* Govt says deals may be renegotiated
* Hidroelectrica produces cheapest energy (Adds details)
BUCHAREST, July 25 (Reuters) - Romania's troubled state-owned power producer Hidroelectrica has cancelled most of the deals under which it sold electricity at below market prices, Economy Minister Daniel Chitoiu said on Wednesday.
Hidroelectrica, which has an installed capacity of 6,400 megawatts and is Romania's cheapest power producer, was declared insolvent last month, plagued by a previous drought and by its highly criticised contracts with a handful of companies that sell most of its output at below-market prices.
"Up until now ... the most disadvantageous contracts both for Hidroelectrica and the national economy have been denounced (cancelled) and there are 3 contracts left that are still under negotiation," Chitoiu told reporters after a government meeting.
"By the end of this month, based on negotiations, they will be denounced or renegotiated at market conditions."
The deals involving several traders and industrial producers, which would expire during 2014-2018, are already under investigation by the European Commission.
The International Monetary Fund, which leads a 5 billion euros international aid package for Romania, has repeatedly urged the government to either cancel the deals or renegotiate them at market prices.
The World Bank has estimated Hidroelectrica loses about 226 million euros to 338 million euros ($408.47 million) each year.
$1 = 0.8275 euros Reporting by Luiza Ilie; Editing by Elaine Hardcastle