Brussels condemns BE rescue

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The Independent Online

The UK Government's £3.3bn bail out of British Energy faces tougher-than-expected opposition from the European Commission, it has emerged.

Parts of the emergency package of loans and support, agreed after the quoted rump of the British nuclear industry came close to bankruptcy last autumn, have been ruled as unlawful state aid in a report made public on the Commission's website.

The conclusions are only preliminary, but demand that British Energy repay some of the tax and interest already waived by the Government. The Commission notified the Government last month that it would launch a formal investigation into the terms of the bail-out, but the searing criticism in its letter suggest a lengthy Brussels battle is in prospect.

The Government has promised to take on £3.3bn of British Energy's historic liabilities, waive tax and renegotiate supply contracts between the company and state-owned BNFL. The Commission says it does not believe the restructuring is the minimum possible or is planned over the shortest possible time, as required by European rules. And it "doubts whether the company can be considered able to compete on the market place on its own merits once the restructuring is complete".

British Energy expressed confidence that the package would eventually be approved by Brussels. It pointed out that the Commission agrees that British Energy qualifies as a "firm in difficulty" which is therefore eligible for restructuring aid. The Commission will rule on whether to approve the bail-out next summer.