British Energy, the UK’s biggest electricity generator, is considering a £5.5 billion break-up plan that would involve creating a new company focused on building the next generation of nuclear power plants, The Times has learnt.

The proposal would mean splitting the group in two, leaving one company to oversee its eight existing nuclear power stations.

The plan will be discussed at a board meeting next month. An announcement on the group’s role in the UK’s new reactor programme is expected soon afterwards.

British Energy, which generates a sixth of UK electricity, has already recruited Gareth Brett, the European director of the US power giant Entergy, to head its new UK reactor division.

He joined on January 7 and is leading the group’s efforts to form partnerships with utilities to build the new stations.

If the plan is approved, Mr Brett would be a strong candidate to head the new organisation, with Bill Coley, the chief executive and an experienced power plant operator, staying on to lead the existing generation business.

Mr Coley said yesterday that a break-up was “one option” being considered but no final decision had been taken. “When we come to ground on the partnerships we will decide [on the structuring of the business],” he said, adding that “anything is possible” at this stage.

Rothschild, the investment bank, is advising British Energy on its strategic options.

A break-up is thought to be a favoured solution for the Government, which owns 39 per cent of British Energy. The company employs 6,000 people across the UK.

Privately, officials in Whitehall have expressed concern that British Energy’s ownership of eight of the most desirable nuclear sites could distort the new UK reactor programme by giving it too much clout over the choice of sites and operators. “A break-up would help create a more level playing field,” one industry source said.

It is understood that at least two private equity firms mulled similar break-up proposals for British Energy last autumn, until the credit crunch forced them to abandon the plans.

The formation of a “newco” would also allow British Energy to brush off some of the reputational damage it has suffered. Four reactors at its Hartlepool and Heysham plants remain out of action following problems in the boiler units. They will not be operational for some time.

British Energy has held talks with more than ten energy companies, including EDF Energy and E.ON, about forming consortiums to build new reactors in the UK.

The Government announced last month that it would support a programme to replace the ageing fleet of British nuclear stations. They are coming to the end of their lives and by 2023 all but one, Sizewell B, are due to be shut down.

British Energy yesterday reported adjusted earnings of £745 million for the nine months to December 30, down from £775 million. Operating costs increased slightly because of the continuing reactor problems.

Shares in British Energy rose 9 per cent to 533p, giving it a market capitalisation of £5.5 billion.

Last month, Dieter Helm, professor of energy policy at New College, Oxford and a key government adviser, attacked the linchpin role of British Energy in the new-build programme.

He said it was potentially a big strategic mistake for the UK, which could lead to “piecemeal decision-making” and spiralling costs.

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