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Alberta Premier Ed Stelmach's flat refusal last week to rescue Nova Chemicals Corp. appears to have closed the door to an obvious

path to salvation of this former symbol of Alberta economic nationalism.

The Premier's indifference is not surprising. Most Albertans would not recognize Nova's name now, let alone support taxpayer

assistance for a business floundering from its own poor choices, including turning its back on the province when it moved its

headquarters from Calgary to the United States a decade ago.

When Nova Chemicals was launched as a publicly traded company in 1998, it had assets of $3.9-billion, revenue of $3.4-billion and

its stock was worth $31.75. The stock closed at $1.99 on Friday on the Toronto Stock Exchange, down from $30.80 on Aug. 29,

making its value in the market a paltry $165.5-million.

Nova's Alberta assets alone would cost north of US$5-billion to replace, CEO Jeff Lipton said in a conference call on Jan. 29. With a

heavy debt load coming due, some of it this month, and substantial cash needs, analysts are questioning Nova's ability to avoid

bankruptcy protection.

"Alone among its petrochemical peers, Nova did not pay down debt during the past few years of above-normal industry profitability,"

Jeffrey Zekauskas, an analyst at JP Morgan Chase & Co., said in a report. "The current ethylene down-cycle is underway with a

prolonged period of weak pricing that could last for two to three years."

Layoffs and cost cutting are under way. Meanwhile, its crown jewel, the Joffre ethylene and polyethylene complex in central Alberta,

one of the largest in the world, is vulnerable to being scooped up at a fire sale price by foreign interests.

With Nova claiming it is working with a major source of financing to ease the crunch, rumours surfaced last week that an Alberta

government-backed institution such as ATB Financial or Alberta Investment Management Corp., the pension fund, might help it with

$100-million in financing. Both denied it.

Those with long memories can only shake their head at how much this once-mighty company has fallen since splitting itself into two

-- a pipeline company and a chemical company -- in 1998, to boost the stock price.

Coinciding with the split, its Alberta natural gas pipeline system was merged with TransCanada Corp., while the chemical business

was spun off into a separate company. A year later, the headquarters of the chemical business were moved to Pittsburgh by Mr.

Lipton, an American.

The move baffled many because of the company's roots and influence in the province. It was also a snub to Alberta politicians such as

former premier Peter Lougheed, who had seen the company as central to the growth of a provincial petrochemical industry to

diversify the economy and produce value-added products from its energy resources. One of Nova's key advantages is access to cheap

feedstock from the province's natural gas industry.

Nova's heritage is similar to that of EnCana Corp., the Calgary-based oil and gas producer that grew from an Alberta business to

become one of North America's largest, and which is also now contemplating a split into two entities.

Nova was created in 1954 as Alberta Trunk Line Ltd. by the Alberta government, a monopoly pipeline system within the province that

fed gas to pipelines outside its borders. But it grew into a diversified energy business over the years. In the 1970s, under Bob Blair, it

hatched one of the first plans for an Alaska gas pipeline. At one point it owned Husky Oil Ltd. Ted Newall took it over in 1993, grew

its chemical business and turned it into a Canadian business icon. Then Mr. Newall and Dick Haskayne, the chairman, orchestrated

the merger of its Alberta pipeline system with that of TransCanada in a massive deal that seemed to make sense at the time.

But while TransCanada blossomed from that new base, Nova Chemicals never became the global chemical powerhouse Mr. Lipton

envisioned. He moved Nova to the United States so it could be closer to investors and customers, make acquisitions and boost the

stock price. Instead, bulking up in the styrenics business led to big losses and today's high debt, while its original operations in

Alberta and Ontario remain, by far, its major assets and major employers.

Meanwhile, Nova missed out on the Alberta oil and gas boom of the last decade, where opportunities to diversify, expand and create

wealth were scooped up by its former Calgary peers.

ccattaneo@nationalpost.com

Once-mighty Nova Chemicals needs rescuer

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Page 1 of 2Once-mighty Nova Chemicals needs rescuer

11/10/2015http://www.nationalpost.com/opinion/story.html?id=bede709e-3829-47d2-8564-6e84867...

7/26/2019 Nova chemicals newspaper article

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Page 2 of 2Once-mighty Nova Chemicals needs rescuer

11/10/2015http://www.nationalpost.com/opinion/story.html?id=bede709e-3829-47d2-8564-6e84867...