Euro-probe forces British Energy closer to the brink

European competition supremo, Mario Monti, is planning to launch a full-blown investigation into the restructuring of British Energy, increasing the chances of administration for the stricken nuclear generator.

Commission insiders revealed that Mr Monti will announce the start of the investigation within two weeks, dashing any hopes of a swift decision on the plans.

But critically, the Commission will say that the investigation could take 18 months to complete, putting it at odds with the Government's timetable.

Because the restructuring plan relies on British Energy's creditors sitting tight and not forcing the business into administration, the Government wants a decision within 13 months of the investigation. And British Energy's emergency £450m government loan expires in September 2004, which would be around 16 months into the Commission investigation.

In a statement, the Department of Trade and Industry said that the Government "reserved the right to withdraw from the restructuring process if the Commission's decision is later than 30 June 2004" - some 13 months into the investigation.

If the Government withdrew, this would almost certainly force British Energy into administration.

The DTI added: "Technically, the Commission must reach a decision within 18 months of opening the investigation, but in practice the Commission may reach a decision well before the end of that period."

DTI officials are planning to lobby the Commission for an early decision. But in a further blow to the Government, a senior Commission source revealed that there was no guarantee that a decision could be made even within 18 months.

"The 18-month period is only an endeavour - our best efforts. It could take much longer. This is a large and complex case, don't forget," said the source.

A spokesman for Mr Monti refused to comment on when the announcement on British Energy would be made.

But he added: "Even if there is a main investigation, then this does not give any indication of the eventual outcome of the case."

The Government submitted the British Energy restructuring plan to the Commission in March.

The DTI is expected to make the details public, after British Energy reveals its next set of results on 3 June.

The restructuring plan is, however, being challenged in the European courts by AES, the US power company that owns the Drax power station in South Yorkshire.