The Wall Street Journal, 19 Dec 2008, LAURA SANTINI
HONG KONG -- A face-off with a small Chinese power company over its losses on oil-related derivatives is turning into a big headache for Goldman Sachs Group Inc., a counterparty for a number of such trades in China.
Arguing that the transactions with the Wall Street firm were "unauthorized," Shenzhen Nanshan Power Station Co. is refusing to pay Goldman for the losses it has incurred, which people familiar with the situation said amount to tens of millions of dollars.
The sum at stake is small compared with losses at some other companies that hedged their oil exposure, but the downside could be significant for Goldman. Its Singapore commodities unit, J. Aron & Co., has acted as counterparty for several Chinese companies that are claiming bigger losses from oil hedging, including Air China Ltd. and China Eastern Airlines Corp.
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