NOVA to appeal $1bn judgment in Dow suit

Source: ICIS News


HOUSTON (ICIS)--NOVA Chemicals plans to appeal a $1bn judgment that it lost in a lawsuit against Dow Chemical over the companies' joint-venture cracker in Joffre, Alberta, the Canadian producer said on Thursday.

The Calgary-based company’s new linear low density polyethylene unit is part of an expansion project at the Alberta site, shown above, and should start sometime in the next seven days. (NOVA Chemicals)"We are extremely disappointed," NOVA said, adding the appeal should take place within 30 days.

The decision should not affect the company's growth plans, which include expanding its Corunna cracker in Ontario province; building a linear low density (LLDPE) plant featuring its Advanced SCLAIRTECH technology; and pursuing its PE joint-venture with Total and Borealis on the US Gulf Coast, NOVA said.

Dow and NOVA own the E3 cracker under a joint venture that NOVA had initially signed with Union Carbide, according to court documents. Under the joint-venture agreement, NOVA ran the plant.

The company accused NOVA of taking ethylene and other products that should have gone to Dow, according to court documents.

Dow also accused NOVA of running the cracker below its full rate, contrary to its obligations under the joint-venture agreement, court documents said.

NOVA breached the agreement and made decisions on the operations of the cracker based on its own corporate needs and strategies, Dow alleged. NOVA ran the cracker as if it wholly owned the plant, disregarding Dow's rights under the joint-venture agreement.

“NOVA was contractually required to run the co-owned ethylene facility at full productive capability and to provide Dow its 50% share of ethylene and co-product production,” according to a statement by lead trial counsel Blair Yorke-Slader of Bennett Jones.

“The court has ruled that NOVA breached its obligations, resulting in reduced productivity and reduced sales of Dow’s downstream derivatives for more than 10 years," he said.

"The company looks forward to having this world-scale facility operated at its full capability, as agreed, restoring Dow’s rightful access to ethylene for its differentiated downstream derivatives to support the company’s growth," Yorke-Slader.

In the court documents, NOVA alleged that Dow's accusations were an attempt to rewrite the joint-venture agreement that would result in supply and production guarantees that were never intended.

NOVA alleged it had no choice but to run the cracker below nameplate capacity because of an ethane shortage that the companies did not expect when they signed the joint-venture agreement.

Dow's complaint covered the years 1997-2012. It could receive more damages for the time after 2012.

NOVA had filed a counterclaim, but this was dismissed, the court said.

The case was litigated in the Court of Queen's Bench of Alberta.

The ethylene capacity of the cracker is 1.27m tonnes/year.

(releads, adds paragraph 2-3)

Pictured above is NOVA Chemicals plant site at Joffre in Alberta, Canada. (Photo from NOVA)