Interserve's share price has fallen more than 26 per cent after the firm said it will more than double the expected charge for exiting its energy-from-waste business to about £160m.
After a review of operational developments and the impact of a "lengthy period of litigation", the British support services and construction group said its original provision of £70m "is no longer adequate to reflect the incurred and anticipated losses" associated with a terminated contract in Glasgow.
The company expects further cash outflows of around £60m in 2017, it said in a statement.
The FTSE 250-listed firm's shares were down 26.47 per cent at 246.5p in early afternoon trading.
Analysts at Liberum downgraded the firm to a "sell" listing, saying even the jump from £70m to £160m may not be enough and giving a "very tentative" estimate of £187m.
Liberum said: "There are a variety of issues including the lengthy litigation at Glasgow and the insolvency of the gasification contractor, Energos. On the call management indicated that there were still significant uncertainties around the appropriate level of provisions."
In its statement, Interserve said: "Managing the challenges of exiting from these projects and of pursuing our entitlements to recoveries and claims from third parties remains the focus for the large, experienced team of commercial, operational and legal experts we have deployed and will remain an area of critical focus for the foreseeable future."
The firm first announced its decision to exit the energy-from-waste business in August because of cost overruns and delays in the Glasgow contract.
In November, Interserve said chief executive Adrian Ringrose would stand down in 2017, but there was no news of who the new replacement would be in the company's full-year results in January.