Nova Chemicals (NCX)

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NOVA Chemicals is a leading chemical company jointly headquartered in Calgary, Alberta, and Pittsburgh, Pennsylvania. It was founded in 1954. NOVA operates two commodity chemical businesses across 14 sites in North America and 4 in Europe. The corporation's chemical assets are divided into two segments: Olefins/Polyolefins and Styrenics. NOVA's Olefins/Polyolefins division produces ethylene, a multipurpose chemical, as well as different grades of polyethylene and polystyrene (PS), two thermoplastics. The Styrenics line manufactures styrene monomer and styrene polymer, two chemicals that are used to make different types of plastic. NOVA creates plastic bags, packaging, containers, pipes, and other household and commercial plastics. Components for appliances, electronics, and automobiles are also produced by the corporation. Further, NOVA creates an extensive line of plastic tools and parts for construction.

NOVA Chemicals formed a 50:50 JV with BP's olefins and derivatives business, Innovene. The JV, called NOVA Innovene, aimed at manufacturing and marketing of styrenic polymers in Europe. The JV expanded after two years when INEOS Styrenics acquired the Innovene JV from BP to include the North American styrene and styrenic polymers businesses. The North American venture includes all of NOVA's commodity styrenics, except for expandable polystyrene (EPS), which will remain with NOVA's performance styrenics segment, as well as NOVA's equity interest in Lyondell's styrene, which also will remain with NOVA. INEOS will contribute all of its North American styrene and PS assets. The INEOS NOVA JV is expected to yield aggregate synergies of $80 million per year. Several cost-cutting measures are taken up to achieve this target. The JV already closed its Montreal, Quebec, polystyrene facility and on the verge of closing its Belpre, Ohio, polystyrene facility as well. All these closures are meant to remove the high-cost capacity and enable consolidation of production at the company's most efficient manufacturing sites.

Nova has the "Alberta advantage", which is partly due to the scale of the ethylene crackers, which are more than 2.5x the scale of the average North American crackers. Second, in western Canada, Nova has access to lower-cost gas, compared with the U.S. Gulf Coast. These account for Nova's historical average of $0.07/lb advantage in ethylene production costs compared to the US Gulf Coast ethane-based ethylene producers. Near-term conditions are firm, with global ethylene demand growth of 4% to outpace capacity growth of 3% in 2008. Each $0.01/lb increase in ethylene cash margin is $0.40 per share.

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