Swedish energy firm Vattenfall could axe up to 2500 staff by the end of 2014 as the company seeks to cut costs by SEK 4.5bn ($703m).

The warning came from Vattenfall chief executive Oystein Loseth (pictured) and his deputy Ingrid Bonde when they spoke at a meeting with the Vattenfall European Works Council.

Loseth said the company was facing low electricity demand, an oversupply of CO2-emission allowances, production overcapacity and low electricity market prices.

“This new reality requires efforts in further improving our efficiency and strengthening our financial position,” he said.

Bonde added that Vattenfall now has to adapt to the “greatly changed market situation” through divestments, a decreased investment plan, staff reductions and a “focus on operational excellence”.

“We also have to continue evaluating our assets. We have recently announced the potential divestment of our Danish thermal business and the evaluation of a sale of our share of the lignite power plant Lippendorf in Germany. Other initiatives, which are currently being further explored, include potential divestments of non-core assets and the evaluation of strategic alternatives for underperforming generation assets.”

Warning of impending job cuts, Loseth said: “We can not see that synergies and savings have been fully realised yet in our staff and support functions. We see a strong potential for cost improvements in these areas, which will require staff reductions in all countries we operate in.”

The job cuts will mainly affect employees currently working in Berlin, Hamburg and Cottbus.

The total reduction of staff in Germany is expected to be roughly 1500 by the end of 2014. In Sweden, a headcount reduction of around 400 is expected, with about 500 jobs going in The Netherlands and other countries 50.

“I would like to emphasise that Vattenfall wants to achieve potential headcount reductions in a socially responsible manner and in close cooperation with the employee representatives of the affected units in all countries,” Loseth said.