British Energy produces about a fifth of the UK's electricity

Higher operating costs and lower-than-expected output led to a �115m ($207m) loss for the three months to 30 June.

To avoid going into administration, British Energy is planning a debt-for-equity swap which will see its creditors take control of the firm.

British Energy nearly collapsed in 2002 after a slump in wholesale power prices

"Progress has been made towards the completion of the proposed restructuring, but it still remains subject to a number of significant uncertainties and important conditions," said British Energy in a statement.

On Thursday, a key shareholder in British Energy, investment company Polygon, dropped its opposition to the �5bn restructuring plan.

Polygon was unhappy at the terms of the deal, which will leave existing shareholders with just 2.5% of the company.

But Polygon decided there was no "commercial logic" in pursuing its complaint.

As part of the restructuring move, British Energy's shares will be delisted from the London stock market later this month.