A company which bought the assets of the failed £30m Arbre wood-burning energy plant in Yorkshire has held negotiations with the DTI about possibly restarting the operation.

It is also rumoured that the company, DAS GreenEnergy UK, is considering dismantling the equipment and shipping it to India, Italy or South Africa.

The assets of the power station near Selby were sold by receivers PricewaterhouseCoopers to DAS GreenEnergy, set up by American Anthony DiNapoli, for £3m during May.

Six bids to buy Arbre were submitted in all, most of which had intended to re-open the plant.

A DTI spokesperson said: “We met with DAS GreenEnergy recently and had a constructive meeting. We are now waiting an announcement of what they intend to do with the plant.”

The spokesperson said the issue of any future DTI funding for Arbre depended on what the company put forward.

&#8220We met with DAS GreenEnergy recently and had a constructive meeting. We are now waiting an announcement of what they intend to do with the Arbre plant”

DTI spokesperson

Any dismantling of the equipment and shipping abroad would be a blow for UK plans to increase green energy production and an embarassment for the government which granted £3m to the project, alongside £10m from the EU.

Arbre closed in August last year with debts of £2m after financial backer Kelda withdrew. It had been hampered by design problems preventing it from operating effectively and, in all, produced electricty for just eight days.

Dozens of farmers signed agreements to supply forest residues and fast-growing willow to fuel the plant.

Biomass is an important part of the the government’s renewables policy, and there are plans to have wood-burning and other projects make up about half of all renewable energy by 2010.