leave the group and be replaced by Adrian Montague, the deputy chairman of Railtrack's successor Network Rail.

Whatever happens, nuclear power stations will continue to generate electricity... customers' lights will stay on

Patricia Hewitt, Trade & Industry Secretary

But analysts say shareholders, lenders and bondholders will all be hard hit and some of British Energy's larger lenders could lose up to 70% of their original investment.

Nuclear liabilities

British Energy has been surviving on a �650m ($388m) government loan since September, and the loan has now been extended to March - although no more money will be available.

But, as part of the deal, the government will underwrite British Energy's multi-billion pound nuclear clean-up liabilities.

Trade & Industry Secretary Patricia Hewitt told the House of Commons that the government had agreed to "play its part" in allowing British Energy to "attempt solvent restructuring".

She said the government recognised that if the restructuring was to work it had to contribute significantly to the company's �2.1bn of nuclear fuel liabilities which extend to 2086.

There's no real difference in the cost to the taxpayer between solvent restructuring or falling into administration

Patricia Hewitt, Trade & Industry Secretary

The cost to the government will average �150m-200m a year for the next 10 years and will then fall.

But the cost to lenders could be much greater.

They have been asked to swap the existing �1.3bn in debt for a mixture of shares and new bonds, which reports have suggested could mean a 70% cut in the value of their investment.

Iain Turner, an analyst at Deutsche Bank, told BBC News Online that no-one knows exactly what shareholder investments could be worth until the deal is finalised.

"It could be 5% it could be 15%," said Mr Turner. But he added that the substantially reduced value of holdings was now in the company's share price which has sunk a further 10% to a new low of 6.5p on Friday.

This values the company at just �44m compared to over �1.6bn at the start of the year.

'Damaging confidence'

Ms Hewitt defended the deal by saying that, because the company could still go into administration, the government had prepared detailed contingency plans to ensure that nuclear safety and security of supply were maintained.

"Whatever happens nuclear power stations will continue to generate electricity... customers' lights will stay on," she told MPs.

"There's no real difference in the cost to the taxpayer between solvent restructuring or falling into administration."

The shadow trade and industry secretary Tim Yeo said it was "absurd" that the government imposed the climate change levy on British Energy and called for the charge to be abolished.

And he said the government's muddled approach to nuclear power was damaging confidence in the industry.

"The government's own decisions and omissions created problems for British Energy which would have otherwise not arisen," he said.

Watchdog approval

On Wednesday, the government's controversial rescue of British Energy won the approval of EU competition watchdogs, provided certain conditions were met.

The UK government set up its emergency loan facility in September after the UK's biggest nuclear power generator warned that it was in danger of going bust.

British Energy was hit hard by a steep drop in electricity prices after the wholesale power market was liberalised.

Other power firms have been able to offset the weaker wholesale market by upping retail prices, but British Energy does not have a retail arm.