In response to energy market liberalisation and privatisation initiatives promoted by the EU and other European states in the 1990s, a large number of US energy utilities expanded their activities in Europe, mainly through acquisitions. The size of their investment was, a decade later, matched by the ensuing scale of their retreat, wealth destruction and often forced exit. Combining interviews, industry studies, published financial data and company reports, this article examines critically their strategy and, in light of widespread failures, seeks to answer the question of what went wrong. It is argued that mistakes might have been avoided through greater appreciation of how market liberalisation evolves given changing government priorities and general sovereign risk. (C) 2008 Elsevier Ltd. All rights reserved.