Struggling energy firm TXU Europe and five subsidiaries have been placed into administration, handing the UK electricity sector a fresh crisis.

A UK court has appointed Ernst & Young and KPMG as administrators to TXU, which owes its banks �780m, and bondholders more than �2bn.

The firm has blamed its financial crisis on a fall of 25% in UK power prices since last year.

"We are satisfied with these cases," Judge William Blackburne said, granting the administration order, which will give the firm protection from creditors, and breathing space to restructure.

Alan Bloom, head of corporate restructuring at Ernst & Yong, said: "Our goal is to maximise the level of recovery."

Broad implications

TXU Europe, owned by US energy giant TXU, owns operations and Germany and Scandinavia, outside the key UK market.

Buts its troubles have been focused in the UK, where it has been in talks with Drax, the UK's largest power station, over renegotiating a supply contract.

The 15-year deal sees TXU pay 60% more for electricity than current market prices.

Meanwhile, UK utility Innogy has asked the High Court to close TXU's European energy trading division.

And Tuesday's order may also affect generator International Power, which ranks TXU Europe as one of its major customers.

International Power earlier on Tuesday warned investors that a worsening of TXU Europe's situation could hit earnings next year.