Dong Energy is grappling with an exploding debt burden after a substantial drop in profits, the company's annual report, released today, showed.

The state-owned energy producer’s posted a loss of 4 billion kroner in 2012, compared a 2.9 billion kroner profit the previous year.

According to its annual report, half of Dong's loss was due to a 2 billion kroner write-off on the value of gas-storage contracts in Germany, as well as higher than expected depreciation values and an increase in net financing costs. More worryingly however, was that the company's interest-bearing debt rose by almost 10 billion kroner, and now stands at 33.5 billion kroner.

Dong managing director Henrik Poulsen admitted the results were below par, and said the company would now focus on divesting non-core assets, cost cutting and an injection of additional equity of at least 6 billion kroner in order to reach its goal of growth rates of 10 percent by 2016.

The company’s decision to invest heavily in gas has cost it dearly, and according to Jyske Bank analyst Jens Hove Thomsen, Dong will have to sell some of its healthier business operations in order to make up for the loss.

“There’s enough value within the company to recuperate the 10 billion kroner loss,” Thomsen told financial daily Børsen. “The only question is, what parts of the company will they have to sell?”

The finance minister, Bjarne Corydon, has brought some calm to the company’s situation by stating that he supported Dong’s strategy.

“We need to ensure that Dong Energy will continue develop,” Corydon wrote in a press statement today. “I am pleased to say that a broad range of parties in parliament are prepared to expand the share capital of the company by at least 6 billion kroner.”

Despite the losses, analysts said Dong still had a fundamentally strong position within the off-shore wind turbine industry.

“Off-shore wind farms are definitely their strength,” Thomasen told Børsen. “They have been a big player in building up that industry, so to focus on that investment would be a sound business strategy.”

Today's announcement came after Dong, in November, announced it would cut over 300 jobs. Poulsen, despite receiving government reassurances, refused to say whether a new round of layoffs was in store.

“It would be imprudent of me to issue a guarantee in this regard,” he told Børsen. “But we have no concrete plans for major layoffs in 2013.”