Britain's nuclear energy supplier has been thrown a multi-million pound lifeline by the government.

Trade and industry secretary Patricia Hewitt told MPs on Thursday that British Energy would be offered cash help worth up to £200 million each year for the next 10 years if it opted for "solvent restructuring".

The central problems for the firm were the liabilities of decommissioning old power stations and processing spent nuclear fuel.

"We have recognised that if this restructuring is to work the government must itself must contribute significantly to the company's £2.1 billion of historic fuel liabilities that are managed by the BNFL and extend to 2086," she said.

Hewitt savaged the company's conduct saying it was "clear there have been management failings" and she announced that Robin Jeffrey would step down as chairman.

Although pledging "customers lights will stay on" there was also a warning that creditors had to "share some of the pain".

"If the company's proposed restructuring is to succeed the existing creditors will have to accept a temporary freeze on payment and subsequently a significant write down in what it is owed," she said.

Hewitt had already announced a loan of £650 million when the company announced it could no longer meet its liabilities.

The facility will be extended to March and the European Commission has now approved the loan, the minister told MPs.As part of the deal the company will now sell its North American arm and implement training reforms by February next year.

Hewitt told the Commons that detailed precautions had been made in case the company goes into administration.

In the event that the rescue deal fell through, liabilities would be taken over by the government.

"We cannot walk away from them - no responsible government would," she said.

For the Conservatives Tim Yeo described the deal as something that was "bad for the taxpayer and perpetuates uncertainty".

The shadow trade secretary argued that one key problem had not been addressed by ministers - the "central absurdity of climate change levy on the company".

"The secretary of state has tried to reassure us that throwing the company a bit more of tax payers money and giving it a bit more time will solve problems," he said.

Liberal Democrat trade spokesman Vincent Cable described British Energy as a "failed, badly managed company" and demanded that the government gave reassurance to other energy companies.