EC launches BE state aid inquiry

3 August 2003

The European Commission (EC) has begun investigating whether British Energy (BE) received unlawful state aid.

The EC said that the proposed restructuring plan of BE "will be analysed under the community guidelines on rescue and restructuring aid while fully recognising that issues covered by the Euratom Treaty will be assessed taking into account the latter treaty's provisions." The UK's Department of Trade and Industry said: "Investigations of this nature are entirely normal in major restructuring aid cases. This is a significant and necessary step forward in the process for the restructuring of BE and the government looks forward to working with the commission to complete the case as swiftly as possible." The process involves the commission publishing a case summary and details of its concerns. This document of concerns was immediately leaked to Friends of the Earth (FoE). According to a statement issued by FoE, potentially unlawful provisions outlined in the document include: • UK plans to relieve BE of its waste liabilities (worth £3298 million to BE).

• New contracts between BE and BNFL to vary the cost of nuclear fuel supply to BE according to the price of electricity ­ benefitting BE by £140 million.

• Transfer of ownership of BE's spent fuel from BE to BNFL ­ benefitting BE by £148 million.

• An agreement by BNFL to standstill payments owed it by BE until March 2004 ­ waiving interest on payments of £397 million.

• Agreements by five local authorities to defer over £4 million of business rates payable by BE, without interest, for three months.

Meanwhile, BE has decided that it can no longer maintain two large office complexes, one of which, Peel Park in East Kilbride, contains a mixture of operational staff and a variety of corporate functions. BE's headquarters and head office will remain in Scotland, but at a smaller office that has yet to be identified. The closure of Peel Park will result in the loss of 80 jobs.

In an earlier announcement, BE confirmed it is standing by the two-year notice period for its new CEO, even though it is in breach of corporate governance guidelines. Mike Alexander stands to gain £800,000 if he leaves the company during his two-year contract, which runs to February 2004.

• Bruce 4's delayed restart will cut the income expected by BE. Under the terms of the February sale of its 82.4% interest in Bruce Power, BE was to receive an additional C$50 million ($36 million) if Bruce 4 started by 15 June, and another C$50 million if Bruce 3 began operating by 1 August. Any delay in the restart of each unit results in the payments being reduced by 10% per month falling to zero after nine months, with the amounts forfeited going to the provincial government of Ontario.



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