The plant supplies 10% of the UK's electricity needs

The energy firm said it would pay out as much as �130m ($206.5m) for the plant near Selby, North Yorkshire.

The future of the Drax station has been under doubt ever since its US owner, AES, abandoned restructuring plans for its �1.3bn debt earlier this month after failing to reach a deal with creditors.

The plant has been hit by a slump in wholesale electricity prices, and was plunged into crisis last year when its biggest customer, electricity supplier TXU, was put into administration and failed to pay a �50m bill.

Deadline looms

The latest offer from International Power is a considerable jump from its previous bid of �80m.

Under the latest deal International Power said it would pay 65p in the pound for Drax's A2-rated debt and 55p in the pound on its B-rated debt.

Investment bank Goldman Sachs had offered 64p and 50p respectively.

Creditors have only two days to reach a decision as both offers expire this Friday.

Since AES walked away from Drax, the power station has been under the control of independent directors.

'Unique situation'

Many other firms have been reported to be interested in launching a bid for the power plant.

These include energy group Innogy, coal giant BHP Billiton and the owner of Powergen, Germany's E.On.

Analysts say the level of interest for the plant is surprising, although it coincides with a more bullish outlook for UK power prices.

"A part of it is bargain-hunting but this is a unique situation because of the distressed nature of the asset and the flexibility the restructuring gives a suitor," said Fraser McLaren, utilities analyst at ING Financial Markets.