BRITISH Energy saw its shares lose a third of their value yesterday after a US hedge fund which investors hoped would fight their corner in the nuclear power generator’s restructuring pulled out ofthe stock.

In a statement, British Energy said New Jersey-based Appaloosa no longer held a stake of 3% or more of the shares, the level at which it must declare a holding.

The hedge fund had acquired a 4.6% stake last week for around 4p per share.

British Energy stock slipped 3.25p to 7p by the close of trading. The shares had doubled in value in a week, driven by media reports of Appaloosa’s investment. They climbed by more than 50% on Wednesday after the Guardian newspaper said Appaloosa had appointed advisers to investigate whether it could challenge British Energy’s current rescue plan.

The East Kilbride-based generator is dependent on a government loan for its survival after a slump in wholesale electricity prices pushed it to the brink of insolvency.

The company, which provides around a fifth of Britain’s electricity needs, signed a rescue deal in October with its creditors and the government which gave bondholders almost complete ownership.

Shareholders, however, were handed a raw deal by the debt-for- equity restructuring package which left them with virtually nothing. Since the deal was cut wholesale electricity prices have improved and the bonds are trading at well above their face value.

The agreement still needs European approval and shareholders will then get the chance to vote on it. British Energy warned it would delist if shareholders refused to back plans to sell its stake in US business AmerGen, a key component of the financial restructuring.

Investors had hoped Appaloosa was going to challenge the rescue plan by using the threat of a no-vote as leverage.