The company has now been granted a vital extension to the loan, which had been due to expire on 27 September, and which now runs to 29 November. At the same time the figure was raised from its original £410 million ($615 million). The loan avoids the embarrassment of a full-blown government bail out and safeguards the 5000 jobs spread across British Energy's eight nuclear power plants.
BE, privatised in 1996, is the UK's biggest nuclear power provider and supplies about one-fifth of the country's power. It has been hit hard by the steep drop in power prices since new trading arrangements brought in at the beginning of 2001 precipitated a plunge in wholesale power prices. While other companies have been able to offset the weaker wholesale market with profitable retail sales, British Energy does not have the necessary retail arm. The company's shares have lost 90 per cent of their value since the beginning of the year, its stock market value at one stage fall ing to just £31 million.
BE has claimed that the government had been aware of potential problems for the last two years. The company has also cancelled an undrawn $260 million ($398 million) loan due to expire in January.
Opposition to the loan has come from Belgium which has complained to the European Commission, claiming the loan breaks European competition rules. Energy Minister Olivier Deleuze suggested that financial help might distort the market, adding that the measures were 'difficult to reconcile with the rules of free competition.' Last year, similar rules sent the Belgian national airline out of business.
Greenpeace has also threatened legal action. It claims the lifeline was created without the permission of the EC, breaching EU rules restricting state subsidies for failing companies. The government counter-claims that it had in fact informed the Commission.
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