The passage of an interplanetary magnetic cloud at Earth on January 10–11, 1997, induced significant geomagnetic disturbances, with a maximum AE in excess of 2000 nT and a minimum Dst of about −85 nT. We use a comprehensive set of data collected from space‐borne instruments and from ground‐based facilities to estimate the energy deposition associated with the three major magnetospheric sinks during the event. It is found that averaged over the 2‐day period, the total magnetospheric energy deposition rate is about 400 GW, with 190 GW going into Joule heating rate, 120 GW into ring current injection, and 90 GW into auroral precipitation. By comparison, the average solar wind electromagnetic energy transfer rate as represented by the ε parameter is estimated to be 460 GW, and the average available solar wind kinetic power USW is about 11,000 GW. A good linear correlation is found between the AE index and various ionospheric parameters such as the cross‐polar‐cap potential drop, hemisphere‐integrated Joule heating rate, and hemisphere‐integrated auroral precipitation. In the northern hemisphere where the data coverage is extensive, the proportionality factor is 0.06 kV/nT between the potential drop and AE, 0.25 GW/nT between Joule heating rate and AE, and 0.13 GW/nT between auroral precipitation and AE. However, different studies have resulted in different proportionality factors. One should therefore be cautious when using empirical formulas to estimate the ionospheric energy deposition. There is an evident saturation of the cross‐polar‐cap potential drop for large AE (>1000 nT), but further studies are needed to confirm this.