Swedish energy giant Vattenfall said Tuesday it was forced to make a huge write-down in the second quarter, illustrating the difficulties faced by European electricity providers in a sluggish economy.
The state-owned firm became one of the first major energy groups in Europe to admit that electricity prices were unlikely to recover "in the forseeable future", as it wrote down the value of its assets by 29.7 billion kronor (3.48 billion euros, $4.58 billion).
Half of the sum arose from the company's operations in the Netherlands, where observers say it overpaid for its Nuon unit in 2009.
But Sweden's financial markets minister, Peter Norman, said the state-owned group's problems went further than that.
"Since 2008, the major European energy companies' share value has dropped by around 50 percent, corresponding to an overall value decline of around 2,400 billion kronor," he said in a statement.
In the year's leading up to the financial crisis, deregulation of Europe's energy markets prompted some electricity producers to make cross-border acquisitions, sometimes taking on debt to do so.
It left them ill equipped to deal with the slump in energy demand that came in the wake of the downturn.
"There is less industrial activity, both in Europe and the Nordics," said Jakob Magnussen, an analyst at Danske Bank.
Other energy groups that have had to write down the value of their assets include Germany's RWE and E.ON, and Norway's Statkraft.
Europe's natural gas-fired power plants have become especially unprofitable as electricity tariffs have dropped while the price they pay for gas has remained high -- more than twice the spot price on the American market.
In the US, the shale gas boom has resulted in a big drop in gas prices, fuelling the economic recovery and helping the country attract energy intensive industry.
The price discrepancy between Europe and America remains for gas because shipping the commodity across the Atlantic is expensive. However, the low price of gas in the US has pushed down the price of coal, both there and in Europe.
Vattenfall's coal-fired electricity plants were likely to be more profitable than their gas-powered counterparts, "which are loss making", according to Mark Schindele, an analyst at Nordea.
But coal could become more expensive if the EU decides to prop up its carbon allowance scheme, the price companies pay for emitting the greenhouse gases blamed for global warming.
In recent years Vattenfall has focused on renewable energy, especially in markets where it is subsidised, such as Britain.
In 2010, the Swedish government told Vattenfall to focus on "environmentally sustainable" energy amid allegations that the company was responsible for more carbon emissions than all of Sweden put together.
"The current situation shows the need to urgently follow this strategy," Peter Norman said on Tuesday.
Swinging to a 23.707 billion kronor loss in the second quarter, compared with a 874 million net profit in the same period a year ago, Vattenfall said it would scale back investments but continue to focus on renewable energy.
The Swedish utility also said it would speed up cost cutting measures, raising its target for savings for 2014 to 2.5 billion kronor from 1.5 billion, and setting a new target of two billion kronor for 2015.
"This is the reality we are facing and we have to react according to what we know about the marketplace today," chief executive Oeystein Loeseth said.
The company said in March it would axe 2,500 jobs by the end of 2014.
Starting next year, the group's operations will be split into one division for the Nordic countries and another one for the rest of Europe.
The new structure "will allow the regions to focus on their respective core issues and will open up opportunities for risk-sharing in Vattenfall's continental operations over time," Loeseth said.