The European Commission has launched an in-depth investigation to establish whether France's guarantee for a E570 million bank loan to finance Finnish electricity producer TVO is compatible with EC Treaty rules on state aid.

<p>The Commission said that it needs to obtain clarifications from France and interested parties to establish whether the total costs of the loan (interest rate plus guarantee premium paid by TVO to the French government) conform with market practices for this type of financial tool. <br /><br />The inquiry comes after the Commission received two complaints at the end of 2004 regarding a E570 million guarantee granted by the French Government, via the French agency for export credit insurance (Coface), to TVO for the purchase of equipment from the French company Areva/Framatome to build a nuclear power plant.<br /><br />From what it has gathered so far, the Commission said that it is possible that the provision of the guarantee, for which TVO pays a fee to the French government, may have lowered TVO&#0039;s financial costs below the levels corresponding to market conditions. The guarantee may also have lowered the financial costs linked to the Areva/Siemens offer for TVO, and, thereby helped the Areva/Siemens consortium to get the contract for the construction of the new nuclear power plant.</p>