THE future of loss-making Drax Power Station was in doubt today after its biggest customer went bust.

TXU Europe, one of Britain's largest power suppliers, went into administration yesterday when AES Drax terminated its 15-year contract with the company.

American-owned Drax, Europe's biggest coal-fired power station, supplied 60 per cent of its output to TXU.

But it pulled the plug on the multimillion-pound contract when TXU failed to pay a £50 million bill for October's power supplies.

Analysts say the latest development could spell trouble for AES Drax, making it more likely to default on more than £1 billion of debts, incurred when it bought the station for £1.875 billion in 1999.

Drax business manager John Readshaw said today the company was confident of overcoming the latest setback.

He said: "We have got to find alternative markets for our electricity. We are currently trying to secure contracts with suppliers and exploring selling directly into the market.

"We won't stand still. We believe we have a viable business and we intend to be successful."

Accountancy firms KPMG and Ernst & Young have been appointed joint administrators of TXU Europe.

Alan Bloom, of Ernst & Young, said: "We are looking to stabilise the position at TXU and ensure

maximum recoveries for creditors."

Last month, coal supplies to Drax were halted temporarily when it was unable to pay a £15 million coal bill to UK Coal.

Commenting on TXU's problems, a UK Coal spokesman said: "The impact on the Selby coalfield depends on Drax's success at selling electricity directly into the market. We hope they are successful.

"We have an ongoing contract with Drax and will continue our supplies."

He said that AES Drax had paid its latest coal bill.

Selby MP John Grogan said he was having urgent talks today with AES Drax and the unions, as well as Government ministers, to discuss the way ahead.

He said: "Potentially the administration of TXU could have substantial knock-on effects for Drax and UK Coal.

"It's a worrying time, but I remain confident that Drax's long-term future is sound."

Updated: 16:08 Wednesday, November 20, 2002