Conditional approval for British Energy restructuring aid

20 January 2005

Filip Ragolle

The restructuring plan for British Energy ("BE"), which involves State aid, has received the Commission's green light.

BE is the only private operator of nuclear power stations in the UK. It also supplies electricity on the UK wholesale market and to large industrial and commercial enterprises, but it does not serve other retail customers. Since 2002 it has been facing financial difficulties and therefore turned to the UK Government for assistance. In September 2002, BE was granted two credit facilities, which were approved by the European Commission as rescue aid on the condition that a restructuring plan was submitted to the Commission within six months. Under the restructuring plan as notified to the Commission, the UK Government will assume the funding of BE's future nuclear liabilities (inter alia the decommissioning of BE's nuclear plants at the end of their commercial lives).

As a condition for approval by the Commission, BE agreed to ring-fence the nuclear generation capacities which are the only activities that are entitled to benefit from State aid. Three separate businesses will be created, each with their own separate accounts: the business dealing with nuclear generation, another unit dealing with non-nuclear generation and a third unit dealing with direct sales to large business customers ("Direct-Supply-to-Business" or "DSB").

The Commission's approval decision contains a number of additional safeguards in order to maintain competition in UK energy markets. BE must cap its production capacity, including its nuclear capacity, for a period of six years. It can also not extend its fossil fuel activities outside the UK and is prevented from acquiring large hydro power plants from its competitors in the UK. Finally, BE will not be allowed to charge prices in the DSB market that its non-aided competitors are unable to afford.

Source: Commission press release IP/04/1125 of 22 September 2004, available here.