Greenpeace wins right to challenge UK nuclear aid
Date: 25-Nov-02
Country: UK
Author: F. Brinley Bruton and David Lawsky
Britain's High Court granted leave for a judicial review of the emergency state loan to the privatised power generator that produces a fifth of Britain's power.
The ruling offers Greenpeace and its ally in the court case, renewable energy firm Ecotricity, a high-profile platform to argue that nuclear power is uneconomic, dangerous and should face an orderly shutdown.
British Energy hit problems this year as wholesale UK electricity prices fell below its cost of production. It begged for help from the government, which gave it a 650 million pound ($1 billion) loan, maturing next Friday.
The European Commission, in its role as Europe's over-arching industry regulator, has described the handout as technically "unlawful" because it was provided without its permission. This is the basis of Greenpeace's case.
But commission officials say they could still approve the aid despite the technical breach. Last week, sources close to the commission said it would approve the aid retrospectively by the end of December, overcoming the UK government's legal problems and raising doubts over Greenpeace's case.
Under EU rules, state financial help deemed to be "rescue aid" can run for six months. The government first gave aid to British Energy in September.
The government's Department of Trade and Industry could not be reached immediately for comment.
Greenpeace was adamant it would press ahead. "EU clearance doesn't necessarily stop our case," said a spokesman. "Either the aid is unlawful or it isn't."
Greenpeace's first hearing is not due until January 27, and the legal wrangling is likely to fade into the background as the government's loan repayment deadline approaches.
"They (Greenpeace and others) can argue all they like in British or EU courts," said an industry analyst. "By the time any ruling is made, a restructuring could be done and dusted."
The government has already extended the loan once, but sources say Friday's deadline should bring with it some indication of what the government plans to do for the long term.
The company's board and the government are locked in talks that could lead to a debt restructuring and/or changes to the structure of the UK's electricity market, to allow the business to emerge as a solvent power provider.
British Energy shareholders have already seen their one-time blue chip holding become a penny stock, and bondholders expect to suffer too in any restructuring. The firm's bond prices trade below 50 percent of face value.
VARIABLE REPROCESSING CHARGE?
Sources close to the situation said the government was looking at how it could benefit from any recovery in British Energy's fortunes in return for continued financial support.
One source said there were talks about the government receiving preferred, non-voting equity in the company, but that now it was most likely to opt for a plan that could cut the amount it pays state-owned BNFL to reprocess nuclear fuel.
Under the plan, BNFL's reprocessing fee would be tied to wholesale electricity prices. This would enable BNFL to cut its charges when British Energy is finding times tough, but raise them when power prices recover.
The current fixed-price charge costs British Energy about 300 million pounds a year. It makes BNFL, and therefore the government, one of British Energy's biggest creditors.
The sources said the government had ruled out taking a substantial equity stake in British Energy directly, or indirectly through state-owned BNFL - something that had been on the table in the early stages of the crisis.
"Any sort of substantial equity involvement would clearly cause quite a lot of problems associated with state aid," said one source involved in the talks. (Additional reporting by Tom Bergin and Andrew Callus).
