A small Chinese power generator on Tuesday rejected demands from a Goldman Sachs unit to pay for nearly $80 million lost on two oil hedging contracts, part of a long-running dispute over how China deals with derivatives losses.
Goldman Sachs was one of the foreign banks, along with Citigroup, Merrill Lynch and Morgan Stanley, blamed by the state assets watchdog for providing “extremely complicated” and difficult to understand derivatives products.
Shenzhen Nanshan Power said in a statement that it received several notices from J. Aron & Company, a trading subsidiary of Goldman Sachs, for at least $79.96 million as compensation for terminating oil option contracts.
“We will not accept the demand by J. Aron for all the losses and related interests,” said Nanshan, in line with the stance it took last December.
“We will try our best to negotiate with J. Aron and resolve the dispute peacefully...but the possibility of using a lawsuit cannot be ruled out when talks fail,” it added.
“J. Aron told us in one notice that if we do not pay the money, they will reserve the right to launch a lawsuit and will not send us any further notice.”
The State Assets Supervision and Administration Commission said in September that it would back state-owned companies in any legal action against the foreign banks that sold them oil derivatives, which resulted in losses when oil prices dived late last year.
A Beijing-based Goldman Sachs corporate communication official declined to comment.
Nanshan said in October last year that two oil option-related contracts with J. Aron were signed by its officials without authorisation from the company.
In December 2008 it said in a statement it had terminated the deals, and that it would not accept J. Aron’s demand for payment.
Many Chinese firms, especially airliners, suffered huge losses from complex oil options trading last year as oil price collapsed to nearly $30 a barrel.—Reuters
Wednesday, December 30, 2009
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