AES, the US energy group that owns Drax, has been trying to negotiate a financial restructuring with banks and bondholders since the power station’s biggest customer, TXU Europe, collapsed in 2002.

International Power is understood to have offered 55p in the pound to purchase a key £150 million portion of Drax’s debt. Under a rescue deal offered to bond holders and banks earlier in July 2003, AES had offered only 47p in the pound for the borrowings.

Creditors were asked to swap £1.3 billion of borrowings for an 80 per cent stake in Drax in return for reclassifying the debt on lower terms. The key to the deal was the £150 million of class A2 debt that would be issued to buy out lenders who did not want to participate in the rescue. The International Power offer would leave the bulk of the deal in place, but would offer better terms for the A2 debt. Instead of retaining a 20 per cent stake in Drax, AES would be able to exit its loss-making investment.