The British government's controversial rescue of ailing nuclear power firm British Energy has won the partial approval of EU competition watchdogs.

The European Commission said on Wednesday it would allow the emergency loan to British Energy, providing certain conditions were met.

The Commission wants the UK government to present it with plans for a full restructuring of British Energy within six months.

The institution also asked for monthly reports detailing all payments to British Energy, and imposed a ceiling of �899m ($1.39bn) on the total amount of aid the firm can receive.

It added that British Energy was barred from using government loans to increase output, and said the firm must repay all government aid at full market rates.

Deadline looms

The UK government set up a �650m emergency loan facility for British Energy in September after the firm, the UK's biggest nuclear power generator, warned that it was in danger of going bust.

The loan facility is due to expire on Friday.

Environmental groups and some of British Energy's competitors have protested that the aid is unfair, with Greenpeace taking legal action to have the company's financial lifeline withdrawn.

But the government is reluctant to let British Energy go under for safety and security of supply reasons.

Cash crunch

British Energy operates eight plants in the UK and produces more than a fifth of the UK's power.

It was hit hard by a steep drop in electricity prices after the wholesale power market was liberalised last year.

Other power firms have been able to offset the weaker wholesale market by upping retail prices, but this tactic is not available to British Energy as it does not have a retail arm.

The company is trying to renegotiate its �300m nuclear fuels reprocessing contract with state-owned BNFL in order to save cash.

It is also thought to be considering selling off its US and Canadian nuclear power interests.