NOVA Chemicals. Styrenics Market Conference Call INEOS NOVA Joint Venture. September 19, 2007

Transcription

1 NOVA Chemicals Styrenics Market Conference Call INEOS NOVA Joint Venture September 19, 2007

2 Forward-Looking Information This material and the comments made by our management contain forward-looking statements with respect to NOVA Chemicals Corporation alone or together with its subsidiaries and affiliates, depending on the context in which such statements are used. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions and projections will not prove to be accurate, that our assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections. Forward-looking statements for the time periods beyond 2007 involve longer-term assumptions and estimates than forwardlooking statements for 2007 and are consequently subject to greater uncertainty. We caution you not to place undue reliance on our forward-looking statements as a number of factors could cause actual results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. The words believe, expect, plan, intend, estimate, or anticipate and similar expressions, as well as future or conditional verbs such as will, should, would, and could often identify forward-looking statements. Specific forward looking statements contained in this material include, among others, statements regarding: our view that we will have positive changes in styrenics fundamentals in the foreseeable future, including our views of HPPO plants and operating rates for POSM plants and how that may affect the styrene markets and our belief that we will see more benzene capacity and supply; our belief that the big driver for better EPS utilization rates in Europe is demand growth and that the demand for construction applications for EPS will grow rapidly; our beliefs about and expectations for our proposed expanded JV with INEOS, including our expectation of new synergies from the expanded JV of approximately $50 million per year and our expectation that the JV will consolidate polymer operations and take out 300 to 400 million pounds of SPS capacity; our expectation of additional consolidation in the styrenics industry; our beliefs concerning our acquisition of styrene production rights from Sterling and how that can change the costs and efficiencies of our proposed expanded JV with INEOS; our estimate of $30 million of increased JV EBITDA related to the acquisition of the styrene production rights from Sterling; our belief that our actions will allow a rapid return to health for the North American segment of the styrenics industry; our beliefs about Asian and European styrene markets, prices, margins and export opportunities and demand for North American produced polymers; our beliefs about expansion of margins for North American styrene and polymer producers; and our beliefs and expectations regarding chain margin improvements for the global JV and how that impacts our EBITDA. With respect to these forward-looking statements, we have made assumptions regarding, among other things: future oil and natural gas prices; our ability to obtain raw materials; our ability to market products successfully to our anticipated customers; the impact of increasing competition; and our ability to obtain financing on acceptable terms. Some of our assumptions are based upon internal estimates and analyses of current market conditions and trends, management plans and strategies, economic conditions and other factors and are necessarily subject to risks and uncertainties inherent in projecting future conditions and results. Some of the risks that could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements include: commodity chemicals price levels (which depend, among other things, on supply and demand for these products, capacity utilization and substitution rates between these products and competing products); feedstock availability and prices; operating costs; terms and availability of financing; technology developments; currency exchange rate fluctuations; starting up and operating facilities using new technology; realizing synergy and cost savings targets; our ability to implement our business strategies; meeting time and budget targets for significant capital investments; avoiding unplanned facility shutdowns; safety, health, and environmental risks associated with the operation of chemical plants and marketing of chemical products, including transportation of these products; public perception of chemicals and chemical end-use products; the impact of competition; changes in customer demand, including customer acceptance of our Performance Products; changes in, or the introduction of new laws and regulations relating to our business, including environmental, competition and employment laws; loss of the services of any of our executive officers; uncertainties associated with the North American, South American, European, and Asian economies; terrorists attacks; severe weather events; and other risks detailed from time to time in our publicly filed disclosure documents and securities commission reports. Our forward-looking statements are expressly qualified in their entirety by this cautionary statement. In addition, the forward-looking statements are made only as of the date of this material, and except as required by applicable law, we undertake no obligation to publicly update these forward-looking statements to reflect new information, subsequent events or otherwise.

3 NOVA Chemicals Leverage Styrene Chain Pounds per share Styrene Monomer Solid Polystyrene * NCX BASF DOW TOTAL LYO *NOVA Chemicals share after INEOS NOVA JV **Prior to Dow/Chevron Phillips JV. Source: CMAI, company reports. ** PANEL 1

4 Styrenics Value Chain Styrene Monomer is the Bottleneck 105 B lbs 65 B lbs 70 B lbs* Styrene Benzene Polystyrene & Styrene Derivatives * in Styrene pounds equivalent Source: Chemical Market Associates (CMAI), NOVA Chemicals. PANEL 2

5 Styrene Chain Margins Consultant View Cyclical cents per pound Peaks 40 Solid Polystyrene Styrene Monomer ytd Source: CMAI. PANEL 3

6 Styrene Chain Margins NOVA Chemicals View cents per pound Cyclical Peaks Solid Polystyrene Styrene Monomer ytd Source: CMAI, NOVA Chemicals. PANEL 4

7 North American Styrene Monomer Operating Rates 100% Average = 82% 90% 80% 70% ytd Source: CMAI. Data through Q PANEL 5

8 North American Styrene Monomer POSM vs. EBSM Operating Rates 100% EBSM Avg. = 80% 90% POSM 80% EBSM 70% ytd Source: CMAI. Data through Q PANEL 6

9 Benzene Price vs. Crude Oil Price $ per gallon $4.00 Benzene price minus WTI Crude Oil price $3.00 Benzene WTI Crude Oil $2.00 $1.00 $0.00 Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Source: CMAI. Data as of Sep 1, PANEL 7

10 Benzene Price vs. Crude Oil Price $ per gallon $3.00 Sep 07 Spread = $1.57 Benzene price minus WTI Crude Oil price $2.00 $1.00 Historical Range $0.00 Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Source: CMAI. Data as of Sep 1, PANEL 8

11 NOVA Chemicals Actions $85M/year Improvement 1. Styrene Contract Expiry: $30M/year Balanced SM position, higher asset utilization 2. EU JV Improvement: $40M/year Plant Closures: Berre, FR and Carrington, UK JV synergies 3. North American Restructuring: $15M/year Plant Closure: Chesapeake,VA PANEL 9

12 European Solid Polystyrene Operating Rate Improvement 13% Capacity Reduction INEOS NOVA Carrington, UK 400 M# BASF Tarragona, SP 155 M# Dow Barry, UK 130 M# Q % Q % Total Gonfreville, FR 90 M# Linpac Sherbourne, UK 65 M# 840 M# : Global solid polystyrene capacity was reduced by 2.5Blbs or 8%. Source: CMAI, NOVA Chemicals. PANEL 10

13 Expandable Polystyrene Demand Growth Average Annual Growth Asia 2% Europe 3% North America 5% Source: CMAI. PANEL 11

14 Construction & Building End-Uses EPS Demand Growth Average Annual Growth Asia 4% Europe 5% North America 10% Source: CMAI. PANEL 12

15 STYRENIX Business Unit Significant EBITDA Improvement $ Millions $25 $0 Q2'05 $(50)M Q2'07 $29M ($25) ($50) Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 PANEL 13

16 Polystyrene Demand Seasonality Quarterly 7 Year Average Quarterly Average Q1 Q2 Q3 Q4 Source: American Chemistry Council (ACC) North American PS Sales Volume data from PANEL 14

17 Expanded INEOS NOVA JV October 1, 2007 Start Up Capacity (Mlbs) Rank % Share North America Styrene Monomer 3720* 1 26% Solid Polystyrene % Europe Solid Polystyrene % Expandable Polystyrene % Global Styrene Monomer 3720* 5 6% Solid Polystyrene % Expandable Polystyrene % *No production from Sterling Texas City site. PANEL 15

18 INEOS NOVA Joint Venture North America Styrene Location (Mlbs) Bayport, TX 1700 Texas City, TX 1070 Sarnia, ON 950 Joliet, IL Decatur, AL Springfield, MA Belpre, OH Montreal, PQ Total 3720 Solid PS (Mlbs) Legend: Solid Polystyrene Styrene Monomer PANEL 16

19 Styrenics Value Chain Styrene Monomer is the Bottleneck 105 B lbs 65 B lbs 70 B lbs* Styrene Benzene Polystyrene & Styrene Derivatives * in Styrene pounds equivalent Source: CMAI, NOVA Chemicals. PANEL 17

20 Styrenics Value Chain Styrene End Uses Solid Polystyrene 43% Expandable Polystyrene 17% 1% annual growth 5% annual growth 7% annual growth Source: CMAI market data demand growth. ABS/SAN 17% Other 7% SBL 7% UPR 5% SBR 4% PANEL 18

21 Sterling Production Rights 11% North American Styrene Capacity INEOS NOVA to include rights to 1.7Blbs SM Sterling retains physical assets closure costs & liabilities Funded with cash from JV operations Expect JV to improve by $30 million/ year increased SM plant rates increased sales volume PANEL 19

22 North American Styrene Monomer Industry Consolidation Total Capacity # of Producers Largest 4 Producers Total/GE B lbs 10 59% NOVA Chemicals Chevron Lyondell 18% 16% 13% 12% INEOS NOVA 2007* 14.4 B lbs 7 82% Dow/Chevron Total/GE Lyondell 26% 24% 18% 14% * Assumes Sterling capacity closed, and Dow/Chevron joint-venture completed. Source: Public information compiled by NOVA Chemicals. PANEL 20

23 Global Styrene Production Reactors ranked by Size Capacity Mlbs/yr 1500 EBSM POSM Source: CMAI. PANEL 21

24 Global Styrene Production EBSM Reactors ranked by Size Capacity Mlbs/yr Bayport, TX 1700 Mlbs 1500 Texas City, TX 1070 Mlbs Sarnia, ON 950 Mlbs Source: CMAI. PANEL 22

25 Global Styrene Production EBSM Reactors ranked by Size Capacity Mlbs/yr Bayport, TX 1700 Mlbs 1500 Texas City, TX 1070 Mlbs Sarnia, ON 950 Mlbs 1000 NA Avg. Size 950 Mlbs EU Avg. Size 650 Mlbs 500 Asia Avg. Size 450 Mlbs 0 Source: CMAI. PANEL 23

26 Global Styrene Production EBSM Reactors by Region Capacity Mlbs/yr Bayport, TX 1700 Mlbs % Source: CMAI. Texas City, TX 1070 Mlbs Sarnia, ON 950 Mlbs 6% 15% 15% 16% 20% 26% 28% 32% 34% 38% 41% 43% 48% 48% 53% 58% 58% 61% 62% 65% 70% 72% 77% 77% 85% 85% North America Europe Asia Rest of World PANEL 24 86% 88% 92% 94% 97% 99%

27 High Export Cost Hurdle to N.America Styrene Fixed + Utility + Freight Costs /lb 6 4 > 5.5 /lb 2 /lb 0.5 /lb 3 /lb 0.5 /lb 2 0 < 2 /lb 3 /lb 5 /lb 4 /lb INEOS NOVA North America Europe Asia Source: CMAI, NOVA Chemicals. PANEL 25

28 North American Styrene Monomer Net Exports ( ) Mlbs Average net = exports 2 Blbs = 2 per Blbsyear SM Net Exports Source: CMAI. Data through PANEL 26

29 Global Styrene Monomer Operating Rates 100% 3% increase without Sterling 90% 91% 88% Industry Operating Rate 80% ytd Source: CMAI. Data through Q PANEL 27

30 Asia Styrene Monomer Operating Rates 110% 100% 90% 80% Industry Operating Rate 70% ytd Source: CMAI. Data through Q PANEL 28

31 Europe Styrene Monomer Operating Rates 100% 90% 80% Industry Operating Rate 70% ytd Source: CMAI. Data through Q PANEL 29

32 Styrene Trade Balance Central Europe N. America 82% Europe 85% Asia Max Rates Middle East Max Rates South America Source: CMAI. Regional operating rates YTD Q PANEL 30

33 North America Styrene Monomer Operating Rates 100% 11% increase without Sterling 93% 90% 80% 82% 70% ytd Source: CMAI. Data through Q PANEL 31

34 NOVA Chemicals Leverage Styrene Chain Margin $M EBITDA Improvement Improvement $/share $400 $300 $200 $100 1 /lb = $19M EBITDA = $0.23 EBITDA per share $5.00 $4.00 $3.00 $2.00 $1.00 $ Margin Improvement ( /lb) PANEL 32

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36 Styrene New Capacity Announcements Capacity (Mlbs) Project Country Assumed Timing Comments 1200 Formosa Taiwan 07 Q3 Started up July Samsung Total Korea 07 Q3 Started up July 07 (330) Asahi Japan 07 Q4 Plant closure 1700 Chevron Phillips S. Arabia 08 Q (730) National Petrochemical Iran 08 Q3 Delayed from 2007 PIC/Dow Kuwait 08 Q4 Further delay to 09 likely Total Petrochemical France 09 Q1 Gonfreville site debottleneck Total Petrochemical France 09 Q1 Carling site shut-down Dushanzi China 09 Q3 Delayed from 2008 Zenhai Refining/Chemical China 09 Q4 POSM plant, Sinopec-Lyondell JV no new projects scheduled CAGR : 2.8% Source: NOVA Chemicals, with various industry sources. PANEL A1

37 INEOS NOVA Joint Venture Europe Location Breda, NLD Marl, DEU Ribecourt, FR Trelleborg, SWE Wingles, FR Total Solid PS (Mlbs) EPS (Mlbs) Legend: Solid Polystyrene Expandable Polystyrene Solid & Expandable Polystyrene PANEL A2