Back when British Energy was going through its £5bn government-backed restructuring in 2002 and 2003, the Eggborough coal-fired power station in East Yorkshire was not considered a prime asset.

The nuclear energy company had bought the 2,000MW power station in 2000 for £640m, but in 2002 had to write off £300m of its investment following a slump in electricity prices. As part of British Energy's restructuring, the banks that lent the money for the Eggborough acquisition were issued with bonds containing an option to buy the plant in the future in return for writing off their loans.

Five years on, a rise in electricity prices means that Eggborough is now profitable and the company is keen to hold on to the plant. As well as generating cash, Eggborough gives British Energy some much-needed flexibility in its electricity generation portfolio, as it can be fired up at relatively short notice when electricity prices are high or there are problems with British Energy's nuclear plants.

The rise in the value of Eggborough means that the bondholders are just as determined to cash in their option when it matures in 2010 and take over ownership of the power station.

The bondholders now mainly consist of hedge funds and distressed debt specialists. Last summer they hired Greenhill, the investment bank, to advise on selling the option and bankers said there were several interested parties. But a firm offer did not materialise and some have suggested that British Energy made it hard for potential buyers to visit the plant and carry out due diligence.

Earlier this year Greenhill came up with another way to allow the bondholders to monetise their asset early, rather than wait until 2010. A company called Ampere Ltd was formed as a vehicle for the option and bondholders have started borrowing against the option. Credit Suisse has arranged this financing and is syndicating the debt, but yesterday declined to say how much was being borrowed.

British Energy said that it would challenge Credit Suisse's deal with Ampere in court in May, as the terms of the original Eggborough bond issue did not allow the option to be transferred. It aims to have the creation of Ampere and the debt financing declared unlawful.

Credit Suisse said yesterday that it and its lawyers "believe that the transaction is permitted under the terms of the Eggborough Power facility. We are disputing vigorously the contention by British Energy that the transaction should not proceed. In Credit Suisse's view, the transaction will have no impact on British Energy or its shareholders."

A person close to the Ampere deal said British Energy was trying to quash the debt-financing to force bondholders into selling the Eggborough option back to British Energy.

Lakis Athanasiou, analyst at Collins Stewart, said that the market assumed the bondholders would exercise the option in 2010 and so Eggborough was not included in models for British Energy past this date. Therefore there was little downside risk to the current British Energy share price.