BRUSSELS (Reuters) - European Union state aid regulators launched on Wednesday an investigation into proposed British support for a 16-billion pound ($26 billion) nuclear power plant to be built by EDF, saying they had doubts the project needed help.
Britain has offered EDF a price guarantee lasting 35 years on power from a plant which the French utility plans to build at Hinkley Point in southwest England, but the support mechanism needs state aid approval from the European Commission.
"The Commission has doubts that the project suffers from a genuine market failure," the executive said in a statement, adding it would seek public feedback on the case because of its unprecedented nature and scale.
Britain is the first European member state seeking state aid approval for a nuclear support scheme.
If the Commission rules that the mechanism does not comply with EU state aid rules, the project is unlikely to go ahead.
"We will use this period to demonstrate how the project meets state aid rules and provides good value for consumers while cutting carbon in the energy sector," said Britain's Secretary of State for Energy and Climate Change, Edward Davey.
He added that opening investigations was standard procedure for the Commission when assessing large investment projects and that it was always expected as part of Hinkley Point's approval process.
"It is right that the European Commission should examine the contract and highlight potential challenges," said EDF Energy, the French firm's UK subsidiary, in a statement.
The Commission will assess whether the nuclear plant can be built without government support and also investigate Britain's plan to back EDF's loans with a state guarantee and the electricity price level agreed in the contract, the Commission said.
The EU's Competition Commissioner Joaquin Almunia told reporters on Wednesday that the executive was not under any legal time pressure to complete the investigation.
"The investigation depends on how complicated it is. This is not exactly the simplest investigation," he said.
A British government source said last week Britain was confident the investigation could be ready by the summer.
EDF has signed preliminary agreements with Chinese investment partners China General Nuclear Corporation (CGN) and China National Nuclear Corporation (CNNC) who will together own 30-40 percent of the project.
French reactor designer Areva will hold a 10 percent stake in the plant.
Reporting by Foo Yun Chee; Additional reporting by Karolin Schaps in London and Barbara Lewis in Brussels; editing by Robert-Jan Bartunek and William Hardy