The thermal power generator and Goldman are battling over the reason why the contracts were terminated, and Nanshan said in a statement to the Shenzhen bourse that the party responsible for the losses had yet to be determined.

Nanshan said in the statement released Tuesday that it would continue to negotiate with Goldman's Singapore unit, J. Aron & Company, to resolve the dispute, but that it had not ruled out possible legal action.

The company is among 68 state-owned firms that lost more than 11 billion yuan (1.6 billion dollars) on derivatives sold by investment banks including Goldman, Merrill Lynch and Morgan Stanley, state media said earlier this month.

The State-Owned Assets Supervision and Administration Commission (SASAC) said in September it would support state-owned companies that take legal action over the heavy losses.

Nanshan is refusing to pay for losses on hedging contracts signed with Goldman Sachs in March 2008, which bet the oil price would stay above 62 dollars a barrel between March and December 2008.

The Chinese company would incur losses if oil fell below 62 dollars.

China's securities regulator ordered Nanshan to cancel the contracts in October 2008 because they had been signed without authorisation.

Goldman Sachs declined to comment.

Earlier this month China accused several foreign investment banks of "maliciously" selling derivative products to dozens of state-owned companies.

The losses were "associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions," Li Wei, vice chairman of SASAC, told state media.

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