British Energy could face High Court challenge

The environmental campaign group Greenpeace yesterday threatened to take the Government to court unless it withdraws immediately the £410m lifeline it gave last week to the embattled nuclear electricity generator British Energy.

A spokesman for the group claimed that the loan facility was illegal under European Commission rules because the Department of Trade and Industry failed to pre-notify Brussels and granted the loan without receiving its approval.

The move by Greenpeace came as a pressure group with strong links to the Labour Party called for British Energy to be placed in administration and its eight nuclear stations taken back under state control.

Sera, which counts more than 100 labour MPs including four Cabinet ministers among its members, said there must be no further tax payers' support for British Energy.

The twin-pronged assault from the two anti-nuclear groups appeared to strengthen the likelihood of British Energy being forced into administration.

A debt-for-equity swap has been mooted as an alternative to the company declaring itself insolvent. But the former senior independent director at British Energy cast doubt on this option yesterday by saying that its UK nuclear stations were unprofitable even before the payment of interest.

Sir Robin Biggam, who retired from the British Energy board in June, said: "Unless there has been a significant change in British Energy's cost structure in recent months, at current wholesale electricity prices, British Energy's UK nuclear generation is lossmaking before interest charges."

Shares in British Energy fell a further 58 per cent to 5p, valuing the company at just £31m as the City concluded there was a very high probability of the company being declared insolvent, in which case shareholders will salvage nothing.

The £410m loan from the Government expires on 27 September. Greenpeace said that unless it was repaid immediately it may launch a formal High Court challenge.

A DTI spokeswoman defended the granting of the loan saying that it had notified Brussels from the outset. "Our overriding priority was to ensure nuclear safety and security of supply. The loan was given as rescue aid and timing was absolutely imperative," she added.