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TABLE OF CONTENTS

As filed with the Securities and Exchange Commission on December 21, 2009

Registration No. 333-                        

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

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Form F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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NOVA CHEMICALS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

1000—7th Avenue S.W., Calgary, Alberta, Canada T2P 5L5
(403) 750-3600
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

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CT Corporation System
111 Eighth Avenue, 13th Floor, New York, New York 10011
(212) 894-8940
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

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        Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

        If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o

        If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o

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CALCULATION OF REGISTRATION FEE

(1)

Estimated solely for the purposes of calculating the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended.

(2)

The registration fee for the securities offered hereby was calculated under Rule 457(f)(2) of the Securities Act of 1933, as amended.

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        The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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Subject to Completion, dated December 21, 2009

Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy.

PRELIMINARY PROSPECTUS

NOVA Chemicals Corporation

OFFER TO EXCHANGE

Up to $350,000,000 aggregate principal amount of our Senior Notes due 2016 that have been registered under the Securities Act of 1933, for any and all of our outstanding Senior Notes due 2016.

Up to $350,000,000 aggregate principal amount of our Senior Notes due 2019 that have been registered under the Securities Act of 1933, for any and all of our outstanding Senior Notes due 2019.

The exchange offer will expire at 5:00 p.m.,
New York City time, on                                    , 2010, unless extended.

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        We are conducting the exchange offer to provide you with an opportunity to exchange your unregistered outstanding notes for freely tradeable exchange notes that have been registered under the Securities Act of 1933, as amended ("Securities Act").

The Exchange Offer

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We will exchange all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes representing the same underlying indebtedness that are freely tradeable.



•

You may withdraw tenders of outstanding notes at any time prior to the expiration date of the exchange offer.



•

The exchange offer expires at 5:00 p.m., New York City time, on                        , 2010, which is the 21st business day after the date of this prospectus.



•

The exchange of outstanding notes for exchange notes in the exchange offer should not be a taxable event for U.S. federal income tax purposes.



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The terms of the exchange notes to be issued in the exchange offer are substantially identical to the outstanding notes, except that the exchange notes will be freely tradeable.

        All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the indenture. In general, the outstanding notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the outstanding notes under the Securities Act.

        Investing in the exchange notes involves risks. You should carefully consider the "Risk Factors" beginning on page 13 of this prospectus before participating in the exchange offer.

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        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the exchange notes to be distributed in the exchange offer or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

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The date of this prospectus is                        , 20        .

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TABLE OF CONTENTS

        We have not authorized any dealer, salesperson or other person to give any information or represent anything to you other than the information contained in this prospectus. You must not rely on unauthorized information or representations.

        This prospectus does not offer to sell nor ask for offers to buy any of the securities in any jurisdiction where it is unlawful, where the person making the offer is not qualified to do so, or to any person who cannot legally be offered the securities. The information in this prospectus is current only as of the date on its cover, and may change after that date.

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TRADEMARKS

		® is a registered trademark of NOVA Brands Ltd.; authorized use/utilisation autorisée.

Advanced SCLAIRTECH™ and SCLAIRTECH™ are trademarks of NOVA Chemicals.

ARCEL®, DYLARK®, DYLITE® and NOVACAT® are registered trademarks of NOVA Chemicals Inc.

EPS Silver® is a registered trademark of NOVA Chemicals (International) S.A. in the European Community and a trademark of NOVA Chemicals Inc. in North America.

SCLAIR® is a registered trademark of NOVA Chemicals Corporation in Canada and of NOVA Chemicals (International) S.A. elsewhere; authorized use/utilisation autorisée.

SURPASS® is a registered trademark of NOVA Chemicals Corporation in Canada and of NOVA Chemicals (International) S.A. elsewhere.

NAS®, STYROSUN® and ZYLAR® are registered trademarks of INEOS NOVA.

Responsible Care® or variations thereof are registered service marks of the Canadian Chemical Producers' Association in Canada and the American Chemistry Council, Inc. in the United States.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

        The consolidated financial statements contained in this prospectus are reported in U.S. dollars but have been prepared in accordance with generally accepted accounting principles ("GAAP") in Canada. Canadian GAAP differs in certain material respects from U.S. GAAP. Note 21 to our Annual Audited Consolidated Financial Statements contained in this prospectus summarizes the effect on our consolidated financial statements of the principal differences between GAAP in Canada and in the United States.

AVAILABLE INFORMATION

        We have filed with the Securities and Exchange Commission (the "SEC") under the Securities Act, a Registration Statement on Form F-4 relating to the notes, of which this prospectus forms a part. This prospectus does not contain all of the information set forth in such Registration Statement, to which reference is made for further information.

        Pursuant to our outstanding debt indentures, we are required to file reports and other information with the SEC. Following the date of this prospectus, we will also be subject to reporting obligations under the Exchange Act of 1934, as amended (the "Exchange Act"). Such reports and other information concerning us can be inspected and copied at the public reference facility maintained by the SEC at Judiciary Plaza, 100 F Street, N.E., Washington, D.C. 20549 or accessed electronically over the Internet at the SEC's website at http://www.sec.gov.

        We also file information, such as periodic reports and financial information, with the Canadian securities administrators. This information may be accessed at www.sedar.com.

        We will provide without charge to each person to whom a copy of this prospectus is delivered, upon the written or oral request of any such person, a copy of any of the documents that we have filed with the SEC or otherwise referred to in this prospectus, other than the exhibits to those documents

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unless the exhibits are specifically incorporated by reference into these documents, or referred to in this prospectus. Requests should be directed to:

NOVA Chemicals Corporation
1550 Coraopolis Heights Road
Moon Township, PA 15108
Attention: Corporate Secretary Department
or
1000 7^th Avenue S.W.
Calgary, Alberta, Canada T2P 5L5
Attention: Corporate Secretary Department

        In order to receive timely delivery of requested documents in advance of the expiration date of the exchange offer, you should make your request no later than                        , 2010, which is five business days before you must make a decision regarding the exchange offer.

ENFORCEABILITY OF CIVIL LIABILITIES

        We are a corporation organized under the laws of the province of New Brunswick, Canada. Some of our directors and officers and some of the experts named in the prospectus reside principally in Canada, Europe or the Middle East. Because these persons are located outside the United States, it may not be possible for you to effect service of process within the United States upon those persons. Furthermore, it may not be possible for you to enforce against us or them, in the United States, judgments obtained in United States courts, including judgments based upon the civil liability provisions of the United States federal securities laws, because all or a substantial portion of our assets and the assets of these persons are located outside the United States. We have been advised by Ronald E.J. Kemle, our Vice President and Deputy General Counsel, that there is doubt as to the enforceability in the Province of Alberta, Canada against us or against our directors, and experts who are not residents of the United States, in original actions or in actions for enforcement of judgments of courts of the United States, of liabilities predicated solely upon United States federal securities laws.

MARKET AND INDUSTRY DATA

        We obtained the market and competitive position data used throughout this prospectus from our own research, surveys or studies conducted by third parties and industry or general publications, including data from Chemical Market Associates, Inc. ("CMAI"), Nexant Chem Systems, the American Chemistry Council, IHS Global Insight and other petrochemical industry consultants. Industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified such data and we are not making any representation as to the accuracy of such information. Similarly, we believe our internal research is reliable, but it has not been verified by any independent sources.

        Unless otherwise indicated, when we present relative market rankings in this prospectus, we include each producer's capacity, including any known capacity it has through ownership of joint venture interests.

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PROSPECTUS SUMMARY

        This summary highlights key information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in the exchange notes. You should read this entire prospectus for a more complete understanding of the exchange notes and the exchange offer. Unless otherwise indicated, all financial information in this prospectus is in U.S. dollars, but is prepared in accordance with Canadian GAAP. Unless otherwise indicated or required by the context, as used in this prospectus, the terms "we," "our" and "us" refer to NOVA Chemicals Corporation and all of its subsidiaries and joint ventures that are consolidated under Canadian GAAP. The effects of significant differences between Canadian and U.S. GAAP have been disclosed in Note 21 to the Annual Audited Consolidated Financial Statements included elsewhere in this prospectus.

Our Business

        Our principal business is the production and marketing of plastics and chemicals. We operate an Olefins/Polyolefins business unit that produces and markets ethylene, polyethylene, higher-value polyethylene, and a variety of chemical and energy products (commonly known as co-products). Our Joffre, Alberta facility is the lowest-cost ethylene production facility in North America and one of the lowest-cost facilities in the world. We also hold a 50% interest in INEOS NOVA, a joint venture with INEOS Group Limited ("INEOS"), which produces and markets styrene monomer and solid polystyrene ("SPS") in North America and SPS and expandable polystyrene ("EPS") in Europe. We also operate a Performance Styrenics business unit that produces and markets EPS as well as higher-value styrenic polymers.

        The following table illustrates the revenue and operating income contributions for our Olefins/Polyolefins business unit, our 50% share of the INEOS NOVA joint venture, and our Performance Styrenics business unit:

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(1)

Certain prior year information has been restated due to the adoption of CICA 3064 on January 1, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Accounting Standards."

Olefins/Polyolefins

        Our Olefins/Polyolefins business unit produces ethylene and polyethylene. As part of the ethylene production process, and in the preparation of feedstocks for this process, we also produce a number of co-products, including propylene, benzene and butadiene. We produce polyethylene primarily from our internal ethylene production. We produce high-density polyethylene ("HDPE"), low-density polyethylene ("LDPE") and linear low-density polyethylene ("LLDPE"). In addition, we develop and market higher-value LLDPE and HDPE manufactured using our Advanced SCLAIRTECH™ technology, which deliver enhanced value to customers due to their tailored performance attributes and improved processing characteristics. Polyethylene products are used in a wide range of consumer staple goods, such as food packaging, stretch wrap, garbage bags, personal care items and housewares.

        Our Joffre, Alberta site is integrated with the Alberta Ethane Gathering System, which connects large-scale ethane extraction plants and ethane storage facilities to our ethylene crackers. The Joffre feedstock pipeline is also integrated with our Joffre site and connects natural gas liquids production and storage facilities in Fort Saskatchewan, Alberta to our Joffre site. Ethylene produced at Joffre is

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fed directly to our onsite polyethylene production facility at our Joffre site, as well as to our customers at Joffre, Prentiss, Edmonton and Scotford, Alberta and to storage and customers at Fort Saskatchewan, Alberta.

        Our Corunna, Ontario ethylene facility is connected to multiple pipeline systems that, in conjunction with the facility's flexi-cracker capabilities, enable us to optimize its feedstock slate. Our Corunna facility provides ethylene by pipeline to our polyethylene production facilities in Mooretown, Ontario and our St. Clair River site in Corunna, Ontario. The Corunna facility also provides ethylene to INEOS NOVA's styrene monomer facility in Sarnia, Ontario, as well as to our customers in the Sarnia, Ontario area.

INEOS NOVA

        We own a 50% interest in INEOS NOVA, a joint venture with INEOS, which produces and markets styrene monomer and SPS in North America and SPS and EPS in Europe. Key end markets for SPS are food packaging, kitchen tools, personal care items and durable goods, and for EPS are electronics and appliance packaging and construction components.

Performance Styrenics

        Our Performance Styrenics business unit produces EPS and styrenic polymers, and has interests in EPS-based downstream businesses and ventures. Key end markets are electronics, appliance and food packaging and construction components. During 2009, we restructured our Performance Styrenics business unit and eliminated certain product lines. We will continue to evaluate this business unit and may exit other product lines.

Acquisition by IPIC

        On July 6, 2009, International Petroleum Investment Company ("IPIC"), which is wholly owned by the government of the Emirate of Abu Dhabi, completed the acquisition of NOVA Chemicals Corporation and, through a wholly owned subsidiary, acquired all of our issued and outstanding common shares for $6.00 per share in cash (the "Acquisition"). Prior to July 6, 2009, IPIC provided us with $350 million of interim debt financing that was converted into our common equity at the closing of the Acquisition. Throughout this prospectus, we refer to the Acquisition and the conversion of the interim debt financing into equity collectively as the "IPIC Transaction."

        IPIC acquired us because of our proprietary technology, the geographic location of our facilities and our talented employees. IPIC also has other investments in the chemicals industry, including Borealis AG ("Borealis"), a petrochemicals company in Europe. Borealis is jointly controlled by IPIC (with 64% of the share capital) and OMV Aktiengesellschaft ("OMV") (with 36% of the share capital). OMV is one of the largest oil and gas groups in Central and Southeastern Europe, with significant investments in petrochemicals. In addition, IPIC owns approximately 19.6% of the share capital of OMV. IPIC is currently reviewing synergies between us and its other portfolio companies with the objective of creating a new global polyolefins leader.

        IPIC, OMV and Borealis entered into an Agreement in Principle (the "AiP") in August 2009 to define our future corporate governance structure, including the composition of our board of directors and the creation of an owners' committee ("Owners' Committee") that will consist of four members—two nominated by IPIC and two nominated by OMV. Pursuant to the terms of the AiP, the four members of the Owners' Committee shall also be members of our board of directors and, in each such capacity, will effectively control, to the extent permitted by law, matters to be determined by our board of directors and shareholders. Through this arrangement, OMV will share control of our company with IPIC.

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        The AiP contemplates that Borealis will acquire from IPIC 24.9% of our share capital pursuant to a share purchase agreement still to be negotiated between IPIC and Borealis. The AiP received the antitrust clearance of the European Commission on October 27, 2009. The AiP also contemplates that in order to optimize synergies between Borealis and NOVA Chemicals, the parties intend to align the activities of and integrate the two companies.

        In accordance with the AiP, our board of directors consists of seven members—four nominated by IPIC, two nominated by OMV and one nominated by Borealis. Dr. Gerhard Roiss (deputy Chief Executive Officer of OMV and chairman of Borealis' supervisory board), David Charles Davies (Chief Financial Officer of OMV and a member of Borealis' supervisory board), Mark Garrett (Chief Executive Officer of Borealis) and Randy G. Woelfel (our Chief Executive Officer) joined our board of directors effective November 10, 2009.

        We cannot assure you that the proposed integration will be implemented as contemplated in the AiP.

Management Changes

        Effective November 16, 2009, our board of directors appointed Randy G. Woelfel as our Chief Executive Officer and Todd D. Karran as our Senior Vice President, Chief Financial Officer and Treasurer upon the resignation of our former Chief Executive Officer and Chief Financial Officer. Effective December 15, 2009, our board of directors established the NOVA Chemicals Management Board and appointed the following senior executive officers as members of the Management Board, reporting directly to our board of directors:

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Randy G. Woelfel, Chief Executive Officer;



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Todd D. Karran, Senior Vice President, Chief Financial Officer and Treasurer;



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William G. Greene, Senior Vice President, Operations;



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Marilyn N. Horner, Senior Vice President and Chief Human Resources Officer; and



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Grant Thomson, Senior Vice President and President, Olefins and Feedstock.

Refinancing

        During October and November 2009, we refinanced a substantial portion of our outstanding debt scheduled to mature in 2010. On October 16, 2009, we issued $350 million of 8.375% senior notes due 2016 and $350 million of 8.625% senior notes due 2019. We used $496 million of the offering proceeds to repay debt under our senior secured credit facility and bilateral credit facilities, and plan to use the balance of the proceeds to repay outstanding debt under our total return swap and for general corporate purposes. On November 17, 2009, we entered into a new $350 million senior secured revolving credit facility to replace our prior facility scheduled to expire on March 31, 2010. In addition, we amended two of our senior unsecured bilateral credit facilities (which were previously amended to shorten their maturity dates to March 2010) to revert back to their original maturity dates. As a result of these transactions, we now have four revolving credit facilities totaling $615 million in borrowing capacity. These facilities include:

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$350 million senior secured revolving credit facility provided by a syndicate of lenders, which matures on November 17, 2012;



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$65 million senior unsecured bilateral credit facility, which expires on March 20, 2010;



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$100 million senior unsecured bilateral credit facility, which expires on March 20, 2011; and

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$100 million senior unsecured bilateral credit facility ($30 million due on March 20, 2010, $30 million due on September 20, 2011 and $40 million due on September 20, 2013).

In addition to our four revolving credit facilities, we have $130 million in accounts receivable securitization programs, which mature in February of 2010, a $75 million total return swap, which terminates on March 31, 2010, and Cdn$250 million (US$233 million, based on an exchange ratio of US$0.93 to Cdn$1.00 as of September 30, 2009) of 7.85% senior notes, which mature in August 2010. Collectively, we have an aggregate of $533 million of debt (including the total return swap) that will mature or expire during 2010. We intend to (i) replace our accounts receivable securitization programs in the first quarter of 2010, (ii) repay upon maturity a portion of our senior unsecured bilateral facilities and (iii) repay our total return swap upon termination.

Ratio of Earnings to Fixed Charges

        The following table summarizes our ratio of earnings to fixed charges in accordance with U.S. GAAP for each year in the five years ended December 31, 2008 and for the nine months ended September 30, 2009. For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings before income taxes plus fixed charges (excluding capitalized interest during the period). Fixed charges consist of interest expense, capitalized interest and amortization of bond discount and issue costs.

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For 2008, 2006, 2005 and the nine months ended September 30, 2009, earnings were insufficient to cover fixed charges by approximately $82 million, $854 million, $164 million and $324 million, respectively, and the ratio is not meaningful.

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        We are a global company organized under the laws of the province of New Brunswick, Canada, with our Canadian operating center located at 1000-7^th Avenue S.W., Calgary, Alberta, Canada T2P 5L5, and our United States operating center located at 1550 Coraopolis Heights Road, Moon Township, PA 15108. Our telephone number is (412) 490-4000. We maintain a website at www.novachemicals.com. The information on our website is not a part of this prospectus.

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Summary of the Terms of the Exchange Offer

        On October 16, 2009, we issued $350,000,000 aggregate principal amount of 8.375% Senior Notes due November 1, 2016, which we refer to in this prospectus as the "2016 outstanding notes," and $350,000,000 aggregate principal amount of 8.625% Senior Notes due November 1, 2019, which we refer to in this prospectus as the "2019 outstanding notes" and together with the 2016 outstanding notes, the "outstanding notes" in a transaction exempt from registration under the Securities Act of 1933, as amended, or the "Securities Act." We refer to this transaction in this prospectus as the "private placement."

        In this prospectus, the term "exchange notes" refers to the 8.375% Senior Notes due November 1, 2016, or the "2016 exchange notes," and the 8.625% Senior Notes due November 1, 2019, or the "2019 exchange notes," each as registered under the Securities Act; the term "2016 notes" refers to 2016 outstanding notes and 2016 exchange notes; the term "2019 notes" refers to the 2019 outstanding notes and 2019 exchange notes; and the term "notes" refers to both the outstanding notes and the exchange notes.

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Summary of the Terms of the Exchange Notes

        The terms of the exchange notes are identical in all material respects to the terms of the outstanding notes, except that the registration rights provisions and the transfer restrictions applicable to the outstanding notes are not applicable to the exchange notes. The exchange notes will evidence the same debt as the outstanding notes. The exchange notes will be governed by the same indenture under which the outstanding notes were issued, and each series of the exchange notes and the outstanding notes will constitute a single class and series of notes for all purposes under the indenture. The following summary is not intended to be a complete description of the terms of the notes. For a more detailed description of the notes, see "Description of Exchange Notes."

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Risk Factors

        See "Risk Factors" for a description of some of the risks you should consider before deciding to participate in the exchange offer.

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RISK FACTORS

        You should consider carefully the following information about these risks, together with the other information contained in this prospectus, before participating in the exchange offer.

Risks Relating to the Exchange Offer

If you choose not to exchange your outstanding notes in the exchange offer, the transfer restrictions currently applicable to your outstanding notes will remain in force and the market price of your outstanding notes could decline.

        If you do not exchange your outstanding notes for exchange notes representing the same underlying indebtedness in the exchange offer, then you will continue to be subject to the transfer restrictions on the outstanding notes as set forth in the outstanding notes and the indenture applicable to those notes. In general, the outstanding notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act. You should refer to "Prospectus Summary—Summary of the Terms of the Exchange Offer," "Description of Exchange Notes—The Exchange Offer" for information about how to tender your outstanding notes.

        The tender of outstanding notes under the exchange offer will reduce the principal amount of the outstanding notes outstanding, which may have an adverse effect upon and increase the volatility of, the market price of the outstanding notes due to reduction in liquidity.

Risks Relating to Our Indebtedness and the Notes

We have a significant amount of debt, which could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes.

        We have a significant amount of indebtedness. On an as adjusted basis after giving effect to the private placement and the refinancing transactions, as of September 30, 2009, we would have had (a) total indebtedness of approximately $1,748 million and (b) additional amounts of approximately $299 million available for borrowing under our credit facilities (including $47 million in letters of credit), subject to customary conditions. In addition, subject to the restrictions in our credit facilities and the indentures, we may incur significant additional indebtedness from time to time.

        The level of our indebtedness could have important consequences, including:

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limiting cash flow available for general corporate purposes, including capital expenditures and acquisitions, because a substantial portion of our cash flow from operations must be dedicated to servicing our debt;



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limiting our ability to obtain additional debt financing on satisfactory terms in the future for working capital, capital expenditures, research and development efforts, acquisitions and other general corporate obligations;



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limiting our ability to obtain feedstock, materials or services on advantageous terms in the future due to debt levels or changes in credit ratings;



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limiting our flexibility in planning for, or reacting to, competitive and other changes in our industry and economic conditions generally;



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exposing us to risks inherent in interest rate fluctuations because some of our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates; and

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increasing our vulnerability to general economic downturns and adverse competitive and industry conditions, which could place us at a competitive disadvantage compared to our competitors that are less leveraged.

        If new debt is added to current debt levels, the related risks described above would intensify. If financing is not available when required or is not available on acceptable terms, we may be unable to grow our business, take advantage of business opportunities, respond to competitive pressures or refinance maturing debt, any of which could have a material adverse effect on our operating results and financial condition.

We will require a significant amount of cash to service our indebtedness, including the notes, and our ability to generate cash depends on many factors beyond our control.

        Our ability to make payments on and to refinance our indebtedness, including the notes, will depend on our ability to generate cash. Our ability to fund working capital and planned capital expenditures will also depend on our ability to generate cash in the future. We have a significant amount of indebtedness, of which approximately $533 million is maturing in 2010. We cannot assure you that:

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our business will generate sufficient cash flow from operations;



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future borrowings will be available under our current or future revolving credit facilities in an amount sufficient to enable us to pay our indebtedness on or before maturity; or



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we will be able to refinance any of our indebtedness on commercially reasonable terms, if at all.

        Factors beyond our control will affect our ability to make these payments and refinancings. These factors could include those discussed elsewhere in this prospectus, including under this "Risk Factors" section and under "Disclosure Regarding Forward-Looking Information."

        If we cannot generate sufficient cash from our operations to meet our debt service obligations, we may need to reduce or delay capital expenditures or curtail research and development efforts. In addition, we may need to refinance our debt, obtain additional financing or sell assets, which we may not be able to do on commercially reasonable terms, if at all. We cannot assure you that our business will generate sufficient cash flow, or that we will be able to obtain funding, sufficient to satisfy our debt service obligations.

Our debt agreements restrict our ability to take certain actions.

        The agreements governing our indebtedness impose significant operating and financial restrictions on us and our subsidiaries. These restrictions may restrict our ability to pursue our business strategies, such as acquisitions or joint ventures, or engage in other favorable business activities.

Our indentures

        The indenture governing the notes and our other indentures contain various covenants that limit our ability to engage in certain transactions, including the ability to create liens or engage in sale and leaseback transactions.

Our credit facilities

        As of December 1, 2009, we have four revolving credit facilities aggregating $615 million. The amounts and expiration dates of these facilities are as follows:

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$350 million senior secured revolving credit facility provided by a syndicate of lenders, which matures on November 17, 2012;

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$65 million senior unsecured bilateral credit facility, which expires on March 20, 2010;



•

$100 million senior unsecured bilateral credit facility, which expires on March 20, 2011; and



•

$100 million senior unsecured bilateral credit facility ($30 million due on March 20, 2010, $30 million due on September 20, 2011 and $40 million due on September 20, 2013).

        While each of the credit facilities contains typical affirmative and negative covenants, which are substantially the same, our senior secured credit facility, as well as other financing agreements, contain financial covenants, which require quarterly compliance. The new senior secured credit facility financial covenants require a maximum senior debt to cash flow ratio of 3:1 and a debt to capitalization ratio not to exceed 60% at the end of each quarter. Our ability to meet the financial covenants may be impacted by events beyond our control, and we cannot assure you that we will be able to satisfy these covenants in the future.

        Our credit facilities also contain restrictive covenants that limit our ability, and the ability of our restricted subsidiaries, among other things, to incur additional liens; sell certain assets; make distributions on or repurchase equity; incur additional debt; enter into hedging arrangements; enter into operating leases; engage in reorganizations or mergers; and change the character of our business.

        A breach of any of these provisions could permit the lenders to declare all amounts outstanding under the credit facilities to be immediately due and payable and to terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under our $350 million secured credit facility could proceed against the collateral granted to them to secure that debt. If the lenders under our credit facilities were to accelerate the repayment of borrowings thereunder, we cannot assure you that we would have sufficient assets to repay the notes. See "Description of Other Indebtedness and Preferred Stock" for additional detail regarding our credit facilities.

A downgrade in the ratings of our debt securities could result in increased interest and other financial expenses related to future borrowings and could restrict our access to additional capital or trade credit.

        Standard & Poor's Corporation, Moody's Investor Service, Inc., Dominion Bond Rating Service Limited ("DBRS") and Fitch Ratings Ltd. maintain credit ratings for our debt securities. Except for the DBRS rating, each of these ratings is currently below investment grade. Any decision by these or other ratings agencies to downgrade such ratings in the future could result in increased interest and other financial expenses relating to our future borrowings and could restrict our ability to obtain additional financing on satisfactory terms, if at all. In addition, any downgrade could restrict our access to, and negatively impact the terms of, trade credit extended by our suppliers of raw materials.

The notes will not be guaranteed by our subsidiaries or IPIC and will be subordinated to certain indebtedness and other obligations of us and our subsidiaries.

The notes will be effectively subordinated to all our secured indebtedness.

        The notes will be effectively junior to all of our secured indebtedness, including our obligations under our $350 million credit facility, to the extent of the collateral securing such indebtedness. As of September 30, 2009, on an as adjusted basis after giving effect to the private placement and the refinancing transactions, we would have had no amounts outstanding under our secured credit facility, beyond $47 million of letters of credit. In addition, our credit facilities and the indenture governing the notes will, subject to specified limitations, permit us to incur additional secured indebtedness. Your notes will be effectively junior to any additional secured indebtedness we may incur to the extent of the collateral securing such indebtedness.

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The notes will be structurally subordinated to all obligations of our subsidiaries.

        Neither IPIC nor any of our subsidiaries will guarantee the notes. You will not have any claim as a creditor against IPIC or any of our subsidiaries, and indebtedness and other liabilities, including trade payables, of our subsidiaries will effectively be senior to your claims against those subsidiaries. In addition, our credit facilities and the indenture governing the notes, subject to specified limitations, permit our subsidiaries to incur additional indebtedness and do not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by our subsidiaries. Any debt incurred at our subsidiaries may contain restrictions or limitations on the subsidiaries ability to pay dividends to us. In addition, our secured credit facility allows our restricted subsidiaries to issue subsidiary guarantees and exclude such guaranteed debt of a restricted subsidiary from the limitations on the incurrence of additional debt. The indenture does not provide for similar guarantees of the notes to the extent we cause any restricted subsidiary to issue such a guarantee under the secured credit facility. See "Description of Other Indebtedness and Preferred Stock—Credit Facilities." As of September 30, 2009, on an as adjusted basis after giving effect to the private placement and the refinancing transactions, our subsidiaries would have had $19 million long-term debt and approximately $428 million of trade debt to which the notes would have been structurally subordinated.

We may incur additional indebtedness ranking equally with the notes.

        If we incur any additional indebtedness or other obligations ranking equally with the notes, including trade payables, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us. This may have the effect of reducing the amount of proceeds paid to you.

If our subsidiaries do not make sufficient distributions to us, then we will not be able to make payments on our notes.

        The notes are the exclusive obligation of our company and not of any of our subsidiaries or IPIC. Because a significant portion of our operations are conducted by our subsidiaries, our cash flow and our ability to service indebtedness are dependent to a large extent upon cash dividends and distributions or other transfers from our subsidiaries. Any payment of dividends, distributions, loans or advances by our subsidiaries to us could be subject to restrictions on dividends or repatriation of earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate, and any restrictions imposed by the current and future debt instruments of our subsidiaries. In addition, payments to us by our subsidiaries are contingent upon our subsidiaries' earnings and business considerations.

        Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the notes or our other unsecured debt or to make any funds available therefor, whether by dividends, loans, distributions or other payments, and they do not guarantee the payment of interest on, or principal of, our unsecured debt. Any right that we have to receive any assets of any of our subsidiaries that are not guarantors upon the liquidation or reorganization of any such subsidiary, and the consequent right of holders of our debt to realize proceeds from the sale of their assets, will be junior to the claims of that subsidiary's creditors, including trade creditors and holders of debt issued by that subsidiary. In addition, even if we were a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us. If our subsidiaries were to guarantee our obligations on the notes in the future, their obligations under such guarantees would still be effectively subordinate to any security interest in the assets in favor of our secured credit facility.

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Your ability to resell the exchange notes may be limited by a number of factors.

        The exchange notes will be new securities for which currently there is no trading market. We do not currently intend to apply for listing of the exchange notes on any securities exchange or stock market. Although the initial purchasers of the outstanding notes have informed us that they intend to make a market in the notes, they are not obligated to do so. Any such market making may be discontinued at any time without notice. The liquidity of any market for the notes will depend on the number of holders of those notes, the interest of securities dealers in making a market in those securities and other factors. Accordingly, we cannot assure you as to the development or liquidity of any market for the notes. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes. We cannot assure you that the market, if any, for the notes will be free from similar disruptions. Any such disruptions may adversely affect the note holders.

You may be unable to enforce your rights under U.S. bankruptcy law.

        We are organized under the laws of the province of New Brunswick, Canada, and we have significant operating assets located outside of the United States. Under bankruptcy laws in the United States, courts typically have jurisdiction over a debtor's property, wherever located, including property situated in other countries. There can be no assurance, however, that courts outside of the United States would recognize a U.S. bankruptcy court's jurisdiction. Accordingly, difficulties may arise in administering a U.S. bankruptcy case involving a Canadian debtor with property located outside of the United States, and any orders or judgments of a bankruptcy court in the United States may not be enforceable.

Canadian bankruptcy, insolvency and other laws may impair the enforcement of remedies under the notes.

        The rights of the trustee to enforce remedies under the indenture governing the notes are likely to be significantly impaired by the restructuring provisions of applicable Canadian federal bankruptcy, insolvency and other restructuring legislation if the benefit of such legislation is sought with respect to us. For example, both the Bankruptcy and Insolvency Act (Canada) and the Companies' Creditors Arrangement Act (Canada) contain provisions enabling an "insolvent person" to obtain a stay of proceedings as against its creditors and others and to prepare and file a proposal for consideration by all or some of its creditors to be voted on by the various classes of its creditors. Such a restructuring proposal could include a compromise of amounts owing under the notes and, if accepted by the requisite majorities of creditors and if approved by the court, would be binding on persons who might not otherwise be willing to accept it. Moreover, an insolvent debtor is permitted to retain possession and administration of its property while it prepares and presents its restructuring proposal to its creditors even though it may be in default under the applicable debt instrument. The powers of the court under the Bankruptcy and Insolvency Act (Canada) and particularly under the Companies' Creditors Arrangement Act (Canada) have been exercised broadly to protect a restructuring entity from actions taken by creditors and other parties. Accordingly, it is impossible to predict if payments under the notes would be made following commencement of or during such a proceeding, whether or when the trustee could exercise its rights under the indenture governing the notes or whether and to what extent holders of the notes would be compensated for any delay in payments of principal and interest.

        Similar consequences may arise if the benefit of the arrangement provisions of the Business Corporations Act (New Brunswick) is sought.

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We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture governing the notes.

        Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all notes that are outstanding at 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or that restrictions in our senior credit facility will not allow such repurchases. In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a "Change of Control" under the indenture governing the notes. See "Description of Exchange Notes—Change of Control Repurchase and Redemption."

Risks Related to Our Business

We are and may continue to be materially adversely affected by the ongoing world financial crisis. The financial crisis and economic downturn will continue to have a negative impact on our business, results of operations, and financial condition and our ability to accurately forecast our results, and may cause a number of the risks that we currently face to increase in likelihood, magnitude and duration.

        The recent worldwide financial and credit crisis has reduced the availability of liquidity and credit to fund the continuation and expansion of many business operations worldwide. This shortage of liquidity and credit, combined with recent substantial losses in worldwide equity markets, could lead to an extended worldwide economic recession and result in a material adverse effect on our business, financial condition and results of operations. The impact of these events will depend on a number of factors, including the duration and severity of these events, whether the U.S., Canadian and global economies enter into a prolonged recession, and whether the recovery period is brief or prolonged. As a result, we may face new risks as yet unidentified, and a number of risks that we ordinarily face and that are further disclosed below have increased, or may increase in likelihood, magnitude and duration. These include but are not limited to deferrals or reductions of customer orders, potential deterioration of customers' ability to pay us or our suppliers' ability to meet their obligations, losses or impairment charges, reduced revenue, reduced demand for our products, deterioration in our cash balances and liquidity, and increased volatility in energy and raw material prices.

We may not realize the expected benefits of a possible integration of our businesses with Borealis' businesses.

        IPIC, OMV and Borealis have entered into an agreement in principle to define our future corporate governance structure, including IPIC sharing control of our company with OMV, which has been approved by the European Commission. As a result of the approval, our business may be integrated with Borealis' businesses. Our ability to realize the anticipated benefits of the integration of our businesses with the businesses of Borealis will depend, in part, on our ability to integrate successfully these businesses, and we cannot assure you that the combination of the two companies will result in the realization of the anticipated economic, operational and other benefits within expected time frames or at all. Our ability to achieve savings and synergies depends on a number of factors, some of which are beyond our control, and we will not be able to fully assess these opportunities until after the completion of the integration. Some of the factors affecting the possible integration include:

•

the potential disruption of our ongoing business and distraction of management;



•

the difficulty in incorporating technology;



•

unanticipated expenses and delays relating to completing development projects and technology integration;



•

the management of geographically remote units;

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•

the establishment and maintenance of uniform standards, controls, procedures and policies;



•

the impairment of relationships with employees and clients as a result of any integration of new management personnel;



•

risks of entering markets or types of businesses in which we have limited or no direct experience;



•

the potential loss of key employees or customers; and



•

potential unknown liabilities.

        As a result of the aforementioned and other risks, a potential integration of our businesses with Borealis' businesses may not generate expected revenue synergies, cross-selling opportunities or cost savings on the expected time frames or at all. If we are unable to implement successfully an integration with Borealis and realize the expected benefits, our results of operations and cash flows could be adversely affected.

Our success could be jeopardized by the loss of key personnel or an inability to attract qualified candidates.

        Effective November 16, 2009, our Chief Executive Officer and our Chief Financial Officer resigned from those offices. In addition, our Senior Vice President, Chief Legal Officer and Corporate Secretary has elected to resign effective as of December 31, 2009. Randy G. Woelfel has been appointed to serve as Chief Executive Officer and Todd D. Karran, our former Vice President, Corporate Development and Treasurer has been appointed to serve as Senior Vice President, Chief Financial Officer and Treasurer. Effective December 15, 2009, our board of directors established the NOVA Chemicals Management Board and, in addition to Messrs. Woelfel and Karran, appointed William G. Greene, Senior Vice President, Operations, Marilyn N. Horner, Senior Vice President and Chief Human Resources Officer, and Grant Thomson, Senior Vice President and President, Olefins and Feedstock, as members of the Management Board, reporting directly to our board of directors. We cannot assure you that this new management team will be successful in executing our strategy and improving our current results of operations and that there won't be other significant departures of key personnel.

The cyclicality of plastics and chemical businesses may cause significant fluctuation in our income and cash flow.

        Our historical operating results reflect the cyclical and volatile nature of plastics and chemical businesses. Our businesses historically experience alternating periods of inadequate capacity and tight supply, causing prices and profit margins to increase, followed by periods of oversupply, resulting from capacity additions. Prolonged oversupply leads to declining capacity utilization rates, prices and profit margins. The markets for ethylene, polyethylene, styrene monomer and styrenic polymers are also highly cyclical, resulting in volatile profits and cash flow over the business cycle. Because we derive nearly all of our revenue from sales of these products, our operating results are more sensitive to this cyclical nature than many of our competitors who have more diversified businesses. This cyclicality is exacerbated by volatility in feedstock prices. We cannot provide assurance that pricing or profitability in the future will be comparable to any particular historical period, including the most recent period shown in our operating results.

        Excess industry capacity, especially at times when demand is weak, has in the past and may in the future cause us and other industry participants to lower production rates, which can reduce our margins, income and cash flow.

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Rising costs of energy and raw materials may result in increased operating expenses and reduced results of operations.

        We purchase large amounts of energy and raw materials, including natural gas and crude oil, for our businesses, representing a substantial portion of our operating expenses. The prices of energy and raw materials have historically been highly volatile and cyclical, and our energy and raw material costs have fluctuated significantly in recent years. Although certain of our customer contracts are tied to changes in feedstock costs or provide for surcharges if feedstock costs change, many contracts are tied to market prices. Currently, the price of crude oil has risen disproportionately more than natural gas prices resulting in a higher than average ratio between the two potentially giving natural gas-based producers an advantage over oil-based producers. We cannot predict whether and to what extent energy and/or raw materials prices will rise in the future or whether and to what extent we will be able to pass on such cost increases to our customers. Any significant energy and/or raw materials cost increase could have a material adverse effect on our business, results of operations, financial condition or cash flow.

Our business may be adversely affected by fluctuations in currency exchange rates and other risks associated with international operations.

        Although we report our results in U.S. dollars, we conduct a significant portion of our business outside the United States, and we are subject to risks normally associated with international operations.

        Our financial results are impacted by both translation and transaction currency effects resulting from changes in currency exchange rates. Translation currency effects occur when the financial results of our subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using the exchange rates prevailing during the relevant period. The resulting impact of such translation can affect results when compared to other periods translated at different foreign exchange rates. Until September 30, 2008, the majority of our subsidiaries which resided outside of the United States had functional currencies other than the U.S. dollar. On October 1, 2008, all of our wholly owned subsidiaries adopted the U.S. dollar as their functional currency and are therefore no longer exposed to translation effects. However, we have non-wholly owned subsidiaries which reside outside of the United States and have retained their non U.S. dollar functional currency and are therefore still exposed to limited translation effects.

        Transaction currency effects occur when one of our subsidiaries incurs costs or earns revenue in a currency different from its functional currency. This can impact our financial results in two ways:

•

Balance sheet re-measurement: monetary items which are denominated in a foreign currency are revalued to the period end foreign exchange rates with the resulting gains or losses being reported on the Foreign exchange gains (losses) line of our Consolidated Statements of Income (Loss).



•

Fixed cost exposure: a significant portion of our operating and selling, general and administrative costs are incurred in Canada and are paid in Canadian dollars. As the Canadian dollar fluctuates relative to the U.S. dollar, these costs will be higher or lower in U.S. dollar terms. This impact will be recorded in each individual line of our Consolidated Statements of Income (Loss).

        Fluctuations in exchange rates may also affect the relative competitive position of a particular manufacturing facility, as well as our ability to market our products successfully in other markets.

        Other risks of international operations include trade barriers, tariffs, exchange controls, national and regional labor strikes, social and political risks, general economic risks, required compliance with a variety of foreign laws, including tax laws, and the difficulty of enforcing agreements and collecting receivables through foreign legal systems.

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Interruptions in our supply of raw materials could adversely affect our business.

        We purchase large amounts of raw materials, including natural gas and crude oil, for our businesses. If temporary shortages due to disruptions in supply caused by weather, transportation, production delays or other factors require us to secure our raw materials from sources other than our current suppliers, we cannot provide you assurance that we will be able to do so on terms as favorable as our current terms, or at all. The amount of ethane available as feedstock in Alberta is dependent on volumes of natural gas available to be extracted at the ethane extraction plants on the mainline of the TransCanada Alberta pipeline system as well as the ethane content in that natural gas. Weather conditions and economic conditions driving demand for and the price of natural gas could lead to short-term supply dislocations. In 2010, we expect the flows of natural gas across the Canadian border to the United States to decline due primarily to low selling prices for natural gas in North America. This will likely lead to less natural gas flowing through the ethane extraction plants on the mainline of the TransCanada Alberta pipeline system and therefore less ethane available as feedstock for our ethylene plants in Western Canada. We plan on working with suppliers and the Alberta government to source additional supply for our feedstock needs. These sources could include, among others, the streaming of natural gas with low ethane content to industrial consumption in Alberta, with the expected result that high ethane content natural gas will flow through the ethane extraction plants; natural gas liquids from large new gas finds in Alberta, British Columbia and northern sources; ethane from off-gas produced at Alberta's oilsands; and ethane from the Alliance pipeline which is not currently extracted in Alberta. There can be no assurances on the timing, volume or ethane content from any of these sources.

We sell our products in highly competitive markets and face significant price pressure.

        We sell our products in highly competitive markets. Due to the commodity nature of a majority of our products, and to a lesser degree for higher value polyethylene manufactured using Advanced SCLAIRTECH technology and our ARCEL® resin, competition in these markets is based primarily on price and to a lesser extent on product performance, product quality, product deliverability and customer service. As a result, we may not be able to protect our market position by product differentiation or pass on cost increases to our customers. Accordingly, increases in raw material costs and other costs may not necessarily correlate with changes in product prices, either in the direction of the price change or in magnitude. Although we strive to maintain or increase our profitability by reducing costs through improving production efficiency, emphasizing higher margin products and controlling selling and administration expenses, we cannot provide you assurance that these efforts will be sufficient to offset fully the effect of any pricing changes on our operating results.

        Among our competitors are some of the world's largest chemical companies and major integrated petroleum companies that have their own raw material resources. Some of these companies may be able to produce products more economically than we can. In addition, most of our competitors are larger and have greater financial resources, which may enable them to invest significant capital into their businesses, including expenditures for research and development. If any of our current or future competitors develop proprietary technology that enables them to produce products that compete with our products at a significantly lower cost, segments of our technology could be rendered over time uneconomical or obsolete. The entrance of new competitors into the industry may reduce our ability to capture profit margins in circumstances where capacity utilization in the industry is decreasing. Further, production from low-cost producers in petroleum-rich countries is increasing in the chemical industry and may expand significantly in the future. Any of these developments could affect our ability to enjoy higher profit margins during periods of increased demand.

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External factors beyond our control can cause fluctuations in demand for our products and in our prices and margins, which may negatively affect our income and cash flow.

        External factors can cause significant fluctuations in demand for our products and volatility in the price of raw materials and other operating costs. Examples of external factors include general economic conditions, including a prolonged economic downturn, competitor actions, technological developments, unplanned facility shutdowns, international events and circumstances, and governmental regulation.

        Demand for our products is influenced by general economic conditions. A number of our products are highly dependent on durable goods markets, which are themselves particularly cyclical. If the global economy does not improve, demand for our products and our income and cash flow would be adversely affected.

        We may reduce production, idle a facility for an extended period of time, or discontinue certain products because of high raw material prices, an oversupply of a particular product, feedstock unavailability and/or lack of demand for that particular product. When we decide to reduce or idle production, reduced operating rates are often necessary for several quarters or, in certain cases, longer and cause us to incur costs, including the expenses of the outages and the restart of these facilities.

Operating problems in our business may adversely affect our income and cash flow.

        The occurrence of material operating problems at our facilities may have a material adverse effect on the productivity and profitability of a particular manufacturing facility, or on our operations as a whole. Our income and cash flow are dependent on the continued operation of our various production facilities. Our operations are subject to the usual hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and wastes, including pipeline, storage tank and other leaks and ruptures; fires; mechanical failure; labor difficulties; remediation complications; discharges or releases of pollutants, contaminants or toxic or hazardous substances or gases and other environmental risks; explosions; chemical spills; unscheduled downtime; transportation interruptions; and inclement weather and natural disasters.

        Some of these hazards may cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and the imposition of civil, regulatory or criminal penalties. Furthermore, we are also subject to present and future claims with respect to workplace exposure, workers' compensation and other matters. We carry insurance against potential operating hazards which is consistent with industry norms. If we were to incur a significant liability that was not covered by insurance, it could significantly affect our productivity, profitability and financial position.

We conduct a significant portion of our operations through, and our consolidated results are materially dependent upon the performance of, INEOS NOVA. We do not control this joint venture and actions taken by it could materially adversely affect our business.

        Our joint venture with INEOS, INEOS NOVA, is a 50:50 joint venture, meaning that our ownership rights, funding obligations and governance rights are equal to those of INEOS. While we have a certain amount of influence over INEOS NOVA, we do not control INEOS NOVA and are therefore dependent on our joint venture partner, INEOS, to cooperate in making strategic and operational decisions regarding the joint venture. As with most joint venture arrangements, there is a significant risk that, as a result of differing views and priorities, there will be occasions when the two parties do not agree on various matters and any such disagreements may result in delayed decisions or disputes. Moreover, the day-to-day operation of INEOS NOVA's plants and business is the responsibility of the joint venture's management team. Therefore, our ability to influence INEOS NOVA's operations on a day-to-day basis is limited, and we may be unable to prevent actions that we believe are not in the best interests of INEOS NOVA or us. In addition, INEOS NOVA is not subject

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to the same requirements regarding internal controls and internal control over financial reporting that we follow. As a result, internal control problems could arise with respect to the joint venture. Any such actions or internal control problems could materially adversely affect our business, results of operations and financial condition.

        As a plastics and chemical producer, INEOS NOVA is exposed to many of the same risks to which we are exposed and which are discussed elsewhere in this "Risk Factors" section.

Our joint venture with INEOS may not realize all of its intended benefits.

        We may not realize the anticipated benefits of the joint venture with INEOS, and cash flow or profits derived from our ownership interest in INEOS NOVA may be less than the cash flow or profits that could have been derived had we retained the transferred assets and continued to operate that business ourselves.

        In addition, we and INEOS have agreed that either party is entitled to exercise a put of all, but not less than all, of such party's interest in the joint venture to the other party or a call for all, but not less than all, of the other party's interest in the joint venture. If either party exercises this put/call option, the other party has the right to present the exercising party with a reverse put or call, as applicable, on identical terms and the exercising party shall be deemed to accept such reverse put or call. If the put/call option is exercised, we may be required to acquire INEOS' 50% ownership interest in the joint venture, which could require a significant investment by us that could adversely affect our financial condition and result in us experiencing difficulties with respect to integrating the joint venture business into our existing business. Alternatively, we could be required to sell our interest in the joint venture to INEOS at a time when such interest may be valuable to us.

We are exposed to costs arising from environmental compliance, cleanup and adverse litigation, which may have a substantial adverse effect on our business, financial condition, operating results and cash flow.

        We are subject to extensive foreign, federal, provincial, state and local environmental laws and regulations concerning the manufacturing, processing and importation of certain chemical substances, air emissions, water discharges and the generation, handling, storage, transportation, treatment, disposal and clean up of regulated substances. Our operations involve the risk of accidental discharges or releases of hazardous materials, personal injury, property and environmental damage. Furthermore, applicable environmental laws and regulations are complex, change frequently and provide for substantial fines, regulatory penalties and criminal sanctions in the event of non-compliance. We cannot provide you assurance that we will not incur substantial costs or liabilities as a result of such occurrences or the enforcement of environmental laws.

        From time to time, we have entered into consent agreements or been subject to administrative orders for pollution abatement or remedial action. Under some environmental laws, we may be subject to strict and under certain circumstances, joint and several liability for the costs of environmental contamination on or from its properties, and at off-site locations where we disposed of or arranged for disposal or treatment of hazardous substances, and may also incur liability for related damages to natural resources. We have been named as a potentially responsible party under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, or its state equivalents, at several third-party sites. We have a provision in our financial statements to cover the estimated costs of remediation of discontinued sites and future environmental liabilities. Nevertheless, we cannot assure you that we will not incur substantial costs and liabilities resulting from future events or unknown circumstances, which exceed our reserves or will be material.

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We could incur significant costs to comply with greenhouse gas emission reduction requirements, which in turn could reduce our operating results and cash flow.

        In 2002, Canada ratified the Kyoto Protocol, and agreed to regulate reductions in air emissions that contribute to climate change. In 2007, the Canadian federal government released its plan for reducing industrial air emissions, including an ultimate goal of reducing greenhouse gas ("GHG") emissions by 20% from 2006 levels by the year 2020 and by 60 to 70% by 2050.

        Since then, the Canadian federal government released information indicating that the climate change regulations for the Energy Intensive Trade Exposed industries were under review and that Canada intends to work closely with the U.S. to establish a North America-wide GHG emission cap and trade system. As a result, legally binding federal GHG emission reduction requirements are expected to be imposed on our operations in Canada, although the scope and timing for such requirements and the related impacts are uncertain.

        Many Canadian provinces are also considering GHG emissions reduction legislation. In Alberta, the Specified Gas Emitters Regulation under the Climate Change and Emissions Management Act came into effect in 2007, imposing annual reductions requirements on facilities that emit over 100,000 tonnes of GHGs per year. In compliance with the regulations, we submitted the GHG emissions baseline data and the 2007 and 2008 emissions data and have satisfied the requirements associated with reducing GHG emissions intensity by 12% from the 2003-2005 baseline. On May 27, 2009, the Ontario legislature introduced Bill 185, which amends the Environmental Protection Act, which provides the foundation for the province's cap and trade program to reduce GHG emissions. This Bill is intended to allow Ontario's program to align with the federal Canadian and other systems in North America and abroad. However, the scope and timing of such a GHG cap and trade system is uncertain. On December 1, 2009, Ontario filed its Greenhouse Gas Emissions Reporting Regulation under the Environmental Protection Act. This regulation provides for the annual reporting of greenhouse gases by prescribed facilities that emit 25,000 tones carbon dioxide equivalent or more per year and comes into force on January 1, 2010.

        Although the United States has not ratified the Kyoto Protocol, a number of federal laws and regulations related to GHG emissions are being considered by the U.S. Environmental Protection Agency ("EPA") and in Congress. In addition, various state and regional laws, regulations and initiatives have been enacted or are being considered, including the Regional Greenhouse Gas Initiative, the Midwestern Regional Greenhouse Gas Reduction Accord, and the Western Climate Initiative. On September 22, 2009, the EPA issued the Final Mandatory Reporting of Greenhouse Gases Rule, which was published in the Federal Register on October 30, 2009. The rule requires reporting of GHG emissions from large sources and is intended to collect accurate and timely emissions data. Under the rule, facilities that emit more than 25,000 metric tons of GHGs per year are required to collect data beginning January 1, 2010 with the first annual reports due March 31, 2011. On September 30, 2009, the EPA released a proposed rule that would impose requirements upon new and modified major stationary sources emitting more than 25,000 metric tons of GHGs per year. The proposed regulations would require new or modified sources beginning as soon as March 2011 to obtain permits on the basis of acceptable GHG controls or mitigation, the standards for which would be established within the current Clean Air Act framework of pre-construction permitting and limitation of emissions using best available control technology or the equivalent. On June 26, 2009, the U.S. House of Representatives passed the bill for the American Clean Energy and Security Act ("ACES"). The ACES would establish an economy-wide cap and trade program; create incentives and standards for clean energy and energy efficiency; and establish GHG emissions standards for vehicles, stationary sources, and fuels. On September 20, 2009, Senators John Kerry and Barbara Boxer unveiled the U.S. Senate's version of the climate change legislation: the Clean Energy Jobs and American Power Act. It proposes, among other things, 20% GHG emission reduction target, compared to 2005 levels by 2020 and an 80% cut by 2050. As a result of the uncertainties surrounding the timing and scope of

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these potential federal laws and regulations, we cannot estimate the potential financial impact on our operations.

        We are developing and implementing a variety of initiatives to reduce GHG emissions and improve energy efficiency across our operations. Due to the uncertainty of long term regulatory requirements, we cannot provide assurance that we will not incur substantial costs to meet GHG emission reduction requirements or whether they will be material.

We may be subject to losses that are not covered by insurance.

        We carry comprehensive liability and property (including fire and extended perils) insurance on all of our facilities, with deductibles and other policy specifications and insured limits customarily carried in the petrochemical industry for similar properties. In addition, some types of losses, such as losses resulting from war are not insured. We determine coverage limits based on what we believe to be a reasonable maximum foreseeable loss scenario for our operations. In the event that an uninsured loss or a loss in excess of insured limits occurs, we may not be reimbursed for the cost to replace capital invested in that property, nor insured for the anticipated future revenues derived from the manufacturing activities conducted at that property, while we could remain obligated for any indebtedness or other financial obligations related to the property. Any such loss could adversely affect our business, results of operations or financial condition.

In addition to our joint venture with INEOS, we have made and may continue to make investments in entities that we do not control.

        We have established joint ventures and made minority interest investments designed to increase our vertical integration, enhance customer service and increase efficiencies in our marketing and distribution. Our principal joint ventures are INEOS NOVA and our jointly owned third ethylene plant at our Joffre facility. We do not control these entities.

        Our inability to control entities in which we invest may affect our ability to receive distributions from those entities or to implement our business plan fully. The incurrence of debt or entry into other agreements by an entity not under our control may result in restrictions or prohibitions on that entity's ability to pay dividends or make other distributions to us. Even where these entities are not restricted by contract or by law from making distributions to us, we may not be able to influence the occurrence or timing of such distributions. In addition, if any of the other investors in a non-controlled entity fails to observe its commitments, that entity may not be able to operate according to its business plan or we may be required to increase our level of commitment. If any of these events were to transpire, our business, results of operations or financial condition could be adversely affected.

Labor disputes could have an adverse effect on our business.

        As of September 30, 2009, we had approximately 2,700 employees globally. Approximately 375, or 14%, of our North American employees are represented by unions under two separate collective bargaining agreements that expire on March 31, 2010 and March 15, 2012. If we are unable to negotiate acceptable contracts with these unions upon expiration of an existing contract or other employees were to become unionized, we could experience work stoppages, a disruption in operations or higher labor costs, which could have an adverse effect on our business, financial condition, results of operations or cash flow.

Our business is dependent on its intellectual property. If our patents are declared invalid or our trade secrets become known to our competitors, our ability to compete may be adversely affected.

        Proprietary protection of our processes, apparatuses and other technology is important to our business. Consequently, we rely on judicial enforcement for protection of our patents. While a

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presumption of validity exists with respect to patents issued to us in the United States and Canada, there can be no assurance that any of our patents will not be challenged, invalidated or circumvented. Furthermore, if any pending patent application filed by us does not result in an issued patent, then the use of any such intellectual property by our competitors could have an adverse effect on our businesses, financial condition, results of operations or cash flow. Additionally, our competitors or other third parties may obtain patents that restrict or preclude our ability to produce or sell our products lawfully in a competitive manner, which could have an adverse effect on our business, financial condition, results of operations or cash flow.

        We also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. While it is our policy to enter into confidentiality agreements with our employees and third parties to protect our intellectual property, these confidentiality agreements may be breached and, consequently, may not provide meaningful protection for our trade secrets or proprietary know-how, or adequate remedies may not be available in the event of an unauthorized use or disclosure of such trade secrets and know-how. In addition, others could obtain knowledge of such trade secrets through independent development or other access by legal means. Although we do not regard any single patent or trademark as being material to our operations as a whole, the failure of our patents or confidentiality agreements to protect our processes, apparatuses, technology, trade secrets or proprietary know-how could have an adverse effect on our business, financial condition, results of operations or cash flow.

        Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties alleging that we infringe third party intellectual property rights. Any litigation or claims brought by or against us, whether with or without merit, or whether successful or not, could result in substantial costs and diversion of our resources, which could have a material adverse effect on our business, financial condition, results of operations or cash flows. Any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property and proprietary rights, could subject us to significant liabilities, require us to seek licenses on unfavorable terms, if available at all, prevent us from manufacturing or selling products and require us to redesign, relabel or, in the case of trademark claims, rename our products, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

We are involved in litigation from time to time in the ordinary course of business.

        We are involved in litigation from time to time in the ordinary course of business. Among these items is a claim for approximately $120 million by Dow Chemical Canada ULC and its European affiliate concerning our third ethylene plant. We have counterclaimed in the same action for an amount well in excess of the Dow claim. Although management does not believe that the claims against it have merit, there can be no assurance on the outcome of any litigation.

Our future pension costs and required level of contributions could be unfavorably impacted by the current credit crisis and market volatility.

        We currently maintain four defined benefit plans in North America covering various categories of employees and retirees, which represent our major defined benefit retirement plans. In addition, we have smaller retirement plans and past service liabilities for former employees now employed by INEOS NOVA in Europe. Funding obligations are determined using actuarial valuations that are based on certain assumptions about the long-term operation of the plans, including employee turnover, retirement rates, the performance of the financial markets and interest rates. If future trends differ from the assumptions, the amount we are obligated to contribute to the plans may increase. If financial markets perform lower than what is assumed, we may have to make larger contributions to the plans than we would otherwise have to make and expenses related to defined benefit obligations could

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increase. Also, if interest rates are lower than we assume, we may be required to make larger contributions than we would otherwise have to make.

        In late 2008 and early 2009, we experienced significant declines in our pension plan assets due to the adverse conditions in the equity markets globally. These economic conditions have had a significant negative impact on the plans' asset values. The U.S. and the Canadian provincial legislators have enacted temporary funding relief measures and market conditions improved in the latter part of 2009. For 2010, we expect our funding obligations to be similar to what we contributed to these plans in 2009. However, if difficult economic conditions persist, absent extended government funding relief we will have to make significantly larger contributions to our defined benefit plans. Reported results could be materially and adversely affected and our cash flow available for other uses may be significantly reduced.

We are controlled by IPIC and its affiliates, whose interests may not be aligned with yours.

        A holding company controlled by IPIC and its affiliates currently owns all of our equity and, therefore, IPIC has the power to control our affairs and policies. It also controls the election of directors, the appointment of management, the entering into mergers, sales of substantially all of our assets and other extraordinary transactions. The directors so elected have authority, subject to the terms of our debt, to issue additional stock, declare dividends and make other decisions. Under the Agreement in Principle among IPIC, OMV and Borealis, IPIC and OMV will share control over decisions affecting us.

        The interests of IPIC and its affiliates and OMV could conflict with your interests. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of IPIC, as equity holders, might conflict with your interests as a holder of the notes. IPIC and its affiliates may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to you as a holder of the notes. Additionally, IPIC and its affiliates are in the business of making investments in companies, and may from time to time in the future acquire interests in businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. See "Related Party Transactions."

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DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

        This prospectus contains forward-looking information with respect to us within the meaning of U.S. federal securities laws. By its nature, forward-looking information requires us to make assumptions and is subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions and projections that constitute forward-looking information will not prove to be accurate, that our assumptions may not be correct and that actual results may vary from the forward-looking information.

        Forward-looking information for the time periods beyond 2010 involves longer-term assumptions and estimates than forward-looking information for 2010 and is consequently subject to greater uncertainty. We caution readers of this prospectus not to place undue reliance on our forward-looking information 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 information.

        The words "believe," "expect," "plan," "intend," "estimate," or "anticipate" and similar expressions, as well as future or conditional verbs such as "should," "would," and "could" often identify forward-looking information. Specific forward-looking information contained in this prospectus includes, among others, statements regarding: our expectations and beliefs with respect to the effect and benefits of the acquisition of us by IPIC; the possibility of a joint control arrangement between IPIC and OMV; our financing plans and beliefs about our liquidity, our credit facilities and other sources of financing; our low-cost position; our plans to restructure our Performance Styrenics business; our beliefs about our competitive advantages and our ability to compete successfully; our beliefs about expected funding for our pension plans; general economic conditions; our beliefs about and expectations for our Olefins/Polyolefins business unit, including our beliefs about our cost advantaged feedstock, our beliefs about future ethane supply in Alberta, our expectation that our polyethylene manufactured using Advanced SCLAIRTECH technology will generate higher, more sustainable margins throughout the chemical industry cycle, our beliefs about the supply/demand balance for ethylene and polyethylene; our beliefs and expectations concerning the global styrenics industry and our joint venture with INEOS, including our belief that efficiency enhancing actions taken by INEOS NOVA and others in the industry and lower feedstock costs could lead to higher operating rates and improved industry profitability; and our beliefs and expectations regarding our Performance Styrenics business unit and our restructuring of this business, including our beliefs about our styrenic polymers and ventures and the advantages they can provide for our customers.

        With respect to forward-looking information contained in this prospectus, we have made material assumptions regarding, among other things: future oil, natural gas, natural gas liquids and benzene 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 information include: a deterioration in our cash balances or liquidity; our ability to access capital markets, which could impact our ability to react to changing economic and business conditions; the ongoing world financial crisis and economic downturn; 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 strategy;

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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; 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; terrorist attacks; severe weather and other risks detailed from time to time in our publicly filed disclosure documents and securities commission reports. The information contained in this prospectus, including the information provided under the heading "Risk Factors," identifies additional factors that could affect our operating results and performance.

        The forward-looking information in this prospectus is expressly qualified in its entirety by this cautionary statement. In addition, the forward-looking information is made only as of the date of this prospectus, and except as required by applicable law, we undertake no obligation to update publicly this forward-looking information to reflect new information, subsequent events or otherwise.

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USE OF PROCEEDS

        The exchange offer is intended to satisfy our obligations under the registration rights agreement that we entered into in connection with the private placement. We will not receive any cash proceeds from the issuance of the exchange notes in the exchange offer. As consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange a like principal amount of outstanding notes, the terms of which are identical in all material respects to the exchange notes and represent the same underlying indebtedness, except that the exchange notes will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement. The outstanding notes that are surrendered in exchange for the exchange notes will be retired and cancelled and cannot be reissued. As a result, the issuance of the exchange notes will not result in any increase or decrease in our capitalization.

RATIO OF EARNINGS TO FIXED CHARGES

        The following table sets forth our ratio of earnings to fixed charges in accordance with U.S. GAAP for each year in the five years ended December 31, 2008 and for the nine months ended September 30, 2009. For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings before income taxes plus fixed charges (excluding capitalized interest during the period). Fixed charges consist of interest expense, capitalized interest and amortization of bond discount and issue costs.

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(1)

For 2008, 2006, 2005 and the nine months ended September 30, 2009, earnings were insufficient to cover fixed charges by approximately $82 million, $854 million, $164 million and $324 million, respectively, and the ratio is not meaningful.

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CAPITALIZATION

        The following table summarizes our consolidated capitalization as at September 30, 2009, on an actual basis, and on an as adjusted basis after giving effect to the private placement and the refinancing transactions. You should read this table with our consolidated financial statements included elsewhere in this prospectus.

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(1)

As of September 30, 2009, we had $243 million of borrowings under our $350 million senior secured revolving credit facility (excluding $47 million of letters of credit). The availability on this revolver was $346 million on September 30, 2009, due to a proportionate reduction of the credit facility in accordance with a quarterly calculation required by the indentures. This credit facility was refinanced in November 2009, and the new facility will expire on November 17, 2012. See "Description of Other Indebtedness and Preferred Stock—Credit Facilities."

(2)

Non-recourse joint venture secured debt, where security is limited to our net investment in the Joffre co-generation joint venture.

(3)

Stated value based on an exchange rate of US$0.93 to Cdn$1.00 at September 30, 2009.

(4)

We terminated this facility effective October 15, 2009.

(5)

Consists primarily of obligations under capital leases.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

        The selected historical consolidated financial information set forth below has been derived from our audited consolidated financial statements for each of the years in the five-year period ended December 31, 2008, which statements have been audited by Ernst & Young LLP, Chartered Accountants. The selected historical consolidated financial information as of and for the nine months ended September 30, 2009 and September 30, 2008 should be read together with our unaudited consolidated financial statements, included elsewhere in this prospectus.

        Certain amounts in the selected historical consolidated financial information presented below have been restated from that which has been included elsewhere in this prospectus due to adoption of new accounting standards or to conform with the presentation of our financial information for the nine months ended September 30, 2009. In the opinion of management, all adjustments considered necessary for a fair presentation of our interim results and financial position have been included in those results and financial position. Interim results and financial positions are not necessarily indicative of the results and financial position that can be expected for a full fiscal year.

        Our financial statements are presented in U.S. dollars, but are prepared in accordance with Canadian GAAP. In certain respects, Canadian GAAP differs from U.S. GAAP. See the reconciliation of Canadian and U.S. GAAP in Note 21 to our Annual Audited Consolidated Financial Statements included elsewhere in this prospectus for a description of material differences between U.S. and Canadian GAAP as they relate to our consolidated financial statements. The selected historical consolidated financial information presented below is condensed and may not contain all of the information that you should consider. This selected financial data should be read in conjunction with the consolidated financial statements, including the related notes, and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

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(a)

Certain prior year information has been restated due to the adoption of CICA 3064 on January 1, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Accounting Standards."

(b)

Restructuring charges include:

In 2004, restructuring charges consisted of $8 million of dismantling costs related to the closure of the polyethylene production line at the St. Clair River site. In 2005, restructuring charges consisted of a $76 million write-down of the Berre, France and Carrington, U.K. EPS plants and $7 million related to our share of severance costs incurred by NOVA Innovene (now the European branch of INEOS NOVA) associated with these closures, a $76 million write-down of the Chesapeake, VA plant resulting from our decision to permanently close the plant and $9 million associated with the write-off of certain other nonproductive assets. In 2006, restructuring charges consisted of a $860 million impairment charge related to our former STYRENIX business unit assets, $56 million related to NOVA Innovene permanently closing its Carrington, UK polystyrene facility and includes $8 million related to expected severance and other departure costs, a $53 million charge for severance, pension and other employee-related costs as a result of restructuring the North American operations to better align resources and reduce costs, a $15 million charge related to the accrual of expected severance costs for the Chesapeake, VA plant which was closed in 2006, and $1 million related to additional actions taken by NOVA Innovene. In 2007, restructuring charges consisted of $7 million associated with the elimination of approximately 90 positions in the U.S. and Europe, $29 million representing INEOS NOVA's announcement to permanently shut down Sterling Chemicals' Texas City Plant, $3 million of closure and severance costs related to INEOS NOVA's announcement to shut-down the Montreal, Quebec polystyrene site, a $32 million impairment charge related to INEOS NOVA's decision to cease polystyrene production at the Belpre, Ohio polystyrene plant and another $3 million related to our share of associated severance costs and $12 million related to additional actions taken to reduce costs by INEOS NOVA and us. In 2008, restructuring charges consisted of $32 million related to impairment charges for certain joint venture and equity investments, costs incurred for discontinued capital projects and other restructuring costs related to actions taken to reduce costs, and $5 million for INEOS NOVA severance costs related to reductions at the Bayport facility. In the nine months

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ended September 30, 2008, restructuring charges consisted of $5 million for INEOS NOVA severance costs related to reductions at the Bayport facility. In the period January 1—July 5, 2009, restructuring charges consisted of $31 million related to our decision to exit the DYLARK® engineering resin business, $10 million of severance and other employee related costs related to Performance Styrenics restructuring and $1 million related to INEOS NOVA pension plan settlement charges. In the period July 6—September 30, 2009, restructuring charges consisted of $18 million related to severance and other employee related costs due to restructuring activities across the company.

(c)

Other gains (losses) include:

(d)

Working capital equals accounts receivable plus prepaid expenses plus inventories less accounts payable and accrued liabilities.

(e)

Total debt equals long-term debt plus installments on long-term debt due within one year and bank loans.

(f)

Total debt includes long-term debt under U.S. GAAP, installments on long-term debt due within one year and bank loans.

(g)

Third party sales only, in millions of pounds.

(h)

Average benchmark prices (expressed in dollars per pound unless otherwise noted) are not necessarily the actual prices realized by us or any other petrochemical company.

(i)

Source: CMAI—USGC Net Transaction Price.

(j)

Source: Townsend Polymer Services Information, Inc. Average benchmark prices weighted according to our sales volume mix in North America.

(k)

Source: CMAI Contract Market.

(l)

Source: NYMEX Henry Hub—3-Day Average Close.

(m)

Source: Platt's—NYMEX WTI daily spot-settled price average for calendar month.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the information contained in the Consolidated Financial Statements and the notes thereto included in this prospectus. This MD&A is based upon financial statements prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). These accounting principles are different in some respects from those generally accepted in the United States, and the significant differences are described in Note 21 to the Annual Audited Consolidated Financial Statements. References are made to a non-GAAP measure throughout this MD&A. This measure is discussed in Supplemental Measures on page 69.

NOVA Chemicals—A Plastics and Chemical Company

        We are a plastics and chemical company whose products are used in a wide variety of applications, including food and electronics packaging, industrial materials, appliances and a variety of consumer goods. On July 6, 2009, a wholly-owned subsidiary of International Petroleum Investment Company ("IPIC") completed the acquisition of all of our issued and outstanding common shares.

        We operate two business units and hold a 50% interest in a joint venture with INEOS Group Limited ("INEOS"), called INEOS NOVA.

Business Units

•

Olefins/Polyolefins manufactures and sells ethylene and polyethylene ("PE"), including higher value PE produced with our Advanced SCLAIRTECH technology as well as chemical and energy co-products.



•

Performance Styrenics manufactures and sells expandable polystyrene ("EPS") in North America and ARCEL resin and other styrenic polymers. This business unit also has interests in EPS-based downstream ventures and businesses principally for building and construction applications.

INEOS NOVA

        INEOS NOVA is a 50:50 joint venture between us and INEOS that manufactures and sells styrene, solid polystyrene ("SPS") and EPS.

IPIC Transaction

        On July 6, 2009, IPIC completed the acquisition of NOVA Chemicals and, through a wholly owned subsidiary, acquired all of our issued and outstanding common shares for $6.00 per share in cash (the "Acquisition"). Prior to July 6, 2009, IPIC provided us with $350 million of interim debt financing that was converted into our common equity at the closing of the Acquisition. We refer to the Acquisition and the conversion of the interim debt financing into equity collectively as the "IPIC Transaction". Our common shares were delisted from the New York Stock Exchange ("NYSE") and the Toronto Stock Exchange ("TSX") on July 6, 2009.

        We elected to use push-down accounting under the Canadian Institute of Chartered Accountants ("CICA") 1625, Comprehensive revaluation of assets and liabilities, which resulted in our assets and liabilities being comprehensively revalued to be consistent with the values recorded by IPIC in accordance with business combination accounting standards. In this respect, we have applied, for the first time and prospectively, the principles of CICA 1582, Business combinations, in connection with push-down accounting. As a result, the carrying values of all identifiable assets and liabilities have been adjusted to their respective estimated fair values on July 6, 2009 as reflected in Note 2 of the

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Unaudited Consolidated Financial Statements. This allocation is provisional pending completion of the valuations and is subject to change.

        Although our company continued as the same legal entity after the IPIC Transaction, our consolidated financial information for 2009 is presented for two periods: Predecessor and Successor, which relate to the periods preceding and succeeding the Acquisition on July 6, 2009. These separate periods are presented to highlight the fact that the financial information for these periods has been prepared under two different historical-cost bases of accounting. Most significantly impacted are: the carrying values of all identifiable assets and liabilities, adjusted to their respective estimated fair values on July 6, 2009, in order to be consistent with the values to be recorded by IPIC, depreciation expenses and Acquisition costs. The Successor portion of the financial information also reflects the equity contributions from IPIC.

Refinancing

        During October and November 2009, we refinanced a substantial portion of our outstanding debt scheduled to mature in 2010. On October 16, 2009, we issued $350 million of 8.375% senior notes due 2016 and $350 million of 8.625% senior notes due 2019. We used $496 million of the offering proceeds to repay debt under our senior secured credit facility and bilateral credit facilities, and plan to use the balance of the proceeds to repay outstanding debt under our total return swap and for general corporate purposes. On November 17, 2009, we entered into a new $350 million senior secured revolving credit facility to replace our prior facility scheduled to expire on March 31, 2010. In addition, we amended two of our senior unsecured bilateral credit facilities (which were previously amended to shorten their maturity dates to March 2010) to revert back to their original maturity dates. As a result of these transactions, we now have four revolving credit facilities totaling $615 million in borrowing capacity. These facilities include:

•

$350 million senior secured revolving credit facility provided by a syndicate of lenders, which matures on November 17, 2012;



•

$65 million senior unsecured bilateral credit facility, which expires on March 20, 2010;



•

$100 million senior unsecured bilateral credit facility, which expires on March 20, 2011; and



•

$100 million senior unsecured bilateral credit facility ($30 million due on March 20, 2010, $30 million due on September 20, 2011 and $40 million due on September 20, 2013).

In addition to our four revolving credit facilities, we have $130 million in accounts receivable securitization programs, which mature in February 2010, a $75 million total return swap, which terminates on March 31, 2010, and Cdn$250 million (US$233 million, based on an exchange ratio of US$0.93 to Cdn$1.00 as of September 30, 2009) of 7.85% senior notes, which mature in August 2010. Collectively, we have an aggregate of $533 million of debt (including the total return swap) that will mature or expire during 2010.

Key Drivers of Financial Performance

        Our earnings and cash flow primarily are influenced by the margins earned on the products we manufacture. Margin is the difference between the selling price of products and the direct cost to produce and distribute them. Margins for companies in the plastics and chemical industry are driven by the supply/demand balance and tend to be cyclical.

Supply/Demand Balance—The Key Driver of Profitability

        The supply/demand balance, as measured by industry operating rates, is generally the best indicator of profitability in the plastics and chemical industry. During peak conditions, when operating

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rates tend to be high, prices and margins generally increase as customers attempt to secure scarce supply to meet their production needs. Conversely, during trough conditions, which tend to occur when operating rates are low, margins generally decrease since there is ample supply to meet customer demand.

Plastics and Chemical Industry Earnings are Cyclical

        By its nature, profitability in the plastics and chemical industry is cyclical. Demand growth is driven by economic growth, which tends to be relatively consistent over time. In contrast, new product supply grows in large increments through the construction of large, complex new plants, which generally require significant capital and lead-time of four to six years to complete.

        As industry operating rates increase, prices and producers' margins tend to increase. Extended periods of profitability encourage new investment in plants to serve growing demand. New supply added in excess of demand growth causes industry operating rates and profitability to decline. Periods of reduced profitability deter investment in new plants and force high-cost, unprofitable producers to rationalize capacity. Continued demand growth and lack of new investment lead to tightening capacity utilization and a return to increased profitability. This alternating pattern of supply surplus and shortage creates the earnings cycles that are typical in commodity industries.

Price, Volume and Cost Influence Profitability

Price is driven by feedstock costs and the supply and demand balance

        Pricing for our polymer and chemical products is based on the amount our customers are willing to pay for these products compared to similar available or competing products. Prices can rapidly change as a result of feedstock costs and fluctuations in the supply/demand balance. While feedstock costs heavily influence the price of our products, margins drive profitability.

Volume is driven by economic growth

        Sales volumes for plastics and chemical products are most heavily influenced by economic growth, a key driver of demand. Sales volumes also may be influenced by short-term changes in customer buying patterns which primarily are driven by expectations of price volatility. Anticipation of higher prices or limited product availability can motivate customers to purchase beyond short-term needs and build inventories. Conversely, expectations of lower prices can motivate customers to delay purchases and consume inventories. These short-term buying patterns can create quarterly earnings volatility for plastics and chemical producers and are not necessarily representative of longer-term profitability.

Costs—feedstock cost advantage is critical to sustained profitability

        Feedstock costs are the single largest component of our costs and account for 70-80% of the total cost of our products. Our primary feedstocks include ethane, crude oil, propane, butane, condensates and styrene, while INEOS NOVA's primary feedstocks are benzene and ethylene. Feedstock costs heavily influence the price of our products, and in recent years, feedstock cost volatility has led to rapid changes in product prices. Since feedstock costs represent the most significant portion of total production costs, a feedstock cost advantage can lead to enhanced profitability relative to industry peers and is the key to our profitability throughout the cycle.

        The remaining 20-30% of the total cost of our products consists of variable conversion costs and fixed costs such as: plant operating and distribution costs; selling, general and administrative costs ("SG&A"); and research and development costs ("R&D"). SG&A costs represent all direct and most indirect expenses incurred in directing and managing the company. R&D costs relate to technical

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activities that support the development and commercialization of new products, technologies and applications.

Our Earnings Sensitivities

        The following table illustrates how changes in various factors could affect our profitability, assuming all other factors are held constant. Changes in the opposite direction would have the opposite effect.

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(1)

A change in the opposite direction would result in the same impact, only in the opposite direction.

(2)

Estimate based on production capacity as of September 30, 2009, assuming 100% utilization.

(3)

Assumes a Canadian corporate tax rate of 30% for ethylene, polyethylene and Canadian dollar currency impact and a U.S. corporate tax rate of 39% for styrene, SPS and EPS.

(4)

Excludes 1.2 billion pounds ethylene capacity that is subject to toll and margin sharing agreements.

(5)

Represents our 50% share of INEOS NOVA's combined global SPS and European EPS capacity.

(6)

INEOS NOVA plans to shut down 200 million pounds of SPS capacity at Breda, The Netherlands, by the end of 2009. This will reduce our share to 1.8 billion pounds.

(7)

Our North American EPS capacity.

(8)

Sensitivity estimate based on expected Canadian dollar denominated fixed costs and net Canadian denominated liabilities and debt.

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NOVA Chemicals' Highlights

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(1)

Certain prior year information has been restated due to the adoption of CICA 3064 on January 1, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Accounting Standards."

(2)

See Supplemental Measures on page 69.

(3)

As of October 1, 2007, the results reflect our 50% share in INEOS NOVA. Prior to that period, results reflected our North American styrene and SPS business and 50% of our interest in the European styrenics joint venture with INEOS.

Changes in Our Net (Loss) Income

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(1)

Certain prior year information has been restated due to the adoption of CICA 3064 on January 1, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Accounting Standards."

(2)

Operating margin equals Revenue less Feedstock and operating costs (includes impact of realized and unrealized gains and losses on mark-to-market feedstock derivatives).

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Discussion of Consolidated Financial Results of Operations

Nine Months Ended September 30, 2009 Versus Nine Months Ended September 30, 2008

        Net Income for the nine months ended September 30, 2009 was lower than the nine months ended September 30, 2008 due to weak economic and business conditions which resulted in lower selling prices and sales volumes that more than offset lower feedstock and operating costs. Higher foreign exchange losses due to a strengthening Canadian dollar on Canadian-denominated liabilities also contributed to the decrease.

        Revenue was $2,926 million in first nine months of 2009, significantly down from $6,213 million in first nine months of 2008. Weak economic and business conditions during the first nine months of 2009 resulted in lower average selling prices for products in all business segments as well as lower sales volumes that more than offset lower feedstock and operating costs compared to the same period in 2008.

        Feedstock and Operating Costs were $2,502 during the first nine months of 2009 compared to $5,433 during the same period in 2008. The steep decline in feedstock and operating costs was due to significantly lower average crude oil, benzene and natural gas prices during the first nine months of 2009 compared to the same period in 2008 due to the reset in commodity and materials prices triggered by the global recession that started in the second half of 2008.

        Depreciation and Amortization expense was $198 million in the first nine months of 2009, up slightly from $196 million in the first nine months of 2008, despite the application of push-down accounting (see "Application of Critical Accounting Estimates—Property, Plant and Equipment").

        Selling, General and Administrative expenses were $44 million higher during the first nine months of 2009 as compared to the first nine months of 2008 primarily due to financial advisor and legal fees of $46 million incurred with respect to the IPIC Transaction during the first nine months of 2009.

        Research and Development expenses were $30 million during the first nine months of 2009, down from $39 million during the first nine months of 2008 due to targeted cost savings.

        Restructuring Charges were $60 million before-tax ($56 million after-tax) during the first nine months of 2009 compared to $5 million before-tax ($4 million after-tax) during the first nine months of 2008. With the IPIC Transaction complete, previously planned restructuring activities, including workforce reductions in the Corporate and Olefins/Polyolefins business units were resumed, resulting in third quarter 2009 restructuring charges of $18 million. Also contributing to the increased restructuring charges during the first nine months of 2009 was our decision to exit the DYLARK engineering resin business during the second quarter of 2009.

        Interest Expense (Net) during the first nine months of 2009 was $9 million higher compared to the first nine months of 2008 primarily due to additional amortization expense of debt issue costs as a result of amendments to existing financings and additional financings completed in the first and second quarters, and debt advisory fees recorded in the first quarter of 2009.

        Income Tax (Recovery) Expense was $140 million lower in the nine months ended September 30, 2009 compared to the same period last year due to the decrease in net income before taxes.

2008 versus 2007

        Net Loss was $39 million compared to net income of $348 million. Net income was lower in 2008 primarily due to lower margins resulting from the effects of the dramatic drop in energy and petrochemical prices in the fourth quarter of 2008. Sharp selling price declines led to lower sales volumes in the fourth quarter, and the precipitous drop in the cost of feedstocks resulted in a negative inventory flow-through impact and year-end inventory write-down totaling $384 million after-tax. This

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was partially offset by a change in functional currency that resulted in a gain of $142 million after-tax, due to the sharp drop in the Canadian dollar in the fourth quarter.

        Revenue was $7,366 million in 2008, up from $6,732 million in 2007. Average selling prices for products in all business segments were higher in 2008 than in 2007, despite the declines in the fourth quarter. In addition, PE sales volumes were 2% higher in 2008 despite a sharp decline in October and November.

        Feedstock and Operating Costs were $6,852 million in 2008, up from $5,597 million in 2007. Feedstock, utility and fuel costs increased in 2008 as average crude oil, benzene and natural gas prices rose significantly during the first three quarters of 2008. While industry feedstock costs increased significantly, our feedstock costs increased less in comparison due largely to our advantaged Alberta based feedstock.

        Depreciation and Amortization expense was $261 million in 2008, up from $237 million in 2007. Depreciation expense was $24 million higher in 2008 as compared to 2007 due to additional depreciation recorded in the INEOS NOVA joint venture, increased amortization of other joint venture start-up costs and $6 million of additional depreciation expense in connection with our change in functional currency.

        Selling, General and Administrative expenses were $225 million in 2008, up from $206 million in 2007, primarily due to increased stock-based compensation expenses related to our forward transactions which were ineffective in the last half of 2008 and increased professional and consulting fees.

        Research and Development expenses were $52 million in 2008, up slightly from $50 million in 2007.

        Restructuring Charges were $37 million before-tax ($33 million after-tax) in 2008, down from $86 million before-tax ($55 million after-tax) in 2007. In 2007, restructuring costs were higher due to actions linked to the formation of the INEOS NOVA joint venture and Sterling Chemicals' permanent shut down of its styrene monomer plant at Texas City, TX. (See Note 13 to the Annual Audited Consolidated Financial Statements for details.)

        Interest Expense (Net) was $156 million in 2008, down from $175 million in 2007. Interest expense declined in 2008 due to lower interest rates and a reduction in debt.

        Other Losses were $2 million before-tax ($1 million after-tax) in 2008, compared to other gains of $20 million before-tax ($14 million after-tax) in 2007. In 2007, we recorded a gain as a result of the sale of the previously shut-down Chesapeake, Virginia, facility and other incidental land.

        Income Tax Expense (Recovery) was a $63 million recovery in 2008, compared to a $53 million expense in 2007 primarily due to lower taxable income.

2007 versus 2006

        Net Income was $348 million in 2007, compared to net loss of $708 million in 2006. Our 2006 results were negatively impacted by restructuring charges totaling $861 million after-tax (see Note 13 to the Annual Audited Consolidated Financial Statements for details). In addition to lower restructuring charges in 2007, margins improved for ethylene and PE as industry price increases, driven by high industry feedstock costs, outpaced increases in our Alberta-based feedstock costs.

        Revenue was $6,732 million in 2007, up from $6,519 million in 2006. Average prices for all of our products increased in 2007, particularly in the second half of the year. In addition, PE sales volume increased due to strong demand in North American and global markets.

        Feedstock and Operating Costs were $5,597 million in 2007, down from $5,675 million in 2006. Despite higher crude oil and benzene prices, our total feedstock costs declined in 2007, due primarily

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to lower feedstock purchases by INEOS NOVA. While industry feedstock costs increased significantly, our feedstock costs increased less in comparison due largely to our advantaged Alberta-based feedstock.

        Depreciation and Amortization expense was $237 million in 2007, down from $293 million in 2006. Expenses were lower in 2007 due to our styrene and SPS asset write-down that occurred at the end of 2006. The impact of this reduction was partially offset by higher depreciation expense resulting from a stronger Canadian dollar.

        Selling, General and Administrative expenses were $206 million in 2007, down slightly from $202 million in 2006. Costs were lower in 2007 as realized savings from cost-reduction efforts offset the increase in stock-based compensation expense (net of the forward transactions) and profit sharing.

        Research and Development expenses were $50 million in 2007, down slightly from $51 million in 2006.

        Restructuring Charges were $86 million before-tax ($55 million after-tax) in 2007, down from $985 million before-tax ($861 million after-tax) in 2006. We undertook a series of restructuring actions, both alone and with our joint venture partner, INEOS, to improve the cost structure of our styrenics business (see Note 13 to the Annual Audited Consolidated Financial Statements for details).

        Interest Expense (Net) was $175 million in 2007, up from $168 million in 2006. The increase in interest expense was due to higher accounts receivable securitization balances, increased draws on the revolving credit facilities and higher interest rates during 2007 compared to 2006.

        Other Gains were $20 million before-tax ($14 million after-tax) in 2007, up from $1 million before-tax in 2006. In 2007, we sold the previously shut-down Chesapeake, Virginia, facility and other incidental land.

        Income Tax Expense (Recovery) was a $53 million expense in 2007, compared to a $146 million recovery in 2006. The year-over-year change was due to strong earnings in Canada in 2007, which lead to higher tax expense and the tax recovery related to the large write-down of the styrene and polystyrene assets in 2006 (see Note 15 to the Annual Audited Consolidated Financial Statements for details).

Olefins/Polyolefins Business Unit

        Our Olefins/Polyolefins business unit produces and sells ethylene, PE and co-products from its two manufacturing centers located in Alberta and Ontario, Canada. The business is built on its cost advantaged feedstock and world-scale and energy-efficient manufacturing facilities in Alberta and proprietary technology such as Advanced SCLAIRTECH ("AST") and gas-phase PE process technology as well as PE catalyst technology.

        Our Olefins/Polyolefins business unit contains three reporting segments:

(1)

Joffre Olefins, which produces and sells ethylene and co-products and includes the Joffre, Alberta, site's three ethylene crackers.



(2)

Corunna Olefins, which produces and sells ethylene and co-products and includes the Corunna, Ontario, ethylene flexi-cracker.



(3)

Polyethylene, which produces and sells PE and includes both the Alberta and Ontario based PE assets.

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Olefins/Polyolefins Business Unit Snapshot

Market Overview

        Ethylene is the most widely produced petrochemical in the world and is the primary feedstock used in the production of PE. It is a key building block for a variety of polymers and other chemicals used to manufacture products such as packaging, containers, films and construction products. Ethylene is primarily transported via pipeline and is regionally traded. Ethylene margins typically expand when operating rates are at or above 90% of nameplate capacity.

        Polyethylene is used to produce everyday, consumer staple oriented items such as food packaging, packaging for personal care items, toys and bottles, and is the most widely used plastic material in the world. Industrial applications include storage drums, industrial wrap, retail packaging and building products. PE resin is globally traded in established merchant markets. PE margins typically expand when operating rates are at or above 90% of nameplate capacity.

        Co-products are produced in the ethylene manufacturing process and can be grouped into two categories: chemical co-products and energy co-products. Chemical co-products include propylene, benzene and butadiene—building blocks that are used to make items such as tires, carpet and clothing fibers, and household goods. Energy co-products include gasoline blending components and fuel oil. The profitability of co-products depends on energy prices and the supply/demand balance for each co-product. The choice of ethylene feedstock mix determines the type and volume of co-products manufactured.

Business Overview

        Our largest-volume product is ethylene, which is the key feedstock for the production of PE. We produce ethylene and co-products at our Joffre, Alberta, and Corunna, Ontario, manufacturing facilities.

Joffre Olefins

        Joffre Olefins produces and sells ethylene and co-products and includes three world-scale ethylene crackers in Joffre, Alberta, where we operate one of the largest and lowest cost ethylene and PE facilities in the world. Our share of production capacity from the Joffre crackers, which excludes Dow Chemical Company's 50% interest in the Ethylene 3 ("E3") cracker, is 4.8 billion pounds per year and represents approximately 75% of our total nameplate ethylene production capacity. Approximately half of our production capacity at Joffre supports internal PE production, while the remainder is sold to third parties. The Joffre crackers have the capacity to produce approximately 830 million pounds per year of ethylene co-products such as hydrogen, propylene and other hydrocarbons.

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        The primary feedstock of the Joffre ethylene crackers is ethane, which is extracted from natural gas by third-party straddle plant operators and delivered to the Joffre site via pipeline. The majority of ethane used at the Joffre site is extracted and delivered under medium-to long-term contracts. We can also directly purchase ethane and have the flexibility to use propane to meet a portion of our feedstock requirements when the economics are favorable.

        The only major use for ethane is as a feedstock for production of ethylene. Given the dynamics of the Alberta ethane markets, we acquire ethane at cost by purchasing natural gas to replace the energy content of the ethane removed from the gas stream plus pay a fee for extraction and delivery. Therefore, our feedstock costs are directly linked to the natural gas price in Alberta. Alberta's historically lower cost of natural gas, due to structural transportation differentials, and more efficient ethane extraction plant infrastructure compared to the U.S. Gulf Coast ("USGC") contributes to our feedstock cost advantage. In comparison, USGC ethane prices generally follow the prices of other ethylene feedstocks such as propane and naphtha, which typically track crude oil prices. Ethane prices are also influenced by more traditional supply and demand dynamics. As a result, the price for ethane on the USGC can be at a substantial premium to the underlying natural gas value.

Corunna Olefins

        Corunna Olefins produces and sells ethylene and co-products that result from the manufacture of ethylene and processing of crude oil and other feedstocks. The Corunna ethylene flexi-cracker has annual production capacity of 1.8 billion pounds of ethylene and 4.7 billion pounds of co-products, depending on the feedstock used. Most of Corunna's ethylene production is consumed by our PE plants and INEOS NOVA's styrene monomer plant in Sarnia, Ontario, while the majority of its co-products are sold to third parties.

        Corunna's manufacturing assets have the flexibility to process a large range of feedstocks and produce diverse chemical and energy co-products. We are able to adjust Corunna's feedstock slate between crude oil, crude oil derivatives and NGLs as market conditions fluctuate. Corunna's crude oil processing unit allows us to purchase crude oil and produce our own naphtha when it is economically favorable to do so. The Corunna facility can access natural gas liquids, or NGL's, such as propane and butane from local producers, Western Canada or the United States. The Corunna facility can also access crude oil and condensates from North America and overseas via marine transportation and pipelines.

Polyethylene

        The Polyethylene segment produces and sells linear low-density polyethylene ("LLDPE"), low-density polyethylene ("LDPE") and high-density polyethylene ("HDPE").

        We have approximately 3.6 billion pounds of annual PE production capacity from our two units in Joffre, Alberta, and our Mooretown and St. Clair River sites in Ontario. In 2008, we expanded the annual production capacity of our AST PE asset at Joffre ("PE2") by 50 million pounds to a total of approximately 950 million pounds and increased the annual production capacity of our LLDPE asset ("PE1") by 30 million pounds to 1,480 million pounds. We expect to complete an additional expansion of our PE1 asset by 20 million pounds, to a total annual production capacity of 1,500 million pounds, by the end of 2010. We also plan to complete a modernization and expansion project at our Mooretown, Ontario LDPE asset. We expect this project to be completed by 2011 and add up to 120 million pounds of annual production capacity, as well as upgrade the product slate, improve reliability and reduce production costs.

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Advanced SCLAIRTECH Technology

        One of the Joffre PE plants, PE2, utilizes Advanced SCLAIRTECH technology to manufacture and sell higher value SURPASS® and SCLAIR® PE resins. SURPASS resins deliver a unique combination of properties not found in traditional PE resins and are used in film applications, such as food packaging; injection molding applications, such as ice cream containers and packaging lids; and rotational molding applications, such as dumpsters and industrial storage containers. SCLAIR resins are used in a variety of flexible packaging applications.

        We are one of only three PE companies worldwide with independent, patented process and single-site catalyst technologies which enable us to produce differentiated higher-value PE resins on a commercial scale. Made with patented Advanced SCLAIRTECH technology and proprietary single-site catalysts, our octene co-polymer resins deliver enhanced value to customers because of their performance attributes and processing benefits. Therefore, we expect them to generate higher, more sustainable margins throughout the chemical industry cycle.

PE exports

        Our PE is primarily sold into North American markets. We have also historically sold up to 20% of our total sales volume to China, other Asian countries and Europe. We own part of a packaging joint venture located in Tianjin, China. We ship bulk PE resin out of the Port of Vancouver to Tianjin where it is bagged for distribution to customers in China.

PE Technology Licensing

        We license our proprietary SCLAIRTECH™ technology and NOVACAT® family of catalysts. Our SCLAIRTECH technology is licensed for use in 11 plants around the world.

        NOVACAT catalysts are a series of advanced Ziegler-Natta catalysts designed specifically for gas-phase PE reactors that can produce butene and hexene LLDPE with improved performance characteristics and manufacturing economics.

Outlook for Olefins/Polyolefins Business Unit

        We believe that there are several factors that affect the long-term earnings potential of our Olefins/Polyolefins business unit.

1.

Supply/Demand Balance—In the next few years, we expect a large amount of ethylene and PE capacity to come on line around the world, mostly in Asia and the Middle East. During this period, supply growth is expected to exceed demand growth causing an oversupply of products and a reduction in global operating rates. We expect some producers will shut down their facilities permanently, which should reduce excess capacity and cause operating rates to return to higher levels over time. In addition, margins in periods of oversupply are typically below re-investment levels and this discourages new investment decisions, eventually leading to a period of inadequate supply and a return to margin expansion.

2.

Cost Advantaged Feedstocks—Our Joffre facility has access to some of the lowest cost feedstocks in the world outside of the Middle East. According to industry experts, the cost of natural gas in North America is expected to remain low relative to crude oil for at least the next several years. This should ensure that we are feedstock advantaged compared to North American competitors that use crude oil based feedstocks. We expect the structural transportation differentials, and more efficient ethane extraction plant infrastructure in Western Canada compared to the USGC to continue, which should also help in maintaining our competitiveness in North America. In addition, well over 50% of global capacity uses feedstock derived from crude oil and is relatively high cost. Since market prices are set by the highest cost producers, our advantaged cost position

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should lead to higher margins for our business relative to those high cost producers when selling at market prices.

3.

Natural Gas Flows—In 2010, we expect the flows of natural gas across the Canadian border to the United States to decline due primarily to low selling prices for natural gas in North America. This will likely lead to less natural gas flowing through the ethane extraction plants on the mainline of the TransCanada Alberta pipeline system and therefore less ethane available as feedstock for our ethylene plants in Western Canada. We are working and plan to continue to work with suppliers and the Alberta government to source additional supply for our feedstock needs. These sources could include, among others, the streaming of natural gas with low ethane content to industrial consumption in Alberta, with the expected result that high ethane content natural gas will flow through the ethane extraction plants; natural gas liquids from large new gas finds in Alberta, British Columbia and northern sources; ethane from off-gas produced at Alberta's oilsands; and ethane to be extracted from the natural gas flowing in the Alliance pipeline.

Olefins/Polyolefins Financial Highlights

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(1)

Certain prior year information has been restated due to the adoption of CICA 3064 on January 1, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Accounting Standards."

(2)

Before inter-segment eliminations between the business units.

(3)

See Supplemental Measures on page 69.

(4)

Represents inter-segment profit eliminations.

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Olefins/Polyolefins Average Benchmark Prices

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(1)

Average benchmark prices do not necessarily reflect actual prices realized by us or any other petrochemical company.

(2)

Source: Chemical Market Associates, Inc. (CMAI)—USGC Net Transaction Price.

(3)

Source: Townsend Polymer Services Information (TPSI); Benchmark prices weighted according to our sales volume mix in North America.

(4)

Source: Canadian Gas Price Reporter. AECO gas is weighted-average daily spot gas price. NYMEX gas is Henry Hub 3-Day Average Close.

(5)

Source: Platt's. NYMEX WTI daily spot-settled price average for calendar month.

Discussion of Financial Results of Olefins/Polyolefins Business Unit

        Operating income of $155 million in the nine months ended September 30, 2009 was significantly lower than operating income of $633 million reported in the nine months ended September 30, 2008. Margins in the first nine months of 2009 were lower in all three segments as lower flow-through feedstock costs were more than offset by lower selling prices and sales volumes than the nine months ended September 30, 2008.

Joffre Olefins

Nine Months Ended September 30, 2009 Versus Nine Months Ended September 30, 2008

        Joffre Olefins reported operating income of $144 million in the nine months ended September 30, 2009, down from $530 million in the same period one year ago. Margins declined due to selling prices that fell more than flow-through feedstock costs together with lower sales volumes. Industry average prices for ethylene were 51% lower in the first nine months of 2009 compared to the same period last year. Operating costs in the nine months ended September 30, 2009 were significantly lower due to lower natural gas and utility costs, and the lower Canadian dollar exchange rate.

2008 Versus 2007

        Revenue was $2,159 million in 2008, up from $1,803 million in 2007 due to higher selling prices which more than offset higher feedstock costs and lower sales volume. Selling prices were 29% higher in 2008 as sharply higher feedstock costs in the first nine months of the year led to price increases by producers. Total sales volume of ethylene and co-products was 7% lower in 2008 primarily due to a sharp reduction in ethylene demand in the fourth quarter.

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        Feedstock and Operating Costs were $1,454 million in 2008, up from $1,205 million in 2007. Costs increased in 2008 due to Alberta natural gas prices which were 31% higher in 2008. Weaker consumption of feedstocks partially offset the impact of higher natural gas costs.

        Operating income was $621 million in 2008, up from $531 million in 2007. Margins in 2008 expanded as price increases outpaced higher feedstock and operating costs.

2007 Versus 2006

        Revenue was $1,803 million in 2007, up from $1,744 million in 2006. Total ethylene sales were 2% higher in 2007 compared to 2006 due to stronger merchant ethylene demand and higher internal consumption of ethylene for Joffre PE production. In addition, average selling prices for ethylene and co-products, which were 2% higher in 2007.

        Feedstocks and Operating Costs were $1,205 million in 2007, up from $1,143 million in 2006. Costs increased in 2007 due to higher Alberta natural gas prices, which were 3% higher in 2007, and stronger consumption of feedstocks to support higher ethylene sales. In addition, costs were negatively impacted by the appreciation of the Canadian dollar in 2007.

        Operating income was $531 million in 2007, down slightly from $537 million in 2007. Margins in 2007 remained at a similar high level to 2006 as stronger revenue offset the impact of higher feedstock costs and a stronger Canadian dollar.

Corunna Olefins

Nine Months Ended September 30, 2009 Versus Nine Months Ended September 30, 2008

        Corunna Olefins reported an operating loss of $102 million in the nine months ended September 30, 2009, compared to an operating loss of $5 million in the nine months ended September 30, 2008. Margins contracted due to selling prices that fell more than feedstock costs together with lower sales volumes. In the first nine months of 2009, industry average ethylene selling prices declined 51% compared to the first nine months of 2008, due to lower flow-through feedstock costs and weak demand in the USGC region.

2008 Versus 2007

        Revenue was $2,537 million in 2008, up from $2,075 million in 2007. The year-over-year improvement was due primarily to an increase in product prices that was partly offset by decreased sales volumes. Energy co-product pricing rose in response to higher WTI crude oil prices, which averaged $27.31/bbl higher than 2007. Higher energy co-product pricing more than offset lower sales volumes. Chemical co-product revenue was also up due to higher pricing, with sales volumes down slightly. Ethylene prices were up 30% over 2007, and other chemical co-product pricing was up 23% over 2007.

        Feedstock and Operating Costs were $2,708 million in 2008, up from $1,856 million in 2007. Feedstock prices were up along with the average WTI crude oil price, which was 38% higher in 2008 versus 2007. In addition, realized losses of $22 million from our feedstock purchase program contributed to higher feedstock costs.

        Operating loss was $243 million in 2008, down from a gain of $152 million in 2007. The year-over-year decline was primarily due to increased feedstock costs for the full year and product price erosion in the second half of 2008. A spike in WTI crude oil prices to record levels in mid-2008 increased feedstock costs and flow-through of costs through the second half of 2008, which delayed the cost benefits of the dramatic decrease in industry WTI crude oil costs that occurred in the second half of 2008. Higher flow-through costs in the second half of 2008 were accompanied by lower product

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pricing on falling WTI crude oil prices, reduced demand, and lower product pricing in response to a global economic slowdown.

2007 Versus 2006

        Revenue was $2,075 million in 2007, up from $1,997 million in 2006. The year-over-year improvement primarily was due to increased ethylene sales, which were 9% higher in 2007 due to stronger internal demand for ethylene. Co-product revenue in 2007 was down slightly compared to 2006. Higher selling prices for energy and chemical co-products, which rose in response to higher WTI crude oil prices, mostly offset the impact of lower energy co-product sales.

        Feedstocks and Operating Costs were $1,856 million in 2007, down slightly from $1,885 million in 2006. Costs in 2007 were lower, despite higher feedstock prices, primarily due to reduced feedstock purchases from lower energy co-products sales. The average WTI crude oil price was 9% higher in 2007 compared to 2006; however, our crude oil costs increased 4% due to the flow-through of costs. In addition, gains from our feedstock purchasing program totaling $38 million in 2007 contributed to lower feedstock costs.

        Operating income was $152 million in 2007, up from $29 million in 2006. The improvement was primarily due to higher selling prices for co-products, which were 15% higher than 2006. Despite the sharp rise in industry crude oil costs in the second half of 2007, Corunna's crude oil costs in 2007 were only 4% higher than 2006 due to the flow-through of costs. Gains from our feedstock purchasing program minimized the year-over-year increase in feedstock costs and contributed to the improvement.

Polyethylene

Nine Months Ended September 30, 2009 Versus Nine Months Ended September 30, 2008

        The Polyethylene segment reported operating income of $116 million in the nine months ended September 30, 2009, up from operating income of $96 million in the nine months ended September 30, 2008. For the nine months ended September 2009, operating costs declined more than margins. Operating costs fell due to the lower Canadian dollar exchange rate and lower utility costs, while margins declined as lower sales volumes and sharply lower selling prices in the first nine months of 2009 more than offset lower feedstock costs and gains in licensing income.

        Polyethylene sales volume was 2,283 million pounds in the first nine months of 2009, lower than the 2,685 million pounds for the comparable period a year ago. In the nine months ended September 30, 2008, customers built inventory due to rising prices and robust demand. In 2009, destocking occurred early in the year followed by steady demand and stable, low inventory due to continued economic uncertainty.

        The average North American industry butene liner polyethylene price was 51¢ per pound in the nine months ended September 30, 2009, significantly lower than the 85¢ per pound average in the nine months ended September 30, 2008, according to TPSI.

2008 Versus 2007

        Revenue was $2,383 million in 2008, up from $2,022 million in 2007. The year-over-year improvement primarily was due to higher PE sales prices. The average PE sales price was up 9¢ per pound, or 16%, year-over-year in 2008 as record oil prices and energy costs drove up plastic prices.

        PE sales volumes in 2008 were 3,432 million pounds, up 2% compared to 2007, despite poor sales in the fourth quarter of 2008.

        International sales volumes rose 4% to 647 million pounds in 2008 compared to 624 million pounds in 2007. International sales represented approximately 19% of total PE sales volume in 2008 as

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strong international PE pricing, driven by higher global production costs and robust demand, supported profitable export opportunities.

        Feedstocks and Operating Costs were $2,298 million in 2008, up from $1,772 million in 2007. Feedstock and operating costs were higher in 2008 due to higher ethylene costs, which were 32% higher than 2007, and higher distribution costs.

        Operating loss in 2008 was $43 million, down from a gain of $127 million in 2007. The year-over-year decline was due to higher feedstock costs outpacing higher prices.

2007 Versus 2006

        Revenue was $2,022 million in 2007, up from $1,922 million in 2006. The year-over-year improvement primarily was due to higher PE sales volume. PE sales volumes in 2007 were 3,375 million pounds, up 4% compared to 2006 due to PE exports and sales of PE manufactured using Advanced SCLAIRTECH technology and solid domestic demand for standard resins.

        International sales volumes rose 48% to 624 million pounds in 2007 compared to 423 million pounds in 2006. International sales represented approximately 19% of total PE sales volume in 2007, up from 13% in 2006 as strong international PE pricing, driven by higher global production costs and robust demand, supported profitable export opportunities.

        Sales of PE manufactured using Advanced SCLAIRTECH technology increased due to continued market penetration of higher value products.

        Feedstocks and Operating Costs were $1,772 million in 2007, up slightly from $1,747 million in 2006. Feedstock and operating costs were higher in 2007 as lower ethylene unit costs, which were 5% lower than 2006, were offset by higher PE sales volume, which required 4% more ethylene consumption.

        Operating income in 2007 was $127 million, up from $75 million in 2006. The year-over-year improvement was due to higher PE sales volumes and increased margins, despite higher costs related to the stronger Canadian dollar.

INEOS NOVA Joint Venture

        INEOS NOVA is a 50:50 joint venture with INEOS that manufactures and sells styrene and SPS in North America and SPS and EPS in Europe. INEOS NOVA was created on October 1, 2007, when we expanded our 50:50 European joint venture, formerly NOVA INNOVENE, to include the North American styrene and SPS businesses of both companies.

Market Overview

        Styrene is a globally-traded commodity and a key feedstock in the production of styrenic polymers, such as SPS and EPS. SPS and EPS are used to make products such as electronics packaging, small appliances, construction components and food packaging. While SPS and EPS resin production accounts for approximately 60% of global styrene demand, styrene is also used in other styrenic polymers such as acrylonitrile butadiene styrene, synthetic rubber and unsaturated polyesters.

        Margins in the styrene and SPS industries are primarily driven by supply/demand dynamics. Styrene is the supply bottleneck in the styrenics chain and therefore the key indicator of supply/demand tightness for both styrene and SPS. Industry operating rates in excess of 92% for styrene generally lead to margin expansion.

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INEOS NOVA Production Profile

        Styrene.    INEOS NOVA has the capacity to produce approximately 3.8 billion pounds of styrene from its three production sites in Bayport and Texas City, Texas, and Sarnia, Ontario. The majority of styrene production is consumed internally to manufacture styrenic polymers, principally SPS and EPS, with the balance sold to third parties.

        The primary raw materials for the production of styrene are benzene and ethylene. INEOS NOVA has entered into long-term supply agreements with us and INEOS to supply virtually all of its ethylene and a portion of its benzene feedstock requirements. The balance of feedstock is obtained through purchases in the open market.

        While INEOS NOVA has roughly the same capacity to consume styrene as it does to produce it, the joint venture has a long styrene position in North America and a short position in Europe. To achieve a more balanced global styrene position, the joint venture engages in transatlantic swap arrangements with other producers and in merchant sales.

        SPS/EPS.    INEOS NOVA has the capacity to produce approximately 1.6 billion pounds per year of SPS from its three production sites in North America and 2.1 billion pounds per year of SPS and EPS from its five sites in Europe. With the shutdown of the Breda, The Netherlands SPS facility at the end of 2009, the European SPS capacity will be reduced by 200 million pounds per year.

Profitability Improvement Potential

        Profitability in the global styrenics industry has been poor in the last several years, primarily due to the oversupply of styrene and relatively high cost of benzene feedstock. However, we believe that the efficiency enhancing actions taken by INEOS NOVA and others in the industry and lower feedstock costs, which could result in demand growth, ultimately will lead to higher operating rates and improved industry profitability.

Cost Reduction

        Since its inception in 2005, INEOS NOVA has aggressively reduced costs through asset rationalizations, reductions in corporate overhead expenses and operating synergies. The expanded joint venture has continued to reduce costs in Europe and North America. The benefit of these cost reductions is shared equally between INEOS and us. INEOS NOVA intends to close its SPS production facilities on the Breda, The Netherlands site by the end of December 2009. The plant has a capacity of about 200 million pounds and currently employs 50 people. The proposed reduction of SPS capacity is not expected to impact the manufacturing of EPS and high performance polystyrene at the Breda site and no change to EPS is planned.

Outlook for INEOS NOVA Joint Venture

        The INEOS NOVA joint venture will continue to reduce costs and conserve cash to position it for positive cash flows in future years. The owners expect the joint venture to manage the business to at least a breakeven cash flow position in 2009 and beyond through a series of actions.

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        First, the joint venture will continue to manage its production to minimize inventory and working capital and reduce costs. Costs will be reduced by minimizing corporate overhead expenses and maximizing operating synergies.

        Second, the INEOS NOVA management team will continue to explore strategic options for further industry consolidation which could lead to further cost reductions and additional synergies. Given the size of the INEOS NOVA joint venture, margin improvements can have a meaningful impact on its earnings and cash flow.

INEOS NOVA Joint Venture Financial Highlights⁽¹⁾

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(1)

As of October 1, 2007, the results reflect our 50% share in INEOS NOVA. Prior to that period, results reflected our North American styrene and SPS business and 50% of our interest in the European styrenics joint venture.

(2)

See Supplemental Measures on page 69.

(3)

Third-party sales. Polystryene sales consist of SPS sales in North America and SPS and EPS sales in Europe.

INEOS NOVA Joint Venture Average Benchmark Prices

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(1)

Average benchmark prices do not necessarily reflect actual prices realized by INEOS NOVA or any other petrochemical company.

(2)

Source: CMAI Contract Market.

Discussion of Financial Results of INEOS NOVA

Nine Months Ended September 30, 2009 Versus Nine Months Ended September 30, 2008

        In the nine months ended September 30, 2009, operating income improved to $11 million from a $19 million operating loss in the nine months ended September 30, 2008, mainly due to higher margins in North American styrene and SPS. Margins were higher in the first nine months of 2009 versus the same period in 2008 due to flow-through feedstock costs that fell more than selling prices. In Europe, SPS margins declined as sharply lower sales volumes more than offset higher unit margins resulting from flow-through feedstock costs that fell more than selling prices. European EPS margins were

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approximately level with the first nine months of 2008 as lower sales volumes and selling prices offset lower flow-through feedstock costs.

2008 Versus 2007

        Revenue was $1,942 million in 2008, down from $2,092 million in 2007. Despite modestly higher prices in 2008, revenue declined due to significantly lower sales volumes. Volume declined due to weaker construction and consumer durables markets, such as those for automobiles and electronics, as the recession in the United States deepened in the latter half of 2008 and broadened to include other regions such as Europe where the company operates. In addition, high costs for feedstock such as benzene limited the opportunity for profitable export of styrene out of North America, further weakening demand.

        Feedstock and Operating Costs were $1,981 million, down slightly from $2,042 million in 2007. Although average benzene costs were slightly lower in 2008, costs generally were higher during the first nine months of 2008 when production was higher. The rapid decline in feedstock costs in the fourth quarter, which pulled down the average cost for the year, occurred in parallel with weaker sales volumes due to the weakness in product markets and the reduction in chain inventory caused by the steep energy and petrochemical price declines in the last three months of 2008.

        Operating loss was $103 million in 2008, compared to a loss of $4 million in 2007. In 2008, margins were compressed as significantly lower sales volumes and higher flow-through feedstock costs more than offset higher selling prices.

2007 Versus 2006

        Revenue was $2,092 million in 2007, down from $2,186 million in 2006. The year-over-year decrease was due to higher selling prices for styrene and SPS, being more than offset by the impact of lower sales volumes. North American average styrene and SPS prices increased by 5% and 10%; respectively, primarily due to higher benzene feedstock costs. In addition, European SPS prices increased by 19% in 2007, in part due to higher feedstock costs.

        Total sales volumes were 13% lower in 2007 than in 2006, due in part to a lack of styrene export opportunities in the fourth quarter of 2007. The combination of higher styrene prices in North America in the fourth quarter, due to sharply higher ethylene feedstock costs, and lower styrene prices in Asia resulted in few profitable export opportunities. In contrast, North American styrene producers exported significant volumes to Asia in the fourth quarter of 2006 due to attractive economics.

        Feedstock and Operating Costs were $2,042 million, down from $2,183 million in 2006. The year-over-year decrease in feedstock costs was due to lower feedstock purchases resulting from lower sales volume.

        Operating loss was $4 million in 2007, compared to a loss of $149 million in 2006. The year-over-year improvement was primarily due to restructuring activities taken in North America and Europe. Since the middle of 2006, the following cost-reduction actions were taken: closure of Chesapeake, Virginia; Carrington, U.K.; and Berre, France, polystyrene sites, expiration of a long styrene supply contract, and continued cost reductions in Europe.

Performance Styrenics Business Unit

        Our Performance Styrenics business unit produces standard EPS resin in North America and ARCEL resin. It also has EPS-based downstream ventures and businesses that aim to create and capture value beyond the sale of EPS resin.

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Business Overview

        Standard EPS resins are used in packaging for food and consumer products and in insulation for the building and construction industry. Currently, sales of our standard EPS resins account for the majority of Performance Styrenics' revenue. As a result, profitability of this business unit is dependent on the cyclical supply/demand balance for EPS.

        ARCEL resin and our ventures apply proprietary and licensed technology to enable customers to reduce their costs and environmental impact.

Styrene Feedstock

        Styrene is the primary feedstock for the production in this business unit. Our minority interest in LyondellBasell Industries' Channelview, Texas, propylene oxide/styrene monomer facility supplies 400 million pounds per year of cost-based styrene to our Performance Styrenics business unit, which is sufficient to meet our anticipated styrene requirements.

Performance Styrenic Polymers

        We have the capacity to produce 350 million pounds per year of standard EPS and ARCEL resin at our production facilities in Monaca (Beaver Valley), Pennsylvania, and Painesville, Ohio. The capacity for EPS has been reduced by about 25% as a result of the restructuring efforts of the Performance Styrenics business unit.

        ARCEL resin is a performance polymer that is molded into foam for protective packaging and used by producers of damage-sensitive goods such as computers, printers, electronics, appliances and furniture. Due to its unique properties, ARCEL resin can earn higher margins over standard, non-differentiated products.

        In 2009, we ended commercial production of our DYLARK engineering resin due to the long-term deterioration of this market.

Downstream Ventures

        We attempt to leverage our intellectual property and market expertise by entering into downstream businesses and ventures, either directly or by entering into strategic relationships with partners. These businesses and ventures are principally for building and construction applications and are in the development or start-up stage. The strategic objective of these initiatives is to capture value beyond the sale of resin. As part of the restructuring of our Performance Styrenics business unit in 2009, we eliminated certain of these downstream businesses and ventures.

Outlook for Performance Styrenics Business Unit

        In 2009, we have restructured this business to a level that we believe can be successful going forward. These changes included the rationalization of EPS capacity toward more sustainable business segments, exiting the DYLARK resin business, and exiting some of our ventures. We intend to continue to evaluate this business unit and may exit other product lines and eliminate, consolidate or sell certain downstream businesses or ventures.

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Performance Styrenics Financial Highlights

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(1)

See Supplemental Measures on page 69.

(2)

Third-party sales.

Performance Styrenics Average Benchmark Prices

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(1)

Average benchmark prices do not necessarily reflect actual prices realized by us or any other petrochemical company.

(2)

Source: CMAI Contract Market.

Discussion of Financial Results of Performance Styrenics

Nine Months Ended September 30, 2009 Versus Nine Months Ended September 30, 2008

        The Performance Styrenics segment reported an operating loss of $27 million in the nine months ended September 30, 2009, a slight improvement from the operating loss of $28 million in the nine months ended September 30, 2008. In the nine months ended September 30, 2009, margins fell as prices declined more than flow-through feedstock costs, and sales volumes fell. Margins declined slightly more than the combination of fixed cost reductions and lower operating costs, while depreciation charges fell.

        In the nine months ended September 30, 2009, EPS sales declined 25% as compared to the nine months ended September 30, 2008 due to the sharp decline in the building and construction market. DYLARK resin sales were 44% lower in the first nine months of 2009 versus the same period in 2008 due to weakness in automotive markets, while ARCEL resin sales were 39% lower due to weakness in consumer durables markets.

2008 Versus 2007

        Revenue in 2008 was $433 million, up from $412 million in 2007. The improvement was due to higher selling prices, particularly for EPS and DYLARK resins. Resin sales volume grew in the first half of 2008, but dropped off sharply in the second half due to declines in domestic and international demand in most construction, automotive and packaging markets.

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        Feedstock and Operating Costs in 2008 were $435 million, up from $380 million in 2007. Costs were higher in 2008 primarily due to the 7% increase in the cost of styrene.

        Operating loss in 2008 was $68 million compared to a loss of $30 million in 2007. The first half of 2008 saw growth in sales volumes and margins, while the second half of 2008 saw unprecedented declines in global demand.

2007 Versus 2006

        Revenue in 2007 was $412 million up from $385 million in 2006. The improvement was due to higher sales volume of EPS and higher selling prices, particularly for EPS and DYLARK resins. EPS sales volumes were 13% higher in 2007 due to stronger domestic demand in the construction market.

        Feedstocks and Operating Costs in 2007 were $380 million, up from $363 million in 2006. Costs were higher in 2007 primarily due to the 6% increase in styrene costs, which more than offset lower operating costs as a result of our restructuring activities.

        Operating loss in 2007 was $30 million, which was relatively unchanged from the $29 million loss in 2006. Margins expanded in 2007 as increased selling prices more than offset higher styrene input costs. The impact of restructuring activities in 2007 also impacted the operating loss.

Corporate Operating Loss and Other Items

        A listing of before-tax corporate and other items for the periods presented is as follows:

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(1)

Certain prior year information has been restated due to the adoption of CICA 3064 on January 1, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Accounting Standards."

Nine Months Ended September 30, 2009 Versus Nine Months Ended September 30, 2008

        Corporate operating costs were $125 million higher during the nine months ended September 30, 2009 compared to the same period last year. The primary reason for the increase in operating costs was increased foreign currency losses on Canadian-denominated liabilities due to a strengthening Canadian dollar of $129 million during the nine months ended September 30, 2009 compared to the same period last year.

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2008 Versus 2007

        Corporate operating costs were $87 million in 2008, as compared to $97 million in 2007.

2007 Versus 2006

        Corporate operating costs were $97 million in 2007 compared to $100 million in 2006, a decrease of $4 million primarily due to one-time lower employee retirement accruals.

Stock-Based Compensation, Forward Transactions and Profit Sharing

        We had three cash-settled, stock-based incentive compensation plans that were marked to market with changes in the value of our common stock price. In November 2005, we entered into cash-settled share forward transactions to manage our exposure to fluctuations in stock-based compensation costs related to the stock-based compensation plans. Compensation costs associated with these plans fluctuated as a result of changes in the market price of our common stock. The forward transactions were to be cash-settled by November 2008, based on the difference between our common stock price on the New York Stock Exchange, or NYSE, and the average execution price. In 2008, we extended the forward transactions until November 2009.

        The intention of these transactions was to give us the same economic effect as if we had borrowed money, purchased our common shares and held them as assets. As our stock price changed, the mark-to-market impact related to the stock-based compensation liability would be offset by the mark-to-market impact related to the forward transactions until such time as our stock price fell below the grant price of the stock-based compensation units.

        Unrealized gains and losses associated with the forward transactions were recorded as part of Selling, general and administrative expenses, offsetting unrealized gains or losses on the cash-settled stock-based incentive compensation plans. At December 31, 2008, the mark-to-market value of the forward transactions was a $118 million unrealized loss (December 31, 2007—$19 million), resulting in a liability. At December 31, 2008 and 2007, this liability is reported in accrued liabilities, since the forward transactions were due to expire in November 2008 and subsequently extended for a one-year term.

        The forward transactions included an interest component which was accrued and payable by us on settlement or extension of the forward transactions. Accrued interest for the initial three-year term totaling $29 million was paid in November 2008 when the forward transactions were extended.

        Prior to December 31, 2008, we agreed to terminate one of the forward transactions for 1,300,000 notional common shares. This forward transaction was cash settled for $42 million in January 2009. The counterparty had the election to terminate the remaining forward transaction (2,312,100 notional common shares) if the closing price of our common shares on any three consecutive trading days commencing February 1, 2009, was $8 or less. This stock price trigger was met and the counterparty elected to terminate the agreement on February 4, 2009. We paid the counterparty $88 million on February 12, 2009. Refer to Note 23 in the Annual Audited Consolidated Financial Statements.

        The three cash-settled stock based compensation plans included the Equity Appreciation Plan, the Restricted Stock Unit Plan and the Deferred Share Unit Plans. During the nine months ended September 30, 2009 we recorded expense of $0 million, $24 million and $0 million, respectively, related to each of those plans (income of $22 million, expense of $5 million and income of $1 million during the nine months ended September 30, 2008). In 2008, we recorded income of $29 million, $14 million and $17 million, respectively, related to each of those plans (expense of $20 million, $15 million and

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$1 million in 2007 and income of $20 million, expense of $3 million and expense of $1 million in 2006). During the nine months ended September 30, 2009 and 2008, we expensed $9 million and $36 million, respectively, related to the forward transactions. In 2008, we expensed $100 million (income of $16 million in 2007 and expense of $20 million in 2006).

        Stock-based compensation also included the amount expensed related to the fair value of stock options earned by employees. During the nine months ended September 30, 2009 and 2008, we expensed $0 million and $2 million, respectively related to stock option grants. In 2008, we expensed $2 million ($2 million in 2007 and $8 million in 2006).

        We have a profit sharing program that is available to most employees and is based on the achievement of shareholder return on equity targets. The profit sharing targets are not expected to be achieved in 2009, thus there is no profit sharing expense during the nine months ended September 30, 2009. We recorded $8 million of profit sharing expense through the nine months ended September 30, 2008 and subsequently reversed this charge in the fourth quarter of 2008 when it was determined that targets would not be achieved. Profit sharing expense in 2007 and 2006 was $14 million and $2 million, respectively.

        Expenses during the nine months ended September 30, 2009, were primarily due to the recognition of stock-based compensation costs for the full vesting of all previously unvested restricted share units upon closing of the IPIC Transaction. At closing of the IPIC Transaction, outstanding units of the stock-based compensation plans were canceled and the restricted share units and deferred share units were cash-settled in July 2009 for $6.00 per unit (outstanding stock options and equity appreciation units had no value). The total cash settlement for these units was $34 million.

        Stock-based compensation and profit sharing expenses net of forward transactions were $42 million in 2008, $6 million higher than 2007 due to the ineffectiveness of the hedge, partially offset by lower profit sharing expense and the mark-to-market on the Deferred Share Unit plan.

Mark-To-Market Feedstock Derivatives

        We maintain a derivative program to manage risk associated with feedstock purchases. We lock in a portion of our propane and butane feedstock requirements as a percentage of crude oil using forward contracts that extend to 2012. The gain or loss resulting from changes in the market value of these derivatives is recorded through earnings each period. We classify mark-to-market adjustments on feedstock derivative positions as corporate items, as they are non-cash items and are not relevant in measuring business performance. Once positions are realized, any income effects are recorded in business results.

        The mark-to-market value of our open feedstock positions increased during the nine months ended September 30, 2009, resulting in an unrealized gain of $28 million. We recorded a non-cash loss of $95 million during the nine months ended September 30, 2008.

        On January 1, 2009, we adopted EIC 173, Credit Risk and the Fair Value of Financial Assets and Liabilities, which requires the mark-to-market value of our open feedstock positions to include consideration of our own credit risk and the credit risk of our counterparties. The adoption of EIC-173 resulted in a one-time credit on January 1, 2009 to opening retained earnings and a corresponding decrease in the mark-to-market liability of $18 million ($12 million after-tax). The mark-to-market impact to earnings was an $87 million loss in 2008 versus a $21 million gain in 2007. The $108 million decline was a result of decreases in forward propane and butane prices relative to crude oil and the number of feedstock positions put in place.

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        The mark-to-market gain was $21 million in 2007 versus a $20 million loss in 2006. The $41 million improvement was a result of increases in forward propane and butane prices relative to crude oil and the number of feedstock positions put in place.

IPIC Transaction Costs

        Costs incurred by us during 2009 include $61 million for financial advisor fees, legal fees and other related transaction costs triggered by the change in control of NOVA Chemicals on July 6, 2009.

Restructuring Charges

Nine Months Ended September 30, 2009

        With the IPIC Transaction complete, previously planned restructuring activities for workforce reductions in the Corporate and Olefins/Polyolefins business units were resumed. Total restructuring charges in the first nine months of 2009 were $60 million ($56 million after-tax) and related to the following:

•

$18 million of severance and other employee related costs due to restructuring activities across the company, $1 million of which have been paid;



•

In June 2009, we began the process of exiting the DYLARK engineering resin business. We recorded a restructuring charge of $31 million which included a $17 million impairment charge related to the DYLARK resin business unit assets, $3 million for severance and other employee related costs, and $11 million for other related exit costs. To date, $2 million of the severance costs have been paid;



•

We also continued the restructuring of our Performance Styrenics segment during 2009 and recorded a restructuring charge of $10 million related to severance and other employee related costs. To date, $5 million of these costs have been paid; and



•

Our 50% share of the INEOS NOVA joint venture includes restructuring costs of $1 million related to pension plan settlement charges.

2008

        In 2008, we recorded restructuring charges of $37 million before-tax ($33 million after-tax) related to the following:

•

$17 million impairment charge related to certain joint venture and equity investments;



•

$9 million related to costs incurred for capital projects which will not be pursued;



•

$6 million related to restructuring charges for actions taken to reduce costs, including the elimination of information technology positions in North America, of which $5 million has been paid related to severance costs for employees; and



•

$5 million related to actions taken by the INEOS NOVA joint venture, including severance costs related to reductions at the Bayport, TX, facility, of which substantially all has been paid related to severance costs for employees.

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2007

        In 2007, we recorded total restructuring charges of $86 million ($55 million after-tax) related to actions taken by INEOS NOVA, as well as us, to reduce costs as follows:

•

INEOS NOVA announced the planned closure of the Belpre, OH, and Montréal, Quebec, sites, resulting in restructuring charges of $38 million (our share) comprised of before-tax non-cash asset write-downs of $32 million and severance costs of $6 million. To date, substantially all of the severance costs have been paid to employees.



•

INEOS NOVA also acquired the exclusive production rights from Sterling Chemical's Texas City, Texas, styrene plant and nominated zero production volume from that facility. Sterling Chemicals subsequently announced plans to permanently shut down the facility. As a result, we recorded a charge of $29 million, our 50% share of the charge.



•

INEOS NOVA had severance costs related to North American employees resulting in a $3 million charge for our share of those costs. To date, substantially all of the severance costs have been paid to employees.



•

During 2007, we recorded a $7 million restructuring charge related to the elimination of approximately 90 positions in the United States and Europe. To date, substantially all of the severance costs have been paid to employees. We also recorded $6 million before-tax charges for other restructuring actions to reduce costs.



•

European restructuring by the INEOS NOVA joint venture resulted in an additional $3 million in costs, all of which have been paid.

2006

        In 2006, we recorded total restructuring charges of $985 million ($861 million after-tax) related to the following: the write-down of the North American and European styrene and polystyrene assets; the write-down of the Carrington, U.K., SPS facility, severance costs for the North American restructuring, severance costs for the Chesapeake, Virginia, SPS plant closure and INEOS NOVA restructuring costs.

•

We recorded a non-cash write-down of $860 million in 2006 ($772 million after-tax) related to styrene and polystyrene assets (see Application of Critical Accounting Estimates—Property, Plant and Equipment).



•

We accrued $56 million of restructuring costs related primarily to non-cash asset write-downs for the Carrington, U.K., SPS facility closure following the announcement to permanently close that site. The charge included $8 million related to total expected severance and other departure costs, substantially all of which have been paid to date.



•

We also accrued $53 million of restructuring costs related to severance, pension and other employee-related costs associated with the North American restructuring announced on June 26, 2006. To date, $40 million has been paid related to severance costs for employees.



•

We accrued $15 million related to severance costs for the Chesapeake, Virginia, polystyrene plant closure. To date, $10 million has been paid to employees.



•

Lastly, $1 million of restructuring costs related to actions taken by INEOS NOVA were accrued and paid.

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Functional Currency Change

        In the third quarter of 2008, the INEOS NOVA joint venture obtained independent financing through a North American accounts receivable securitization program. This substantially eliminated the joint venture's potential reliance on us to fund operations. As a result of this change in circumstances, we undertook a review of the functional currency exposures of all of our businesses and concluded that the currency exposures of our Canadian entities predominately are now U.S. dollars. Accordingly, as required by GAAP, we commenced recording transactions in our Canadian entities using U.S. dollars as the functional currency effective October 1, 2008. This results in foreign currency impacts of holding Canadian dollar denominated financial assets and liabilities being recorded through the income statement rather than being included in translation gains and losses deferred in accumulated other comprehensive income ("AOCI"). We accounted for this change prospectively and any amounts that had been previously deferred in AOCI continue to be included in AOCI unless there is a realized reduction in the net investment in the Canadian entities.

        The Canadian to U.S. dollar exchange rate changes resulted in $117 million of foreign exchange gain during the fourth quarter of 2008 that was recorded in corporate results. We will continue to recognize such foreign exchange gains and losses flow through earnings in the future and will separately report these amounts on the Consolidated Statement of Income (Loss).

Insurance Credit (Charge)

        We are one of many participants in OIL and sEnergy—two mutual insurance companies formed to insure against catastrophic risks. We continue to participate in OIL, an insurance pool for property and liability; however, sEnergy, an insurance pool for business interruption, is in the process of winding-up its operations. The earliest this process is likely to be complete is the second quarter of 2010. We believe our reserves are adequate to cover any outstanding claims. We expect to receive the full amount of our investment prior to the dissolution of sEnergy.

2008

        No insurance charges were incurred during 2008.

2007

        We recorded a $4 million ($3 million after-tax) credit due to the reduction of estimated future claims payments.

2006

        We recorded a $19 million ($13 million after-tax) charge in 2006 related to our share of potential incremental future payments required to meet losses in OIL and sEnergy.

Other Gains and Losses

Nine Months Ended September 30, 2009

        In the nine months ended September 30, 2009, we recognized a gain of $6 million ($6 million after-tax) primarily related to the disposition of our interest in LRM Industries, LLC (joint venture).

2008

        In 2008, we recognized other losses of $2 million ($1 million after-tax).

2007

        In 2007, we recognized other gains of $20 million ($14 million after-tax) related to the sale of the previously shut-down Chesapeake, Virginia, facility and other incidental land. We received cash proceeds of $6 million for these transactions and entered into a $14 million note receivable, bearing

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interest of 8.75% per annum and due in full in 2012, in connection with the sale of the Chesapeake, Virginia, facility.

Liquidity and Capital Resources

        Our principal sources of liquidity are cash flows from operations, cash on-hand and borrowings under our revolving credit facilities. We utilize our accounts receivable securitization programs as additional sources of financing. Our principal uses of cash are operating expenditures, capital expenditures and debt service.

Cash Flow

        The following is a summary of cash flow:

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(1)

Certain prior year information has been restated due to the adoption of CICA 3064 on January 1, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Accounting Standards."

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Inflows of Cash

        Operating working capital and other increased by $344 million during the first nine months of 2009 primarily due to the cash settlement of the share forward transactions in January and February 2009 (see Stock-Based Compensation, Forward Transactions and Profit Sharing), a $56 million reduction in the balance outstanding on our accounts receivable securitization programs, lower natural gas prices which decreased accounts payable and increased inventory due to a planned turnaround at Corunna.

        Operating working capital and other decreased by $173 million in 2008 primarily due to a sharp decline in feedstock costs during the fourth quarter which caused a reduction in the value of inventory, as well as product price decreases which significantly decreased receivables. We recorded a $129 million write-down in inventory to reflect the net realizable value of inventory at year-end. The decline in inventory and receivables was partially offset by the decrease in accounts payable which also reflects the decline in feedstock costs. Operating working capital increased by $221 million in 2007 due to rapidly rising feedstock costs which increased the value of inventory, as well as product price increases which increased receivables. Operating working capital decreased by $52 million in 2006 primarily due to a decrease in receivables and inventory.

        In total, we generated $272 million in cash from operations in 2008 versus $329 million in 2007 and $350 million in 2006. Cash generation was primarily due to significant working capital reductions in the last quarter of 2008 versus underlying business unit earnings strength in 2007.

Outflows of Cash

        Capital expenditures and turnarounds during the first nine months of 2009 were $79 million. We significantly reduced our capital expenditure budget for 2009 as part of our cost-cutting plan. We focused only on the projects that were critical to the continued safe, reliable and environmentally responsible operation of our plants and deferred other projects. Our capital expenditures and turnaround costs were $210 million in 2008, compared to $198 million in 2007 and $246 million in 2006.

        In 2007, INEOS NOVA acquired the exclusive rights to production from the Sterling Chemicals' Texas City, Texas, styrene plant for $60 million, of which our 50% share was $30 million. INEOS NOVA nominated zero production from Sterling in December 2007, which prompted Sterling to permanently shut down the Texas City plant.

        In April 2009, we repaid our $250 million 7.4% notes using borrowings on revolving credit facilities and the $150 million backstop facility entered into with IPIC. In 2008, we repaid our $125 million of 7.25% debentures that were scheduled to mature in 2028, but were redeemed at the option of the holders. This debt repayment was funded by cash on hand and borrowings on revolving credit facilities. In 2007, we were able to reduce debt by $13 million despite the significant investment in working capital from rapidly escalating feedstock and product prices. In May 2006, we repaid $300 million of medium-term notes upon maturity. This debt repayment was funded by an issuance in October 2005 of $400 million of senior floating rate notes due in 2013.

Commitments

        We have various contractual cash obligations, including long-term debt repayments and associated interest, feedstock derivatives, contributions to pension plans, operating leases for office space and railcars and unconditional purchase obligations related to minimum amounts of feedstock and other raw material purchases pursuant to agreements entered into to secure short- and long-term supply.

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Contractual Cash Obligations

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(1)

Includes current portion and bank loans.

(2)

Interest payments were calculated using interest rates that were in effect as of December 31, 2008.

(3)

Includes estimate for 2009 only.

(4)

Includes property, railcar and other equipment leasing commitments.

(5)

Raw material agreements are typically market-based. Obligations have been calculated using current pricing.

Liquidity

        We define liquidity as total available revolving credit facilities, less utilization (including letters of credit), plus cash and cash equivalents. Our total liquidity at the end of the third quarter of 2009 was $308 million, up from $244 million at the end of the second quarter of 2009. As of December 1, 2009, our total liquidity was $811 million. Our future liquidity is dependent on the actions described below and many other factors such as cash generated from ongoing operations, internal actions taken to reduce costs and conserve cash, and the availability of other potential sources of financing.

Credit Facilities

        We had five revolving credit facilities aggregating $765 million as of September 30, 2009 ($683 million as of December 31, 2008). The amounts and expiration dates of these facilities were as follows:

•

$65 million on March 20, 2010;



•

$350 million on March 31, 2010;



•

$150 million on March 31, 2010;



•

$100 million on March 31, 2010; and



•

$100 million (tranches: $30 million on March 20, 2010; $30 million on March 31, 2010 and $40 million on March 31, 2010).

        During October and November 2009, we refinanced a substantial portion of our outstanding debt scheduled to mature in 2010. Effective October 15, 2009, we terminated our undrawn $150 million facility. On October 16, 2009, we issued $350 million of 8.375% senior notes due 2016 at an issue price of 99.34%, and $350 million of 8.625% senior notes due 2019 at an issue price of 99.168%. The 2016 notes and 2019 notes have an effective yield to maturity of 8.5% and 8.75%, respectively. Net proceeds from the offering were $681 million (after deducting discounts of $5 million and fees of $14 million).

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The net proceeds were used to repay $242 million outstanding under the our $350 million secured revolving credit facility and $254 million outstanding under our bilateral credit facilities. The remaining cash balance of $185 million will be used to repay the total return swap when it terminates in March 2010 and for general corporate purposes.

        On November 17, 2009, we entered into a new $350 million senior secured revolving credit facility to replace our prior secured facility scheduled to expire on March 31, 2010. In addition, we amended two of our senior unsecured bilateral credit facilities (which were previously amended to shorten their maturity dates to March 2010) to revert back to their original maturity dates. As a result of these transactions, we now have four revolving credit facilities totaling $615 million in borrowing capacity. These facilities include:

•

$350 million senior secured revolving credit facility provided by a syndicate of lenders, which matures on November 17, 2012;



•

$65 million senior unsecured bilateral credit facility, which expires on March 20, 2010;



•

$100 million senior unsecured bilateral credit facility, which expires on March 20, 2011; and



•

$100 million senior unsecured bilateral credit facility ($30 million due on March 20, 2010, $30 million due on September 20, 2011 and $40 million due on September 20, 2013).

        Prior to July 6, 2009, IPIC provided us with $350 million of interim debt financing that was converted into common equity at the closing of the IPIC Transaction. Related accrued interest and fees totaling $17 million ($12 million after-tax) on the interim debt financing were forgiven by IPIC and reclassified to Contributed surplus. We removed the balance in common shares of $508 million as of July 6, 2009, before push-down adjustments, and recorded the cash paid by IPIC to acquire all of our issued and outstanding common shares for $499 million.

        The new $350 million secured revolving credit facility is governed by financial covenants that require us to maintain a maximum senior debt to cash flow ratio of 3:1 and a debt to capitalization ratio not to exceed 60% at the end of each quarter.

        Our total return swap and our accounts receivable securitization programs (as well as our prior $350 million secured revolving credit facility) are governed by financial covenants which require quarterly compliance. We are required to maintain consolidated cash flow that is not less than $50 million for each of the quarters ending September 30, 2009 and December 31, 2009. The minimum consolidated cash flow required can be reduced by cash proceeds received from new equity contributed by IPIC through the remainder of 2009 (excluding the equity contributions made on July 6, 2009 discussed above). We were in compliance with this covenant at September 30, 2009. The total return swap terminates in March 2010, and we do not intend to extend its maturity date. We expect to enter into new accounts receivable securitization programs during the first quarter of 2010 to replace our existing programs, and we anticipate that the financial covenants in those programs will be substantially similar to those contained in our senior secured revolving credit facility.

        We have $130 million ($190 million at December 31, 2008) in accounts receivable programs that expire in February 2010. The balances as of September 30, 2009 and December 31, 2008, were $119 million and $175 million, respectively. We do not include any undrawn amounts under the accounts receivable securitization programs as part of liquidity.

        The INEOS NOVA joint venture has two accounts receivable securitization programs, a $150 million North American program and a €120 million European program. NOVA Chemicals' 50% share of the balances as of September 30, 2009 and December 31, 2008, were $24 million and $27 million, respectively, under the North American program and €24 million and €25 million, respectively, under the European program.

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Series A Preferred Shares and Total Return Swap

        Our subsidiary, NOVA Chemicals Inc., has issued Series A preferred shares with a 0.5% dividend rate. We have the right to repurchase the Series A preferred shares at any time. However, any such repurchase may obligate us to pay an early termination fee under the terms of the total return swap described below.

        We also entered into a total return swap with respect to the Series A preferred shares. On the initial closing date of the total return swap in 2001, the counterparty through its hedge providers purchased the Series A preferred shares for $191 million plus accrued and unpaid dividends. We subsequently reduced the equity notional amount of the total return swap to $126 million and, in February 2009, reduced the equity notional amount to $75 million. On settlement of the total return swap at the end of the term, we will owe the counterparty the difference between the actual sale price received by the counterparty for the Series A preferred shares and the equity notional amount if the sale price is less than the equity notional amount. Upon termination of the total return swap, we expect that we will exercise our right to repurchase the Series A preferred shares for a net price equal to the equity notional amount.

        Under the terms of the total return swap: (i) the counterparty pays us the total return on the Series A preferred shares (periodic dividends plus positive changes in the equity value of the Series A preferred shares upon termination of the swap); and (ii) we pay the counterparty a spread to LIBOR, as well as any negative changes in the equity value of the Series A preferred shares upon termination of the swap. All periodic dividends, changes in equity value of the Series A preferred shares and interest payments are charged to earnings as incurred.

        If the average price of our outstanding 6.5% medium-term notes due 2012 decreases by a certain amount, we are required to post maintenance collateral. Once the margin-posting requirement is triggered, if the average price increases by 5% or more, any excess collateral may be returned us. If the average price decreases by 5% or more, we would be required to post additional collateral.

        If we default on other debt of at least $25 million and upon certain other events, the counterparty would have the right to sell the Series A preferred shares to a third party and terminate the swap. We would then owe the counterparty the difference between the actual sale price received by the counterparty and the equity notional amount if the sale price is less than the equity notional amount. If the sale price is greater than the equity notional amount, the counterparty would owe us the difference between the sale price and the equity notional amount. Subsequent to such termination of the swap, we may, at our option, exercise our call right and repurchase the preferred shares from the third party for a purchase price of $198 million.

        In February 2009, we and the counterparty agreed to extend the term of the total return swap until June 30, 2010 and reduce the equity notional amount. In May 2009, we and the counterparty amended the total return swap to change the termination date to March 31, 2010. Because the term expires within the next 12 months, the Series A preferred shares are classified under Long-term debt due within one year on our consolidated balance sheets. We do not intend to extend the maturity date of the total return swap or replace it.

Off-Balance Sheet Accounts Receivable Securitization Programs

        NOVA Chemicals.    Our off-balance sheet financing activities are limited to participation in accounts receivable securitization programs. We have been engaged in the current programs since 1999 to obtain lower financing rates than those available from other sources. As of December 31, 2008, the capacity of trade accounts receivable sold to a third party on a revolving basis was a maximum of $300 million, which represented a $50 million decrease in the programs as compared to December 31, 2007. At September 30, 2009 and December 31, 2008, $119 million and $175 million, respectively, were

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sold under the programs. Of the total amount, $59 million and $84 million, respectively, were sold via a special purpose entity (SPE) that is 100% owned by us. The SPE isolates the sold receivables and the related cash collections for the exclusive benefit of the purchasers. We have no right to any cash collected from these receivables; therefore, neither the receivables nor any obligation to the purchasers is reflected in our Consolidated Financial Statements. No other business is conducted through SPE's.

        The programs were scheduled to expire on June 30, 2010. On February 13, 2009, the maximum amount of the programs was reduced from $300 million to $190 million and the expiration date was changed to February 2010. In June 2009, the maximum amount of the programs was reduced from $190 million to $130 million.

        INEOS NOVA Joint Venture (North America).    INEOS NOVA entered into a $150 million accounts receivable securitization program in the third quarter of 2008 which expires in July 2010. At September 30, 2009 and December 31, 2008, $48 million and $54 million, respectively were sold under the program. Our 50% share of the receivables sold was $24 million and $27 million, respectively. The INEOS NOVA joint venture has no right to any cash collected from these receivables; therefore, neither the receivables nor any obligation to the purchasers is reflected in either the INEOS NOVA joint venture financial statements or our Consolidated Financial Statements.

        INEOS NOVA Joint Venture (Europe).    In November 2006, the INEOS NOVA joint venture (formerly NOVA Innovene European joint venture) entered into a five-year, € 120 million accounts receivable securitization program. This program expires in November 2011. At September 30, 2009 and December 31, 2008, €48 million and € 50 million, respectively, were sold under the program. Our 50% share of the receivables sold was €24 million and € 25 million, respectively. The INEOS NOVA joint venture has no right to any cash collected from the sold receivables and control of the accounts receivable has been effectively transferred to the purchaser; therefore, neither the receivables nor any obligation to the purchaser is reflected in either the INEOS NOVA joint venture financial statements or our Consolidated Financial Statements.

Advanced Manufacturing Investment Strategy Loan

        Our subsidiary NOVA Chemicals (Canada) Ltd., entered into a loan agreement for a loan in the principal amount of Cdn $10,000,000 made available by Her Majesty the Queen in right of the Province of Ontario as represented by the Minister of Economic Development and Trade under Ontario's Advanced Manufacturing Investment Strategy. We may use the loan proceeds only to finance certain eligible costs associated with the modernization and expansion of our LDPE capability at our Mooretown facility. We drew down the full Cdn$10,000,000 in the fourth quarter of 2009 (the "Disbursement"). The maturity date of the loan is December 1, 2019 and the interest rate is 4.92% per annum calculated monthly. Provided that there is no event of default and we fully achieve certain cumulative job targets at the Mooretown facility, the interest accruing during the first five years (the "Incentive Period") will be fully forgiven at the end of the Incentive Period. In the event that the cumulative job target is not met during the Incentive Period, interest based on 4.92% per annum rate and adjusted downward depending on the actual jobs achieved during the Incentive Period will be payable on the 60^th day following the last day of the Incentive Period. Interest accruing during the post Incentive Period calculated from the last day of the Incentive Period shall be due and payable annually, in arrears, for the remainder of the term. Provided there is no event of default, principal repayment will be deferred during the Incentive Period. Thereafter, principal in the amount of 20% of the amount advanced and outstanding on the last day of the Incentive Period will be due and payable annually commencing on the sixth anniversary of the Disbursement. We may prepay the full principal amount of the loan plus any accrued interest without any premium or penalty. NOVA Chemicals Corporation guaranteed the loan.

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Current Debt Maturities or Redemptions

        In addition to our borrowings under our four credit facilities aggregating $615 million of borrowing capacity as discussed above, we have the following financings that are maturing or may be redeemed in the next 12 months: (i) Cdn$250 million (US$233 million) relating to 7.85% senior notes due August 30, 2010, (ii) $75 million relating to the total return swap with respect to the Series A preferred shares of NOVA Chemicals Inc. discussed above, and (iii) borrowings under our accounts receivable securitization facilities aggregating a maximum amount of $130 million discussed above. We currently expect to pay off the 7.85% senior notes and the total return swap upon maturity and enter into new accounts receivable securitization programs during the first quarter of 2010 to replace our existing securitization programs.

Supplemental Measures

        We present Operating (Loss) Income below, which does not have any standardized meaning prescribed by Canadian GAAP and is therefore unlikely to be comparable to similar measures presented by other companies. We believe that this financial measure, when presented in conjunction with the comparable GAAP financial measure, is useful to readers because the information is an appropriate measure for evaluating our operating performance. Internally, we use this non-GAAP financial information as an indicator of business performance. This measure should be considered in addition to, and not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP.

•

Operating (Loss) Income—net (loss) income before interest expense, income taxes and other gains and losses, assists readers in analyzing our income (loss) from operations.

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(1)

Certain prior year information has been restated due to the adoption of CICA 3064 on January 1, 2009. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Accounting Standards".

Application of Critical Accounting Estimates

        The following represents the estimates most critical to the application of our accounting policies. For a summary of our significant accounting policies, please see Note 2 to the Annual Audited Consolidated Financial Statements.

        Purchase Accounting.    On July 6, 2009, IPIC acquired 100% of our outstanding common shares for consideration of $6.00 per share. We elected to use push-down accounting under CICA 1625, Comprehensive Revaluation of Assets and Liabilities which resulted in our assets and liabilities being comprehensively revalued to be consistent with the values recorded by IPIC in accordance with business combination accounting standards. In this respect, we applied prospectively, the principles of CICA 1582, Business Combinations, in connection with push-down accounting. As a result, the carrying values of all identifiable assets and liabilities have been adjusted to their respective estimated fair values on July 6, 2009. This allocation is provisional pending completion of the valuations and is subject

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to change. In accordance with CICA 1582, the provisional $906 million excess of the acquisition date fair values of our identifiable assets and liabilities over the total purchase consideration is considered a bargain purchase by IPIC and is recorded as a component of Contributed surplus.

        In determining the estimated fair values for all identifiable assets and liabilities, management applied judgments in many areas for the period from mid 2009 to 2015 with terminal values beyond that date. These judgments were made with data available on the July 6, 2009 acquisition date. Assumptions were made regarding product selling prices, feedstock costs, future supply/demand dynamics, inflation, discount rate, foreign exchange rates and others. We based these assumptions on third-party industry experts, CMAI data or other outside experts. In all cases, we believe the assumptions are fair and reasonable and represent neither too conservative nor too optimistic a view of the future.

        Inventories.    We carry inventories at the lower of cost or net realizable value. The cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of purchase include the purchase price (net of discounts and rebates), import duties and other taxes and transport and handling costs. The costs of conversion include costs directly related to the units of production, such as labor, and a systematic allocation of fixed (i.e. depreciation) and variable production overhead costs that are incurred in converting the materials into finished goods. Other costs may include non-production overhead costs or the costs of designing products for specific customers. Cost is determined on a first-in, first-out (FIFO) basis as we believe this basis is the best method to match actual costs incurred with related revenue. Prior to January 1, 2008, the date of adoption of CICA 3031, Inventories, there was no allocation of fixed production overhead costs to inventory.

        In the fourth quarter of 2008, there were significant decreases in prices of crude oil and other liquid petroleum products used to produce polyethylene, ethylene and co-products at our Corunna facility. As a result, Corunna's commodity feedstocks and manufactured ethylene, co-products and polyethylene finished goods inventory have been written down to the lower of cost or estimated net realizable value as of December 31, 2008, and a write-down of $129 million was recorded in Feedstock and operating costs in 2008. Estimated net realizable value was determined using accepted benchmark indices. No such write-down occurred in 2007 or 2006.

        Property, Plant and Equipment (PP&E).    Our PP&E consists primarily of land, buildings for producing petrochemicals and manufacturing equipment. We value PP&E at historical cost. Financing costs incurred during major construction projects are capitalized as part of the cost of the asset until the asset is available for use. Costs related to turnaround activities are capitalized and amortized over the period remaining until the next turnaround activity, while maintenance and repair costs are expensed as incurred.

        Judgmental aspects of accounting for PP&E involves estimates of the life of the assets, the selection of an appropriate method of depreciation and determining whether an impairment of our assets exists and measuring such an impairment. These assessments are critical due to their potential impact on earnings and equity.

        We are able to choose from alternative methods of depreciation. The straight-line method was chosen rather than other methods, such as units of production, because the straight-line method is more conservative, requires less estimation and judgment and is a systematic and rational basis reflecting the period over which the assets' benefit is realized.

        We periodically review the estimated useful lives of PP&E and make adjustments when appropriate. During July 2009, we reassessed the remaining useful lives of our plant and equipment which resulted in increasing certain asset estimated useful lives for our Western Canada assets to 20 years and decreasing our Eastern Canada assets to 10 years. This change was made after a thorough

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analysis by company engineers familiar with the plant sites and management's assessment of economic utility. Total depreciation expense recorded during the third and fourth quarters of 2009 based on revalued property, plant and equipment and revised estimated useful lives was approximately $50 million lower than if original estimated useful lives were retained.

        Net PP&E at September 30, 2009, totaled approximately $4 billion. PP&E is tested for impairment at the lowest level for which identifiable cash flows exist. Impairment testing of the plant assets occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. We assess recoverability by comparing the carrying amount of the asset group to the estimated future cash flows expected to be generated by the assets, undiscounted and without interest charges. If an asset is considered impaired, the impairment loss to be recognized would be measured as the amount by which the asset's carrying amount exceeds its fair value.

        The estimate of PP&E fair value is based on estimated discounted future cash flows expected to be generated by the asset. The assumptions underlying cash flow projections represent management's best estimates at the time of the impairment review. Factors that management must estimate include: industry and market conditions, sales volume and prices, costs to produce, inflation, etc. Changes in key assumptions or actual conditions, which differ from estimates, could result in an impairment charge. We use reasonable, supportable and, where available, third-party, industry expert assumptions when performing impairment reviews.

        In connection with the IPIC Transaction, we applied push-down accounting as described in Note 2 of the Unaudited Consolidated Financial Statements, and the carrying value of PP&E was adjusted to its estimated fair value on July 6, 2009. Based on current assets values and expected future cash flows of all business units, we concluded that the carrying value of the business units in all segments as of September 30, 2009 was appropriate.

        Our Olefins/Polyolefins business has an established, long-term record of profitability, and based on current asset carrying values and expected future cash flows as of December 31, 2008 and 2007, we concluded the carrying values of the assets of this business unit at the end of December 31, 2008 and 2007, were appropriate.

        During 2006, we restructured our traditional Styrenics business into two business units, Performance Styrenics (which includes North American EPS and styrenic Performance Polymers) and STYRENIX (which included the reportable segments of Styrene Monomer, North American SPS and our interest in NOVA Innovene, the 50:50 European joint venture with INEOS). The STYRENIX business unit is now part of the INEOS NOVA joint venture. In 2006, we recorded an after-tax charge of $46 million to write-off the asset value of its Chesapeake, Virginia, SPS plant and another $46 million to write-off the asset value of NOVA Innovene's Carrington, U.K., SPS facility as a result of the closure of these STYRENIX plants.

        On December 31, 2006, we used third-party forecasts of market conditions and product margins to assess the recoverability through projected future cash flows of the STYRENIX plant carrying values. The assets' carrying value at December 31, 2006, prior to write-down, was $1.1 billion. Fair value was estimated to be $242 million. Thus, the assets were written down to the estimated fair value, resulting in a non-cash charge of $860 million ($772 million after-tax).

        On October 1, 2007, we and INEOS expanded our European joint venture to include the North American Styrene and SPS businesses of both companies. The expanded joint venture is called INEOS NOVA. The contribution of assets was completed on a book value basis. In the fourth quarter of 2007, INEOS NOVA announced its plans to shut down the Montréal, Quebec, polystyrene facility, for which there was no book value remaining, and its plans to shut down the Belpre, Ohio, polystyrene facility, which resulted in a $32 million non-cash asset write-down for us. An impairment review was conducted at December 31, 2008, and based on the asset carrying values and expected future cash flows of the

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expanded INEOS NOVA joint venture; we and the joint venture concluded that the carrying value of the assets as of December 31, 2008, was appropriate.

        We also conducted a review of our Performance Styrenics business unit's assets at the end of 2008 and 2007. Based on the asset carrying values and expected future cash flows of the Performance Styrenics business unit's assets, we concluded that the carrying value of the business unit as of 2008 and 2007 was appropriate.

        Asset Retirement Obligations.    United States and Canadian GAAP require companies to record liabilities associated with future plant decommissioning and site restoration costs on both active and inactive plants at their fair value, based on a discounted value of the expected costs to be paid when the assets are retired. At September 30, 2009, we had approximately $34 million of accumulated reserve for these activities.

        During 2009, as a result of push-down accounting as described in Note 2 of the Unaudited Consolidated Financial Statements, we increased our asset retirement obligations by $7 million. The obligations were also increased as a result of the accretion of the liabilities.

        As a result of the commencement of the INEOS NOVA joint venture on October 1, 2007, the asset retirement obligations associated with the plants that were contributed to the joint venture were removed from our liabilities. However, the joint venture was required to establish asset retirement obligations associated with the assets contributed by us and INEOS, and we included 50% of this obligation through proportionate consolidation in our results.

        During 2008, 2007 and 2006, there were no business conditions or decisions that resulted in a requirement to increase or decrease the asset retirement obligations associated with active or divested sites. The obligations were increased as a result of the accretion of the liabilities. For inactive sites or sites that became inactive in 2008, 2007 and 2006, the reserves were generally considered adequate for the environmental remediation work required.

        We undertook an evaluation of the costs to conduct decommissioning and site restoration to satisfy the projected obligations under applicable environmental requirements upon termination of operations at currently operating plant sites in 2003. Canadian GAAP required that the present value of inflation-adjusted decommissioning and site restoration costs be recorded as increases to the carrying values of the assets at that time and that this amount be depreciated over the estimated remaining lives of the assets. Because the decommissioning may not take place for 25 years or more, significant uncertainty exists concerning the nature of the decommissioning and site restoration activities that may be required. Furthermore, significant judgment is involved in the estimation process, because the degree of natural attenuation, evolution of new technologies and potential land uses may mitigate future environmental liabilities and potential costs. In 2007, we engaged a third-party to perform an in-depth review of our active plant sites and required clean-up and restoration activities. The third party concluded that our current estimates of the costs to complete these obligations were reasonable at December 31, 2007. Management has reviewed these cost estimates and believes they are still valid in 2009.

        The present value of this future obligation (using a credit-adjusted risk-free rate of 10.5% to discount the estimated future cash flows) was approximately $22 million prior to the July 6, 2009 IPIC acquisition. On July 6, 2009, the obligation was reassessed in connection with the IPIC Transaction and push-down accounting exercise (see Note 2 of the Unaudited Consolidated Financial Statements) and it was determined that the discount rate be increased. In addition, the timing of the obligation was adjusted to match the assets revised estimated useful lives. This estimated liability will increase, or accrete, each year over the lives of the active plants until it reaches the $190 million to $225 million expected to be incurred on closure of the plants. The resulting expense is referred to as accretion expense and is included in operating expenses. For the nine months ended September 30, 2009, accretion expense was $2 million. In each of 2008, 2007 and 2006, this expense was $2 million.

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        Pension Plans.    We sponsor both defined benefit and defined contribution pension arrangements covering substantially all of our employees. For the defined contribution plans, the cost is expensed as earned by employees. For the defined benefit plans, obligations and expense are determined using actual discount rates and assumptions for mortality, termination, retirement and other rates, as well as the expected return on plan assets and the rate of increase for future compensation. We use current mortality rate tables commonly used for actuarial calculations and select other assumptions in line with past experience and current economic conditions. The return on plan assets is not the actual return, but an expected rate based on estimates of long-term rates of return for various asset classes and the investment strategy of the plans. The discount rate is based on actual market interest rates at the measurement date on high quality debt instruments with a duration or projected cash flows that match the timing and amount of expected benefit payments of our plans.

        Canadian GAAP requires that actuarial gains and losses be recognized in our income using a systematic and consistent methodology. For defined benefit pensions, we amortize such gains and losses over the estimated remaining service lifetime of the employee group to the extent these gains or losses exceed 10% of the greater of the accrued benefit obligation or market value of assets. This alternative avoids recognizing into income large unrealized gains or losses in individual years. Immediate recognition of such gains and losses would introduce significant volatility into our earnings. Cumulative unrealized actuarial gains and losses have ranged from a $61 million gain at December 31, 1999, to a $235 million loss at December 31, 2008. In connection with the IPIC Transaction, we applied push-down accounting as described in Note 2 of the Unaudited Consolidated Financial Statements. As a result of the push-down accounting, pension assets were decreased by $65 million and pension liabilities were increased by $219 million to reflect funded status of the plans on July 6, 2009. On December 31, 2009, unrealized actuarial gains or losses are not expected to be significant.

        On September 28, 2007, we amended certain defined benefit pension plans in the United States. The amendments provided for benefits to be frozen as of January 1, 2008, and transition relief to be provided to plan participants meeting certain age and service requirements. At the same time, we also enhanced benefits under one of our defined contribution plans. These actions serve to ascertain more certainty with regards to pension cost.

        A total of $33 million, $39 million and $52 million was contributed in 2009, 2008, and 2007, respectively, to all of our defined benefit pension plans. The contributions were based on the most recently filed valuations with pension regulators in various countries. We contributed $12 million, $14 million and $8 million in 2009, 2008 and 2007, respectively, to the defined contribution plans.

        Funding for our defined benefit pension plans is largely driven by the North American pension plans, as they constitute a significant portion of the our pension plan assets and obligations. For 2010, funding for the defined benefit plans is expected to be approximately $37 million as employees accrue additional pension benefits and special payments are made to cover the shortfall between assets and liabilities. Contributions to defined contribution plans for 2010 are expected to be $11 million.

        Income Taxes.    The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current and future years for events that have been recognized in our financial statements or tax returns. Judgment is required in assessing current and future tax consequences. Variations in the actual outcome of tax consequences could materially impact our financial position or results of operations. In connection with the IPIC Transaction, we applied push-down accounting as described in Note 2 of the Unaudited Consolidated Financial Statements, which resulted in a potential future tax liability of $532.

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        We have a valuation allowance and a tax reserve to provide for uncertain tax positions. The valuation allowance primarily relates to the ability of the company to utilize tax loss carry-forwards. The amount of loss carry-foward available to the company, has been reduced as required by applicable tax rules due to the IPIC Transaction. A valuation allowance has been provided for the full amount of all available tax losses. The allowance was increased by $11 million for the nine months ended September 30, 2009, $41 million in 2008, $14 million in 2007 and $226 million in 2006. A tax reserve is used to provide for potential tax liability associated with uncertain tax position and potential disputes with tax authorities. For the nine months ended September 30, 2009, the reserve was unchanged. During 2008, the reserve was reduced by $20 million. During 2007, the reserve was reduced by $13 million due to the successful resolution of a dispute with the Belgian tax authorities. There were no changes to the reserve in 2006.

Accounting Standards

We adopted CICA 3064 on January 1, 2009. Assets such as pre-production costs and start-ups costs, which no longer meet the definition of intangible assets as prescribed by CICA 3064 were removed from the balance sheet and in accordance with CICA 1506, Accounting Changes, these changes have been applied retrospectively. The effect of the restatement at December 31, 2007 was to decrease Other non-current assets by $40 million, decrease Future income tax liability by $11 million, decrease Accumulated other comprehensive income by $4 million and increase Reinvested deficit by $25 million.

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The following summarizes the impact of the adoption of CICA 3064 in the periods presented:

 

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        In February 2008, the Canadian Accounting Standards Board confirmed that the use of IFRS will be required for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011 for publicly accountable profit-oriented enterprises. IFRS will replace Canada's current GAAP for listed companies and other profit-oriented enterprises that are responsible to large or diverse groups of stakeholders. Companies will be required to provide one year of comparative data in accordance with IFRS.

        During 2008, we established a project team to develop an IFRS changeover plan. A number of sub-teams were formed to begin the diagnostic phase of the project. The diagnostic phase includes the assessment of differences between Canadian GAAP and IFRS; options available under IFRS; potential system changes required; and effects on internal controls and processes. We continue to investigate the impact of IFRS convergence in 2009 and will provide updated disclosure of our convergence plan and discuss major differences identified between our current accounting policies under Canadian GAAP and those expected to be applied under IFRS, on a qualitative basis, in our 2009 annual MD&A. We are on track to meet the major milestones.

Market and Regulatory Risk

        The Audit Committee of our Board of Directors regularly reviews foreign exchange, interest rate and commodity hedging activity and monitors compliance with the our hedging policy. Our policy prohibits the use of financial instruments for speculative purposes and limits hedging activity to the underlying net economic exposure. See additional information in Note 20 to our Annual Audited Consolidated Financial Statements contained in this prospectus. Additional risks inherent in the our business and operations are discussed above under the caption "Risk Factors".

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Foreign Exchange Hedging

        We have U.S., Canadian and European-based petrochemical operations which expose us to both translation and transaction effects resulting from changes in currency exchange rates. Through September 30, 2008, all of our operations were considered self-sustaining and were translated into U.S. dollars for reporting purposes using the current rate method. Resulting translation gains or losses were deferred in AOCI until there was a realized reduction of the net investment in the foreign operation. Transaction currency effects occur when we incur monetary assets or liabilities in a currency different from its functional currency.

        In the third quarter of 2008, the INEOS NOVA joint venture obtained independent financing through a North American accounts receivable securitization program. This significantly eliminated the joint venture's reliance on us to fund operations. As a result of this change in circumstances, we undertook a review of the functional currency exposures of all of our businesses and concluded that the currency exposures of our Canadian entities predominately are now U.S. dollars. Accordingly, as required by GAAP, we commenced recording transactions in our Canadian entities using U.S. dollars as the functional currency effective October 1, 2008. This results in all foreign currency impacts of holding Canadian dollar denominated financial assets and liabilities being recorded through the income statement rather than being included in translation gains and losses deferred in AOCI. We accounted for this change prospectively and any amounts that had been previously deferred in AOCI continue to be included in AOCI unless there is a realized reduction in the net investment in the Canadian entities. The translated amount on September 30, 2008, became the historical basis for all items as of October 1, 2008. We continue to hold investments in joint ventures and other subsidiaries with differing functional currencies and these will continue to be classified as self-sustaining operations, with translation gains and losses deferred in AOCI.

        Through September 30, 2008, our functional currency was the Canadian dollar which exposed us to currency risks from our investing, financing and operating activities. We have established a policy which provides a framework for foreign currency management, hedging strategies and defines approved hedging instruments. Hedging instruments may be used to minimize the gains and losses due to short-term foreign currency exchange rate fluctuations. The exposure that may be hedged in accordance with the our foreign exchange policy is limited to operational transaction exposure and is generally used only to balance out our cash positions. Foreign currency risks resulting from the translation of assets and liabilities of foreign operations into our functional currency are generally not hedged; however, we may hedge this risk under certain circumstances.

        Foreign currency risks also may result from certain investing activities such as the acquisition and disposal of investments in foreign companies and may be caused by financial liabilities in foreign currencies and loans in foreign currencies that are extended to affiliated entities for financing purposes. In recent years, these risks generally have not been hedged.

        Our subsidiaries and affiliated entities generally execute their operating activities in their respective local currencies. We historically have not used currency derivatives to hedge such payments.

        At September 30, 2009 and December 31, 2008, we had no outstanding foreign currency derivative instruments. At December 31, 2007, we had an outstanding foreign currency swap for the purpose of balancing our cash position. The swap was set up to buy $63 million Canadian dollars (sell $63.6 million U.S. dollars) for value on December 31, 2007, and sell $63 million Canadian dollars (buy $63.6 million U.S. dollars) on January 2, 2008. The fair value of the swap was not material to our Consolidated Financial Statements.

        At September 30, 2009, December 31, 2008 and December 31, 2007, the INEOS NOVA joint venture also had several short-term foreign currency swaps outstanding, maturing through

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October 2009, January 29, 2009 and February 29, 2008, respectively. Our 50% share of the swaps fair value was not material to our Consolidated Financial Statements.

        Our investing, financing and operating activities continue to be exposed to currency risks, which effective October 1, 2008, includes both translation and transaction effects. As of September 30, 2009 and December 31, 2008, we had a net liability position of $956 million and $857 million, respectively, in non-U.S. dollar currencies at their respective current exchange rates. Each 1% weakening (strengthening) of the Canadian dollar against the U.S. dollar would decrease (increase) the value of the net liability by $7 million after-tax. Any change in the Euro would not be material.

        Currency risks, as defined by CICA Section 3862, arise when a monetary financial instrument is denominated in a currency that is not the functional currency.

Commodity Price Risk Management and Hedging

        We use commodity-based derivatives to manage our exposure to price fluctuations on crude oil, refined products and natural gas transactions. The instruments are used to moderate the risk of adverse short-term price movements. Occasionally, longer-term positions will be taken to manage price risk for anticipated supply requirements. The extent to which commodity-based derivatives are used depends on market conditions and requires adherence to our hedging policy. We limit our positions in futures markets to proprietary feedstock requirements and do not use derivative instruments for speculative purposes.

        Commodity swaps are sometimes used and designated as fair value hedges intended to hedge the fair value of our crude inventory against changes in the market price. As of September 30, 2009 and December 31, 2008, we had no outstanding commodity-based derivatives designated as fair value hedges. Open commodity-based derivatives as of December 31, 2007, used to hedge our crude inventory value matured in January 2008 and were not material. Unrealized gains and losses on derivative instruments designated and qualifying as fair value hedging instruments, as well as the offsetting unrealized gains and losses on the hedged items, are included in income in the same accounting period within Feedstock and operating costs in the Consolidated Statements of Income (Loss).

        In addition, we utilize options, swaps and futures instruments as economic hedges of commodity price exposures, but do not meet the hedge accounting criteria of CICA Section 3865, Hedges, or are not designated as qualifying hedges. Gains and losses on these commodity-based derivatives are included in Feedstock and operating costs in the Consolidated Statements of Income (Loss).

Equity Forward Contracts

        Equity forward contracts were used to manage exposures to fluctuations in our stock-based compensation costs, as the costs of the plans varied as the market price of the underlying common shares changed. For further details on our equity forward contracts, see Stock-Based Compensation, Forward Transactions and Profit Sharing.

Liquidity Risk

        Liquidity risk is the risk that we will not have sufficient funds available to meet our liabilities. We seek to maintain liquidity within a targeted range in the form of cash and cash equivalents and undrawn revolving credit facilities to position us to make scheduled cash payments, pay down debt, ensure ready access to capital, and assist in the solvency and financial flexibility of company operations. Adjustments to the liquidity reserve are made upon changes to economic conditions, anticipated future debt maturities, underlying risks inherent in our operations and capital requirements to maintain and

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grow operations. Liquidity totaled $308 million at September 30, 2009, $573 million at December 31, 2008 and $552 million at December 31, 2007.

        Repayment of amounts due within one year may be funded by cash flows from operations, cash on-hand, undrawn revolving credit facilities, accounts receivable securitization programs and internal actions taken to reduce costs and conserve cash. Capital markets transactions may also be used in managing the balance between maturing obligations and available liquidity. Our future liquidity is dependent on factors such as cash generated from ongoing operations, internal actions taken to reduce costs and conserve cash and other potential sources of financing.

Credit Risk Management

        Counterparty credit risk on financial instruments arises from the possibility that a counterparty to an instrument in which we are entitled to receive payment fails to perform on its obligations under the contract. This includes any cash amounts owed to us by those counterparties, less any amounts owed to the counterparty by us where a legal right of offset exists and also includes the fair value of contracts with individual counterparties which are recorded in the Consolidated Financial Statements.

        For derivative financial instruments, we have established a limit on contingent exposure for each counterparty based on the counterparty's credit rating. Credit exposure is managed through credit approval and monitoring procedures. We do not anticipate that any counterparties we currently transact with will fail to meet their obligations. At September 30, 2009, December 31, 2008 and December 31, 2007, we had no credit exposure for foreign currency, interest rate or share-based instruments. At September 30, 2009 we had $1 million of credit exposure for commodity-based instruments. (December 31, 2008—$1 million and December 31, 2007—$20 million).

        In order to manage credit and liquidity risk, we invest only in highly rated instruments that have maturities of nine months or less. Limits on the term of an investment, the type of investment and concentration limits per institution are established. Typically we invest only in overnight bank term deposits.

        Trade credit risk includes an unexpected loss in cash and earnings if a customer is unable to pay its obligations or the value of security provided declines. Trade receivables over 30 days were up from 1% at September 30, 2008 to 2% at September 30, 2009. There is no indication as of September 30, 2009, that the debtors will not meet their obligations. Trade receivables over 30 days were up from 1% at December 31, 2007, to 5% at December, 31, 2008, of total trade receivables. Historically, trade receivable credit losses (bad debt write-offs) have been immaterial and bad debt expense continues to be immaterial in 2009.

Government Regulation and Environmental Protection

        We are committed to the Responsible Care® initiative as the basis for our overall safety, health, environment, security and risk program. Responsible Care is a global industry initiative that is currently practiced by chemical industry in over 50 countries worldwide. Responsible Care was created by the Canadian Chemical Producers' Association in 1985 and adopted by the American Chemistry Council in the United States in 1988. As a participant in Responsible Care, we are committed to the responsible management of our products through their life cycle, the safety of our operations, the continuous reduction of the emissions and wastes from our facilities and sustainability.

        Similar to other companies that manufacture and sell plastics and chemicals, we are subject to extensive environmental laws and regulations. These laws and regulations concern the manufacturing, processing and importation of certain substances, discharges or releases to air, land or water and the generation, handling, storage, transportation, treatment, disposal and clean-up of regulated materials.

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        Although we believe that our businesses, operations and facilities are being operated in material compliance with applicable environmental laws and regulations, the operation of any petrochemical facility and the distribution of petrochemical products involve the risk of accidental discharges of hazardous materials, personal injury and property and environmental damage.

        From time to time, we have entered into consent agreements or have been subject to administrative orders for pollution abatement or remedial action. Under some environmental laws, we may be subject to strict and, under certain circumstances, joint and several liability for the costs of environmental contamination on or from our properties and at off-site locations where we disposed of or arranged for disposal or treatment of hazardous substances and may also incur liability for related damages to natural resources. We have been named as a potentially responsible party under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, or its state equivalents, at several third-party sites. Provision has been made in our financial statements to cover the estimated costs. Nevertheless, we cannot provide you assurance that we will not incur substantial costs and liabilities resulting from future events or unknown circumstances which exceed our reserves or will be material.

        In 2002, Canada ratified the Kyoto Protocol, and agreed to regulate reductions in air emissions that contribute to climate change. In 2007, the Canadian federal government released its plan for reducing industrial air emissions, including an ultimate goal of reducing greenhouse gas ("GHG") emissions by 20% from 2006 levels by the year 2020 and by 60 to 70% by 2050. Since then, the Canadian federal government released information indicating that the climate change regulations for the Energy Intensive Trade Exposed industries were under review and that Canada intends to work closely with the U.S. to establish a North American GHG emission cap and trade system. As a result, legally binding federal GHG emission reduction requirements are expected to be imposed on our operations in Canada, although the scope and timing for such requirements and the related impacts are uncertain.

        Many Canadian provinces are also considering GHG emissions reduction legislation. In Alberta, the Specified Gas Emitters Regulation under the Climate Change and Emissions Management Act came into effect in 2007, imposing annual reductions requirements on facilities that emit over 100,000 tones of GHG per year. In compliance with the regulations, we submitted the required GHG emission reports and have satisfied the requirements associated with reducing greenhouse gas emission intensity by 12% from the 2003-2005 baseline.

        Although the United States has not ratified the Kyoto Protocol, a number of federal laws and regulations related to GHG emissions are being considered by the U.S. Environmental Protection Agency and in Congress. In addition, various state and regional laws, regulations and initiatives have been enacted or are being considered, including the Regional Greenhouse Gas Initiative, the Midwestern Regional Greenhouse Gas Reduction Accord, and the Western Climate Initiative.

        Regardless of the status of the potential laws and regulations, we are developing and implementing a variety of initiatives to reduce GHG emissions and improve energy efficiency across our operations. As a result of the uncertainties surrounding the scope and timing of these potential laws and regulations, we cannot estimate the potential financial impact on our operations.

Summarized Quarterly Financial Information

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BUSINESS

General

        On July 6, 2009, International Petroleum Investment Company ("IPIC"), which is wholly owned by the government of the Emirate of Abu Dhabi, completed the acquisition of NOVA Chemicals Corporation and, through a wholly owned subsidiary, acquired all of our issued and outstanding common shares for $6.00 per share in cash. IPIC acquired us because of our proprietary technology, the geographic location of our facilities and our talented employees. IPIC also has other investments in the chemicals industry, including Borealis AG ("Borealis"), a petrochemicals company in Europe. Borealis is jointly controlled by IPIC (with 64% of the share capital) and OMV Aktiengesellschaft ("OMV") (with 36% of the share capital). OMV is one of the largest oil and gas groups in Central and Southeastern Europe, with significant investments in petrochemicals. In addition, IPIC owns approximately 19.6% of the share capital of OMV. IPIC is currently reviewing synergies between us and its other portfolio companies with the objective of creating a new global polyolefins leader.

        Our principal business is the production and marketing of plastics and chemicals. We operate an Olefins/Polyolefins business unit that produces and markets ethylene, polyethylene, higher-value polyethylene manufactured using our Advanced SCLAIRTECH technology, and a variety of chemical and energy products (commonly known as co-products). We also operate a Performance Styrenics business unit that produces and markets expandable polystyrene ("EPS") as well as higher-value styrenic polymers. Our Performance Styrenics business unit also includes our interests in EPS-based downstream businesses and ventures for end-use consumer and industrial applications primarily for the building and construction industry.

        Our polyethylene and styrenic polymer resins are used in a wide range of applications including rigid and flexible packaging, containers, plastic bags, plastic pipe, consumer electronics, building and construction materials, housewares and other industrial and consumer goods.

        Ethylene is a basic chemical used to manufacture a wide variety of polymers and other chemical products. Ethylene production in excess of our internal consumption requirements is sold to third parties. In addition, we engage in swap transactions with other producers of ethylene where we have limited or no ethylene production capability.

        We produce polyethylene primarily from our internal ethylene production. We produce the following varieties of polyethylene: high-density polyethylene ("HDPE"), low-density polyethylene ("LDPE") and linear low-density polyethylene ("LLDPE"). In addition, we develop and market higher-value LLDPE and HDPE manufactured using our Advanced SCLAIRTECH technology, including SURPASS and some SCLAIR polyethylene resins.

        Styrene monomer is a basic chemical used to manufacture a wide variety of polymers and other chemical products. We have a minority interest in LyondellBasell Industries' ("LyondellBasell") propylene oxide/styrene monomer ("PO/SM") facility in Channelview, Texas and an associated long-term styrene monomer processing agreement to acquire styrene monomer that provides sufficient styrene monomer supply for the operation of our Performance Styrenics business unit.

        Our Performance Styrenics business unit produces EPS, ARCEL resin and has interests in EPS-based downstream businesses and ventures for the building and construction industry.

        In addition to its principal business of producing and marketing plastics and chemicals, we have a licensing business. For example, we offer for license our proprietary polyethylene SCLAIRTECH process technology and catalyst technology. We also license our Performance Styrenics business unit's technology such as its in-mold labeled cup and container technology.

        We own a 50% interest in INEOS NOVA, a joint venture with INEOS Group Limited ("INEOS") that produces and markets styrene monomer and solid polystyrene ("SPS") in North America and SPS

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and EPS in Europe. INEOS NOVA produces styrenic polymers primarily from its internal styrene monomer production. INEOS NOVA sells styrene monomer production in excess of its internal consumption to third parties. In addition, INEOS NOVA is engaged in various swap transactions with other producers of styrene monomer where it has limited or no styrene monomer production.

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Certain prior year information has been restated to conform with current year's presentation.

Properties and Production Facilities

        Our products are manufactured at seven sites in North America. All production facilities are owned by us (except LyondellBasell's PO/SM facility in Channelview, Texas, in which we have a minority interest, and the E3 manufacturing plant at Joffre, Alberta, in respect of which we and Dow Chemical Canada Inc. ("Dow") each own 50%). With the exception of the Channelview facility, we own the land on which our production facilities are located.

        INEOS NOVA produces styrene monomer at three facilities in North America, SPS at three facilities in North America and styrenic polymers at five sites in Europe.

        In addition to our production facilities, we lease or own approximately 548,000 square feet of office space in numerous locations, mostly in North America. Our Canadian operating center is located in Calgary, Alberta. Our United States operating center is located in Moon Township, Pennsylvania.

        The following charts and tables show our and INEOS NOVA's plastics and chemical product flow and production facilities.

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NOVA Chemicals Product Flow Chart

        

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INEOS NOVA Product Flow Chart

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Facility Profile (Olefins/Polyolefins)

        

Facility Profile (Performance Styrenics)

        

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Facility Profile (INEOS NOVA⁽¹⁾)

        

Our Business Segments

Olefins/Polyolefins

        Our Olefins/Polyolefins business unit produces ethylene and polyethylene. As part of the ethylene production process, and in the preparation of feedstocks for this process, we also produce a number of co-products.

        Our Joffre, Alberta site is integrated with Alberta Ethane Gathering System ("AEGS"), which connects large-scale ethane extraction plants and ethane storage facilities to our ethylene crackers. The Joffre feedstock pipeline is also integrated with the Joffre site and connects natural gas liquids production and storage facilities in Fort Saskatchewan, Alberta to the Joffre site. AltaGas Income Trust ("AltaGas") completed construction of the Joffre feedstock pipeline in early 2005, and we operate and are the sole shipper on this pipeline. Ethylene produced at Joffre is fed directly to onsite polyethylene production at Joffre, as well as to customers at Joffre, Prentiss, Edmonton and Scotford, Alberta and to storage and customers at Fort Saskatchewan, Alberta.

        The Corunna, Ontario ethylene facility is connected to multiple pipeline systems that, in conjunction with the facility's flexi-cracker capabilities, enable us to optimize our feedstock slate. In addition, we utilize rail and marine transport to transport feedstocks. The Corunna facility provides ethylene by pipeline to our polyethylene production facilities in Mooretown, Ontario and our St. Clair

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River site in Corunna, Ontario. The Corunna facility also provides ethylene to INEOS NOVA's styrene monomer facility in Sarnia, Ontario as well as to customers in the Sarnia, Ontario area.

        For financial reporting purposes, we have three reportable segments as part of our Olefins/Polyolefins business unit: Joffre Olefins, Corunna Olefins and Polyethylene.

Ethylene

        We have annual production capacity of approximately 6,600 million pounds of ethylene (excluding Dow's share of E3). Ethylene is a commodity chemical that we produce through thermal cracking, or pyrolysis, of various feedstocks, a process that uses high temperatures to break down the carbon chains. The feedstocks used to produce ethylene are natural gas liquids and crude oil derived feedstocks including ethane, naphtha, propane, butane and gas oils. The most common feedstocks used by us are ethane and, to a lesser extent, crude oil and naphtha. Ethylene is used in the manufacture of polyethylene, styrene monomer, styrenic polymers and polyvinyl chloride, as well as chemical intermediates such as ethylene oxide, ethylene glycol, ethylene dichloride and vinyl acetate.

        We produce ethylene at two locations, Joffre, Alberta and Corunna, Ontario.

Joffre, Alberta Facility

        We have three ethylene production facilities at Joffre, Alberta: E1, E2 and E3 (E3 is 50% owned by Dow). These three plants have an annual production capacity of approximately 1,600, 1,800 and 2,800 million pounds of ethylene (including Dow's share of E3 production capacity), respectively, for a total combined capacity of 6,200 million pounds. The combined co-product production capacity of E1, E2 and E3 is approximately 830 million pounds per year, depending on the feedstock used.

        Approximately half of the ethylene production capacity at these facilities (excluding Dow's share of E3 production capacity) is used internally to support our Joffre polyethylene production and the rest is sold to third parties. Third party sales are facilitated through a variety of medium to long-term contracts. These contracts typically contain pricing mechanisms that include a cost recovery component and a market-based component.

        All of the ethylene plants at the Joffre site use ethane as their primary feedstock. Ethane is typically supplied under contracts with the owners of natural gas liquids extraction and fractionation plants located in Alberta. Most of these supply agreements have 10 to 20 years remaining on their terms with the possibility of renewal by the parties. The price we pay under these agreements consists of two components: (1) the cost to replace the energy content of the ethane extracted from the gas stream (this component varies with the price of natural gas; we may pay the owner for replacement natural gas or purchase or swap natural gas to physically replace the energy content of the ethane) and (2) a fee to cover an agreed upon portion of the costs of plant operation and return on invested capital (this component may be fixed or vary with production). We supplement our ethane supplies through spot purchases.

        We have enhanced our ethane feedstock availability through the development of third-party sources. One third-party source of ethane is from the ethane extraction facility adjacent to the Joffre site, which extracts natural gas liquids from the natural gas used as fuel for both our Joffre site and Dow's Prentiss, Alberta site. A second source of incremental ethane is from modifications made to existing extraction plants. These modifications increased the efficiency of existing plants to yield additional volumes of ethane from the same volume of natural gas.

        Virtually all of the ethane requirements for the Joffre site are transported via AEGS. Under a transportation agreement, we have the right to ship ethane on AEGS. We have also entered into an operating agreement with Fort Chicago, the owner of AEGS, under which we are responsible for the

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physical operation of AEGS, while Fort Chicago has responsibility for all commercial aspects of AEGS operations.

        We have the flexibility to use propane in addition to ethane for a portion of the Joffre feedstock requirements. Propane can be transported to Joffre by the Joffre feedstock pipeline owned by AltaGas.

        We continuously look for opportunities to expand our feedstock flexibility and supply to enhance our operational flexibility and support longer-term growth opportunities. In July 2007, the Alberta government released details of its "incremental ethane extraction policy" that provides incentives for value-added production and use of ethane in the province. We plan to take advantage of this policy to increase the utilization of our existing ethylene crackers at our Joffre manufacturing facility.

        In 2008, we participated in the Alberta Energy and Utilities Board's (the "EUB") inquiry into potential inequities surrounding the conventions and practices governing the extraction of natural gas liquids from the common natural gas stream transported on Alberta-regulated pipelines and other related matters (the "Inquiry"). The Inquiry examined whether or not these conventions and practices need to be changed, what those changes might be, and how they could be implemented. The Inquiry's report to the Alberta government was issued in February 2009. The Inquiry made several recommendations that could be beneficial to the petrochemical industry in Alberta. We anticipate that we will be involved in a number of committees and policy groups seeking consensus on the implementation of the various recommendations of the Inquiry. In addition, TransCanada has received approval to move the regulation of its Alberta system (the former NOVA Gas Transmission Ltd.) from the EUB to the National Energy Board. We plan to participate in shipper committees and regulatory proceedings relating to this change of regulation.

        As part of the ethylene production process at Joffre, we produce approximately 830 mmlbs of co-products per year, depending on the feedstock used. Co-products, other than hydrogen and carbon dioxide, are shipped by railcar to markets in Alberta, Ontario and the U.S. Gulf Coast.

Corunna, Ontario Facility

        The Corunna, Ontario olefins facility, located near Sarnia, Ontario, has an annual production capacity of approximately 1,800 million pounds of ethylene and 900 million pounds of propylene. In both cases, capacity is dependent on feedstock mix. The Corunna olefins facility has the flexibility to process a wide range of hydrocarbon feedstocks including crude oil, condensates, ethane, propane, butane, naphtha and gas oils to produce ethylene and co-products for use by our downstream operations and for sale to third parties. The feedstock chosen depends on market conditions and is determined by using a model that calculates the optimal feedstock mix to produce the most profitable mix of products. The majority of ethylene production from the Corunna olefins facility is used internally by us to produce polyethylene or sold to INEOS NOVA for styrene monomer production.

        The blend of feedstocks processed in the Corunna, Ontario olefins facility determines the range of co-products obtained, with heavier feedstocks such as naphtha producing more co-products. The facility has a production capacity of approximately 4,700 million pounds of co-products per year.

        Feedstocks for the Corunna, Ontario olefins facility are obtained from a wide variety of sources. Crude oil and naphtha are the main feedstocks processed at the facility. Condensate, a lighter feedstock than crude oil that yields a higher proportion of olefins versus fuel oil co-products, as well as propane, butane and naphtha are also processed at the Corunna facility. All crude oil and the majority of condensate are delivered via Enbridge Inc. ("Enbridge") pipeline systems. We source crude oil and condensate feedstocks from offshore locations, western Canada and the United States. Offshore crude oil and condensate are delivered to Portland, Maine and then ultimately to the Corunna facility via Enbridge's Line 9 pipeline system. Propane, butane and naphtha are sourced from western Canadian and local producers as well as United States sources, principally by pipeline.

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Co-Products

        Co-products are produced in the ethylene manufacturing process and can be grouped into two categories: chemical co-products and energy co-products. Chemical co-products include propylene, benzene, and butadiene—building blocks that are used to make items such as tires, carpet and clothing fibers, or household goods. Energy co-products include gasoline additives and fuel oil. The profitability of co-products depends on energy prices and the supply and demand balance for each co-product. Co-product production depends on the feedstock mix. Total co-product production capacity is approximately 5,500 million pounds per year. The majority of the co-products produced at our Joffre, Alberta and Corunna, Ontario facilities is sold to third parties. However, some co-products are consumed internally by us or sold to INEOS NOVA either as fuel or for the production of other products. For example, benzene, a co-product produced at our Corunna flexi-cracker is transported by pipeline from this facility to INEOS NOVA's Sarnia, Ontario styrene monomer facility and is used in the production of styrene monomer by INEOS NOVA.

Polyethylene

        We have annual production capacity of approximately 3,600 million pounds of polyethylene. Polyethylene is produced through the polymerization of ethylene. We produce polyethylene from ethylene supplied from our Joffre, Alberta and Corunna, Ontario facilities at three locations in Canada: Joffre, Alberta; St. Clair River, Corunna, Ontario; and Mooretown, Ontario.

        We have two polyethylene plants located at Joffre, Alberta, PE1 and PE2. PE1 has annual production capacity of approximately 1,480 million pounds and produces LLDPE from ethylene supplied from E1, E2 and E3. PE1 currently utilizes the NOVACAT family of catalysts that was developed by us and our catalyst development partner, INEOS, as well as our proprietary gas-phase process technology originally licensed from Union Carbide Corporation ("UCC"). The licenses from UCC are fully paid and the obligations of confidence and non-use pursuant to these licenses have expired. Accordingly, we pay no royalties for the use of this technology and independently sustain and develop this technology as used in our facilities. PE2 has annual production capacity of approximately 950 million pounds. PE2 uses Advanced SCLAIRTECH technology to produce our SURPASS and some SCLAIR polyethylene resins from ethylene supplied from E1, E2 and E3. During 2008, we completed operational improvements to increase capacity at PE2 to approximately 950 million pounds per year and increased the annual production capacity of our LLDPE asset, PE1, by 30 million pounds to 1,480 million pounds. We expect to complete an additional expansion of our PE1 asset by 20 million pounds, to a total annual production capacity of 1,500 million pounds, by the end of 2010.

        We have a polyethylene plant located at the St. Clair River site in Corunna, Ontario, which has annual production capacity of approximately 450 million pounds. We typically manufacture HDPE at this plant but can also manufacture LLDPE. Ethylene feedstock is supplied from the Corunna, Ontario olefins facility.

        Our polyethylene plant located near Mooretown, Ontario has an annual production capacity of approximately 740 million pounds. Ethylene feedstock is supplied from our Corunna, Ontario olefins facility. One of the lines at the plant currently uses our proprietary gas-phase process technology originally licensed from UCC to produce HDPE and the other line at the plant currently uses our proprietary high pressure process technology, also originally licensed from UCC, to produce LDPE. These licenses from UCC are fully paid and the obligations to UCC of confidence and non-use pursuant to these licenses have expired. We plan to complete a modernization and expansion project at our Mooretown, Ontario LDPE asset. We expect this project to be completed by 2011 and add up to 120 million pounds of annual production capacity, as well as upgrade the product slate, improve reliability and reduce production costs.

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Advanced SCLAIRTECH Technology

        After acquiring SCLAIRTECH technology in 1994, we further developed the technology and, in December 1996, announced that we had developed Advanced SCLAIRTECH technology. Advanced SCLAIRTECH solution-phase technology yields higher-value polyethylene resins that we believe provide several advantages over standard polyethylene resins, such as clarity and toughness in end-use products manufactured by our customers.

        Advanced SCLAIRTECH technology used at PE2 includes two proprietary catalyst systems. The Ziegler-Natta ("Z-N") catalyst introduced in 2001 is used to make our SCLAIR line of polyethylene products. These are octene-based polyethylene grades primarily for film applications. In 2003, we commercialized a single-site catalyst using Advanced SCLAIRTECH technology and introduced a series of new polyethylene products under the trademark SURPASS. SURPASS resins have been commercialized for film, rotational molding and thin wall injection molding applications. We expect to continue to shift sales of our polyethylene resins to higher-value polyethylene resins manufactured using Advanced SCLAIRTECH technology.

Joffre, Alberta Cogeneration Plant

        In June 2000, we, ATCO Power Canada Ltd. ("ATCO"), and an affiliate of EPCOR Utilities Inc. ("EPCOR") opened a natural gas-fired cogeneration power plant with a nominal installed peak capacity of 480 megawatts at our production site at Joffre, Alberta. The power plant supplies the electrical needs for the entire Joffre site, with excess power sold to Alberta's provincial power grid. The facility also provides steam to certain production facilities within the site. The three companies jointly own the cogeneration facility, with ATCO serving as the facility operator. The respective interests of the parties are 40% for each of ATCO and EPCOR and 20% for NOVA Chemicals.

Performance Styrenics

        Our Performance Styrenics business unit includes our EPS and ARCEL resin assets, our minority interest in LyondellBasell's PO/SM facility in Channelview, Texas and our interests in EPS-based downstream businesses and ventures for the building and construction industry. During 2009, we have restructured our Performance Styrenics business unit to decrease overall fixed costs and focus our resources on only our best and most immediate opportunities. For example, we rationalized our EPS capacity to a more sustainable level to allow us focus on our best performing EPS products. In addition, we ended commercial production of our DYLARK engineering resin, one of our polymer products, due to the long-term deterioration of this market. We intend to continue to evaluate this business unit and may exit other product lines and eliminate, consolidate or sell certain downstream businesses or ventures.

        The long-term styrene monomer processing agreement associated with our interest in LyondellBasell's PO/SM facility provides sufficient styrene monomer supply for the operation of our Performance Styrenics business unit. We and INEOS NOVA have an agreement in place whereby INEOS NOVA provides our required share of benzene to the LyondellBasell facility.

North American Polymers

        We produce EPS at our Beaver Valley site at Monaca, Pennsylvania and at our Painesville, Ohio facility. EPS resins are used in applications such as foam cups, noodle bowls, takeout and ice cream containers, insulation board and foam packaging. Our EPS cup and container resin is sold under the trademark DYLITE®.

        Our Beaver Valley site in Monaca, Pennsylvania produces ARCEL resins, which contain polystyrene and polyethylene. This expandable bead is sold into the protective packaging market. In

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addition to producing ARCEL moldable foam resins at our Beaver Valley site, in September 2005, we entered into an agreement with Ningbo Chang-Qiao Engineering Plastics Co., Ltd., an affiliate of Loyal Chemical Industrial Corporation, to provide new finishing capacity for ARCEL moldable foam resin near Shanghai, China.

        The Beaver Valley site also produced DYLARK resins for use in instrument panels and other parts for the global automotive industry. Due to the long-term deterioration of the market, we recently decided to end commercial production of our DYLARK resin.

Downstream Businesses and Ventures

        We attempt to leverage our intellectual property and market expertise by entering into downstream businesses and ventures, either directly or by entering into strategic relationships with partners. These businesses and ventures are in the development or start-up stage. The strategic objective of these initiatives is to capture value beyond the sale of resin. In addition to the sale of the finished products manufactured by these businesses and ventures, we have, to a limited extent, licensed certain of our proprietary technology, such as our in-mold labeled cup and container technology. As part of the restructuring of our Performance Styrenics business unit in 2009, we eliminated certain of these downstream businesses and ventures. We intend to continue to evaluate this business unit, which may result in exiting certain downstream businesses and ventures.

INEOS NOVA

        We own a 50% interest in INEOS NOVA, a 50:50 joint venture with INEOS that produces and markets styrene monomer and SPS in North America and SPS and EPS in Europe.

Styrene Monomer

        INEOS NOVA has a total rated production capacity of approximately 3,750 million pounds of styrene monomer per year at sites in Sarnia, Ontario (980 million pounds), Bayport, Texas (1,700 million pounds) and Texas City, Texas (1,070 million pounds). Styrene monomer is produced from ethylene and benzene. INEOS NOVA produces styrene monomer by the process of alkylation of ethylene with benzene to produce ethylbenzene and then dehydrogenation of ethylbenzene.

        In connection with the expansion of the joint venture on October 1, 2007, we and an affiliate of INEOS entered into a series of North American feedstock agreements with INEOS NOVA's North American operating companies. All of the ethylene and approximately half of the benzene requirements for the Sarnia, Ontario styrene monomer facility are supplied by pipeline from our Corunna, Ontario olefins facility. The balance of benzene feedstock is obtained from nearby third-party petroleum refineries. We and the affiliate of INEOS entered into ethylene supply agreements with INEOS NOVA to supply the Bayport, Texas styrene monomer facility with the ethylene required for that facility. All benzene for the Bayport, Texas facility is obtained from external sources. All of the ethylene for the joint venture's Texas City, Texas styrene monomer facility is obtained from INEOS's affiliate and the benzene is obtained from nearby third party refineries as well as from merchant sources.

        In connection with the commencement of the joint venture in October 2005, we entered into a contract to supply the joint venture with 50% of its styrene monomer requirements. When the joint venture was expanded in 2007, we contributed our North American styrene monomer assets and our European styrene monomer purchase contracts to INEOS NOVA. Accordingly, INEOS NOVA is now responsible for supplying the 50% of its European styrene monomer requirements that was formerly supplied by us. INEOS NOVA has a contract with INEOS pursuant to which INEOS is responsible for supplying the joint venture with the remaining 50% of its European styrene monomer requirements.

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        While INEOS NOVA does not produce styrene monomer in Europe, it obtains a portion of its styrene monomer feedstock requirement at a cost comparable with the local costs of production through swap agreements with major European styrene monomer producers that have a requirement for styrene monomer feedstock in North America but do not have sufficient styrene monomer production capabilities in North America. INEOS NOVA obtains the remainder of its 50% styrene monomer feedstock requirement in Europe from purchase agreements with third parties, supplemented by merchant purchases.

Styrenic Polymers

        INEOS NOVA produces SPS (which is sold in various grades, including crystal and high-impact) in North America and SPS and EPS in Europe.

        INEOS NOVA's styrenic polymer feedstock requirements can currently be satisfied through internal styrene monomer production and purchase agreements and the agreement with INEOS to provide 50% of the joint venture's European styrene monomer requirements. Where styrene monomer is geographically dislocated, INEOS NOVA may use a series of swap arrangements with other producers to position styrene monomer where it needs such styrene monomer.

North American SPS

        INEOS NOVA has three SPS manufacturing facilities in North America: Decatur, Alabama; Joliet, Illinois, and Indian Orchard at Springfield, Massachusetts. Total SPS production capacity for North America is 1,635 million pounds per year, consisting of both crystal and impact polystyrene.

        Crystal polystyrene end-use applications include CD jewel boxes, food packaging, one-time-use foodservice ware (cups/plates/bowls/utensils), medical applications, quick-service/convenience packaging and insulation. Impact polystyrene resins are used in applications such as office/desk supplies, small appliances, industrial spools, bathroom accessories, electronics housings, food packaging and one-time-use foodservice ware.

European SPS and EPS

        INEOS NOVA has five facilities in Europe with total rated annual styrenic polymer production capacity of approximately 2,075 million pounds. INEOS NOVA has an aggregate SPS capacity of 1,175 million pounds per year produced at facilities in Breda, The Netherlands; Marl, Germany; Wingles, France; and Trelleborg, Sweden. In September 2009, INEOS NOVA announced the closure of it SPS production facilities in Breda, The Netherlands, by the end of December 2009. The plant has a capacity of 200 million pounds per year.

        INEOS NOVA has the capability to produce EPS at four of its five European sites, with aggregate annual capacity of approximately 900 million pounds.

Distribution of Products

        Our products are marketed primarily through our sales force, with support from established distributors, agents and traders. Canadian products are sold into the United States primarily through our subsidiary, NOVA Chemicals Inc., for resale through distribution arrangements. Our subsidiary, NOVA Chemicals (International) S.A., sells in Europe, Asia, Africa, Australia, and Latin America either directly or through distribution arrangements. Distribution agreements among our affiliates provide for arm's length pricing.

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        The following table summarizes, for the years ended December 31, 2008, 2007 and 2006, the geographic segments in which we sell our products and the percentage of sales in each segment.

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Note:

(1)

The 2007 sales include: (i) the results from the first nine months of our former STYRENIX business unit and NAS® and ZYLAR® resins that were formerly included in our Performance Styrenics business unit and contributed to the expanded joint venture; and (ii) our 50% share of INEOS NOVA's sales for the last three months of 2007. The 2006 sales are comprised of our former STYRENIX business unit and NAS and ZYLAR resins.

        No significant portion of our business is dependent upon a single customer. Sales to Canadian and United States federal, state, provincial and local governmental bodies account for less than 1% of annual sales.

        In total, we have negotiated contracts that contain cost-recovery mechanisms and a market-indexed component, for the sale of approximately 2 billion pounds per year of ethylene.

        As part of our ethylene production process, and in the preparation of feedstocks for this process, a number of co-products are also manufactured. Co-products are shipped to markets in Alberta, Ontario and the U.S. Gulf Coast.

        We and INEOS NOVA have entered into certain non-competition and distribution agreements. Pursuant to these agreements, we distribute INEOS NOVA's European produced EPS in North America for INEOS NOVA and INEOS NOVA distributes our ARCEL resins and EPS for us in Europe.

        We lease or own approximately 5,800 rail hopper and tank cars for use in transportation and delivery of our polyethylene, co-products and styrenic polymer products to customers in North America. Trucks are used for distributing products sold in bags and boxes and smaller loads of bulk products. Marine vessels are used to transport bulk product and products sold in bags and boxes, mostly to Asia. We do not own or lease trucks or ships, but do pay transportation fees under short-term arrangements.

Competition

        We compete with other chemical producers on the basis of price, service, product quality, performance and deliverability. Among our competitors are some of the world's largest plastics and chemical companies and major integrated oil companies that are larger and have greater financial resources. Some also have their own raw material resources. The keys to competing successfully in this industry are scale of facilities, low-cost feedstocks and differentiated product and process technologies.

        Prices for our standard chemical and polymer products are determined in part by market factors, such as supply/demand balances and feedstock costs that are beyond our control. We generally sell these products at prevailing market prices but, on occasion, products are sold based on negotiated prices.

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Cyclicality

        Our historical operating results reflect the cyclical and volatile nature of the plastics and chemical businesses. The markets for ethylene, polyethylene, styrene monomer and styrenic polymers historically experience alternating periods of inadequate capacity and tight supply, causing prices and profit margins to increase, followed by periods of oversupply resulting from capacity additions. Prolonged oversupply leads to declining capacity utilization rates, prices and profit margins. Because we derive nearly all of our revenue from sales of these products, our operating results are more sensitive to this cyclical nature than many of our competitors that have more diversified businesses. Currently, known ethylene and styrene monomer chain capacity additions in North America over the next several years are limited. On a global basis, while large ethylene and polyethylene additions in the Middle East and Asia have been announced, these projects continue to experience delays due to shortness of labor and construction materials and general market conditions. However, we expect new global capacity to begin to start up during 2009, 2010 and beyond. The primary driver of cyclical upswings in the ethylene and styrenics sectors is generally the combination of limited supply growth and improved demand growth, which is driven by sustained gross domestic product and industrial production growth.

        Cyclicality is exacerbated by volatility in feedstock prices. In response to higher feedstock prices and other market factors, plastics and chemical producers will generally announce price increases. However, the implementation of announced price increases depends on many factors, including market conditions, the supply/demand balance for a particular product and feedstock costs, which may be beyond our control.

Intellectual Property

Overview

        We own directly, or license from affiliates, a large number of patents in Canada, the United States and other countries. We also own or license a number of trademarks, which are used to identify various chemical and plastic products. While these patents and trademarks constitute valuable assets, we do not regard any single patent or trademark as being material to our operations as a whole.

        We actively support all of our technologies to maintain our competitive position, including technologies developed by us and those licensed from third parties. Some of the technologies licensed from third parties are subject to certain restrictions on use.

        We were initially a licensee of the technology used in our manufacturing operations. However, over time, we have acquired a variety of business units with associated technology assets in areas including process and catalyst technology, as well as polymer technologies. In addition, since 1994 we have expanded our research and development activities. The result is a technology portfolio with approximately 600 patents (excluding INEOS NOVA owned patents), margin-enhancing polyethylene process technologies such as Advanced SCLAIRTECH technology, proprietary single-site catalyst positions and styrenic Performance Polymers such as ARCEL resin.

        We own two key technologies for the production of polyethylene—SCLAIRTECH technology and Advanced SCLAIRTECH technology. In addition to these technologies, we conduct research and development on other polyethylene technologies including gas-phase and high-pressure technology.

        We acquired our proprietary SCLAIRTECH technology and a global SCLAIRTECH technology licensing business from DuPont Canada Inc. in 1994. Our St. Clair River site utilizes SCLAIRTECH technology to produce SCLAIR HDPE resins. In addition, our SCLAIRTECH technology is currently licensed for use at 11 plants worldwide.

        In 2001, we began commercial operation of our new, proprietary Advanced SCLAIRTECH technology for the production of polyethylene. The first step in the introduction of this technology was

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to utilize a proprietary Z-N catalyst to manufacture new polyethylene products. In 2002, a line of new, Z-N catalyzed, octene-based SCLAIR resins was launched intended for higher-value polyethylene film applications.

        In April 2003, we announced the commercial introduction of our first polyethylene resins produced with Advanced SCLAIRTECH technology and utilizing our new proprietary single-site catalyst. We manufacture and sell these polyethylene resins under the trademark SURPASS. SURPASS resins have been commercialized for film, rotational molding and thin wall injection molding applications.

        We continue to focus on developing and commercializing higher-value polyethylene manufactured using Advanced SCLAIRTECH technology, including those used in film, injection molding and rotational molding.

Polyethylene Catalysts

        We have developed three key proprietary families of catalyst technologies for polyethylene production. The first is a family of proprietary single-site catalysts for Advanced SCLAIRTECH technology and other polymer technologies including gas-phase polyethylene. These single-site catalysts impart unique properties and create products that compete with many metallocene-based polyethylene products. The second family of catalysts includes proprietary Z-N catalysts used for SCLAIRTECH technology and Advanced SCLAIRTECH technology. Finally, the NOVACAT family of catalysts was developed by us and our catalyst development partner, INEOS, for use in gas-phase polyethylene. NOVACAT catalysts provide enhanced throughput, product range and properties when compared to traditional Z-N catalysts in commercial gas-phase polyethylene production facilities. Variants of the catalyst are available for the manufacture of conventional and higher-value LLDPE and narrow molecular weight HDPE. The NOVACAT family of catalysts is currently being run on several different gas-phase technologies by us and licensees.

Styrenic Polymer Technologies and Products

        We and INEOS NOVA own or have the rights to a significant portfolio of styrenics technology, in the fields of both polymer production and styrenic polymer applications. Prior to 1999, we licensed technology from a number of other companies and also developed our own technology for the polymerization of styrene monomer. As part of our acquisition of styrenics assets from Huntsman Corporation and The Shell Petroleum Company Limited ("Shell"), we acquired additional access to a broad range of styrenic product and process technology, as well as knowledge in polystyrene and styrenic polymers. The technologies acquired include the one-step Shell process technology for EPS and polystyrene manufacturing and compounding technology relating to a number of styrenic polymers.

        Examples of styrenic polymer technologies are ARCEL resins that are sold into the protective packaging market, EPS Silver resins that are sold primarily into the European construction and building marketplace and DYLITE premium cup and container grade resins used for EPS cups.

Chemicals Technologies

        During 2008, we, in collaboration with the University of Petroleum, China, the University of Stuttgart, Germany, and the Alberta Energy Research Institute, Canada, continued development of two catalytic processes for the conversion of heavy oil fractions to lighter components such as olefins and paraffins. If commercialized, these technologies could enable the transformation of low cost Alberta oil sands feedstock to chemical feedstock for olefins production. Success to date in this program has resulted in increased funding from the Alberta Energy Research Institute.

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Research and Development

        The following table summarizes, for the years ended December 31, 2008, 2007 and 2006, the amount we spent on research and development activities and technical support, including activities to improve our existing products.

        Our estimate for 2009 spending is $35 million for research and development and $7 million for technical support.

Olefins/Polyolefins

        Our Olefins/Polyolefins business unit conducts research at the NOVA Chemicals Research & Technology Center and the NOVA Chemicals Technical Center, both located in Calgary, Alberta. Both centers are equipped with state of the art facilities for the development of new catalysts, olefin and polyolefin processes as well as full scale testing of new products. The demonstration plant for Advanced SCLAIRTECH technology is located at the St. Clair River site in Corunna, Ontario and is capable of testing new catalysts, new polyethylene products and reactor processes.

Performance Styrenics

        NOVA Chemicals operates a technical center located at the Beaver Valley site in Monaca, Pennsylvania. The Performance Styrenics business unit also operates a pilot plant at the Beaver Valley site.

Responsible Care and Environmental Regulations

        In 1985, we adopted the Responsible Care initiative as the basis for our overall safety, health, environment, security and risk program. Responsible Care is a global chemical industry performance initiative created by the Canadian Chemical Producers' Association in 1985 and adopted by the American Chemistry Council in the United States in 1988. Responsible Care is currently practiced by chemical industry associations in over 50 countries worldwide. Responsible Care requires participants to commit to the responsible management of the total life cycle of their products.

        Since 1990, we have utilized an internal environment, health and safety audit program to manage regulatory compliance at our operating facilities. Our Responsible Care Audit Program was evaluated by a leading international environment, health and safety consulting firm in 1997, 2001, 2003 and 2007. Based on the 2007 assessment, the consulting firm concluded that the Responsible Care Audit Program is a top quartile program that has all of the hallmarks of an industry leading program.

        Like other companies in our industry, we are subject to extensive environmental laws and regulations at all levels of government. These laws and regulations concern the manufacture, processing and importation of certain chemical substances, discharges or releases to air, land or water and the generation, handling, storage, transportation, treatment, disposal and clean-up of regulated materials.

        Although we believe that our businesses, operations and facilities are being operated in material compliance with applicable environmental laws and regulations, the operation of any petrochemical facility and the distribution of chemical products involve the risks of accidental discharges of hazardous materials, personal injury and property and environmental damage.

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        United States and Canadian generally accepted accounting principles require companies to record liabilities associated with future plant decommissioning and site restoration costs on both active and inactive plants at their fair value based on a discounted value of the expected costs to be paid when the assets are retired. On September 30, 2009, NOVA Chemicals had $30 million of accumulated reserve for activities anticipated to be required for the decommissioning and site restoration of currently active plant sites.

        We review our accumulated reserves for decommissioning and site restoration quarterly to determine if adjustments are required. Because these plants may be in operation in excess of 40 years, significant uncertainty exists concerning the nature of the decommissioning and site restoration activities that may be required. Furthermore, significant judgment is involved in the estimation process because the degree of natural attenuation, evolution of new technologies and potential future land uses may mitigate future environmental liabilities and potential costs.

        Our environmental capital expenditures, including pollution abatement and remedial programs, were $4 million in 2008 (2007: $19 million; 2006: $8 million) and are estimated to be $6 million in 2009. Operating expenses relating to environmental protection were $6 million in 2008 (2007: $9 million; 2006: $15 million) and are estimated to be $6 million in 2009. Total remedial expenditures to dismantle and remediate discontinued facilities and sites totaled $1 million in 2008 (2007: $2 million; 2006: $1 million). This figure is expected to be $1 million in 2009.

Employee and Labor Relations

        As of September 30, 2009, we employed approximately 2,700 full-time employees globally.

        Collective bargaining agreements with various unions, covering approximately 375, or 14%, of the approximately 2,700 North American employees, are in place at certain plants located in Ontario and Pennsylvania. A collective bargaining agreement involving approximately 226 employees at our olefins plant in Corunna, Ontario was re-negotiated in 2007 with an expiration date of March 31, 2010. A collective bargaining agreement involving approximately 150 employees at the polystyrene plant at the Beaver Valley site in Monaca, Pennsylvania was re-negotiated in 2009 with an expiration date of March 15, 2012. We engage in continuous dialogue with the unions to address current issues and proactively address potential bargaining items.

        We provide medical, health, life insurance, retirement plans and other benefits to our employees, which are comparable with other companies in the chemical industry where our operations are located.

Foreign Operations

        Foreign operations are subject to various risks differing from those in Canada and the United States including political events, tax changes, labor difficulties, price controls and other governmental actions. We actively address these risks as part of our risk management system.

        We sell our products worldwide. We have established our international commercial headquarters in Switzerland to coordinate commercial activities outside of North America and maintain sales support operations globally.

Legal Proceedings

        We are involved in litigation from time to time in the ordinary course of business. Among these items is a claim for approximately $120 million by Dow Chemical Canada ULC and its European affiliate concerning our third ethylene plant. We have counterclaimed in the same action for an amount well in excess of the Dow claim. Although management does not believe that the claims against it have merit, there can be no assurance on the outcome of any litigation.

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MANAGEMENT

Directors

        The following table sets forth as of December 1, 2009, in alphabetical order, the name of each of our directors, his age, his residence, principal occupation(s) during the five preceding years and the period during which he has served as a director. The terms of office of the directors continue until their successors are elected or appointed.

Executive Officers

        The following table sets forth the name of each of our executive officers, his or her residence, present positions within the company and his or her principal occupations during the five preceding years.

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        There are no family relationships among any of our directors or executive officers. There are no material arrangements or understandings between any two or more directors or executive officers pursuant to which any person was selected as a director or officer.

        Each of the officers is appointed by the board to serve, subject to the discretion of the board, until their successors are appointed or they resign.

Recent Changes to Organizational Structure, Board of Directors and Executive Officers

        IPIC, OMV and Borealis entered into an Agreement in Principle (the "AiP") in August 2009 to define our future corporate governance structure, including the composition of our board of directors and the creation of an owners' committee ("Owners' Committee") that will consist of four members—two nominated by IPIC and two nominated by OMV. Pursuant to the terms of the AiP, the four members of the Owners' Committee shall also be members of our board of directors and, in each such capacity, will effectively control, to the extent permitted by law, matters to be determined by our board of directors and shareholders. Through this arrangement, OMV will share control of our company with IPIC.

        The AiP contemplates that Borealis will acquire from IPIC 24.9% of our share capital pursuant to a share purchase agreement still to be negotiated between IPIC and Borealis. The AiP received the antitrust clearance of the European Commission on October 27, 2009.

        In accordance with the AiP, our board of directors consists of seven members—four nominated by IPIC, two nominated by OMV and one nominated by Borealis. Dr. Gerhard Roiss (deputy Chief Executive Officer of OMV and chairman of Borealis' supervisory board), David Charles Davies (Chief Financial Officer of OMV and a member of Borealis' supervisory board), Mark Garrett (Chief Executive Officer of Borealis) and Randy G. Woelfel (our Chief Executive Officer) joined our board of directors effective November 10, 2009.

        Effective November 16, 2009, our board of directors appointed Randy G. Woelfel as Chief Executive Officer and Todd D. Karran as Senior Vice President, Chief Financial Officer and Treasurer upon the resignation of our former Chief Executive Officer, Christopher Pappas, and Senior Vice President and Chief Financial Officer, Larry MacDonald. Effective December 15, 2009, our board directors created the NOVA Chemicals Management Board and, in addition to Messrs. Woelfel and Karran, appointed William G. Greene, Senior Vice President, Operations, Marilyn N. Horner, Senior Vice President and Chief Human Resources Officer, and Grant Thomson, Senior Vice President and President, Olefins and Feedstock, as members of the Management Board, reporting directly to our board of directors.

Board Practices

Board of Directors

        The board of directors, which is also referred to in this prospectus as the Board, currently consists of seven members. Each director is elected annually, and we expect that such directors will serve until their successors are appointed or they resign, unless his or her office is earlier vacated in accordance with the by-laws of the corporation or with the provisions of the Business Corporations Act (New Brunswick). Each of the directors has served in his respective capacity since his election; see the table above for the period during which each director and member of senior management has served in that office.

Directors' Service Contracts

        There are no director service contracts between us and our directors providing for benefits upon termination of employment, other than an employment agreement with Randy G. Woelfel.

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Committees of the Board

        The board of directors has established two standing committees (the "Committees") and has delegated certain of its responsibilities to each of the Committees. In this regard, each Committee has been mandated to perform certain advisory functions, and to make recommendations and report to the Board. The two standing committees of the Board are the Audit Committee and the Remuneration Committee. Effective November 10, 2009, the Public Policy and Responsible Care Committee of the board of directors and the Corporate Governance Committee of the board of directors were dissolved, with the responsibilities of such committees reassigned to the full board of directors.

        Each of the Committees has the authority to retain outside advisors to assist in the discharge of its respective responsibilities. Each of the Committees reviews its respective charter at least annually and, as required, recommends changes to the Board. Each of the Committees has a charter; a brief summary of the Committee charters follows, together with current Committee membership.

Audit Committee

Chairman: David Davies
Vice Chairman: Mohamed Al Mehairi
Other Members: Gerhard Roiss, Georg Thoma

        The Audit Committee of the Board (formerly known as the Audit, Finance and Risk Committee) reviews and inquires into matters affecting our financial reporting, our system of internal accounting and financial controls and procedures and our financial audit procedures and plans; oversees the policies and practices relating to corporate compliance and risk management strategies; recommends to the board of directors the appointment and remuneration of the external auditors and reviews with management the mandate and appointment of internal auditors; oversees the funding, administration and investment of the trust funds associated with our retirement plans; and reviews with management and reports to the board of directors on our financing plans and objectives.

        The board of directors approves, on the recommendation of the Audit Committee, all fees paid to the external auditors in respect of audit services. In addition, in accordance with applicable rules regarding audit committees, the Audit Committee reviews and approves (in advance) the scope and related fees for all non-audit services that are to be provided by the external auditors. In doing so, the Audit Committee considers whether the provision of these non-audit services may impact the objectivity and independence of the external auditor.

        The Audit Committee is composed entirely of independent directors. All members of the Audit Committee are financially literate, and Mr. Davies is an audit committee financial expert as defined by SEC rules.

Remuneration Committee

Chairman: Mohamed Al Mehairi
Vice Chairman: David Davies
Other Members: Gerhard Roiss, Georg Thoma

        The Remuneration Committee of the board of directors (formerly known as the Human Resources Committee) is responsible for overseeing our policies and practices with respect to human resources. In this regard, the Remuneration Committee reviews recommendations for the appointment of persons to senior executive positions, and considers terms of employment including succession planning and matters of compensation. This Committee recommends to the Board the goals and objectives used to determine executive leadership compensation, and evaluates the NOVA Management Board's performance. For additional information relating to the compensation of our senior executives in 2008, see "Executive Compensation".

        The Remuneration Committee is composed entirely of independent directors.

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COMPENSATION

Director Compensation

        In 2008, the total compensation for non-employee directors included an annual retainer; an additional retainer for Committee chairs and Audit, Finance and Risk ("AFR") Committee (now the Audit Committee) members; and equity based awards.

        Prior to the closing of the IPIC Transaction, non-employee directors could elect to receive their equity based awards as options ("Options"), equity appreciation units ("EAUs") or restricted stock units ("RSUs"). Options entitled the non-employee director to purchase shares of our common stock ("Common Shares") at a price equal to the closing trading price for our Common Shares on the Toronto Stock Exchange (the "TSX") or the New York Stock Exchange (the "NYSE") on the day on which the Options were granted. EAUs and RSUs allowed non-employee directors to benefit from appreciation in the price of Common Shares. Upon redemption of an EAU, a non-employee director was paid, in cash, the difference between the closing prices of the Common Shares on the NYSE on the date of redemption and the date of grant, less applicable withholdings. RSUs were valued using the closing price of the Common Shares on the TSX or NYSE on the vesting date (generally the third anniversary of the grant date) and paid in cash, less applicable withholdings, by the end of the year in which they vested.

        At closing of the IPIC Transaction, the value of all outstanding Options and EAUs was nil, and all Options and EAUs were cancelled pursuant to the Arrangement Agreement with IPIC. In addition, all outstanding RSUs were cancelled in exchange for a cash payment of $6.00 per RSU in accordance with the Arrangement Agreement.

        Non-employee directors who served on our board of directors in 2008 and until the consummation of the IPIC Transaction on July 6, 2009, except as noted below, received the following compensation and equity based awards during 2008:

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Notes:

(1)

Includes RSU and DSU dividend equivalents. Prior to the closing of the IPIC Transaction, non-employee directors were eligible to participate in the Director Deferred Share Unit Plans ("DSUP"). Under the DSUP, non-employee directors could elect, on an annual basis, to receive all or a portion of their director fees in deferred share units ("DSUs") economically equivalent to Common Share value. The fees deferred to the DSUP were converted to an equivalent number of DSUs based on the market value of the Common Shares at a specified time. Non-employee directors were required to hold DSUs until they were no longer a director. All outstanding DSUs were cancelled in exchange for a cash payment of US$6.00 per DSU at the closing of the IPIC Transaction in accordance with the Arrangement Agreement.

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(2)

In 2008, Mr. Blumberg and Dr. Boer were members of the Technical Advisory Committee ("TAC") and were paid a fee of US$7,000 for each meeting attended. In 2008, two TAC meetings were held. Mr. Blumberg and Dr. Boer attended both meetings.

(3)

Ms. Brlas joined the Board on September 24, 2008. Her annual retainer and equity based awards were pro-rated based on the number of months in 2008 she was a director.

(4)

Mr. Fischer joined the Board on November 13, 2008. His annual retainer was pro-rated based on the number of months in 2008 he was a director. Mr. Fischer was not granted an equity based award in 2008.

(5)

Mr. Fortier retired from the Board effective April 14, 2009.

(6)

In 2008, Mr. Stanford was Chairman of the Board. Mr. Stanford was not paid an additional retainer fee for chairing the Corporate Governance Committee during 2008.

(7)

Mr. Stanford was reimbursed US$31,916 for the cost of office and support services attributed to us.

        Subsequent to the closing of the IPIC Transaction, we have not paid any compensation to our directors.

Director Share Purchase Plan

        In 2008, the non-employee directors were eligible to participate in the Director Share Purchase Plan under which each participating director could elect to have some or all of his or her director fees paid to a custodian at the end of each calendar quarter. The custodian would use the funds to purchase Common Shares in the open market on behalf of the participating director. The Director Share Purchase Plan was terminated at the closing of the IPIC Transaction.

Non-Employee Director Equity Based Awards

        The table below shows as of December 31, 2008, the number of Common Shares that were available for acquisition under Options and EAUs available for redemption, both vested and unvested, and the dollar value of "in-the-money" unexercised Options and EAUs that were not yet redeemed, both vested and unvested; and the number and value of unvested RSUs.

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Notes:

(1)

The exercise price of Options granted prior to 2005 was the closing price of Common Shares on the TSX on the date of grant. The exercise price of Options granted during or after 2005 was the closing price of the Common Shares on the TSX or NYSE on the date of grant. The redemption value of EAUs was the closing price of the Common Shares on the NYSE on the date of grant.

(2)

The value of unexercised Options priced off the TSX was calculated as the difference between the closing price of Common Shares on the TSX on December 31, 2008 (Cdn$5.85) and the exercise price of the related Option. The value of unexercised Options priced off the NYSE and unredeemed EAUs was calculated as the difference between the closing price of Common Shares on the NYSE on December 31, 2008 (US$4.77) and the exercise price/redemption value of the related Option or EAU.

(3)

"In-the-money" means that the market value of the Common Shares underlying the Option or EAU on that date exceeds the Option exercise price or the EAU redemption price.

(4)

RSUs included dividend equivalents that have been converted to additional RSUs.

(5)

RSUs were valued using the NYSE closing price (US$4.77) on December 31, 2008.

(6)

Ms. Brlas joined the Board on September 24, 2008 and was granted a pro-rata award at that time.

(7)

Includes 3,000 Options for each of Dr. Boer and Messrs. Dineen, Fortier and Hawkins that expired unexercised and were cancelled on March 3, 2009.

(8)

Mr. Fischer joined the Board on November 12, 2008. He was not granted an equity based award in 2008.

        In February 2009, other than Messrs. Fischer and Stanford, each Non-employee director was granted 14,210 RSUs as part of their 2009 compensation. Mr. Fischer was granted 16,578 RSUs, as part of his pro rata 2008 and 2009 compensation and Mr. Stanford was granted 19,539 RSUs as part of his compensation as Chairman of the Board.

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        The table below shows for 2008, (a) the number and value of Options that vested in 2008; (b) the number and value of Common Shares acquired on exercise of Options and the number and value of EAU redemptions; and (c) the value of RSUs that vested and were paid in 2008.

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Notes:

(1)

RSUs granted in 2005 vested on February 16, 2008. RSUs for directors that are Canadian taxpayers were valued using the closing price on the TSX on the vesting date (Cdn$29.42), and RSUs for directors that are U.S. taxpayers were valued using the closing price on the NYSE on the vesting date (US$29.35).

        At closing of the IPIC Transaction, the value of all outstanding Options and EAUs was nil, and all Options and EAUs were cancelled pursuant to the Arrangement Agreement. In addition, all outstanding RSUs were cancelled in exchange for a cash payment of US$6.00 per RSU in accordance with the Arrangement Agreement.

Executive Officer Compensation

Summary Compensation Table

        The following table sets forth the compensation earned in the fiscal year ended December 31, 2008 by the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") at that time and each of our three most highly compensated executives, other than our CEO and CFO, who were serving as executives at the end of the 2008 fiscal year (collectively, the "Named Executive Officers" or "NEOs").

        Mr. Lipton resigned as Chief Executive Officer effective May 1, 2009, upon which Mr. Pappas served as President and Chief Executive Officer through November 16, 2009. Mr. MacDonald resigned as CFO effective November 16, 2009. Mr. Mustoe resigned as Senior Vice President, Chief Legal Officer and Corporate Secretary effective December 15, 2009.

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Notes:

(1)

The Board believed it was appropriate to provide key employees the opportunity to elect to receive their equity based long-term incentive compensation as Options/EAUs and/or RSUs. For 2008, all of the NEO's elected to receive and were awarded their equity based long-term incentive compensation as RSUs.

(2)

None of the NEOs elected to receive or were awarded Options in 2008.

(3)

This column discloses the value of RSUs as of the date of grant. The number of RSUs granted was calculated by dividing the expected RSU value by the Common Share price on the date of grant. When a dividend was declared on the Common Shares, the value of the dividend was added as full or partial units to the RSU accounts. The number and dollar value of RSUs granted in 2008 based on the closing NYSE Common Share price of US$4.77 on December 31, 2008 were as follows:

(4)

Incentive compensation awards are earned in the year reported and paid prior to March 15 the following year unless the NEO elected to defer all or a portion of the award to the key employee deferred share unit plan ("Key Employee DSUP") or the Restoration Plan (see Defined Contribution Programs below for an explanation of the Restoration Plan). The elections of the NEOs are listed below:

Ms. Horner was not eligible to participate in the DSUP in 2008.

Where an election was made to defer all or a portion of an incentive compensation award to the Key Employee DSUP or the Restoration Plan, the dollar value reported in this column represents the pre-tax value of the incentive compensation award at the time of the award.

All outstanding DSUs were cancelled in exchange for a cash payment of US$6.00 per DSU at the closing of the IPIC Transaction in accordance with the Arrangement Agreement.

(5)

In 2008, we did not sponsor non-equity based long-term compensation plans.

(6)

For further details on Pension Values, see "Defined Benefit Pension Obligations" and "Defined Contribution Accounts".

(7)

Includes basic, transition and matching contributions made to the U.S. Savings and Profit Sharing Plan and the Restoration Plan.

(8)

In 2008, each NEO received benefits and perquisites in addition to base salary and annual incentive compensation awards. The value of these benefits and perquisites for each NEO, other than Mr. Lipton and Ms. Horner, does not exceed the lesser of Cdn$50,000 or 10% of the total annual salary. For Mr. Lipton, the amount of all other compensation includes US$102,848 for his personal use of the company's aircraft, US$131,343 for RSU dividend equivalents, and US$136,209 for DSU dividend equivalents. Ms. Horner's perquisites include a golf course initiation fee in the amount of US$38,000.

(9)

This column also includes the dollar value of insurance premiums paid by us with respect to term life insurance for the benefit of the NEO, the value of the dividend equivalents earned under the DSUPs and the RSU plan, and currency exchange related payments, where applicable.

(10)

On September 24, 2008, Ms. Horner was appointed Senior Vice President, Chief Human Resources Officer. Her annual salary was increased to $340,000 at that time.

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Equity Based Long-Term Incentive Awards and Exercises

        The table below shows the total number of Common Shares available for acquisition under Options and EAUs available for redemption, both vested and unvested, and the dollar value of "in-the-money" unexercised Options and EAUs not yet redeemed, both vested and unvested; and the number and value of unvested RSUs as of December 31, 2008.

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Notes:

(1)

The exercise price of Options granted prior to 2005 was the closing price of the Common Shares on the TSX on the date of grant. The exercise price of Options granted to the NEOs in 2005 and after was the closing price of the Common Shares on the NYSE on the date of grant. The redemption price of EAUs was the closing price of the Common Shares on the NYSE on the date of grant.

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(2)

"In-the-money" means that the market value of the Common Shares underlying the Option or EAU on that date exceeds the Option exercise price or the EAU redemption price. The value of unexercised Options granted prior to 2005 is calculated as the difference between the closing price of the Common Shares on the TSX on December 31, 2008 (Cdn$5.85) and the exercise price of the related Option. The value of unexercised Options granted in 2005, 2006, 2007 and 2008 and unredeemed EAUs is calculated as the difference between the closing price of the Common Shares on the NYSE on December 31, 2008 (US$4.77) and the exercise price of the related Option or redemption price of the EAU.

(3)

RSUs include dividend equivalents that have been converted to additional RSUs.

(4)

RSUs are valued using the NYSE closing price (US$4.77) on December 31, 2008.

(5)

Includes 279,000 Options held by Mr. Lipton and 28,000 Options held by Mr. MacDonald that expired unexercised and were cancelled on March 3, 2009.

        In February 2009, the Board decided that notwithstanding the elections made by employees, it was appropriate to award the 2009 equity based long-term incentives as RSUs. The following grants were made to the NEOs:

        The table below shows for 2008, (a) the number and value of Options that vested in 2008; (b) the number and value of Common Shares acquired on exercise of Options and the number and value of EAU redemptions; and (c) the value of RSUs that vested and were paid in 2008.

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Notes:

(1)

Value of vested Options/EAUs was determined using the closing price of our Common Shares on NYSE on the relevant vesting date.

(2)

Aggregate value realized has been converted to U.S. dollars using the exchange rate used at the time of payment.

(3)

The value of exercised Options is determined using the market price of the Common Shares on the date of exercise. The value of exercised Options settled as share appreciation rights was determined using the closing price of the Common Shares on the last trading day preceding the date of exercise.

(4)

RSUs granted in 2005 vested on February 16, 2008. RSUs were valued using the closing price on the NYSE (US$29.35) on the vesting date.

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Retirement Plans

Defined Benefit Programs

        We sponsor defined benefit programs in Canada and the United States both of which have been redesigned and are not available to new hires. The NEOs, all of whom were hired prior to the redesign and met the eligibility requirements for transition benefits in the United States, continued to accrue benefits under the applicable programs in 2008.

Canadian Defined Benefit Program

        The Canadian defined benefit pension component under our Canadian pension plans for salaried employees provides retirement income based on the employee's years of service and the average base salary of the highest 36 consecutive months of the employee's final 10 years of service ("Highest Average Earnings") adjusted to reflect benefits payable under government sponsored plans.

        Our Canadian defined benefit pension component provides a benefit formula that is integrated with the Canada Pension Plan. The non-contributory annual benefit is equal to the sum of (a) plus (b) where:

(a)

is 1.0% of credited service multiplied by the lesser of:



(i)

Highest Average Earnings; or



(ii)

Average Maximum Pensionable Earnings (defined below); and



(b)

is 1.6% of credited service multiplied by the amount, if any, by which the Highest Average Earnings exceeds the Average Maximum Pensionable Earnings.

        Average Maximum Pensionable Earnings is the three year average of the year's maximum pensionable earnings as determined in accordance with the Canada Pension Plan Act.

        Married retirees receive a 60% joint and survivor pension benefit, and single retirees receive an annuity for life guaranteed for five years after the pension benefits commence. Pension benefits are indexed, as applicable, after retirement based on a formula of 75% of the increase in the national Canadian consumer price index minus 1% up to a maximum of 5%.

        Normal retirement age under the defined benefit pension component is 65, however, a member can retire with full benefits at age 62. Members may also elect early retirement and receive a reduced pension if they are between ages 55 and 62.

        On December 31, 1999, we introduced a defined contribution pension component to our Canadian pension plans for salaried employees. Employees were permitted to make a one-time irrevocable election to convert their defined benefits to the defined contribution pension or remain with their defined benefit pension. Messrs. MacDonald and Mustoe, and Ms. Horner were residents of Canada at that time and elected to remain in the defined benefit pension component. All Canadian employees who joined NOVA Chemicals after December 31, 1999, are members of the defined contribution pension component of the Canadian pension plans.

U.S. Defined Benefit Program

        All U.S. salaried employees hired prior to December 31, 2007 participate in a defined benefit pension plan. Effective December 31, 2007, we froze this defined benefit plan and amended the defined contribution plan (see "Defined Contribution Programs") to provide certain enhancements. Employees who had attained the age of 50 with at least one year of service as of December 31, 2007 ("Transition Employees") qualified for transition benefits, including earnings escalation for purposes of calculating defined benefits, for up to five years. All of the NEOs were eligible for these transition benefits.

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        The benefit formula for the U.S. defined benefit plan is 1.2% of the Final Average Earnings multiplied by credited service. Final Average Earnings, other than for senior U.S. executives, is the average of the highest 36 consecutive months of base salary in the 10 years prior to December 31, 2007 or for Transition Employees, the earlier of December 31, 2012 and the Transition Employee's termination date. The pension benefit for a single retiree is a whole life benefit while a married retiree's benefit is a 100% joint and survivor benefit. Such benefit is provided by reducing the whole life benefit during the life of the retiree in order to provide 100% of that reduced benefit to the surviving spouse.

        Normal retirement age under the U.S. defined benefit plan is 65, however, a member can retire with full benefits at age 62. Members may also elect early retirement and receive a reduced pension if they are between the ages of 55 and 62 and have at least five years service.

Supplemental Executive Retirement Plans and Supplemental Pension Agreements

        Our defined benefit pension programs are subject to the Income Tax Act or the Internal Revenue Code ("IRC") maximum annual benefit accrual limits. We have adopted Supplemental Executive Retirement Plans ("SERPs") to provide supplementary pension payments, computed with reference to the earned pension under our defined benefit pension programs. These supplementary payments are above the maximum annual benefit accrual permitted by the Income Tax Act or the IRC and, therefore, are not deductible for income tax purposes by us until paid to the respective executive or employee. The aggregate supplementary pension benefits are generally equivalent to the benefit which would be earned under our pension plans without the maximum annual benefit accrual limit described above. For senior U.S. executives, including the NEOs, Final Average Earnings are calculated using base salary plus incentive compensation awards under the U.S. SERP. Consistent with the redesign of the U.S. defined benefit pension plan, the U.S. SERP was frozen as of December 31, 2007 other than for transition benefits, and relocation and special pension arrangements as detailed below.

        The SERPs also provide supplementary pension payments to executives who have relocation or special pension arrangements. Messrs. MacDonald and Mustoe, and Ms. Horner relocated from Canada to the U.S. and are entitled to the relocation pension arrangement. Under this arrangement, executives receive the greater of the total of their accrued benefits under each defined benefit program in which they have participated and the accrued benefit under the defined benefit program from which they retire assuming credited service under that plan recognizes all of the executive's service with the company.

        Mr. Lipton's employment contract provided that we make up any short-fall should the value of retirement benefits provided through us and Mr. Lipton's previous employer be less than the value of pension benefits that Mr. Lipton would have received had he remained with his previous employer until retirement. In addition, Mr. Lipton's employment contract provided that he receive two years' pensionable service for every year that he served as our CEO. In December 2008, Mr. Lipton announced his retirement effective May 1, 2009 and in connection with this announcement, we entered into a letter agreement with Mr. Lipton. Pursuant to this agreement, Mr. Lipton's pensionable service and earnings were frozen as of December 31, 2008. Mr. Lipton received his pension as a lump sum payment in 2009.

        Mr. Pappas' employment contract provided that we will recognize his 22 years of industry service prior to joining us for purposes of calculating his pension benefits. Mr. Pappas elected to receive payment as a lump sum at age 55 (August 2010).

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Defined Benefit Pension Obligations

        The following table summarizes the defined benefit pensions for each NEO as of December 31, 2008:

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Notes:

(1)

Canadian values have been converted to U.S. dollars using the 2008 average exchange rate (Cdn$1.00 = US$0.9397).

(2)

Age 62 is the earliest age an individual can receive full retirement benefits.

(3)

Other than Mr. Lipton, assuming each NEO remained with us until his or her normal retirement date.

(4)

Mr. Lipton's pension benefit is based on service with his previous employer plus two years of service for every year he is CEO; and is offset by his pension from his previous employer and his Restoration Plan transition benefits (see "Defined Contribution Programs—Canadian Defined Contribution SERP and Restoration Plan").

(5)

In December, 2008, we announced that Mr. Lipton would retire on May 1, 2009. These values represent the annual pension benefit Mr. Lipton would be entitled to receive upon retirement if he elected an annuity. Mr. Lipton elected a lump sum and was paid $36,840,000 in 2009.

(6)

Mr. Pappas is credited with 22 years of additional service.

(7)

Messrs. MacDonald and Mustoe, and Ms. Horner are entitled to receive the greater of: the sum of their Canadian and U.S. pension benefits, and their U.S. pension benefit assuming all of their service was in the U.S.

        The change in each NEO's defined benefit pension for 2008 is as follows:

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Notes:

(1)

Years of credited service is the service used to calculate the defined pension. Service under the U.S. Defined Benefit Pension Plan was frozen as of December 31, 2008 for Mr. Lipton and December 31, 2007 for the other NEOs. Years of credited service under the Canadian Defined Benefit Option represents credited service as of date of transfer to the U.S.

(2)

Represents the estimated annual pension, excluding any employee paid ancillary benefits, that would be received by the Named Executive Officer upon retirement at age 65 based on actual or projected pensionable service to the stated date and actual pensionable earnings at December 31, 2008. Estimated annual pension at age 65 assumes no increase in final average

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earnings or service. The NEOs are not accruing additional years of service under the frozen U.S. Defined Benefit Plan or the Canadian Defined Benefit Option.

(3)

Reflects the impact of interest on prior year's obligations, changes in discount rates used to measure the obligations and the impact of assumption and employee demographic changes.

(4)

Mr. Lipton announced his retirement effective May 1, 2009 and elected to receive his defined pension benefit as a lump sum payment. This benefit was paid to Mr. Lipton in 2009.

(5)

Canadian values have been converted to U.S. dollars using the 2008 average exchange rate of Cdn$1 = US$0.9397.

(6)

Messrs. MacDonald and Mustoe's 2008 compensatory change decreased because the December 31, 2007 accrued obligation assumed an annual salary growth of 4% whereas the notional salary used in determining the Canadian portion of the December 31, 2008 accrued obligation was not increased.

(7)

The value of Messrs. MacDonald and Mustoe and Ms. Horner's defined pension benefit has decreased as a result of the increase in the discount rate for the portion of the obligation associated with the Canadian registered and supplemental pension plans.

        The key actuarial assumptions used in calculating the values in the table above are as follows:

        The method used to determine estimated pension benefits may not be identical to the method used by other companies. Therefore, the estimated pension benefits may not be directly comparable to other companies' estimated pension benefits.

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Defined Contribution Programs

        We sponsor defined contribution programs in Canada and the United States.

Canadian Defined Contribution Program

        Canadian employees who joined the company after December 31, 1999, and employees who elected to convert their defined benefits to the defined contribution component of the Canadian pension plans as explained above, participate in the Canadian defined contribution program. We contribute 6% of a Canadian employee's base salary to a defined contribution account and the employee may elect to make voluntary contributions. Contributions are locked in until the employee terminates from the company.

U.S. Defined Contribution Program

        The U.S. Savings and Profit Sharing Plan (the "U.S. Savings Plan") was redesigned when the U.S. defined benefit pension plan was frozen. Effective January 1, 2008, we make contributions to each U.S. employee's account of 3% of total pay and matching contributions of up to 6% of total pay for total company contribution of up to 9% of total pay. Transition Employees receive, until the earlier of December 31, 2012 and the Transition Employee's termination date, an additional transition contribution of 5% of total pay. Total pay includes base salary, incentive compensation awards, profit sharing, shift differential and overtime. In addition, employees may make voluntary employee contributions to the plan. All of the NEOs participated in the U.S. Savings Plan in 2008.

Canadian Defined Contribution SERP and Restoration Plan

        Our defined contribution programs are also subject to maximum annual contributions under the Income Tax Act and the IRC. We has adopted a SERP in Canada and the U.S. Savings and Profit Sharing Restoration Plan (the "Restoration Plan") to provide a mechanism to continue defined contributions for employees who exceed the legislated maximums.

        The Canadian SERP provides a notional account for contributions or conversion amounts that exceed the legislated maximums. The accounts are credited with earnings equivalent to the earnings of the balanced fund that is offered as an investment under the Canadian defined contribution program.

        In the U.S., when total pay of an executive, including the NEOs, exceeds the legislated maximum, excess company contributions are made to the Restoration Plan. In addition, participants may elect, prior to each performance year, to make voluntary employee contributions to the Restoration Plan of their base salary, incentive compensation award and profit sharing. If an employee elects to make voluntary contributions, company matching contributions will be made to the Restoration Plan after total pay exceeds the IRC maximums. All of the NEOs participated in the Restoration Plan in 2008.

Defined Contribution Accounts

        The following table summarizes each NEO's defined contribution account for 2008:

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Notes:

(1)

Includes the company's contributions: 3% basic contributions, 5% transition contributions and up to 6% matching contributions.

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NEO Agreements

        Employment Contracts

        Prior to the IPIC Transaction, we and our subsidiaries entered into employment contracts with certain NOVA Chemicals' executives, including the NEOs. The employment contracts stipulate that on a change of control, the employment relationship is governed by the change-of-control agreements (see Related Party Transactions—Our Agreements with Executive Officers). Completion of the IPIC Transaction constituted a change of control, and the employment relationships are governed by the change-of-control agreements until July 2012.

        The employment contracts provided for indefinite terms of service with each NEO. In December 2008, Mr. Lipton entered into a letter agreement with us which specified the payments Mr. Lipton would receive on his retirement (which payments are described elsewhere in this prospectus) and released us from any claims under his employment contract.

        In the event of termination of a NEO's employment other than for cause (as defined in the employment contract) or due to his or her constructive dismissal (as defined in the employment contract), such NEO, other than Mr. Lipton, would have been entitled to be paid a lump sum payment, conditional upon his or her execution and delivery of a release. For each NEO, these lump sum payments would have been based on: a) base salary in effect at the time of termination; b) Incentive Compensation Plan award calculated at target; and c) perquisite allowance. This lump sum amount would have equaled 24 months for each of Messrs. Pappas, MacDonald and Mustoe and Ms. Horner. In addition, each NEO would receive continued medical, dental and life insurance coverage, and pension entitlement. Each NEO would also be entitled to financial counseling and outplacement support. Lump sum payments made pursuant to the severance provisions of these agreements would have been delayed, with interest, for up to six months following separation of service in compliance with §409A of the IRC.

        Mr. Lipton was also entitled under his employment contract to personal use of the corporate airplane of up to 75 hours annually and the pension entitlement described above (see "Supplemental Executive Retirement Plans and Supplemental Pension Agreements"). Mr. Pappas' agreement provided that his industry service prior to joining us would be credited for pension purposes (see "Supplemental Executive Retirement Plans and Supplemental Pension Agreements"). In the event of involuntary termination, Ms. Horner is entitled to relocation costs to Calgary or equivalent location as set out in our Relocation Guidelines.

        Each NEO has also agreed not to disclose or use for his or her own benefit confidential information (as defined in the employment contract), except as necessary to perform his or her duties to us or as required by law. Also, during his or her employment with us, no NEO may engage in or render services to a competing business (as defined in the employment contract), and for a one year period after termination of employment, no NEO may solicit customers, suppliers or employees to terminate their relationship with us.

        On December 5, 2008, NOVA Chemicals entered into a letter agreement with Mr. Lipton superseding the provisions of his employment contract, other than those set forth in the paragraph above, and addressing various compensation and other matters in connection with Mr. Lipton's retirement from active service with us. Pursuant to the letter agreement, Mr. Lipton continued to serve on the Board of Directors until May 1, 2009.

        The letter agreement provided for an annual incentive compensation payment for 2008 equal to 232% of target under our Incentive Compensation Plan and provided that Mr. Lipton would be eligible to receive a pro-rata incentive compensation award for 2009, with an annualized target level of 100% of Mr. Lipton's base salary in the discretion of the Board at the time that 2009 bonuses are paid to similarly-situated employees. The letter agreement also provided for the standard 2009 equity based

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long-term incentive grant with a grant date value of 480% of Mr. Lipton's annual base salary. In the event that Mr. Lipton resigned or was terminated by us for cause (as defined in the letter agreement) prior to the retirement date, Mr. Lipton would forfeit his right to the benefits described above. In addition, Mr. Lipton ceased to participate in our supplemental pension arrangements, and his rights thereunder was converted into the right to receive two payments, on February 16, 2009 and May 1, 2009, of his accrued supplemental pension benefits as of December 31, 2008. Mr. Lipton also agreed that we may delay payment of either or both SERP payments if the Audit Committee of the Board reasonably determined in good faith that making the applicable SERP payment on schedule would jeopardize our ability to continue as a going concern (see "Supplemental Executive Retirement Plans and Supplemental Pension Agreements").

PRINCIPAL SHAREHOLDERS

        IPIC's subsidiary, NOVA Chemicals Holding GmbH, holds all of our issued and outstanding Common Shares.

RELATED PARTY TRANSACTIONS

Transaction Agreements

        Prior to July 6, 2009, IPIC provided us with $350 million of interim debt financing that was converted into common equity at the closing of the IPIC Transaction. Related accrued interest and fees totaling $17 million ($12 million after-tax) on the interim debt financing were forgiven by IPIC and reclassified to Contributed surplus. We removed the balance in common shares of $508 million as of July 6, 2009, before push-down adjustments, and recorded the cash paid by IPIC to acquire all of our issued and outstanding common shares for $499 million.

Our Agreements with Executive Officers

        We have change-of-control agreements with certain of our executive officers, including the NEOs (other than Mr. Lipton who retired on May 1, 2009). Completion of the IPIC Transaction constituted a "change of control" under these agreements. The agreements provide that on the termination without cause or constructive dismissal of such executive within three years following the change of control, the executive is entitled to receive a lump sum severance payment (based on base salary, incentive compensation and other compensation) and continuation of certain benefits during the severance period, which is 30 months for each of Messrs. Pappas, MacDonald and Mustoe and Ms. Horner. The agreements for these NEOs also provide for (i) a tax equalization payment in the event the executive is subject to the change of control golden parachute excise tax, except that in the event that the value of the payments to the executive do not exceed 110% of the maximum amount payable without triggering the excise tax, the payments are reduced to the maximum amount that can be paid without triggering the tax and (ii) that these NEOs may terminate their employment within 30 days following the first anniversary of a change of control in order to receive the severance benefits.

        Messrs. Pappas, MacDonald and Mustoe have or will receive payments under their change of control agreements.

Directors and Officers' Insurance

        We maintain directors and officers' liability insurance with policy limits of $150 million in the aggregate, subject to a deductible in respect of corporate reimbursement of Cdn$1 million for each loss. We are generally to be reimbursed for payments made under corporate indemnity provisions on behalf of our directors and officers, and individual directors and officers (or their heirs and legal representatives) are generally covered for losses arising during the performance of their duties for which they are not indemnified by us. Major exclusions from coverage include claims arising from

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illegal acts, those acts which result in illegal personal profit, violation of any fiduciary duty under the U.S. Employee Retirement Income Security Act of 1974, pollution damage (except for resultant shareholder actions) and claims brought by a director or officer against another of our directors or officers or by us against one of our directors or officers, except for derivative actions.

        Effective as of the closing of the IPIC acquisition ("IPIC Closing"), we obtained and fully paid the premium for the extension of the directors and officers' insurance policies for a claims reporting or run-off and extended reporting period of seven years from and after the IPIC Closing with respect to any claim related to any period or time at or prior to the IPIC Closing, and with terms, conditions, retentions and limits of liability that were no less advantageous to each present and former director, officer, trustee and employee of the company and our subsidiaries than the coverage provided under our existing policies prior to the IPIC Closing (which terms are consistent with our current policy described above) with respect to any actual or alleged error, misstatement, misleading statement, act, omission, neglect, breach of duty or any matter claimed against a director, officer or employee of the company or any of our subsidiaries by reason of him or her serving in such capacity that existed or occurred at or prior to the IPIC Closing (including in connection with the approval or completion of the IPIC Transaction.

Director Indemnity Agreements

        Prior to the IPIC Transaction, we entered into indemnity agreements with our former directors containing provisions that may require us to, among other things, indemnify such directors against certain liabilities that may arise by reason of their status or service as our former directors, to obtain the approval of a court, if required, to meet such indemnity obligations, to reimburse such directors for related taxes and duties, and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, provided that any expenses advanced not actually required shall be repaid. The right to indemnification will only apply where the director acted honestly and in good faith with a view to the best interest of the entity that he served and, in the case of a criminal or administrative action, had reasonable grounds for believing that his conduct was lawful. The indemnity agreements further provide that such former directors must give written notice upon becoming aware of any proceeding which may give rise to the indemnification obligation and that such directors have the right to independent legal counsel at their expense, unless we have approved such independent counsel, upon which we are obligated to pay such approved counsel's legal fees.

        Following the IPIC Transaction, we entered into indemnity agreements with each of our current directors containing provisions that may require us and from time to time, certain of our affiliates, to, among other things, indemnify such directors against certain liabilities that may arise by reason of their status or service as our directors, and obtain the approval of a court, if required, to meet such indemnity obligations. The directors are entitled to reimbursement for time spent responding to or testifying in connection with any proceedings involving us, tax gross-up payments to the extent such directors are not entitled to certain tax deductions related to the indemnification payments, and reimbursement of their expenses incurred as a result of any proceeding against them as to which they could be indemnified, provided that any expenses not actually incurred shall be repaid. The right to indemnification will only apply where the director acted honestly and in good faith with a view to the best interest of the entity that it serves and, in the case of a criminal or administrative action, had reasonable grounds for believing that his conduct was lawful. The indemnity agreements further provide that we shall be the indemnitor of first resort and that we are required to advance the full amount of expenses incurred by the directors.

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DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK

Credit Facilities

        As of December 1, 2009, we have four revolving credit facilities aggregating $615 million of borrowing capacity. Details regarding amounts, types of advances, and expiration dates of these facilities are as follows:

•

$350 million senior secured credit facility, available for Prime Loans, USBR Loans, LIBOR Loans, Swingline Advances, Bankers' Acceptances, and Letters of Credit, expires on November 17, 2012;



•

$65 million senior unsecured bilateral credit facility, available for Prime Loans, USBR Loans, and LIBOR Loans, expires on March 20, 2010;



•

$100 million senior unsecured bilateral credit facility, available for Prime Loans, USBR Loans, and LIBOR Loans, expires on March 20, 2011; and



•

$100 million senior unsecured bilateral credit facility ($30 million due on March 20, 2010, $30 million due on September 20, 2011 and $40 million due on September 20, 2013), available for LIBOR Loans and conversions from LIBOR Loans to USBR Loans in limited circumstances.

        As of December 1, 2009, we had utilized $49 million of our revolving credit facilities (all of which was in the form of letters of credit). While each of the credit facilities contains typical affirmative and negative covenants, which are substantially the same, our senior secured credit facility contains financial covenants, which require quarterly compliance. The covenants require a maximum senior debt to cash flow ratio of 3:1 and a debt to capitalization ratio not to exceed 60% at the end of each quarter.

        Our other revolving credit facilities have no financial covenants associated with them. We are in compliance with all covenants under our credit facilities.

        In addition to the refinancing transactions completed in November 2009, we intend to (i) replace our accounts receivable securitization programs in the first quarter of 2010, (ii) repay upon maturity a portion of our senior unsecured bilateral facilities and (iii) repay our total return swap upon termination. We anticipate that the financial covenants in any new accounts receivables securitization programs will be substantially similar to those contained in our senior secured revolving credit facility.

Security and Guarantees

        Borrowings under our $350 million credit facility are secured by a fixed and floating charge on certain of our real property and a security interest in certain of our personal property. Our other facilities are unsecured. Also, each of the restricted subsidiaries under our $350 million secured credit facility has agreed that, upon an event of default, dissolution, bankruptcy or insolvency, any intercompany indebtedness owed by us to the restricted subsidiary will be subordinated to the prior payment of the obligations under those credit facilities. Further, we have provided a guarantee to the lenders under our $350 million secured credit facility covering certain hedging transactions entered into with our restricted subsidiaries. Our obligations under our $350 million secured credit facility have been guaranteed by our restricted subsidiaries. Our obligations under our other credit facilities have not been guaranteed by any of our subsidiaries.

        Our outstanding senior notes and debentures issued prior to the private placement in October 2009 are issued under indentures which contain a "negative pledge" provision. Under this provision, we and our subsidiaries are permitted to incur secured debt or to enter into sale-leaseback transactions to the extent that such otherwise impermissible debt (or debt attributable to such sale-leaseback transactions) does not exceed 10% of our consolidated net tangible assets. The indenture

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under which the exchange notes offered hereby contains substantially the same provision, except the 10% amount was increased to 15% and security interests securing debt under credit facilities in an aggregate of $350 million are permitted and, therefore, excluded from the 15% basket. As a result, the indentures under which our prior outstanding senior notes and debentures were issued and the indenture under which the exchange notes offered hereby will be issued permit us to incur secured debt under our secured credit facility, and permit us and our subsidiaries to incur secured debt under future credit facilities, so long as the aggregate amount thereof when incurred (and when added to the then outstanding amount of otherwise impermissible secured debt and debt attributable to sale-leaseback transactions) does not exceed 10% of our consolidated net tangible assets in the case of our outstanding notes and 15% in the case of the exchange notes offered hereby.

Interest; Fees

        Loans under our credit facilities bear interest at a floating rate, which is calculated as a base rate plus an applicable pricing margin. The applicable pricing margins under our senior $350 million secured credit facility vary with the type of loan and range between 2.50% and 4.75%. The applicable pricing margins for advances under our other credit facilities vary with the type of loan and range between 1.25% and 7.50%.

        The base rate depends on the type of advance we choose and may be (i) a LIBOR rate (LIBOR Rate), (ii) the greatest of (A) the agent's prime rate, (B) the average rate for one-month banker's acceptances plus 1.00%, and (C) in the case of Swing Line Advances made by way of Prime Loans, the cost of funds for the Swing Line Lender (Prime Rate), or (iii) the greatest of (A) the agent's base rate, (B) the Federal Funds Rate plus 1.00%, (C) LIBOR for a period of one month on any day plus 1.00% per annum, and (D) in the case of Swing Line Advances made by way of USBR Loans, the cost of funds for the Swing Line Lender (USBR Rate).

        We may draw upon the $350 million secured credit facility through bankers' acceptances and letters of credit, each of which carries specific fees.

        We are required to pay a standby fee based on the total unused commitment amount of each credit facility. These standby fees accrue daily and for our $350 million senior secured credit facility vary with the senior debt to cash flow ratio and range between 0.875% and 1.20%. With respect to our other credit facilities, the standby fees are fixed and range between 2.25% and 7.50%. With respect to our $350 million secured credit facility, if we have borrowed 50% or more of the aggregate commitment, we are required to pay utilization fee based on the amount outstanding. This utilization fee accrues daily and is equal to 0.50%. With respect to our two $100 million credit facilities and our $65 million credit facility, we are required to pay facility origination fees calculated on the maximum facility amounts. These facility origination fees accrue daily, are fixed and range between 1.00% and 5.25%.

Covenants

        In addition to the financial covenants that govern our $350 million secured credit facility as explained above in more detail, our credit facilities also limit our ability to, among other things, incur additional liens, sell certain assets, make distributions on or repurchase equity, incur additional debt, enter into hedging arrangements, enter into operating leases, engage in reorganizations or mergers, or change the character of our business. Certain of these covenants are subject to exceptions and materiality qualifiers.

        Our senior secured credit facility limits distributions during any four consecutive fiscal quarters equal to the greater of (A) 55% of consolidated free cash flow for such four fiscal quarters, and (B) U.S. $10,000,000.

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Prepayment

        Voluntary prepayments of principal amounts outstanding and voluntary reductions of the unutilized portion of the credit facilities are permitted at any time, upon the giving of proper notice and subject to minimum dollar amounts.

Events of Default

        Our credit facilities contain customary events of default, including, but not limited to, payment defaults, breach of covenant, incorrect representations or warranties, cross default of other indebtedness, cross default of secured swap obligations, certain events of bankruptcy, insolvency or dissolution, judgment defaults, change of control, and invalidity of any loan documents or provisions thereof supporting the credit facilities. Certain of the events of default are subject to exceptions and materiality qualifiers.

        The terms used in this summary have specific meanings as used in the credit facilities.

Existing Senior Notes and Debentures Other than the Notes

        As of September 30, 2009, we had outstanding the following senior notes and debentures:

•

Cdn$250 million 7.85% Notes due 2010;



•

$400 million 6.5% Senior Notes due 2012;



•

$400 million of Senior Floating Rate Notes due 2013; and



•

$100 million of 7.875% Debentures due 2025.

        These debt securities are our direct, unsecured obligations and are not guaranteed by any of our subsidiaries. All of the indentures under which the debt securities listed above were issued are substantially similar, and do not limit the amount of other indebtedness or securities that may be issued by us or our subsidiaries, except as set forth below. Under these indentures, we and our subsidiaries are limited in our ability to enter into sale-leaseback transactions and prohibited from securing any other indebtedness (with certain exceptions) without providing that the debt securities shall be equally and ratably secured. The indentures do allow us and our subsidiaries to incur secured debt or to enter into sale-lease back transactions to the extent that such otherwise impermissible debt (or debt attributable to such sale-leaseback transactions) does not exceed 10% of our consolidated net tangible assets in addition to a number of other exceptions.

        Under the indentures, we may consolidate, merge or amalgamate with another entity, or sell or otherwise convey our properties and assets substantially as an entirety to another entity, only if we are the continuing entity or if the successor entity is either a Canadian or U.S. company that expressly assumes all of our obligations related to the debt securities.

        Events of default under these indentures include payment defaults, defaults in covenants or warranties under the indentures, certain events of bankruptcy, insolvency, and defaults under other indebtedness of a certain minimum amount.

Joffre Cogeneration Construction Facility

        In December 1999, Joffre Cogeneration Funding Corporation ("JCFC"), our joint venture with ATCO Power Canada Ltd. and an affiliate of EPCOR Utilities Inc., entered into a credit facility to finance the construction and operation of a natural-gas-fired cogeneration power plant at our production site at Joffre, Alberta. The credit facility provides for borrowings up to Cdn $268.7 million and consists of a Cdn $158.7 million tranche (Tranche A) that matures in September 2012, a Cdn $100 million tranche (Tranche B) that matures in September 2020 and a Cdn $10 million revolving loan

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that is renewable for successive 364-day periods. As of September 30, 2009, $2.6 million, and $100.0 million were outstanding under the Tranche A loan and the Tranche B loan, respectively, and the revolving loan was undrawn. Our share of the total outstanding borrowings under the credit facility is 20%, or Cdn $20.5 million.

        The credit facility is secured by a first priority lien on the cogeneration facility and consents to assignment of certain material contracts of the cogeneration facility. The Tranche A loan bears interest at the quoted rate of bankers' acceptances plus a spread that ranges from 175 basis points (currently) to 187.5 basis points. The Tranche B loan bears interest at 8.59%. The revolving loan bears interest at the quoted rate of bankers' acceptances plus 100 basis points. The credit facility requires JCFC to meet certain financial tests and limits the ability of JCFC to incur additional liens, incur additional indebtedness, amend certain contracts and make investments. In addition, the credit facility also places restrictions on us and the other owners of JCFC in connection with uncommitted power transactions, natural gas purchases, contract terminations and the sale of interests in JCFC.

Series A Preferred Shares and Total Return Swap

        Our subsidiary, NOVA Chemicals Inc., has issued Series A preferred shares with a 0.5% dividend rate. We have the right to repurchase the Series A preferred shares at any time. However, any such repurchase may obligate us to pay an early termination fee under the terms of the total return swap described below.

        We also entered into a total return swap with respect to the Series A preferred shares. On the initial closing date of the total return swap in 2001, the counterparty through its hedge providers purchased the Series A preferred shares for $191 million plus accrued and unpaid dividends. We subsequently reduced the equity notional amount of the total return swap to $126 million and, in February 2009, reduced the equity notional amount to $75 million. On settlement of the total return swap at the end of the term, we will owe the counterparty the difference between the actual sale price received by the counterparty for the Series A preferred shares and the equity notional amount if the sale price is less than the equity notional amount. Upon termination of the total return swap, we expect that we will exercise our right to repurchase the Series A preferred shares for a net price equal to the equity notional amount.

        Under the terms of the total return swap: (i) the counterparty pays us the total return on the Series A preferred shares (periodic dividends plus positive changes in the equity value of the Series A preferred shares upon termination of the swap); and (ii) we pay the counterparty a spread to LIBOR, as well as any negative changes in the equity value of the Series A preferred shares upon termination of the swap. All periodic dividends, changes in equity value of the Series A preferred shares and interest payments are charged to earnings as incurred.

        If the average price of our outstanding 6.5% medium-term notes due 2012 decreases by a certain amount, we are required to post maintenance collateral. Once the margin-posting requirement is triggered, if the average price increases by 5% or more, any excess collateral may be returned us. If the average price decreases by 5% or more, we would be required to post additional collateral.

        If we default on other debt of at least $25 million and upon certain other events, the counterparty would have the right to sell the Series A preferred shares to a third party and terminate the swap. We would then owe the counterparty the difference between the actual sale price received by the counterparty and the equity notional amount if the sale price is less than the equity notional amount. If the sale price is greater than the equity notional amount, the counterparty would owe us the difference between the sale price and the equity notional amount. Subsequent to such termination of the swap, we may, at our option, exercise our call right and repurchase the preferred shares from the third party for a purchase price of $198 million.

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        In February 2009, we and the counterparty agreed to extend the term of the total return swap until June 30, 2010 and reduce the equity notional amount. In May 2009, we and the counterparty amended the total return swap to change the termination date to March 31, 2010. Because the term expires within the next 12 months, the Series A preferred shares are classified under Long-term debt due within one year on our consolidated balance sheets.

Off-Balance Sheet Accounts Receivables Securitizations Programs

        Our off-balance sheet financing activities are limited to participation in accounts receivable securitization programs that expire during the first quarter of 2010. We have been engaged in the current programs since 1999 to obtain lower financing rates than those available from other sources. As of December 31, 2008, the capacity of trade accounts receivable sold to a third party on a revolving basis was a maximum of $300 million, which represented a $50 million decrease in the programs as compared to December 31, 2007. On February 13, 2009, the maximum amount of the programs was reduced from $300 million to $190 million and the expiration date was changed from June 2010 to February 2010. In June 2009, the maximum amount of the programs was reduced further to $130 million. At September 30, 2009 and December 31, 2008, $119 million and $175 million, respectively, were sold under the programs. Of the total amount, $59 million and $84 million, respectively, were sold via a special purpose entity ("SPE") that is 100% owned by us. The SPE isolates the sold receivables and the related cash collections for the exclusive benefit of the purchasers. We have no right to any cash collected from these receivables; therefore, neither the receivables nor any obligation to the purchasers is reflected in our consolidated financial statements. We conduct no other business through SPE's.

        In November 2006, INEOS NOVA entered into a five-year, €120 million European accounts receivable securitization program. Our 50% share of the outstanding balance was €24 million and €25 million at September 30, 2009 and December 31, 2008, respectively. The program expires in November 2011. INEOS NOVA entered into a $150 million North American accounts receivable securitization program in the third quarter of 2008 which expires in July 2010. Our 50% share of the outstanding balance was $24 million and $27 million at September 30, 2009 and December 31, 2008, respectively.

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THE EXCHANGE OFFER

        We hereby offer to exchange a like principal amount of exchange notes representing the same underlying indebtedness as the outstanding notes for any or all outstanding notes on the terms and subject to the conditions set forth in this prospectus and accompanying letter of transmittal. We refer to the offer as the "exchange offer." You may tender some or all of your outstanding notes pursuant to the exchange offer.

        This prospectus, together with the letter of transmittal, is first being sent to all holders of outstanding notes known to us on or about            , 2010. Our obligation to accept outstanding notes for exchange notes pursuant to the exchange offer is subject to certain conditions set forth under "Conditions to the Exchange Offer" below. We currently expect that each of the conditions will be satisfied and that no waivers will be necessary.

Purpose and Effect of the Exchange Offer

        We sold the outstanding notes on October 16, 2009 to Barclays Capital Inc., HSBC Securities (USA) Inc., RBC Capital Markets Corporation and TD Securities (USA) LLC pursuant to a purchase agreement. These initial purchasers subsequently sold the outstanding notes to:

•

"qualified institutional buyers" ("QIBs"), as defined in Rule 144A under the Securities Act, in reliance on Rule 144A; and



•

persons in offshore transactions in reliance on Regulation S under the Securities Act.

        As a condition to the initial sale of the outstanding notes, we entered into a registration rights agreement with Barclays Capital Inc., HSBC Securities (USA) Inc., RBC Capital Markets Corporation and TD Securities (USA) LLC, as representatives of the other initial purchasers of the outstanding notes. Pursuant to the registration rights agreement, we agreed to:

•

file with the SEC by January 14, 2010 a registration statement under the Securities Act with respect to the issuance of the exchange notes in an exchange offer; and



•

use our commercially reasonable efforts to cause the registration statement to become effective under the Securities Act on or before April 14, 2010.

        We agreed to issue and exchange the exchange notes for all outstanding notes validly tendered and not validly withdrawn prior to the expiration of the exchange offer. The filing of the registration statement is intended to satisfy some of our obligations under the registration rights agreement and the purchase agreement.

        The term "holder" with respect to the exchange offer means any person in whose name outstanding notes are registered on the trustee's books or any other person who has obtained a properly completed bond power from the registered holder, or any person whose outstanding notes are held of record by The Depository Trust Company, which we refer to as "DTC," who desires to deliver the outstanding notes by book-entry transfer at DTC.

        If we fail to comply with certain obligations under the registration rights agreement, we will be required to pay additional interest to holders of the outstanding notes and the exchange notes required to be registered on a shelf registration statement. Please read the section "Exchange offer; registration rights" for more details regarding the registration rights agreement.

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        Each holder of outstanding notes that wishes to exchange their outstanding notes for exchange notes representing the same underlying indebtedness in the exchange offer will be required to make the following written representations:

•

any exchange notes to be received by such holder will be acquired in the ordinary course of its business;



•

such holder has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes in violation of the provisions of the Securities Act;



•

such holder is not an affiliate of NOVA Chemicals, as defined by Rule 405 of the Securities Act, or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; and



•

it is not engaged in, and does not intend to engage in, a distribution of exchange notes.

        Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where the broker-dealer acquired the outstanding notes as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. Please see "Plan of Distribution."

Terms of the Exchange Offer

        Based on the terms and conditions in this prospectus and in the letter of transmittal, we will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes properly surrendered pursuant to the exchange offer and not withdrawn prior to the expiration date. Outstanding notes may be surrendered only in integral multiples of $1,000. The form and terms of the exchange notes are the same as the form and terms of the outstanding notes except that:

•

the exchange notes will be registered under the Securities Act and will not bear legends restricting the transfer of the exchange notes; and



•

holders of the exchange notes will not be entitled to any of the registration rights of holders of outstanding notes under the registration rights agreement.

        The exchange notes will evidence the same indebtedness as the outstanding notes, which they replace, and will be issued under, and be entitled to the benefits of, the same indenture, which authorized the issuance of the outstanding notes. As a result, the exchange notes and the outstanding notes will be treated as a single class of debt securities under the indenture.

        As of the date of this prospectus, $350 million in aggregate principal amount of the outstanding 2016 notes and $350 million in aggregate principal amount of the outstanding 2019 notes are outstanding. All of the notes are registered in the name of Cede & Co., as nominee for DTC. Solely for reasons of administration, we have fixed the close of business on,                  , 20      as the record date for the exchange offer for purposes of determining the persons to whom this prospectus and the letter of transmittal will be mailed initially. There will be no fixed record date for determining holders of the outstanding notes entitled to participate in this exchange offer.

        In connection with the exchange offer, neither the Business Corporations Act (New Brunswick), our governing statute, nor the indenture governing the notes gives you any appraisal or dissenters' rights. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement and the applicable requirements of the Securities Exchange Act and the related SEC rules and regulations.

        For all relevant purposes, we will be regarded as having accepted properly surrendered outstanding notes if and when we give oral or written notice of our acceptance to the exchange agent. The

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exchange agent will act as agent for the surrendering holders of outstanding notes for the purposes of receiving the exchange notes from us.

        If you surrender outstanding notes in the exchange offer, you will not be required to pay brokerage commissions or fees. In addition, subject to the instructions in the letter of transmittal, you will not have to pay transfer taxes for the exchange of outstanding notes. We will pay all charges and expenses, other than certain applicable taxes described under "—Fees and Expenses."

Expiration Date; Extensions; Amendments

        The "expiration date" is 5:00 p.m., New York City time on            , 2010 unless we extend the exchange offer, in which case the expiration date is the latest date and time to which we extend the exchange offer.

        In order to extend the exchange offer, we will:

•

notify the exchange agent of any extension by oral or written notice; and



•

issue a press release or other public announcement which would include disclosure of the approximate number of outstanding notes deposited and which would be issued prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

        We reserve the right:

•

to delay accepting any outstanding notes;



•

to extend the exchange offer;



•

to terminate or amend the exchange offer, and not accept for exchange any outstanding notes not previously accepted for exchange, upon the occurrence of any of the events set forth in "—Conditions of the Exchange Offer" by giving oral or written notice to the exchange agent; or



•

to waive any conditions or otherwise amend the exchange offer in any respect, by giving oral or written notice to the exchange agent.

        Any delay in acceptance, extension, termination or amendment will be followed as soon as practicable by a press release or other public announcement or post-effective amendment to the registration statement.

        If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose that amendment by means of a prospectus supplement or post-effective amendment that will be distributed to the holders. We will also extend the exchange offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the holders, if the exchange offer would otherwise expire during the five to ten business day period.

        We will have no obligation to publish, advertise or otherwise communicate any public announcement of any delay, extension, amendment (other than amendments constituting a material change to the exchange offer) or termination that we may choose to make, other than by making a timely release to an appropriate news agency.

Interest on the Exchange notes

        The exchange notes will accrue cash interest on the same terms as the outstanding notes, payable semi-annually in arrears on May 1 and November 1 of each year, commencing May 1, 2010. Outstanding notes accepted for exchange will not receive accrued interest thereon at the time of exchange. However, each exchange note will bear interest from the most recent date to which interest

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has been paid on the outstanding notes, or if no interest has been paid on the outstanding notes or the exchange notes from October 16, 2009.

Resale of the Exchange notes

        We believe that you will be allowed to resell the exchange notes to the public without registration under the Securities Act, and without delivering a prospectus that satisfies the requirements of Section 10 of the Securities Act, if you can make the representations set forth above under "Exchange Offer Summary—Summary of the Terms of the Exchange Offer—Procedures for participating in the exchange offer." However, if you intend to participate in a distribution of the exchange notes, you must comply with the registration requirements of the Securities Act and deliver a prospectus in connection with resales, unless an exemption from registration is otherwise available. In addition, you will be subject to additional restrictions if you are an "affiliate" of NOVA Chemicals as defined under Rule 405 of the Securities Act. You will be required to represent to us in the letter of transmittal accompanying this prospectus that you meet these conditions exempting you from the registration requirements.

        Our belief that you will be allowed to resell the exchange notes without registration is based on interpretations of the SEC expressed in some of the SEC's no-action letters to other issuers in exchange offers like ours. However, we have not asked the SEC to consider this particular exchange offer in the context of a no-action letter. Therefore, you cannot be certain that the SEC will treat it in the same way it has treated other exchange offers in the past.

        A broker-dealer that has bought outstanding notes for market-making or other trading activities has to deliver a prospectus to resell any exchange notes it receives for its own account in the exchange offer. This prospectus may be used by a broker-dealer to resell any of its exchange notes. We have agreed in the registration rights agreement to send this prospectus to any broker-dealer that requests copies in the letter of transmittal for a period of up to one year after expiration date of the exchange offer. See "Plan of Distribution" for more information regarding broker-dealers.

Procedures for Tendering

General Procedures

        If you wish to surrender outstanding notes you must:

•

complete, sign and date the letter of transmittal, or a facsimile thereof, or send a timely confirmation of a book-entry transfer of your outstanding notes to the exchange agent;



•

have the signatures guaranteed if required by the letter of transmittal; and



•

mail or deliver the required documents to the exchange agent at the address appearing below under "—Exchange Agent" for receipt prior to the expiration date.

        In addition, either:

•

certificates for your outstanding notes must be received by the exchange agent along with the letter of transmittal;



•

a timely confirmation of a book-entry transfer of the outstanding notes into the exchange agent's account at DTC, pursuant to the procedure for book-entry transfer described below, must be received by the exchange agent prior to the expiration date; or



•

you must comply with the procedures described below under "—Guaranteed Delivery Procedures."

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        THE METHOD OF DELIVERY TO THE EXCHANGE AGENT OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR ELECTION AND RISK. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY OUTSTANDING NOTES TO US. YOU MAY REQUEST THAT YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE PERFORM THESE TRANSACTIONS FOR YOU.

        If you do not withdraw your surrender of outstanding notes prior to the expiration date, you will be regarded as agreeing to surrender the outstanding notes in accordance with the terms and conditions in this offer.

        If you are a beneficial owner of the outstanding notes and your outstanding notes are held through a broker, dealer, commercial bank, trust company or other nominee and you want to surrender your outstanding notes, you should contact your intermediary promptly and instruct it to surrender the outstanding notes on your behalf.

Signatures and Guarantee of Signatures

        Signatures on a letter of transmittal or a notice of withdrawal described below under "—Withdrawal of Tenders," as the case may be, must generally be guaranteed by an eligible institution. You can submit a letter of transmittal without guarantee if you surrender your outstanding notes (a) as a registered holder and you have not completed the box titled "Special Delivery Instruction" on the letter of transmittal or (b) for the account of an eligible institution. In the event that signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantee must be made by:

•

a member firm of a registered national securities exchange or of the National Association of Securities Dealers;



•

a commercial bank or trust company having an office or correspondent in the United States; or



•

an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized signature guarantee programs identified in the letter of transmittal.

        If you sign the letter of transmittal even though you are not the registered holder of any outstanding notes listed in the letter of transmittal, your notes must be endorsed or accompanied by a properly completed bond power, signed by the registered holder exactly as the registered holder's name appears on the outstanding notes.

        In connection with any surrender of outstanding notes in definitive certificated form, if you sign the letter of transmittal or any outstanding notes or bond powers in your capacity as trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or if you are otherwise acting in a fiduciary or representative capacity, you should indicate this when signing. Unless waived by us, you must submit with the letter of transmittal evidence satisfactory to us of your authority to act in the particular capacity.

        The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may utilize DTC's automated tender offer program to surrender outstanding notes.

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Acceptance of Tenders

        Your tender of outstanding notes will constitute an agreement between you and us governed by the terms and conditions provided in this prospectus and in the letter of transmittal.

        We will be deemed to have received your tender as of the date when your duly signed letter of transmittal accompanied by your outstanding notes tendered, or a timely confirmation of a book-entry transfer of these notes into the exchange agent's account at DTC with an agent's message, or a notice of guaranteed delivery from an eligible institution is received by the exchange agent.

        All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of surrendered outstanding notes will be determined by us in our sole discretion, which will be final and binding.

        We reserve the absolute right to reject any and all outstanding notes not properly surrendered. Nor will we accept any outstanding notes if our acceptance of them would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of surrender as to particular outstanding notes.

        Unless waived, you must cure any defects or irregularities in connection with surrenders of outstanding notes within the time period we will determine. Although we intend to notify holders of defects or irregularities in connection with surrenders of outstanding notes, neither we, the exchange agent nor anyone else will be liable for failure to give this notice. Surrenders of outstanding notes will not be deemed to have been made until any defects or irregularities have been cured or waived.

        We do not currently intend to acquire any outstanding notes that are not surrendered in the exchange offer or to file a registration statement to permit resales of any outstanding notes that are not surrendered pursuant to the exchange offer. We reserve the right in our sole discretion to purchase or make offers for any outstanding notes that remain outstanding after the expiration date. To the extent permitted by law, we also reserve the right to purchase outstanding notes in the open market, in privately negotiated transactions or otherwise. The terms of any future purchases or offers could differ from the terms of the exchange offer.

Effect of Surrendering Outstanding notes

        By surrendering outstanding notes pursuant to the exchange offer, you will be telling us that, among other things:

•

you have full power and authority to surrender, sell, assign and transfer the outstanding notes surrendered;



•

we will acquire good title to the outstanding notes being surrendered, free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sale agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim when the outstanding notes are accepted by us;



•

you are acquiring the exchange notes in the ordinary course of your business;



•

you are not engaged in, and do not intend to engage in, the distribution of the exchange notes;



•

you have no arrangement or understanding with any person to participate in the distribution of the exchange notes;



•

you acknowledge and agree that if you are a broker-dealer registered under the Exchange Act or you are participating in the exchange offer for the purpose of distributing the exchange notes, you must comply with the registration and prospectus delivery requirements of the Securities Act

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in connection with a secondary resale of the exchange notes, and you understand that you cannot rely on the position of the SEC's staff in their no-action letters;

•

you understand that a secondary resale transaction described above and any resales of exchange notes obtained by you in exchange for outstanding notes acquired by you directly from us should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508 of Regulation S-K of the SEC; and



•

you are not an "affiliate," as defined in Rule 405 under the Securities Act, of NOVA Chemicals.

        If you are a broker-dealer and you will receive exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities or other trading activities, you must acknowledge in the letter of transmittal that you will deliver a prospectus in connection with any resale of your exchange notes. See "Plan of Distribution."

Return of Outstanding Notes

        If any surrendered outstanding notes are not accepted for any reason described in this prospectus or if outstanding notes are withdrawn or are submitted for a greater principal amount than you desire to exchange, those outstanding notes will be returned without expense as promptly as practicable (a) to the person who surrendered them or (b) in the case of outstanding notes surrendered by book-entry transfer into the exchange agent's account at DTC, the outstanding notes will be credited to an account maintained with DTC.

Book-Entry Delivery Procedure

        Any financial institution that is a participant in DTC's system may make book-entry deliveries of outstanding notes by causing DTC to transfer these outstanding notes into the exchange agent's account at DTC according to DTC's procedures for transfer. To effectively tender notes through DTC, the financial institution that is a participant in DTC will electronically transmit its acceptance through the Automatic Transfer Offer Program. DTC will then edit and verify the acceptance and send an agent's message to the exchange agent for its acceptance. An agent's message is a message transmitted by DTC to the exchange agent stating that DTC has received an express acknowledgment from the participant in DTC tendering the outstanding notes that the participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce this agreement against the participant. The exchange agent will make a request to establish an account for the outstanding notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus.

        A delivery of outstanding notes through a book-entry transfer into the exchange agent's account at DTC will only be effective if an agent's message or the letter of transmittal or a facsimile of the letter of transmittal with any required signature guarantees and any other required documents is transmitted to and received by the exchange agent at the address indicated below under "—Exchange Agent" for its receipt on or before the expiration date unless the guaranteed delivery procedures described below are complied with. Delivery of documents to DTC does not constitute delivery to the exchange agent.

Guaranteed Delivery Procedures

        If you wish to surrender your outstanding notes and (a) your outstanding notes are not readily available so you can meet the expiration date deadline or (b) you cannot deliver your outstanding notes, the letter of transmittal or any other required documents to the exchange agent prior to the expiration date, you may still participate in the exchange offer if:

•

the surrender is made through an eligible institution;

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•

prior to the expiration date, the exchange agent receives from the eligible institution a properly completed and duly executed notice of guaranteed delivery substantially in the form provided by us, by facsimile transmission, mail or hand delivery, containing the name and address of the holder, the certificate number(s) of the outstanding notes, if applicable, and the principal amount of outstanding notes surrendered. The notice of guaranteed delivery must also state that the surrender is being made thereby and guarantee that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, together with the certificate(s) representing the outstanding notes in proper form for transfer or a book-entry confirmation with an agent's message, as the case may be, and any other required documents, will be deposited by the eligible institution with the exchange agent; and



•

the properly executed letter of transmittal, as well as the certificate(s) representing all surrendered outstanding notes in proper form for transfer or a book-entry confirmation, as the case may be, and all other documents required by the letter of transmittal are received by the exchange agent within three New York Stock Exchange trading days after the expiration date.

Withdrawal of Tenders

        Except as otherwise provided in this prospectus, you may withdraw your surrender of outstanding notes at any time prior to the expiration date.

        To withdraw a surrender of outstanding notes in the exchange offer, the exchange agent must receive a written or facsimile transmission notice of withdrawal at its address set forth herein prior to the expiration date. Any notice of withdrawal must:

•

specify the name of the person having deposited the outstanding notes to be withdrawn;



•

identify the outstanding notes to be withdrawn, including the certificate number or numbers, if applicable, and principal amount of the outstanding notes; and



•

be signed by the holder in the same manner as the original signature on the letter of transmittal by which the outstanding notes were tendered or be accompanied by documents of transfer sufficient to permit the trustee to register the transfer of these notes into the name of the person withdrawing the tender.

        All questions as to the validity, form, eligibility and time of receipt of notices will be determined by us, in our sole discretion, and our determination shall be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly surrendered for purposes of the exchange offer, and no exchange notes will be issued unless the outstanding notes so withdrawn are validly retendered. Properly withdrawn outstanding notes may be resurrendered by following one of the procedures described above under "—Procedures for Tendering" at any time prior to the expiration date.

Conditions of the Exchange Offer

        Notwithstanding any other term of the exchange offer, or any extension of the exchange offer, we do not have to accept for exchange, or exchange notes for, any outstanding notes, and we may terminate the exchange offer before acceptance of the outstanding notes, if:

•

any statute, rule or regulation has been enacted, or any action has been taken by any court or governmental authority that, in our reasonable judgment, seeks to or would prohibit, restrict or otherwise render consummation of the exchange offer illegal; or



•

any change, or any development that would cause a change, in our business or financial affairs has occurred that, in our sole judgment, might materially impair our ability to proceed with the

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exchange offer or that would materially impair the contemplated benefits to us of the exchange offer; or

•

a change occurs in the current interpretations by the staff of the SEC that, in our reasonable judgment, might materially impair our ability to proceed with the exchange offer.

If we, in our sole discretion, determine that any of the above conditions is not satisfied, we may:

•

refuse to accept any outstanding notes and return all surrendered outstanding notes to the surrendering holders;



•

extend the exchange offer and retain all outstanding notes surrendered prior to the expiration date, subject to the holders' right to withdraw the surrender of the outstanding notes; or



•

waive any unsatisfied conditions regarding the exchange offer and accept all properly surrendered outstanding notes that have not been withdrawn. If this waiver constitutes a material change to the exchange offer, we will promptly disclose the waiver by means of a prospectus supplement or post-effective amendment to the registration statement that includes this prospectus that will be distributed to the holders. We will also extend the exchange offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the holders, if the exchange offer would otherwise expire during the five to ten business day period.

Exchange Agent

        U.S. Bank National Association is the exchange agent for the exchange offer. You should direct any questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notice of guaranteed delivery to the exchange agent, addressed as follows:

        To Confirm by Telephone: (800) 934-6802

        Facsimile Transmissions (eligible institutions only): (651) 495-8158

        U.S. Bank National Association also serves as trustee under the indenture.

Fees and Expenses

        We will pay for the expenses of the exchange offer. The principal solicitation is being made by mail. However, additional solicitation may be made by facsimile transmission, e-mail, telephone or in person by our officers and regular employees.

        We have not retained a dealer-manager for the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees and out-of-pocket expenses.

        We will pay any transfer taxes applicable to the exchange of outstanding notes. If, however, a transfer tax is imposed for any reason other than the exchange, then the amount of any transfer taxes will be payable by the person surrendering the notes. If you do not submit satisfactory evidence of payment of taxes or of an exemption with the letter of transmittal, the amount of those transfer taxes will be billed directly to you.

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Consequences of Failing to Exchange Outstanding Notes

        Participation in the exchange offer is voluntary. You are urged to consult your financial and tax advisors in making your decisions on what action to take.

        Outstanding notes that are not exchanged will remain "restricted securities" within the meaning of Rule 144(a)(3)(iii) of the Securities Act. Accordingly, they may not be offered, sold, pledged or otherwise transferred except:

•

to a person who the seller reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A;



•

in an offshore transaction complying with Rule 904 of Regulation S under the Securities Act;



•

pursuant to an exemption from registration under the Securities Act provided by Rule 144, if available; or



•

pursuant to an effective registration statement under the Securities Act.

Accounting Treatment

        For accounting purposes, we will recognize no gain or loss as a result of the exchange offer. The expenses of the exchange offer will be amortized over the remaining term of the notes.

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DESCRIPTION OF EXCHANGE NOTES

General

        The form and terms of the exchange notes and the outstanding notes are identical in all material respects, except that transfer restrictions and registration rights provisions applicable to the outstanding notes do not apply to the exchange notes.

        The outstanding notes were, and the exchange notes will be, issued under an indenture (the "Indenture") dated as of October 16, 2009 by and between the Company and U.S. Bank National Association, as Trustee (the "Trustee"). The following summary of the Indenture does not include all of the information included in the Indenture and may not include all of the information that you would consider important. This summary is qualified by reference to the Trust Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of the Indenture, including the definitions of terms therein and those terms made a part of the Indenture by reference to the TIA as in effect on the date of the Indenture.

        Definitions of certain terms used in this section are set forth under "Certain Definitions" and throughout this description. Capitalized terms that are used but not otherwise defined herein have the meanings assigned to them in the Indenture, and those definitions are incorporated herein by reference. For purposes of this section, references to the "Company" include only NOVA Chemicals Corporation and not its Subsidiaries, all references to the "2016 Notes" shall be deemed to refer collectively to the 2016 outstanding notes and 2016 exchange notes, all references to the "2019 Notes" shall be deemed to refer collectively to the 2019 outstanding notes and 2019 exchange notes, and all references to "Notes" shall be deemed to refer collectively to the outstanding notes and the exchange notes.

Brief Description of the Notes

        The 2016 exchange notes offered hereby are limited in aggregate principal amount to $350,000,000 and will mature on November 1, 2016. The 2019 exchange notes offered hereby are limited in aggregate principal amount to $350,000,000 and will mature on November 1, 2019. We can issue an unlimited amount of additional Notes of either series under the Indenture in the future. Any additional Notes that we issue in the future will be identical in all respects to either the 2016 exchange notes or the 2019 exchange notes that we are issuing now, except that Notes issued in the future may have different issuance prices and will have different issuance dates. Notwithstanding the foregoing, we will not issue additional Notes under the same CUSIP number unless such additional Notes have no more than a de minimis amount of original issue discount or such issuance would constitute a "qualified reopening" for U.S. federal income tax purposes.

        The Notes will be issued in fully registered form only, without coupons, in denominations of $2,000 and integral multiples of $1,000 in excess thereof. Initially, the Trustee will act as paying agent and registrar for the Notes. The Notes may be presented for registration or transfer and exchange at the offices of the registrar, which initially will be the Trustee's corporate trust office. The Company may change any paying agent and registrar without notice to holders of the Notes. The Company will pay principal (and premium, if any) on the Notes at the Trustee's corporate office in New York, New York. Interest may be paid at the Trustee's corporate trust office, by check mailed to the registered address of the holders or by wire transfer if instructions therefor are furnished by a holder. Any 2016 outstanding notes or 2019 outstanding notes that remain outstanding after the completion of the exchange offer, together with the exchange notes of the same series issued in the exchange offer, will be treated as a single class of securities under the Indenture.

        The 2016 Notes will pay interest at the rate of 8.375% per annum and the 2019 Notes will pay interest at the rate of 8.625% per annum, which, in each case, will be payable semi-annually in arrears

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on each May 1 and November 1, commencing on May 1, 2010, and will initially accrue from the date of issuance and thereafter from the last date to which interest has been paid. The Company will pay interest to holders of record on the April 15 and October 15 immediately preceding each interest payment date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

        So long as required by its governing legislation, the Company shall cause to be kept, by the Company or an appropriately registered trust corporation, a central securities register which complies with the requirements of such legislation. Additionally, the Company will cause to be recorded promptly in the central securities register the particulars of each issue, exchange or transfer of Notes. The Trustee shall maintain at its corporate trust office a branch register containing the same information with respect to each entry contained therein as contained in the central register. In the event of a conflict between the information contained in the central register and the information contained in a branch register, the information contained in the central register shall prevail.

Ranking

        The obligations of the Company evidenced by the Notes will rank:

•

senior in right of payment to all future subordinated obligations of the Company, if any;



•

pari passu in right of payment with all other existing and future unsubordinated Debt of the Company, including our Credit Agreement and other revolving credit facilities and our 7.85% senior notes due 2010, 6.5% senior notes due 2012, senior floating rate (six-month LIBOR plus 3.125%) notes due 2013 and 7.875% debentures due 2025; and



•

effectively subordinated in right of payment to the Company's existing and future secured obligations, including borrowings under the Credit Agreement, to the extent of the value of the assets securing such obligations.

        As of September 30, 2009, on an as adjusted basis after giving effect to the private placement and the refinancing transactions, we would have had $1,729 million of senior unsecured indebtedness outstanding, including the Notes, and $19 million of senior secured indebtedness outstanding, including borrowings under our Credit Agreement. As of September 30, 2009, we would also have had an additional $299 million of unused borrowing capacity available under our Credit Agreement (after giving effect to approximately $47 million of outstanding letters of credit), all of which would be secured if borrowed.

No Subsidiary Guarantees

        The Notes will not be guaranteed by any of our Subsidiaries. On a pro forma basis after giving effect to the private placement and use of the proceeds therefrom, as of September 30, 2009, our subsidiaries would have had $19 million of long-term indebtedness, and approximately $428 million of trade payables, to which the Notes would have been structurally subordinated. In addition, under our Credit Agreement, all of our restricted subsidiaries are required to provide guarantees, and there is no limitation on any other guarantees. The Indenture does not provide for similar guarantees of the Notes to the extent we cause any restricted subsidiary to issue such a guarantee under our Credit Agreement. See "Description of Other Indebtedness and Preferred Stock—Credit Facility."

Optional Redemption

        Except as set forth below and as described below under the caption "Change of Control Repurchase and Redemption," the Notes may not be redeemed at the option of the Company prior to their maturity.

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2016 Notes

        At any time on or after November 1, 2013, the Company may, at its option, redeem the 2016 Notes, in whole or in part, at the redemption prices (expressed as a percentage of the principal amount thereof) set forth below, together with accrued and unpaid interest thereon, if any, to the redemption date (subject to the rights of holders of 2016 Notes on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning November 1 of the years indicated:

        At any time prior to November 1, 2012, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2016 Notes issued under the Indenture at a redemption price (expressed as a percentage of principal amount thereof) equal to 108.375% of the principal amount of the 2016 Notes redeemed, together with accrued and unpaid interest thereon, if any, to the redemption date (subject to the rights of holders of 2016 Notes on the relevant record date to receive interest due on the relevant interest payment date), with the net cash proceeds of one or more Equity Offerings; provided that:

(1)

at least 65% of the aggregate principal amount of the 2016 Notes originally issued under the Indenture (excluding 2016 Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and



(2)

the redemption occurs within 60 days of the date of the closing of such Equity Offering.

        At any time prior to November 1, 2013, the 2016 Notes will be redeemable, on any one or more occasions, in whole or in part, at the option of the Company, at a redemption price equal to the sum of:

•

100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date, plus



•

the Make Whole Amount.

2019 Notes

        At any time on or after November 1, 2014, the Company may, at its option, redeem the 2019 Notes, in whole or in part, at the redemption prices (expressed as a percentage of the principal amount thereof) set forth below, together with accrued and unpaid interest thereon, if any, to the redemption date (subject to the rights of holders of 2019 Notes on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning November 1 of the years indicated:

        At any time prior to November 1, 2012, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2019 Notes issued under the Indenture at a

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redemption price (expressed as a percentage of principal amount thereof) equal to 108.625% of the principal amount of the 2019 Notes redeemed, together with accrued and unpaid interest thereon, if any, to the redemption date (subject to the rights of holders of 2019 Notes on the relevant record date to receive interest due on the relevant interest payment date), with the net cash proceeds of one or more Equity Offerings; provided that:

(1)

at least 65% of the aggregate principal amount of the 2019 Notes originally issued under the Indenture (excluding 2019 Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and



(2)

the redemption occurs within 60 days of the date of the closing of such Equity Offering.

        At any time prior to November 1, 2014, the 2019 Notes will be redeemable, on any one or more occasions, in whole or in part, at the option of the Company, at a redemption price equal to the sum of:

•

100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date, plus



•

the Make Whole Amount.

        For purposes of the foregoing discussion of the optional redemption feature of the 2016 Notes and the 2019 Notes, the following definitions are applicable:

        "Comparable Treasury Issue" means the United States Treasury security selected by a Reference Treasury Dealer as having a maturity most nearly equal to the period from the redemption date to November 1, 2013 (for purposes of the 2016 Notes) and November 1, 2014 (for purposes of the 2019 Notes); provided, however, that if the period from the redemption date to November 1, 2013 (in the case of the 2016 Notes) and November 1, 2014 (in the case of the 2019 Notes) is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

        "Comparable Treasury Price" means, with respect to any redemption date,

•

the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities"; or



•

if such release (or any successor release) is not published or does not contain such price on such business day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

        "Make Whole Amount" means, with respect to any Note; the greater of

(a)

1.0% of the principal amount of such Note; and



(b)

the excess, if any, of (1) the amount equal to the sum of the present values of (x) the remaining scheduled payments of interest of such Note to be redeemed through November 1, 2013 (with respect to the 2016 Notes) and November 1, 2014 (with respect to the 2019 Notes) and (y) the redemption price of such Note at November 1, 2013 (with respect to the 2016 Notes) and November 1, 2014 (with respect to the 2019 Notes), in each case, discounted to the redemption date (assuming a 360-day year consisting of twelve 30-day months) at the

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Special Adjusted Treasury Rate from the dates on which such interest and redemption price would have been payable over (2) the principal amount of such Note being redeemed.

        "Reference Treasury Dealer" means each of (1) Barclays Capital Inc. or any successor (or, if the foregoing shall not be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer) and (2) any Primary Treasury Dealer selected by the Company.

        "Reference Treasury Dealer Quotation" means, with respect to any Reference Treasury Dealer on any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date.

        "Special Adjusted Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, plus 0.50%.

Selection and Notice

        If fewer than all the 2016 Notes or all the 2019 Notes, as the case may be, issued under the Indenture are to be redeemed at any time, the Trustee will select the 2016 Notes or 2019 Notes, as applicable, for redemption on a pro rata basis (or, in the case of Notes issued in global form, based on a method that most nearly approximates pro rata selection as the Trustee deems fair and appropriate) unless otherwise required by law or depositary requirements; provided that no Notes of $2,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to the redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A exchange note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest stops accruing on Notes or portions of them called for redemption.

Sinking Fund

        There will be no mandatory sinking fund payments for the Notes.

Tax Gross-Up Amounts

        The Indenture provides that payments made by the Company under or with respect to the Notes will be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, interest, assessment or other governmental charge imposed or levied by or on behalf of the Government of Canada or any other jurisdiction in which such payments are made on behalf of the Company or in which the Company is resident for tax purposes, including, in each case, any province or territory thereof or by any authority or agency therein or thereof (the "Relevant Tax Jurisdiction") having power to tax ("Taxes"), unless the Company is required to withhold or deduct Taxes under the law of the Relevant Tax Jurisdiction or by the interpretation or administration thereof. If, after the Issue Date, the Company or Trustee is so required to withhold or deduct any amount for or on account of Taxes (other than United States "backup" withholding) from any payment made under or with respect to the Notes, the Company will pay to each holder of Notes such additional amounts

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("Tax Gross-Up Amounts") as may be necessary so that the net amount received by such holder (including the Tax Gross-Up Amounts) after such withholding or deduction (including any deduction or withholding in respect of the Tax Gross-Up Amounts) will not be less than the amount such holder would have received if such Taxes had not been withheld or deducted; provided that no Tax Gross-Up Amounts will be payable with respect to a payment made to a holder of the Notes (to the extent that any of the following apply, such holder shall be referred to as an "Excluded Holder"):

(a)

with which the Company does not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment; or



(b)

which is subject to such Taxes by reason of its being connected with the Relevant Tax Jurisdiction or any province or territory thereof otherwise than by the mere holding of the Notes or the receipt of payments thereunder; or



(c)

which fails to comply with any certification, identification, information, documentation or other reporting requirement if compliance is required by applicable law or regulation as a condition to exemption from or a reduction in the rate of deduction or withholding of Taxes, but only to the extent the holder is legally entitled to comply with such requirements and only if such holder received a written request from the Company delivered reasonably in advance of the date the compliance is required.

        The Company will also:

(a)

make such withholding or deduction, and



(b)

remit the full amount deducted or withheld to the relevant authority in accordance with applicable law.

        If the Company is required to withhold or deduct any such amounts on account of Taxes, the Company will furnish to holders of Notes copies of the Information Return NR4 and any other information returns applicable in Canada within 30 days of the date that each such return is required to be filed with the Canadian taxing authorities. The Company will indemnify and hold harmless each holder of Notes (other than an Excluded Holder) and upon written request reimburse each such holder for the amount of:

(a)

any Taxes so levied or imposed and paid by such holder as a result of payments made under or with respect to the Notes (to the extent not covered by Tax Gross-Up Amounts),



(b)

any liability (including penalties, interest and expense) of such holder arising therefrom or with respect thereto, and



(c)

any Taxes levied or imposed on such holder with respect to any reimbursement under clause (a) or (b) above.

        If the Company becomes obligated to pay Tax Gross-Up Amounts with respect to such payment, then at least 30 days prior to each date on which any payment under or with respect to the Notes is due and payable, the Company will deliver to the Trustee an Officers' Certificate stating the fact that such Tax Gross-Up Amounts will be payable, the amounts so payable, and setting forth such other information as is necessary to enable the Trustee to pay such Tax Gross-Up Amounts to the holders of the Notes on the payment date. Whenever in the Indenture there is mentioned, in any context:

(a)

the payment of principal (and premium, if any),



(b)

purchase prices in connection with a repurchase of Notes,



(c)

interest, or



(d)

any other amount payable on or with respect to any of the Notes,

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such mention shall be deemed to include mention of the payment of Tax Gross-Up Amounts provided for in this section to the extent that, in such context, Tax Gross-Up Amounts are, were or would be payable in respect thereof.

        The obligation to pay Tax Gross-Up Amounts and any indemnification payments under the terms and conditions described above will survive any termination, defeasance or discharge of the Indenture.

Redemption For Tax Reasons

        The Company may at any time, upon not less than 30 nor more than 60 days prior written notice, redeem in whole but not in part the outstanding Notes at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption if it has become or would become obligated on or before the next interest payment date to pay any Tax Gross-Up Amounts in respect of the Notes as a result of any change from the date of this prospectus (including any announced prospective change) in any laws or regulations of the Relevant Tax Jurisdiction or any political subdivision or taxing authority thereof, or any change from the date of this prospectus in any interpretation or application of such laws or regulations by any legislative body, court, governmental agency, taxing authority or regulatory authority (including any such change resulting from the enactment of any legislation or the publication of any judicial decision or regulatory or administrative determination) of Relevant Tax Jurisdiction or any political subdivision or taxing authority thereof (a "Change in Tax Law").

        Prior to the publication or, where relevant, mailing of any notice of redemption pursuant to the foregoing, the Company will deliver to the Trustee:

(a)

an officer's certificate stating that the Company is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Company so to redeem have occurred (including that such obligation to pay such Tax Gross-Up Amounts cannot be avoided by the Company taking reasonable measures available to it); and



(b)

an opinion of independent tax advisors of recognized standing qualified under the laws of the Relevant Tax Jurisdiction and reasonably satisfactory to the Trustee to the effect that the Company is or would be obligated to pay such Tax Gross-Up Amounts as a result of a Change in Tax Law.

Certain Covenants

Negative Pledge

        The Indenture provides that the Company will not and will not permit any Subsidiary to create any Security Interest on any of its property or assets (including Capital Stock), whether owned on the date of the Indenture or thereafter acquired, to secure any Debt unless at the same time it shall secure equally and ratably with such Debt all Notes then outstanding under the Indenture by the same instrument or by another instrument for so long as such obligation is so secured; provided that this covenant shall not hinder or prevent the sale of any property or assets of the Company (except in the case of a sale in connection with a transaction prohibited by the covenant described under the caption "Limitation on Sale/Leaseback Transactions") or hinder or prevent:

(i)

Security Interests existing on the date of initial issuance of the Notes;



(ii)

Security Interests on any property, Capital Stock, or other assets existing at the time of acquisition thereof by the Company or any Subsidiary (which may include property previously leased by the Company or any Subsidiary and leasehold interests thereon, provided that the lease terminates prior to the acquisition);

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(iii)

Security Interests on property, Capital Stock, or other assets of a corporation or other entity existing at the time such corporation or other entity is merged into or consolidated with the Company or any Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation or other entity as an entirety or substantially as an entirety to the Company or any Subsidiary;



(iv)

Security Interests on property, Capital Stock, or other assets ("Secured Projects") acquired, constructed or improved by the Company or any Subsidiary after the initial issuance of the Notes which are created or assumed contemporaneously with, or within 270 days after such acquisition (or, in the case of property or other assets constructed or improved, within 270 days after the completion or commencement of commercial operation of such property or other assets, whichever is later) to secure or provide for the payment of any part of the purchase price of such property, Capital Stock, or other assets or cost of such construction or improvement; provided that if a commitment to so finance such a payment is obtained prior to or within such 270-day period and the related Security Interest is created within 90 days after the expiration of the 270-day period, the applicable Security Interest shall be deemed to be included in this clause (iv); and provided further, that such Security Interests may also extend to: (a) any Necessary Assets; provided that the instrument granting such Security Interest does not materially impair the continued operation of each Significant Facility requiring or dependent on such Necessary Assets notwithstanding a default under such instrument or acceleration of the obligations secured thereby; (b) any unimproved real property theretofore owned by the Company or any Subsidiary, on which the property so constructed, or the improvement is located; and (c) contract rights (including revenue therefrom) of the Company or any Subsidiary directly related to such Secured Projects;



(v)

Security Interests securing Debt issued pursuant to a receivables facility or similar credit arrangement which provides for Debt issued by the Company or any Subsidiary thereunder and interest thereon and related obligations to be secured by a pledge of receivables of the Company or any Subsidiary in accordance with an indenture or other agreement and which further provides that the holder of interests in the trust created pursuant to such indenture or other agreement is to be entitled to a first call on the proceeds of any enforcement of the security under the indenture or other agreement that are attributable to receivables of the Company or any Subsidiary;



(vi)

the granting of any security, whether by way of letter of credit, surety bond or otherwise, which is posted or granted pursuant to a court order or agreement with a third Person in the context of a dispute by the Company or any Subsidiary of the claims by a third Person purportedly arising in the ordinary course of business of, or incident to current construction by, the Company or any Subsidiary;



(vii)

the deposit of cash, letters of credit, surety bonds, labor and material bonds or any other security in connection with contracts (other than for the payment of Debt) or tenders in the ordinary course of business or to secure margin accounts in the ordinary course of business, workmen's compensation, surety or appeal bonds, costs of litigation required by law, public and statutory obligations, liens or claims whether arising at common law, equity or pursuant to statute whether incident to current construction or otherwise, including but not limited to mechanics', workmen's, carriers' and other similar liens;



(viii)

Security Interests securing Debt or other obligations of a Subsidiary owing to the Company or a wholly-owned Subsidiary;



(ix)

Security Interests on or other conveyances of property or other assets owned by the Company or any Subsidiary in favor of the Government of Canada or any Province or Territory thereof or the United States of America or any State, territory or possession thereof (or the District

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of Columbia), or any department, agency, instrumentality or political subdivision of the Government of Canada or any Province or Territory thereof or the United States of America or any State, territory or possession thereof (or the District of Columbia), to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any Debt incurred for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the property subject to such Security Interests;

(x)

Security Interests securing Debt and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (x) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder and together with any extension, renewal or replacement Debt incurred pursuant to clause (xi) below to extend, renew or replace any Debt incurred pursuant to this clause (x)) not to exceed $350.0 million;



(xi)

any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Security Interest referred to in the foregoing clauses (i) to (x), inclusive, without increase of the principal of the Debt secured thereby; provided, however, that such extension, renewal or replacement shall be limited to all or a part of the property or other assets which secured the Security Interest so extended, renewed or replaced (plus improvements on such property or other assets); and provided, further, that any Security Interest permitted by any of the foregoing clauses (i) to (x), inclusive, of this covenant shall not extend to or cover any property of the Company or any Subsidiary other than the property specified in such clauses and improvements thereto.

        Notwithstanding the foregoing provisions or the provisions of the covenant described under the caption "Limitation on Sale/Leaseback Transactions," the Company or any Subsidiary may issue, incur, create, assume or guarantee (collectively, "incur") Debt secured by Security Interests which would otherwise be subject to the foregoing restrictions and enter into any Sale/Leaseback Transaction that would otherwise be prohibited by the covenant described under the caption "Limitation on Sale/Leaseback Transactions" in an aggregate principal amount which, together with all other outstanding Debt of the Company and each Subsidiary or any of them which (if originally issued, incurred, created, assumed or guaranteed at such time) would otherwise be subject to the foregoing restrictions and the aggregate Attributable Debt of all such Sale/Leaseback Transactions of the Company and each Subsidiary or any of them at any one time outstanding together, does not, as of the date of incurrence, exceed 15% of Consolidated Net Tangible Assets of the Company. This 15% Consolidated Net Tangible Assets "basket" provision provides the Company with capacity to incur secured debt and engage in Sale/Leaseback Transactions in addition to the capacity provided by the carveouts in clauses (i) through (xi) above.

Limitation on Sale/Leaseback Transactions

        The Indenture provides that the Company will not, and will not permit any Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property unless (i) the Company or such Subsidiary would be entitled to create Security Interests on such property securing such Attributable Debt without equally and ratably securing the Notes pursuant to the covenant described under the caption "Negative Pledge" or (ii) the net cash proceeds received by the Company or any Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the fair value (as determined by the Board of Directors of the Company or, as the case may be, such Subsidiary) of such property and the Company or such Subsidiary shall apply or cause to be applied, in the case of a sale or transfer for cash, an amount equal to the net proceeds thereof and, in the case of a sale or transfer otherwise than for cash, an amount equal to the fair market value of the property so leased, to the retirement, within 180 days after the effective date of such Sale/Leaseback Transaction, of the Notes or Debt of the Company ranking on a parity with the Notes and owing to a Person other than the Company or any

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affiliate of the Company or to the construction or improvement of real property or personal property used in the ordinary course of business. These restrictions will not apply to (a) transactions providing for a lease for a term, including any renewal thereof, of not more than three years; (b) transactions between the Company and a Subsidiary or between Subsidiaries; and (c) transactions between the Company and a joint venture, partnership or other association or affiliation in which the Company has at least a 50% interest, directly or indirectly, entered into for operational or strategic reasons and not for financing reasons; provided, however that the aggregate Attributable Debt of all Sale/Leaseback Transactions of the Company and each Subsidiary or any of them incurred pursuant to this clause (c) does not at any one time in the aggregate exceed 5% of Consolidated Net Tangible Assets of the Company as of the most recently ended quarter of the Company for which financial statements of the Company have been provided (or were required to have been provided) to the holders of the Notes.

Change of Control Repurchase and Redemption

        If a Change of Control occurs, each holder of Notes will have the right to require the Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that holder's Notes pursuant to a change of control offer ("Change of Control Offer") on the terms set forth in the Indenture. In the Change of Control Offer, the Company will offer a change of control payment ("Change of Control Payment") in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest on the Notes repurchased to the date of purchase subject to the rights of holders of Notes on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Company will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the Change of Control Payment Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue of such compliance.

        On the Change of Control Payment Date, the Company will, to the extent lawful:

(1)

accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;



(2)

deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and



(3)

deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

        The paying agent will promptly mail to each holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a exchange note equal in principal amount to any unpurchased portion of the Notes surrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

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        The provisions described above that require the Company to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.

        The Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to the Indenture as described above under the caption "—Optional Redemption," unless and until there is a default in payment of the applicable redemption price. Notwithstanding anything to the contrary contained herein, a Change of Control Offer may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer is made.

        If holders of not less than 90% in aggregate principal amount of the outstanding Notes of the applicable series properly tender and do not withdraw such Notes in a Change of Control Offer (or an offer made by a third party as described above) and we, or any third party making an offer in lieu of us, as described above, purchase all of the Notes of such series properly tendered and not withdrawn by such holders, we or the third party making such offer will have the right, upon not less than 30 nor more than 60 days' prior notice, given not more than 30 days following such purchase pursuant to the Change of Control Offer or offer by such third party described above, to redeem all the Notes of such series that remain outstanding following such purchase at a redemption price in cash equal to the applicable Change of Control Payment.

        The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the properties or assets of the Company and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of Notes to require the Company to repurchase its Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain.

Events of Default

        The Indenture provides, with respect to the Notes, that the following shall constitute Events of Default:

(i)

default in the payment of any interest (including Tax Gross-Up Amounts) upon any Note, when the same becomes due and payable, continued for 30 days;



(ii)

default in the payment of the principal of or any premium on any Note when the same becomes due and payable;



(iii)

default in the performance, or breach, of any covenant or warranty of the Company in the Indenture (other than a covenant or warranty, a default in whose performance or whose breach is specifically dealt with elsewhere in the Indenture), continued for 60 days after written notice to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the Notes then outstanding of any particular series voting as a separate class;



(iv)

default under any indenture or instrument evidencing or under which the Company or any Subsidiary has outstanding any Debt (other than an obligation payable on demand or

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maturing less than 12 months from the date such Debt is incurred) in any individual instance in excess of an amount equal to 5% of Consolidated Shareholders' Equity shall occur and be continuing and, if such Debt has not already matured in accordance with its terms, such Debt shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration is not rescinded or annulled within 15 Business Days after notice thereof shall have been given as provided in the Indenture, or default in any payment when due at final maturity of any such Debt, including any applicable grace period; and

(v)

certain events of bankruptcy, insolvency or reorganization described in the Indenture with respect to the Company or any of its Significant Subsidiaries.

        If an Event of Default with respect to the Notes of any series shall occur and be continuing (other than an event of bankruptcy, insolvency or reorganization with respect to the Company), the Trustee or the holders of not less than 25% in aggregate principal amount of the outstanding Notes of the applicable series may declare Notes of that series due and payable immediately. However, the holders of a majority in principal amount of the outstanding Notes of the applicable series, by written notice to the Company and the Trustee, may, under certain circumstances, rescind and annul such declaration. If an Event of Default with respect to the Company listed in clause (v) of the preceding paragraph occurs and is continuing, then the Notes shall become immediately due and payable without any declaration or other act on the part of the Trustee or the holders.

        The Company is required to file with the Trustee, annually, an Officers' Certificate as to its compliance with all conditions and covenants under the Indenture. The Indenture provides that the Trustee may withhold notice to the holders of the Notes of any default (except payment defaults on the Notes) if it considers it in the interest of the holders of the Notes to do so.

        Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders, unless such holders shall have offered to the Trustee reasonable indemnity. Subject to such provisions for the indemnification of the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes of the applicable series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Notes of such series.

        No holder of Notes will have any right to institute any proceeding with respect to the Indenture, or for the appointment of a receiver or trustee, or for any remedy thereunder, unless:

(a)

such holder has previously given to the Trustee written notice of a continuing Event of Default,



(b)

the registered holders of at least 25% in aggregate principal amount of the outstanding Notes of the applicable series have made a written request and offered reasonable indemnity to the Trustee to institute such proceeding as trustee, and



(c)

the Trustee shall not have received from the registered holders of a majority in aggregate principal amount of the outstanding Notes of the applicable series, a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days.

        However, such limitations do not apply to a suit instituted by the holder of any Note for enforcement of payment of the principal of, and premium, if any, or interest on, such Note on or after the respective due dates expressed in such Note.

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Merger or Consolidation

        The Indenture provides that the Company may not amalgamate or consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

(i)

the Person formed by such consolidation or amalgamation or into which the Company is merged or the Person which acquires or leases the assets of the Company substantially as an entirety is organized and existing under the laws of any Canadian or United States jurisdiction, and assumes the Company's obligations on the Notes and under the Indenture;



(ii)

immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and



(iii)

the Company has delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that such amalgamation, consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with the Indenture and that all conditions precedent provided for relating to such transaction have been complied with.

In addition, no such amalgamation, consolidation, merger or transfer may be made if, as a result thereof, any property or assets of the Company would become subject to any mortgage or other encumbrance securing Debt, unless such mortgage or other encumbrance could be created pursuant to the provisions described under "Negative Pledge" above without equally and ratably securing the Notes or unless the Notes are secured equally and ratably with, or prior to, the Debt secured by such mortgage or other encumbrance.

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Modification or Waiver

        Modification and amendment of the Indenture with respect to any series of Notes may be made by the Company and the Trustee with the consent of the holders of not less than a majority in principal amount of all outstanding Notes of such series; provided that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby, among other things; (i) change the Stated Maturity of the principal of, or any installment of interest on, any such Note; (ii) change the time at which any Notes may or shall be redeemable or repayable; (iii) reduce the principal amount or the rate of interest on or any premium payable upon the redemption or repayment of any such Note; (iv) adversely affect any right of repayment at the option of the holder of any such Note; (v) change the place or currency of payment of principal of, or any premium or interest on, any such Note; (vi) reduce the above-stated percentage of holders of Notes necessary to modify or amend the Indenture or to consent to any waiver thereunder (including a waiver of certain defaults); (vii) change any obligation of the Company to pay Tax Gross-Up Amounts; or (viii) modify the foregoing requirements with certain exceptions.

        The holders of a majority in aggregate principal amount of outstanding Notes of each series affected thereby have the right to waive compliance by the Company with certain covenants with respect to such series.

        Modification and amendment of the Indenture may be made by the Company and the Trustee without the consent of any holder, for any of the following purposes: (i) to evidence the succession of another Person to the Company as obligor under the Indenture; (ii) to add to the covenants of the Company for the benefit of the holders; (iii) to add Events of Default for the benefit of the holders; (iv) to secure the Notes pursuant to the provisions described above under "Negative Pledge," "Limitation on Sale/Leaseback Transactions" and "Merger or Consolidation" or otherwise; (v) to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under the Indenture by more than one Trustee; (vi) to cure any ambiguity, defect or inconsistency in the Indenture, provided such action does not adversely affect the interests of holders in any material respect; (vii) to comply with any requirements of the SEC in order to effect and maintain the qualification of the Indenture under the Trust Indenture Act; (viii) to supplement any of the provisions of the Indenture to the extent necessary to permit or facilitate defeasance and discharge of the Notes; or (ix) to conform the text of the Indenture or the Notes to any provision of this Description of Exchange Notes to the extent that such provision was intended to be a verbatim recitation of a provision of the Indenture or the Notes, which intent may be evidenced by an Officers' Certificate to that effect; provided, however, such action shall not adversely affect the interests of any of the holders in any material respect.

        The Indenture provides that in determining whether the holders of the requisite principal amount of the Notes of the applicable series then outstanding have given any request, demand, authorization, direction, notice, consent or waiver thereunder. Notes owned by the Company or any other obligor or affiliate of the Company or such other obligor shall be disregarded and not deemed to be outstanding.

Discharge, Defeasance and Covenant Defeasance

        The Company may discharge certain obligations to holders of any series of Notes which have not already been delivered to the Trustee for cancellation and which have either become due and payable or are by their terms due and payable within one year (or scheduled for redemption within one year) by irrevocably depositing with the Trustee trust funds in an amount sufficient to pay the entire indebtedness on such Notes of the applicable series for principal (and premium, if any) and interest to the date of such deposit (if such series of Notes have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be.

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        The Company may, at its option and at any time, elect to have the obligations of the Company discharged with respect to any series of Notes ("defeasance"). Such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such outstanding Notes of such series and to have satisfied its other obligations under the Indenture with respect thereto, except for (i) the rights of holders of such series of Notes to receive solely from the trust fund described below payments in respect of the principal of (and premium, if any) and interest on such series of Notes when such payments are due, (ii) the Company's obligations with respect to such series of Notes relating to the issuance of temporary securities, the registration, transfer and exchange of such series of Notes, the replacement of mutilated, destroyed, lost or stolen Notes of such series, the maintenance of an office or agency in the applicable place of payment, the holding of money for security payments in trust and with respect to the payment of Tax Gross-Up Amounts, if any, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the defeasance provisions of the Indenture. The Company may, at its option and at any time, elect to be released from its obligations with respect to certain covenants that are described in the Indenture (including those described under "Negative Pledge," "Limitation on Sale/Leaseback Transactions" and "Merger or Consolidation" above) ("covenant defeasance") and any omission to comply with such obligations thereafter shall not constitute a default or an Event of Default with respect to such series of Notes.

        In order to exercise either defeasance or covenant defeasance, (i) the Company must irrevocably deposit with the Trustee (or other qualifying trustee), in trust, for the benefit of the holders of such series of Notes cash, government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants to pay the principal of (and premium, if any) and interest on the Notes of the applicable series, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor in United States Dollars; (ii) in the case of defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date of the Indenture, there has been a change in the applicable United States federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of such Notes of the applicable series will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (iii) in the case of covenant defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States to the effect that the holders of such Notes of the applicable series will not recognize income, gain or loss for United States federal income tax purposes as a result of such covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (iv) in the case of defeasance or covenant defeasance, the Company shall have delivered to the Trustee an opinion of counsel in Canada to the effect that holders of such outstanding Notes of the applicable series will not recognize income, gain or loss for Canadian federal or provincial income tax or other tax purposes as a result of such defeasance or covenant defeasance, as applicable, and will be subject to Canadian federal or provincial income tax and other tax including withholding tax, if any, on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred.

Resignation of Trustee

        The Trustee may resign or be removed with respect to the Notes and a successor Trustee may be appointed to act with respect to the Notes.

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Payment and Paying Agents

        Principal, premium, if any, and interest, if any, on Notes will be payable at an office or agency of the Trustee in New York, New York, except that at the option of the Company interest may be paid (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer to an account located in the United States maintained by the Person entitled thereto as specified in the Security Register. Payment of any installment of interest on Notes will be made to the Person in whose name such Note is registered at the close of business on the Regular Record Date for such interest.

        The Company may at any time designate additional Paying Agents or rescind the designation of any Paying Agent or approve a change in the office through which any Paying Agent acts, except that the Company will be required to maintain a Paying Agent in each Place of Payment for such series.

SEC Reports

        The Indenture provides that, whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the holders of Notes or cause the Trustee to furnish to the holders of Notes (or make available through the SEC's EDGAR system):

(a)

within 120 days after the end of each fiscal year (or such shorter period as the SEC may prescribe), annual reports on Form 20-F or, to the extent permitted by the rules and regulations of the SEC, Form 40-F (or, in each case, any successor form) containing the information required to be contained therein (or required in such successor form),



(b)

within 60 days after the end of each of the first three fiscal quarters of each fiscal year (or such shorter period as the SEC may prescribe), reports on Form 6-K (or any successor form), and



(c)

promptly (but in no event later than five business days) from time to time after the occurrence of an event required to be therein reported, such other reports on Form 6-K (or any successor form);

        All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. In addition, the Company will file a copy of each of the reports referred to above with the SEC for public availability within the time periods specified above (unless the SEC will not accept such a filing) and will post the reports on its website within those time periods. The Company will at all times comply with TIA §314(a).

        If at any time, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the first paragraph of this covenant with the SEC within the time periods specified above unless the SEC will not accept such a filing. The Company will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Company's filings for any reason, the Company will post the reports referred to in the preceding paragraphs on its website within the time periods that would apply if the Company were required to file those reports with the SEC.

        In addition, the Indenture provides that, for so long as any Notes remain outstanding, if at any time the Company is not required to file with the SEC the reports required by the preceding paragraphs, the Company will furnish to the holders of Notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

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Consent to Jurisdiction and Service of Process

        The Company has irrevocably appointed CT Corporation System as its agent for service of process in any suit, action or proceeding with respect to the Indenture or the Notes brought in any federal or state court located in New York City and that each of the parties submit to the jurisdiction thereof.

Governing Law

        The Indenture is and the Notes will be governed by the internal laws of the State of New York, without reference to principles of conflicts of law.

Enforceability of Judgments

        Since a majority of our assets, as well as the assets of a number of our directors and officers, are outside the United States, any judgment obtained in the United States against us or certain of our directors or officers, including judgments with respect to the payment of principal on the Notes, may not be collectible within the United States.

        We have been informed by Ronald E.J. Kemle, our Vice President and Deputy General Counsel, that the laws of the Province of Alberta permit an action to be brought in a court of competent jurisdiction in the Province of Alberta to recognize and enforce any final and conclusive judgment in personam of a New York Court that is not impeachable as void or voidable under the internal laws of the State of New York for a sum certain if (i) the New York Court rendering such judgment had jurisdiction over the judgment debtor, as recognized by the courts of the Province of Alberta (and in the case of the Company, submission in the Indenture to the jurisdiction of the New York Court will be sufficient for that purpose); (ii) such judgment was not obtained by fraud, or in a manner contrary to natural justice and the enforcement thereof would not be inconsistent with public policy, as such term is understood under the laws of the Province of Alberta; (iii) such judgment was not obtained contrary to any order made by the Attorney General of Canada under the Foreign Extraterritorial Measures Act (Canada) or by the Competition Tribunal under the Competition Act (Canada); (iv) the enforcement of such judgment would not be contrary to the laws of general application limiting the enforcement of creditors rights or by operation of, judicial orders made pursuant to, Canadian bankruptcy, insolvency, reorganization, or winding up legislation and does not constitute, directly or indirectly, the enforcement of foreign revenue, expropriatory or penal or other public laws in the Province of Alberta; (v) a dispute between the same parties based on the same subject matter has not given rise to a decision rendered by a court in the Province of Alberta or an arbitration tribunal or been decided by a foreign authority and the decision meets the necessary conditions for recognition under Alberta law; (vi) no new admissible evidence relevant to the action is discovered prior to the rendering of judgment by the court of the Province of Alberta; (vii) interest payable on the Notes is not characterized by a court of the Province of Alberta as interest payable at a criminal rate within the meaning of Section 347 of the Criminal Code (Canada); and (viii) the action to enforce such judgment is commenced within the appropriate limitation period. Under the Currency Act (Canada), a court of the Province of Alberta may only give judgments in Canadian dollars.

        In the opinion of such counsel, there are no reasons under present laws of the Province of Alberta for avoiding recognition of such judgments of New York Courts under the Indenture or on the Notes based upon public policy. We have been advised by such counsel that there is doubt as to the enforceability in the Province of Alberta, Canada against us or against our directors and officers who are not residents of the United States, in original actions or in actions for enforcement of judgments of courts of the United States, of liabilities predicated solely upon U.S. federal securities laws.

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Concerning the Trustee

        U.S. Bank National Association is the Trustee under the Indenture and has been appointed by the Company as registrar and paying agent with regard to the Notes. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.

        The holders of a majority in principal amount of the then outstanding Notes of each series will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee with respect to such series, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will not be under any obligation to exercise any rights or powers under the Indenture at the request of any holder of Notes, unless such holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

Certain Definitions

        Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms as well as any other capitalized terms used herein for which no definition is provided. Unless the context otherwise requires, an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP.

        "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate set forth or implicit in the terms of such transaction or, if not practicable to determine such rate, the weighted average interest rate per annum borne by the Notes outstanding pursuant to the Indenture, compounded semi-annually, in either case as determined by the principal accounting or financial officer of the Company) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended).

        "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.

        "Board of Directors" means:

(1)

with respect to a corporation, the Board of Directors of the corporation or any committee thereof duly authorized to act on behalf of such board;



(2)

with respect to a partnership, the Board of Directors of the general partner of the partnership;



(3)

with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and



(4)

with respect to any other Person, the board or committee of such Person serving a similar function.

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        "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, but excluding any debt securities convertible into such equity.

        "Change of Control" means the occurrence of any of the following:

(1)

the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger, amalgamation or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole to any Person (including any "person" (as that term is used in Section 13(d)(3) of the Exchange Act)) other than the Principal or a Related Party of the Principal;



(2)

the adoption of a plan relating to the liquidation or dissolution of the Company;



(3)

the consummation of any transaction (including, without limitation, any merger, amalgamation or consolidation), the result of which is that any Person (including any "person" (as defined above)), other than the Principal and any Related Party of the Principal, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or



(4)

the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors.

        "Consolidated Net Tangible Assets" means, as of any particular time, the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom: (a) all current liabilities except for (1) notes and loans payable, (2) current maturities of long-term debt and (3) current maturities of obligations under capital leases; and (b) to the extent included in said aggregate amount of assets, all goodwill, trade names, trademarks, patents, organization expenses, unamortized debt discount and expenses and all other intangible assets, all as set forth on the consolidated balance sheet of the Company and its consolidated subsidiaries and computed in accordance with generally accepted accounting principles.

        "Consolidated Shareholders' Equity" means, at any date, the aggregate of the dollar amount of the outstanding preferred and common share capital of the Company, plus any outstanding warrants exercisable into shares, plus any outstanding debentures or other Debt which are convertible into shares at the option of the Company and which have no significant retraction privilege, plus or minus the amount, without duplication, of any reinvested earnings or deficit, plus any contributed surplus, plus or minus any cumulative translation adjustment, all as set forth in the most recent audited year-end consolidated balance sheet of the Company.

        "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who:

(1)

was a member of such Board of Directors on the date of the Indenture; or



(2)

was nominated for election or elected to such Board of Directors with the approval of the Principal, any Related Party of the Principal or a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

        "Credit Agreement" means that certain Restated Credit Agreement, dated as of March 12, 2008, by and among the Company, and the Lenders (as defined therein), providing for up to $350.0 million of revolving credit borrowings, including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, restated, modified, renewed, refunded, replaced in any manner (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time.

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        "Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case, with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced in any manner (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time.

        "Debt" means notes, bonds, debentures or other similar evidences of indebtedness for money borrowed.

        "Equity Offering" means an offering of Capital Stock of the Company in a public offering registered under the Securities Act.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Exchange Notes" means the notes issued as evidence of the same continuing Debt of the Company under, and in exchange for, the Notes as described under "Exchange Offer; Registration Rights."

        "Issue Date" means October 16, 2009.

        "Necessary Assets" means all assets, including, without limitation, land, buildings, manufacturing facilities, equipment, control systems, easements and rights of way, permits and other regulatory approvals, pipelines, utilities, pumping and storage facilities, roads, computers and computer software, technology and all other forms of intellectual property, feedstock supply agreements, and product sale agreements of any kind (including purchase of feedstock) used or useful in the ownership, operation or maintenance of the property acquired, constructed or improved whether or not in existence prior to such acquisition, construction or improvement.

        "Officers' Certificate" means a certificate signed by any of the Chairman, the Chief Executive Officer, the President, a Senior Vice President or a Vice President, or by any one of the foregoing together with the Treasurer, an Assistant Treasurer, the Secretary or any Assistant Secretary of the Company, and delivered to the Trustee.

        "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

        "Principal" means International Petroleum Investment Company.

        "Related Party" means:

(1)

any controlling stockholder or majority-owned Subsidiary; or



(2)

any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding a majority (and controlling) interest of which consist of the Principal and/or such other Persons referred to in the immediately preceding clause.

        "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Subsidiary transfers such property to a Person and the Company or a Subsidiary leases it from such Person, other than leases between the Company and a wholly-owned Subsidiary or between wholly-owned Subsidiaries.

        "SEC" means the Securities and Exchange Commission.

        "Securities Act" means the Securities Act of 1933, as amended.

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        "Security Interest" means any mortgage, pledge, lien, conditional sale or other title retention agreement, or other similar security interest.

        "Significant Facility" means any plant or other facility of the Company or any Subsidiary, whether now owned or hereafter acquired, having a book value as of the date of determination in excess of 10% of Consolidated Net Tangible Assets.

        "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of the indenture.

        "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).

        "Subsidiary" means any corporation of which at the time of determination the Company, directly or indirectly through one or more Subsidiaries, owns more than 50% of the shares of Voting Stock.

        "Trust Indenture Act" means the provisions of the Trust Indenture Act of 1939, as amended, and regulations thereunder.

        "Voting Stock" means stock of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the Board of Directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

        The following summary describes certain material U.S. federal income tax consequences of the exchange of outstanding notes for exchange notes in accordance with the exchange offer, and of the ownership and disposition of the exchange notes. This discussion deals only with persons that hold outstanding notes and exchange notes as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, or the Code, and that purchased the outstanding notes for cash in the initial offering at the initial offering price. This discussion does not address the U.S. federal income tax consequences that may be relevant to a particular holder subject to special treatment under certain U.S. federal income tax laws (for example, persons subject to the alternative minimum tax provisions of the Code). Also, this discussion is not intended to be wholly applicable to all categories of investors, some of which, such as dealers in securities or currencies, banks, trusts, partnerships or other pass-through entities, expatriates, insurance companies, tax-exempt organizations, persons that hold outstanding notes or exchange notes as part of a hedging or conversion transaction or a straddle, persons deemed to sell exchange notes under the constructive sale provisions of the Code, U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar and investors in pass-through entities, may be subject to special rules.

        This discussion is based on the Code, the final, temporary and proposed Treasury regulations promulgated thereunder, administrative pronouncements and judicial decisions, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. We have not requested, and will not request, a ruling from the U.S. Internal Revenue Service, or the IRS, with respect to any of the U.S. federal income tax consequences described below. There can be no assurance that the IRS will not disagree with or challenge any of the conclusions set forth herein.

        Each holder should consult with its own tax advisor regarding the U.S. federal income tax consequences applicable to such holder of the exchange of outstanding notes for exchange notes pursuant to the exchange offer, and the ownership and disposition of the exchange notes, in light of its particular situation, as well as any consequences arising under the laws of any state, local or foreign taxing jurisdiction.

Exchange Offer

        The exchange of an outstanding note for an exchange note pursuant to the exchange offer should not be a taxable event for U.S. federal income tax consequences. The exchange note received for an outstanding note should be treated for U.S. federal income tax purposes as a continuation of the outstanding note. As a result, (i) a holder of the notes should not recognize taxable gain or loss as a result of the exchange of outstanding notes for the exchange notes pursuant to the exchange offer, (ii) a holder's holding period of the exchange notes should include the holding period of the outstanding notes surrendered in exchange therefor and (iii) a holder's adjusted tax basis in the exchange notes should be the same as such holder's adjusted tax basis in the outstanding notes surrendered in exchange therefor.

U.S. Holders

        The discussion in this section is limited to persons that are U.S. Holders. For these purposes, "U.S. Holder" means the beneficial owner of an exchange note that for U.S. federal income tax purposes is (i) an individual who is a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation that is created or organized under the laws of the United States or any political subdivision thereof or therein or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust, if (a) it is subject to the primary supervision of a United States court and the control of one or more U.S. persons or (b) a valid election to be treated as a U.S. person is in effect. If a partnership or other entity taxable as a partnership holds the exchange notes, the tax treatment of a partner will generally depend on the status

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of the partner and the activities of the partnership. Each partner should consult its own tax advisor as to the tax consequences of the purchase, ownership and disposition of the exchange notes.

Stated Interest

        A U.S. Holder must generally include stated interest on an exchange note (including any Tax Gross-Up Amounts) in its ordinary income at the time such interest is received or accrued, in accordance with such U.S. Holder's method of accounting for U.S. federal income tax purposes. Interest income on an exchange note generally will be foreign source income and generally will constitute "passive category income" or, in the case of certain U.S. Holders, "general category income." Foreign withholding tax, if any, paid at the rate applicable to a U.S. Holder would, subject to various limitations and conditions, be treated as foreign income tax eligible for credit against such holder's U.S. federal income tax liability. As an alternative to the tax credit, a U.S. Holder may elect to deduct such taxes (the election would then apply to all foreign income taxes and certain other foreign taxes such U.S. Holder paid in that taxable year). The rules relating to foreign tax credits and the timing thereof are complex, and U.S. Holders should consult their own tax advisors regarding the availability of a foreign tax credit and the application of the foreign tax credit limitations to their particular situation.

Sale, Exchange, Redemption or Other Taxable Disposition of Exchange Notes

        Upon the sale, exchange, redemption or other taxable disposition of an exchange note, a U.S. Holder generally will recognize taxable gain or loss equal to the difference between (i) the amount realized on such disposition (other than any amounts attributable to accrued and unpaid interest, which will be taxed as interest income as described above) and (ii) such U.S. Holder's adjusted tax basis in the exchange note. A U.S. Holder's adjusted tax basis in an exchange note will generally equal the cost to such U.S. Holder of the outstanding note acquired in the initial offering and exchanged for the exchange note, decreased by the amount of principal payments received with respect to the exchange note.

        Any gain or loss recognized on a disposition of the exchange note will generally be capital gain or loss and will be long-term capital gain or loss if the exchange note has been held for more than one year. The U.S. Holder's ability to deduct capital losses may be limited.

Information Reporting and Backup Withholding

        In general, information reporting will apply to all payments made to a U.S. Holder (other than exempt recipients, such as corporations). A U.S. Holder of exchange notes may be subject to backup withholding, currently at a rate of 28%, with respect to "reportable payments," which includes interest and principal paid on the exchange notes or the gross proceeds of a sale, exchange, redemption or other taxable disposition of the exchange notes. The payor of any reportable payments is required to deduct and withhold the applicable backup withholding amount from such payments if (i) the payee fails to furnish its correct Taxpayer Identification Number ("TIN") to the payor in the prescribed manner, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) the payee has failed properly to report the receipt of reportable payments and the IRS has notified the payor that backup withholding is required or (iv) the payee fails to certify under penalties of perjury that such payee is not subject to backup withholding. If any one of these events occurs with respect to a U.S. Holder of exchange notes, we or our paying or other withholding agent will be required to withhold the applicable backup withholding amount from any payments of principal and interest on an exchange note or the gross proceeds of a sale, exchange or redemption of the exchange notes unless the U.S. Holder otherwise establishes an exemption.

        Any amount withheld from a payment to a U.S. Holder under the backup withholding rules will be allowed as a refund or credit against such U.S. Holder's U.S. federal income tax liability, so long as the

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required information is provided timely to the IRS. We, our paying agent or other withholding agent generally will report to a U.S. Holder of exchange notes and to the IRS the amount of any reportable payments made in respect of the exchange notes for each calendar year and the amount of tax withheld, if any, with respect to such payments.

        U.S. Holders of exchange notes are urged to consult their own tax advisors regarding their qualification for an exemption from backup withholding and information reporting and the procedures for obtaining such an exemption, if applicable.

Non-U.S. Holders

        The discussion in this section is limited to the U.S. federal income tax consequences relevant to a beneficial owner of an exchange note that, for U.S. federal income tax purposes, is not a U.S. Holder (a "Non-U.S. Holder").

Interest

        Subject to the discussion of backup withholding below, payments of interest on an exchange note to a Non-U.S. Holder generally will not be subject to U.S. federal income tax, provided that such interest is not effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States.

        If interest on the exchange notes is effectively connected with the conduct by a Non-U.S. Holder of a trade or business within the United States, and, in the case of certain tax treaties, is attributable to a permanent establishment in the United States, such interest will be subject to U.S. federal income tax on a net income basis at the rates applicable to U.S. persons generally (and, with respect to corporate holders, may also be subject to a 30% branch profits tax).

Sale, Exchange, Redemption or Other Taxable Disposition of Exchange Notes

        Subject to the discussion of backup withholding below, any gain realized by a Non-U.S. Holder on the sale, exchange, redemption or other taxable disposition of an exchange note generally will not be subject to U.S. federal income tax, unless (i) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States and, in the case of certain tax treaties, is attributable to a permanent establishment in the United States, or (ii) the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are satisfied.

        If a Non-U.S. Holder's gain is described in clause (i) above, such Non-U.S. Holder generally will be required to pay U.S. federal income tax on the net gain derived from the sale or other taxable disposition in the same manner as if it were a U.S. person (and with respect to corporate holders may also be subject to a 30% branch profits tax). If an individual Non-U.S. Holder is subject to the 183-day rule described in clause (ii) of the immediately preceding paragraph (and the individual is not treated as a U.S. Holder because of such presence in the United States), such individual holder generally will be subject to U.S. federal income tax at a rate of 30% (or at a lower applicable treaty rate) on the net gain derived from the sale or other taxable disposition, which may be offset by the Non-U.S. Holder's other capital losses, if any, but may not be offset by capital loss carryover.

Information Reporting and Backup Withholding

        In certain instances, backup withholding and information reporting may apply to interest and principal payments on an exchange note and payments of the proceeds of the sale of an exchange note within the United States, or by a U.S. payor or a U.S. middleman, unless the Non-U.S. Holder furnishes us or our paying agent with appropriate documentation of such Non-U.S. Holder's non-U.S. status.

        Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S. Holder's U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

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CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

        The following is, as of the date hereof, a summary of the principal Canadian federal income tax considerations generally applicable to a purchaser of outstanding notes pursuant to the original offering who, as a beneficial owner, acquires exchange notes in exchange for outstanding notes pursuant to the exchange offer and who, at all relevant times, for purposes of the application of the Income Tax Act (Canada) and the Income Tax Regulations (collectively, the "Tax Act"), is not, and is not deemed to be, resident in Canada, deals at arm's length and is not affiliated with NOVA Chemicals Corporation, deals at arm's length with any person resident in Canada to whom the holder disposes of the outstanding notes or exchange notes, does not use or hold and is not deemed to use or hold outstanding notes or exchange notes in or in the course of carrying on a business carried on in Canada, and is not an insurer carrying on an insurance business in Canada and elsewhere (a "Non-Canadian Holder").

        This summary is based upon the current provisions of the Tax Act in force as of the date hereof, all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the "Tax Proposals") and counsel's understanding of the current administrative policies and assessing practices of the Canada Revenue Agency (the "CRA") published in writing by the CRA prior to the date hereof. This summary is not exhaustive of all possible Canadian federal income tax considerations, and except for the Tax Proposals, does not take into account or anticipate any changes in law or CRA administrative policies or assessing practices, whether by way of legislative, regulatory, administrative or judicial decision or action, nor does it take into account or consider any other federal tax considerations or any provincial, territorial or foreign tax considerations, which may differ from those discussed herein. While this summary assumes that the Tax Proposals will be enacted in the form proposed, no assurance can be given that this will be the case, and no assurance can be given that judicial, legislative or administrative changes will not modify or change the statements below.

        This summary is of a general nature only and is not, and is not intended to be, and should not be construed to be, legal or tax advice to any particular holder and no representation with respect to the income tax consequences to any particular holder is made. Non-Canadian Holders and other holders should consult their own tax advisors with respect to the tax consequences of an investment in exchange notes having regard to their own particular circumstances.

        Under the Tax Act, no Canadian withholding tax will apply to interest, principal, or premium paid or credited on outstanding notes or exchange notes to a Non-Canadian Holder by NOVA Chemicals Corporation, or to the proceeds received by a Non-Canadian Holder on the disposition of outstanding notes or exchange notes including any disposition on the exchange of outstanding notes for exchange notes, a redemption, or payment on maturity.

        No other tax on income or gains will be payable under the Tax Act by a Non-Canadian Holder on interest, principal, or premium, or on the proceeds received by a Non-Canadian Holder on the disposition of outstanding notes or exchange notes including the exchange of outstanding notes for exchange notes, a redemption, or payment on maturity.

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ERISA CONSIDERATIONS

        The outstanding notes or the exchange notes may be purchased and held by an employee benefit plan subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or by an individual retirement account or other plan subject to Section 4975 of the Internal Revenue Code (the "Code"). A fiduciary of an employee benefit plan subject to ERISA must, however, determine that the purchase and holding of a note is consistent with its fiduciary duties under ERISA. The fiduciary of an ERISA plan, as well as any other prospective investor subject to Section 4975 of the Code or any similar law, must also determine that the purchase and holding of notes does not result in a non-exempt prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code or any similar law. Each purchaser and transferee of a note who is subject to Section 406 of ERISA and/or Section 4975 of the Code or any similar law ("Plan Investor") will be deemed to have represented to us, by its acquisition and holding of the note, that its acquisition and holding of the note does not constitute or give rise to a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or any similar law. The sale of any notes to any Plan Investor is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by Plan Investors generally or any particular Plan Investor, or that such an investment is appropriate for Plan Investors generally or any particular Plan Investor.

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BOOK-ENTRY, SETTLEMENT AND CLEARANCE

The Global Notes

        The exchange notes issued in exchange for outstanding notes will be represented by global notes in definitive, fully registered form, without interest coupons (collectively, the "global notes").

        Upon issuance, the global notes will be deposited with the Trustee as custodian for The Depository Trust Company ("DTC") and registered in the name of Cede & Co., as nominee of DTC.

        Ownership of beneficial interests in each global note will be limited to persons who have accounts with DTC ("DTC participants") or persons who hold interests through DTC participants. We expect that under procedures established by DTC:

•

upon deposit of each global note with DTC's custodian, DTC will credit portions of the principal amount of the global note to the accounts of the DTC participants; and



•

ownership of beneficial interests in each global note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the global note).

        Beneficial interests in the global notes may not be exchanged for notes in physical, certificated form except in the limited circumstances described below.

Book-entry procedures for the global notes

        All interests in the global notes will be subject to the operations and procedures of DTC, Euroclear and Clearstream. We provide the following summaries of those operations and procedures solely for the convenience of investors. The operations and procedures of each settlement system are controlled by that settlement system and may be changed at any time. We are not responsible for those operations or procedures.

        DTC has advised us that it is:

•

a limited purpose trust company organized under the laws of the State of New York;



•

a "banking organization" within the meaning of the New York State Banking Law;



•

a member of the Federal Reserve System;



•

a "clearing corporation" within the meaning of the Uniform Commercial Code; and



•

a "clearing agency" registered under Section 17A of the Securities Exchange Act of 1934.

        DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its participants. DTC's participants include securities brokers and dealers, banks and trust companies; clearing corporations and other organizations. Indirect access to DTC's system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.

        So long as DTC's nominee is the registered owner of a global note, that nominee will be considered the sole owner or holder of the notes represented by that global note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a global note:

•

will not be entitled to have notes represented by the global note registered in their names;

164

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•

will not receive or be entitled to receive physical, certificated notes; and



•

will not be considered the owners or holders of the notes under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the Trustee under the indenture.

        As a result, each investor who owns a beneficial interest in a global note must rely on the procedures of DTC to exercise any rights of a holder of notes under the indenture (and, if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which the investor owns its interest).

        Payments of principal, premium (if any) and interest with respect to the notes represented by a global note will be made by the Trustee to DTC's nominee as the registered holder of the global note. Neither we nor the Trustee will have any responsibility or liability for the payment of amounts to owners of beneficial interests in a global note, for any aspect of the records relating to or payments made on account of those interests by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those interests.

        Payments by participants and indirect participants in DTC to the owners of beneficial interests in a global note will be governed by standing instructions and customary industry practice and will be the responsibility of those participants or indirect participants and DTC.

        Transfers between participants in DTC will be effected under DTC's procedures and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way under the rules and operating procedures of those systems.

        Cross-market transfers between DTC participants, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected within DTC through the DTC participants that are acting as depositaries for Euroclear and Clearstream. To deliver or receive an interest in a global note held in a Euroclear or Clearstream account, an investor must send transfer instructions to Euroclear or Clearstream, as the case may be, under the rules and procedures of that system and within the established deadlines of that system. If the transaction meets its settlement requirements, Euroclear or Clearstream, as the case may be, will send instructions to its DTC depositary to take action to effect final settlement by delivering or receiving interests in the relevant global notes in DTC, and making or receiving payment under normal procedures for same-day funds settlement applicable to DTC. Euroclear and Clearstream participants may not deliver instructions directly to the DTC depositaries that are acting for Euroclear or Clearstream.

        Because of time zone differences, the securities account of a Euroclear or Clearstream participant that purchases an interest in a global note from a DTC participant will be credited on the business day for Euroclear or Clearstream immediately following the DTC settlement date. Cash received in Euroclear or Clearstream from the sale of an interest in a global note to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream cash account as of the business day for Euroclear or Clearstream following the DTC settlement date.

        DTC, Euroclear and Clearstream have agreed to the above procedures to facilitate transfers of interests in the global notes among participants in those settlement systems. However, the settlement systems are not obligated to perform these procedures and may discontinue or change these procedures at any time. Neither we nor the Trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their participants or indirect participants of their obligations under the rules and procedures governing their operations.

165

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Certificated notes

        Notes in physical, certificated form will be issued and delivered to each person that DTC identifies as a beneficial owner of the related notes only if:

•

DTC notifies us at any time that it is unwilling or unable to continue as depositary for the global notes and a successor depositary is not appointed within 90 days;



•

DTC ceases to be registered as a clearing agency under the Securities Exchange Act of 1934 and a successor depositary is not appointed within 90 days;



•

we, at our option, notify the Trustee that we elect to cause the issuance of certificated notes; or



•

certain other events provided in the indenture should occur.

166

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PLAN OF DISTRIBUTION

        We are not using any underwriters for this exchange offer. We are bearing the expenses of the exchange.

        Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date and ending on the close of business one year after the expiration date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until, 2010, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.

        We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        For a period of one year after the expiration date, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holder of the outstanding notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the outstanding notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

        This prospectus does not qualify the distribution of exchange notes to any purchaser resident in Canada.

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LEGAL MATTERS

        Orrick, Herrington & Sutcliffe LLP, San Francisco, California, will pass upon certain legal matters under U.S. law for us regarding this offering. Stewart McKelvey will pass upon certain legal matters under Canadian law regarding this offering for us.

EXPERTS

        The consolidated financial statements of NOVA Chemicals Corporation as of and for the years ended December 31, 2008, 2007 and 2006 included in this prospectus have been audited by Ernst & Young LLP, Chartered Accountants as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

        The partners of Ernst & Young LLP, Chartered Accountants, the auditors of NOVA Chemicals, beneficially own, directly or indirectly, no securities of NOVA Chemicals.

AVAILABLE INFORMATION

        We have filed with the SEC a registration statement on Form F-4 under the Securities Act with respect to the exchange notes being offered in this prospectus. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to us and the exchange notes, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete, and, where such contract or other document is an exhibit to the registration statement, each such statement is qualified by the provisions in such exhibit to which reference is hereby made. Pursuant to our outstanding debt indentures, we are required to file reports and other information with the SEC. Furthermore, as a result of the offering of the exchange notes, we will become subject to the informational requirements of the Exchange Act. The registration statement and other information can be inspected and copied at the public reference facility maintained by the SEC at Judiciary Plaza, 100 F Street, N.E., Washington, D.C. 20549. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC's home page on the Internet
(http://www.sec.gov).

168

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Financial Statements

Unaudited Financial Statements

F-1

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MANAGEMENT'S REPORT

To the Shareholders of NOVA Chemicals Corporation

        The Consolidated Financial Statements and other financial information included in this annual report have been prepared by management. It is management's responsibility to ensure that sound judgment, appropriate accounting principles and methods and reasonable estimates have been used in the preparation of this information. They also ensure that all information presented is consistent.

        Management also is responsible for establishing and maintaining internal controls and procedures over the financial reporting process. The internal control system includes an internal audit function and an established business conduct policy that applies to all employees. In addition, the Company has adopted a code of ethics that applies to its Chief Executive Officer, Chief Financial Officer and Corporate Controller. The business conduct policy and the code of ethics can be viewed on NOVA Chemicals' website (www.novachemicals.com). Management believes the system of internal controls, review procedures and established policies provide reasonable assurance as to the reliability and relevance of financial reports. Management also believes that NOVA Chemicals' operations are conducted in conformity with the law and with a high standard of business conduct.

        During the past year, we have directed efforts to improve and document the design and operating effectiveness of internal control over external financial reporting. The effectiveness of internal control over financial reporting has been subjected to audit by the shareholders' auditors. As at year-end, we have reported that internal control over financial reporting is effective. In compliance with Section 302 of the United States Sarbanes-Oxley Act of 2002, NOVA Chemicals' Chief Executive Officer and Chief Financial Officer will provide to the Securities and Exchange Commission a certification related to NOVA Chemicals' annual disclosure document in the U.S. (Form 40-F). The same certification will be provided to the Canadian Securities Administrators.

        The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Board carries out this responsibility principally through its Audit, Finance and Risk Committee. The Committee, which consists solely of independent directors, reviews the financial statements and annual report and recommends them to the Board for approval. The Committee meets with management, internal auditors and external auditors to discuss internal controls, auditing matters and financial reporting issues. Internal and external auditors have full and unrestricted access to the Audit, Finance and Risk Committee. The Committee also recommends a firm of external auditors to be appointed by the shareholders.

Jeffrey M. Lipton                                                                                                 Chief Executive Officer		Larry A. MacDonald Senior Vice President & Chief Financial Officer
March 5, 2009 Calgary, Canada

F-2

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MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

        The following report is provided by management in respect of NOVA Chemicals' internal control over financial reporting (as defined in Rules 13a-15f and 15d-15f under the United States Securities Exchange Act of 1934):

1.

NOVA Chemicals' management is responsible for establishing and maintaining adequate internal control over financial reporting for NOVA Chemicals.

2.

Management has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework to evaluate the effectiveness of NOVA Chemicals' internal control over financial reporting. Management believes that the COSO framework is a suitable framework for its evaluation of NOVA Chemicals' internal control over financial reporting because it is free from bias, permits reasonably consistent qualitative and quantitative measurements of NOVA Chemicals' internal controls, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of NOVA Chemicals' internal controls are not omitted and is relevant to an evaluation of internal control over financial reporting.

3.

NOVA Chemicals' Consolidated Financial Statements include the accounts of the INEOS NOVA joint venture via proportionate consolidation in accordance with Canadian GAAP. Management is unable to evaluate the effectiveness of internal control within the joint venture due to the fact that NOVA Chemicals does not have the right or authority to evaluate the internal controls of the joint venture and does not have the access necessary, in practice, to evaluate those controls. Management's conclusion regarding the effectiveness of internal controls does not extend to the internal controls of the joint venture. The 2008 Consolidated Financial Statements of NOVA Chemicals included $526 million and $299 million of total and net assets, respectively, related to the INEOS NOVA joint venture as of December 31, 2008, and $1,845 million and $112 million of revenues and net loss, respectively, for the year then ended.

4.

Management has assessed the effectiveness of NOVA Chemicals' internal control over financial reporting, as at December 31, 2008, and has concluded that such internal control over financial reporting is effective. There are no material weaknesses in NOVA Chemicals' internal control over financial reporting that have been identified by management.

5.

Ernst & Young LLP, who has audited the Consolidated Financial Statements of NOVA Chemicals for the year ended December 31, 2008, has also issued a report on internal controls under Auditing Standard No. 5 of the Public Company Accounting Oversight Board (United States). This report is located on page 77 of this Annual Report.

Jeffrey M. Lipton                                                                                                 Chief Executive Officer		Larry A. MacDonald Senior Vice President & Chief Financial Officer
March 5, 2009 Calgary, Canada

F-3

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INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

Under Canadian Generally Accepted Auditing Standards and
the Standards of the Public Company Accounting Oversight Board (United States)

To the Directors of NOVA Chemicals Corporation

        We have audited the Consolidated Balance Sheets of NOVA Chemicals Corporation as at December 31, 2008 and 2007, and the related Consolidated Statements of Income (Loss), Comprehensive Income (Loss), Changes in Shareholders' Equity, and Cash Flows for each of the years in the three-year period ended December 31, 2008. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with Canadian Generally Accepted Auditing Standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, these Consolidated Financial Statements present fairly, in all material respects, the financial position of NOVA Chemicals Corporation as at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with Canadian Generally Accepted Accounting Principles.

        As discussed in Note 2 to the Consolidated Financial Statements, in 2008 the Corporation made changes to its methods of accounting for inventories and its Deferred Share Units Plan, in 2007 made changes to its methods of accounting for stock-based compensation, financial instruments and hedges and also changed its presentation of equity and changes in equity, including reporting of comprehensive income. As discussed in Note 21 in 2007, the Corporation made changes to its methods of accounting for uncertainty in income taxes and defined benefit pension and other post-retirement plans. In addition as described in Note 19, the Corporation has restated its segment reporting for the year ended December 31, 2006.

        We have also audited, in accordance with the Standards of the Public Company Accounting Oversight Board (United States), NOVA Chemicals Corporation's internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 5, 2009, expressed an unqualified opinion thereon.

Ernst & Young LLP
Chartered Accountants

March 5, 2009
Calgary, Canada

F-4

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INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROLS

Under Standards of the Public Company Accounting Oversight Board (United States)

To the Directors of NOVA Chemicals Corporation

        We have audited NOVA Chemicals Corporation (NOVA Chemicals or the Corporation) internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). NOVA Chemicals' management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of the Corporation's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with Generally Accepted Accounting Principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        As indicated in Management's Annual Report on Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the INEOS NOVA joint venture, included in NOVA Chemicals' 2008 Consolidated Financial Statements and constituting $526 million and $299 million of total and net assets, respectively, as of December 31, 2008, and $1,845 million and $112 million of revenues and net loss, respectively, for the year then ended. Our audit of internal control over financial reporting of NOVA Chemicals did not include an evaluation of the internal controls over financial reporting of the INEOS NOVA joint venture.

        In our opinion, NOVA Chemicals maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

F-5

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        We have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of NOVA Chemicals Corporation as at December 31, 2008 and 2007, and the Consolidated Statements of Income (Loss), Comprehensive Income (Loss), Changes in Shareholders' Equity, and Cash Flows for each of the years in the three-year period ended December 31, 2008, and our report dated March 5 2009, expressed an unqualified opinion thereon.

Ernst & Young LLP
Chartered Accountants

March 5, 2009
Calgary, Canada

F-6

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NOVA CHEMICALS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

YEAR ENDED DECEMBER 31

(millions of U.S. dollars, except number of shares and per share amounts)

See accompanying Notes to Consolidated Financial Statements.

F-7

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NOVA CHEMICALS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

YEAR ENDED DECEMBER 31

(millions of U.S. dollars)

See accompanying Notes to Consolidated Financial Statements.

F-8

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NOVA CHEMICALS CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31 (millions of U.S. dollars)

---

(1)

In 2008, NOVA Chemicals reclassified certain balance sheet amounts. The prior period was restated. See Notes 2, 3 and 7.

On behalf of the board:
Kerry L. Hawkins Director		Jeffrey M. Lipton Director

See accompanying Notes to Consolidated Financial Statements.

F-9

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NOVA CHEMICALS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31

(millions of U.S. dollars)

---

(1)

In 2008, NOVA Chemicals reclassified certain balance sheet amounts. The prior periods were restated. See Notes 2, 3 and 7.

See accompanying Notes to Consolidated Financial Statements.

F-10

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NOVA CHEMICALS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

YEAR ENDED DECEMBER 31

(millions of U.S. dollars)

---

(1)

Unlimited number of authorized voting common shares without par value, non-voting first preferred shares and non-voting second preferred shares. Currently only common shares are issued and outstanding.

(2)

Stated common share capital for legal purposes at Dec. 31, 2008, 2007 and 2006 was $1,643 million, $1,640 million and $1,632 million, respectively.

See accompanying Notes to Consolidated Financial Statements.

F-11

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All amounts in U.S. dollars, unless otherwise noted.

1.     BASIS OF PRESENTATION

NOVA Chemicals is incorporated under the laws of the Canada Business Corporations Act. Where used in these financial statements, "NOVA Chemicals" or "the Corporation" or "the Company" means NOVA Chemicals Corporation alone or together with its subsidiaries and affiliates, depending on the context in which such terms are used. The Consolidated Financial Statements include the accounts of the Corporation, its subsidiaries and the proportionate share of the accounts of its joint ventures. Where reference is made to balances due to and from, and transactions with affiliate, "affiliate" means INEOS NOVA (see Note 5 on page 95 and other joint ventures. These transactions arise from business conducted between NOVA Chemicals and INEOS NOVA and other joint ventures.

These Consolidated Financial Statements have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles (GAAP). These accounting principles are different in some respects from those generally accepted in the United States and the significant differences are described in Note 21, "United States Generally Accepted Accounting Principles" (U.S. GAAP).

The Corporation reports its Consolidated Financial Statements in U.S. dollars. The Corporation used the Canadian dollar as its functional currency for its Canadian operations from inception of the Company to Sep. 30, 2008. Effective Oct. 1, 2008, NOVA Chemicals changed its functional currency to the U.S. dollar (see Note 2).

The preparation of these Consolidated Financial Statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Actual results could differ materially from those estimates due to factors such as fluctuations in commodity prices, foreign exchange rates, interest rates, changes in economic conditions and regulatory changes. Examples of significant estimates include the following: the estimated useful lives of assets; the recoverability of tangible assets; certain actuarial and economic assumptions used in determining defined benefit plan costs, accrued benefit obligations and pension plan assets; estimates of cash flows related to environmental site restoration and clean-up and the resulting asset retirement obligations; assumptions used in impairment calculations for property, plant and equipment; estimates for allowance for doubtful accounts; assumptions used in estimating the net realizable value of inventory; and the estimated tax valuation allowance and tax reserve.

Refer to Note 23 for significant events subsequent to Dec. 31, 2008 which have impacted the Corporation's liquidity and future outlook.

F-12

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Changes in Accounting Policies

F-13

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

F-14

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

F-15

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

F-16

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

F-17

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

F-18

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

Short-term investments with initial maturities not greater than 90 days are considered to be cash equivalents and are recorded at cost, which approximates current market value.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. NOVA Chemicals maintains an allowance for doubtful accounts for estimated losses of accounts that may become uncollectible. The allowance is based on the Corporation's historical percentage of uncollectible accounts, current delinquent customer accounts and management's assessment of the current business environment and its potential impact on the Corporation's customers. NOVA Chemicals considers a receivable delinquent if it is unpaid after the terms of the related invoice have expired. The allowance is evaluated quarterly based on a review of the aged receivables. Accounts receivable are written off to the allowance account at the time a customer receivable is known to be uncollectible or are written down to their estimated net realizable value if not collectible in full.

Foreign Currency Translation

NOVA Chemicals' financial results are impacted by both translation and transaction currency effects resulting from changes in currency exchange rates. Through Sep. 30, 2008, the Corporation's operations were considered self-sustaining and were translated into U.S. dollars using the current rate method. Resulting translation gains or losses were deferred in Accumulated Other Comprehensive Income (AOCI) until there was a realized reduction of the net investment in the foreign operations. In the third quarter of 2008, the INEOS NOVA joint venture obtained independent financing through a North American accounts receivable securitization program. This significantly eliminated the joint venture's reliance on NOVA Chemicals to fund operations. As a result of this change in circumstances, NOVA Chemicals undertook a review of the functional currency exposures of all of its businesses and concluded that the currency exposures of its Canadian operations are predominately U.S. dollars. Accordingly, as required by generally accepted accounting principles, NOVA Chemicals commenced recording transactions in its Canadian operations using U.S. dollars as the functional currency effective Oct. 1, 2008. This results in all foreign currency impacts of holding Canadian dollar denominated financial assets and liabilities being recorded through the income statement rather than being included in translation gains and losses deferred in AOCI. NOVA Chemicals accounted for this change prospectively and any amounts that had been previously deferred in AOCI continue to be included in AOCI unless there is a realized reduction in the net investment in the Canadian operations. The translated amounts on Sep. 30, 2008, became the historical basis for all items as of Oct. 1, 2008. NOVA Chemicals continues to hold investments in joint ventures and other subsidiaries with differing functional currencies and these will continue to be classified as self-sustaining operations, with translation gains and losses deferred in AOCI. See Note 20 for impacts of the change in functional currency.

Transaction currency effects occur when NOVA Chemicals or one of its subsidiaries incurs monetary assets or liabilities in a currency different from its functional currency. Prior to Oct. 1,

F-19

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2008, these transaction gains and losses were recorded in Feedstock and operating costs and Selling, general and administrative expenses in the Consolidated Statements of Income (Loss). After Oct. 1, 2008, these transaction gains and losses are recorded in Foreign exchange gains in the Consolidated Statements of Income (Loss).

Derivative Instruments

The Corporation sells petrochemical products at prices denominated in various currencies; purchases energy commodities; invests in foreign operations; issues short- and long-term debt, including amounts in foreign currencies; and utilizes a number of stock-based compensation plans. These activities result in exposures to fluctuations in foreign currency exchange rates, commodity prices, interest rates and common stock prices. NOVA Chemicals may choose to modify these exposures by entering into contractual arrangements (derivatives), which reduce the exposure by creating offsetting positions. Derivative instruments are used only for economic hedges of foreign exchange rate, commodity price, interest rate and stock price volatility risks. NOVA Chemicals enters into derivative financial instruments with high credit quality counterparties and diversifies its positions among such counterparties in order to reduce its exposure to credit losses. In addition, the credit risk of financial instruments with a positive fair value is minimized by way of limit management, which sets individual relative and absolute figures for risk exposure depending on the counterparty's credit rating. The Company has not experienced any credit losses on derivatives during the three-year period ended Dec. 31, 2008. Negative fair value is also minimized by way of limit management. If the aggregate negative fair value is at or above the corporate market risk limit, the appropriate level of management must be immediately notified and an appropriate course of action is determined. These derivative instruments are not utilized for trading or speculative purposes.

NOVA Chemicals has U.S., Canadian and European-based petrochemical operations. The Corporation periodically manages its exposure to fluctuations in Canadian and Euro dollar exchange rates by using forward exchange contracts.

NOVA Chemicals may choose to use commodity-based derivatives to manage its exposure to price fluctuations on crude oil, refined products and natural gas transactions. The instruments are used to moderate against adverse short-term price movements. Occasionally, longer-term positions will be taken to manage price risk for anticipated supply requirements.

When considered appropriate, NOVA Chemicals enters into interest rate swaps in order to manage the fixed and floating interest rate mix on its long-term debt portfolio. The interest rate swap agreements generally involve the periodic exchange of payments without the exchange of the notional principal amounts upon which the payments are based.

Equity forward contracts are used to manage exposures to fluctuations in the Corporation's stock-based compensation costs, as the costs of the plans vary with changes in the market price of the underlying common shares.

Changes in the fair value of derivative instruments are reported in income or OCI, depending on the use of the derivative and whether it is designated and qualifies for hedge accounting treatment under the provisions of CICA 3865, Hedges. Unrealized gains and losses on derivative instruments

F-20

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

designated and qualifying as cash flow hedges are recorded in OCI to the extent the hedges are effective, until the underlying transactions are recognized in Feedstock and operating costs on the Consolidated Statements of Income (Loss). To the extent effective, unrealized gains and losses on derivative and non-derivative instruments used as hedges of the Company's net investment in foreign operations are recorded in OCI. The ineffective portions of cash flow hedges and hedges of net investment in foreign operations, if any, are recognized in income immediately.

Unrealized gains and losses on derivative instruments designated and qualifying as fair value hedging instruments, as well as the offsetting unrealized gains and losses on the hedged items, are recognized in Feedstock and operating costs on the Consolidated Statements of Income (Loss) in the same accounting period. Unrealized gains and losses on derivative instruments that do not qualify or are not designated as hedges are marked to market at the end of each accounting period with the results included in Feedstock and operating costs on the Consolidated Statements of Income (Loss).

Financial Instruments

Financial assets and liabilities are recognized on the balance sheet when NOVA Chemicals becomes a party to a financial instrument. Financial instruments also include derivatives. Financial assets and liabilities are divided into the following categories:

Held for trading financial assets and liabilities are measured at fair value and all gains (losses) are recognized in net income (loss) in the period in which they arise. Financial and non-financial derivative instruments are classified as held for trading and recorded as either assets or liabilities, with the exception of non-financial derivative contracts that were entered into and continue to be held for the purpose of receipt or delivery of a non-financial item in accordance with NOVA Chemicals' expected purchase, sale and usage requirements. Certain derivatives embedded in non-derivative contracts are also measured at fair value. This category includes Cash and cash equivalents and derivative instruments included in Accounts receivable, Investments and other assets, Accounts payable and accrued liabilities and Deferred credits and long-term liabilities.

Loans and receivables are financial assets with fixed or determinable payments, which are not quoted in an active market and are not derivatives, debt securities or financial assets designated as available-for-sale or held for trading upon initial recognition. Loans and receivables are initially valued at fair value and subsequently measured at amortized cost which approximates fair value. Included in this category are trade accounts receivable, advances receivable from affiliates and other receivables (all included in Accounts receivable), other assets included in Prepaid expenses and other assets and Restricted cash.

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for sale upon initial recognition, or that are not classified as loans and receivable, held-to-maturity investments or held for trading. Available-for-sale financial instruments are measured at fair value, determined by published market prices in an active market, except for investments in equity instruments that do not have quoted market prices in an active market which are measured at cost. Changes in fair value are recognized in OCI and only are recognized in net

F-21

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

income (loss) when the asset is disposed or to reflect an impairment. Available-for-sale financial assets are included in Investments and other assets.

Held-to-maturity investments consist of non-derivative financial assets with fixed or determinable payments and a fixed maturity that NOVA Chemicals has the positive intention and ability to hold to maturity and which do not fall under other categories listed above. These investments are initially recorded at fair value and subsequently measured at amortized cost. NOVA Chemicals has no financial assets that are included in this category.

Other financial liabilities are initially valued at fair value and subsequently measured at amortized cost. This category includes trade accounts payable, other accounts payable and certain accrued liabilities included in Accounts payable and accrued liabilities, Bank loans (lines of credit), certain long-term liabilities included in Deferred credits and long-term liabilities and long-term debt.

Transaction costs related to all financial assets and liabilities are added to the acquisition or issue cost, unless the financial instrument is classified as held for trading, in which case the transaction costs are recognized immediately in net income (loss).

Inventories

NOVA Chemicals carries inventories at the lower of cost or net realizable value. The net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale. Cost is determined on a first-in, first-out (FIFO) basis. Beginning Jan. 1, 2008, the cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of purchase include the purchase price (net of discounts and rebates), import duties and other taxes and transport and handling costs. The costs of conversion include costs directly related to the units of production, such as labor, and a systematic allocation of fixed and variable production overheads that are incurred in converting the materials into finished goods. Other costs may include non-production overheads or the costs of designing products for specific customers. Financing costs are not included in production costs. Prior to Jan. 1, 2008, there was no allocation of fixed production overhead to inventory.

Investments

Investments in debt and marketable equity securities, including warrants, are classified as trading, available-for-sale or held-to-maturity. Investments classified as trading are reported at fair value with unrealized gains and losses included in income (loss). Investments classified as available-for-sale are reported at fair value with unrealized gains and losses recorded in OCI. Those classified as held-to-maturity are recorded at amortized cost. Investments in non-affiliated entities that do not have a quoted market price in an active market are measured at cost. Investments are assessed annually for potential impairment.

Joint Ventures

NOVA Chemicals applies the proportionate consolidation method of accounting for its investments in joint venture operations. Under this method, NOVA Chemicals records, on a line-by-line basis

F-22

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

within its financial statements and notes, its pro-rata share of the joint venture's assets, liabilities, revenues, expenses and cash flows.

Property, Plant and Equipment (PP&E)

NOVA Chemicals' PP&E primarily consists of land, buildings and manufacturing equipment for producing petrochemicals. PP&E are valued at historical cost. Financing costs incurred during major construction are capitalized as part of the cost of the asset until the asset is available for use. Costs related to turnaround activities are capitalized and amortized over the period remaining to the next turnaround activity, while maintenance and repair costs are expensed as incurred.

The Corporation periodically reviews the carrying value of PP&E for impairment when circumstances indicate an asset's value may not be recoverable. If it is determined that an asset's undiscounted cash flows are less than its carrying value, the asset is written down to its fair value.

Depreciation

Buildings are depreciated on a straight-line basis over twenty years, and equipment is depreciated on a straight-line basis generally between three and twenty years, depending on the type of equipment. These rates are designed to write-off assets to their salvage values over their estimated useful lives.

Deferred Start-up Costs

Costs associated with start-up activities on constructed plants are deferred from the date of mechanical completion of the facilities until the date the Corporation is ready to commence commercial service. Any revenues earned during this period are recorded as a reduction in deferred start-up costs. These costs are amortized on a straight-line basis over a five-year period, commencing on the date of commercial service.

Leases

Leases are classified as operating or capital depending upon the terms and conditions of the contracts. Leases that transfer substantially all the benefits and risks of ownership to the Corporation are accounted for as capital leases. Assets under capital leases are amortized on a straight-line basis over the period of expected use and are classified as PP&E. Obligations recorded under capital leases are reduced by lease payments, net of imputed interest, and are classified as long-term debt.

Income Taxes

The liability method of tax allocation accounting is used. Under the liability method, future tax assets and liabilities are determined based on differences between the accounting and tax basis of assets and liabilities and measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.

F-23

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Periodically, future tax assets are evaluated as to the likelihood of their realization. In instances where it is not more likely than not that the future tax asset will be realized, a valuation allowance is recorded to reduce all or a portion of the future tax asset to its estimated realizable amount. Changes in the valuation allowance are recorded as a component of income tax expense or recovery.

Asset Retirement Obligations

An asset retirement obligation represents a legal obligation associated with the retirement of PP&E that is incurred upon the acquisition, construction, development or normal operation of that long-lived asset. The Corporation recognizes asset retirement obligations in the period in which they are incurred, if a reasonable estimate of fair value can be made. The associated estimated asset retirement costs are capitalized as part of the carrying amount of the PP&E and depreciated over its useful life. NOVA Chemicals' asset retirement obligations primarily are associated with closure of certain assets used in the chemicals manufacturing process.

Employee Future Benefits

Pension Plans.    NOVA Chemicals sponsors both defined benefit and defined contribution pension arrangements covering substantially all employees.

The cost of defined benefit pensions is determined using the projected benefit method prorated on employment services and is expensed as employees provide services. Adjustments arising from plan amendments, as well as transitional pension assets or obligations, are amortized on a straight-line basis over the estimated average remaining service lifetime (EARSL). Adjustments arising from changes in assumptions and experience gains and losses are amortized over the EARSL when the cumulative unamortized balance exceeds 10% of the greater of accrued obligations or plan assets. Gains or losses arising from plan curtailments and settlements are recognized in the year in which they occur. In the event that curtailments and settlements occur in the same period, curtailment accounting is performed before settlement accounting. For purposes of calculating the expected return on plan assets, pension assets are valued at fair value. Liabilities are measured at market discount rates that reflect the yield at the latest measurement date on a portfolio of high quality corporate bonds of similar duration as the Corporation's pension liabilities.

The cost of defined contribution benefits is expensed as earned by employees. NOVA Chemicals makes contributions in accordance with all plan agreements.

Post-Retirement Benefits Other Than Pensions.    In North America, NOVA Chemicals provides medical care and life insurance benefits to eligible retirees and their dependents. Post-retirement benefit costs are expensed as the employees provide service.

Stock-Based Compensation

The Corporation uses the fair-value based method of accounting for equity-settled, stock-based compensation awards granted to employees, such as options, where compensation expense is measured and recognized based on the fair value of the stock-based award. Amounts related to compensation costs are initially credited to contributed surplus and then transferred to common

F-24

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

shares upon exercise of options or reinvested earnings (deficit) upon cancellation or retirement of options.

The Corporation uses the liability method of accounting for cash-settled, stock-based compensation awards granted to employees, such as equity appreciation and restricted stock units. Units granted are marked to market each period based on the value of NOVA Chemicals' common stock as reported on the Toronto or New York Stock Exchanges, as applicable. Changes in value are recorded in income (loss) over the service period or for vested units as such changes arise.

Deferred Share Unit Plans

Units issued under these plans are calculated based on annual management incentive awards or director fees. Prior to Oct. 1, 2008, the cost of the units earned was expensed as employees and directors provided services. Any adjustments to the value of the units as a result of expected changes in NOVA Chemicals' common stock value were amortized on a straight-line basis over the EARSL of individuals participating in the plans. Beginning Oct. 1, 2008, units granted are marked to market each period based on the average value of NOVA Chemicals' common stock as reported on the Toronto or New York Stock Exchanges, as applicable, for the last five trading days prior to the end of the period. Changes in the market value of the units are recorded in income (loss) each period and resulted in $16 million before-tax ($13 million after-tax or $0.16 per share) of income in the fourth quarter of 2008. The prior periods were not restated as the amount was deemed to be immaterial.

Earnings per Share

The treasury stock method is used to calculate diluted earnings per share. Under this method, the incremental number of common shares outstanding for the diluted earnings per share calculation is determined assuming that the proceeds from exercise of dilutive options are used to repurchase common shares at the average market price during the period.

Securitizations

Accounts receivable securitization transactions are recorded as sales of assets based on the transfer of control to the purchasers. Transactions recorded in this manner result in the removal of the sold assets from the Corporation's balance sheet. Interest paid, net of servicing fees, on the portfolio of sold receivables is recorded as interest expense.

Revenue Recognition

The Corporation recognizes revenue when the earnings process is complete. This generally occurs when products are shipped to the customer in accordance with the terms of the sales agreement; title and risk of loss has been transferred; and pricing is fixed or determinable. The Corporation accounts for sales incentives as a reduction in revenue at the time revenue is recorded.

Research and Development

Expenditures associated with research and development activities are expensed as incurred.

F-25

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investment Tax Credits

The Corporation accounts for investment tax credits using the cost-reduction approach. Investment tax credits related to the acquisition of assets are deducted from the related assets with depreciation calculated on the net amount. Investment tax credits related to current expenses are included in the determination of income (loss) for the period.

Comparative Figures

Certain comparative figures have been reclassified to conform to the current year's presentation.

In 2008, NOVA Chemicals reclassified prepaid expenses of $20 million and rebate accruals of $20 million for 2007 from Accounts Receivable to Prepaid expenses and other assets and Accounts payable and accrued liabilities, respectively (see Notes 3 and 7).

3.     ACCOUNTS RECEIVABLE

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(1)

Classified as loans and receivables. See Note 20.



(2)

2007 was restated to reclassify $(20) million to Accounts payable and accrued liabilities. See Notes 2 and 7.



(3)

Classified as held-for-trading. See Note 20.



(4)

2007 was restated to reclassify $20 million to Prepaid expenses and other assets. See Note 2.



(5)

2007 includes $60 million in unsecured notes receivable bearing interest at 4.5% per annum. In 2008, this note receivable was reclassified to Investments and other assets. See Note 5.

F-26

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

3.     ACCOUNTS RECEIVABLE (Continued)

Accounts Receivable Securitization Programs

NOVA Chemicals

The Corporation sells undivided interests in certain trade accounts receivable pursuant to revolving securitization transactions in which the Corporation retains servicing responsibilities. The receivables are sold at a discount approximating the purchaser's financing cost of issuing commercial paper backed by the accounts receivable. The Corporation pays a fee on this same basis, plus a margin that varies with the Corporation's interest coverage ratio. The sale of receivables is reflected as a reduction of accounts receivable and in operating cash flows. As the purchaser receives collections on the previously sold interests, new accounts receivable are sold by the Corporation to a maximum amount equal to the lesser of eligible receivables or $300 million (2007 and 2006—$350 million). Recourse on sold receivables is limited to the receivables and certain reserves provided to cover credit losses and dilution (such as discounts, rebates and other non-cash reductions). The accounts receivable programs expire on June 30, 2010. These programs are governed by the same financial covenants as two of the revolving credit facilities (see Note 8).

On Feb. 13, 2009, the maximum amount of the programs was reduced from $300 million to $190 million and the expiration date was changed to February 2010. See Note 23 in the Notes to Consolidated Financial Statements.

Information regarding the Corporation's securitization programs is as follows:

One of the Corporation's securitization programs involves the use of a special purpose entity (SPE). In that program, the Corporation sells certain trade accounts receivable to the SPE, which then sells interests in such receivables to a purchaser. The SPE is legally separate from the Corporation. The assets of the SPE (including the receivables transferred to it) are not available to creditors of the Corporation, and the transferred receivables are legally not an asset of the Corporation.

F-27

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

3.     ACCOUNTS RECEIVABLE (Continued)

Information regarding the cash flows between the Corporation and the SPE are as follows:

---

(1)

Collections received by the SPE on accounts receivable previously sold are used to purchase interests in new accounts receivable.



(2)

Servicing fees are considered to be immaterial on an annual basis and as such are recorded as received.



(3)

Sales proceeds from trade receivables that are ineligible under the terms of the banks securitization agreement due to items such as age.

INEOS NOVA Joint Venture (North America)

INEOS NOVA entered into a $150 million accounts receivable securitization program in North America during the third quarter of 2008 which will expire in July 2010. The INEOS NOVA joint venture has no right to any cash collected from the sold receivables and control of the accounts receivable has been effectively transferred to the purchaser; therefore, neither the receivables nor any obligation to the purchaser is reflected in NOVA Chemicals' Consolidated Financial Statements.

Information regarding NOVA Chemicals' share of INEOS NOVA's North American securitization program is as follows:

INEOS NOVA Joint Venture (Europe)

In 2006, the INEOS NOVA joint venture (formerly NOVA Innovene) entered into an accounts receivable securitization program for the sale of its European trade receivables to a maximum of 120 million euros. This program expires in November 2011. The INEOS NOVA joint venture has no right to any cash collected from the sold receivables and control of the accounts receivable has been effectively transferred to the purchaser; therefore, neither the receivables nor any obligation to the purchaser is reflected in NOVA Chemicals' Consolidated Financial Statements.

F-28

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

3.     ACCOUNTS RECEIVABLE (Continued)

Information regarding NOVA Chemicals' share of INEOS NOVA's European securitization program is as follows:

As of Dec. 31, 2008, INEOS NOVA was in compliance with its securitization programs' covenants.

4.     INVENTORIES

 

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(1)

Refer to accounting policy on Inventories in Note 2.

In 2008, there were significant decreases in the prices of crude oil and other liquid petroleum products used to produce polyethylene, ethylene and co-products at NOVA Chemicals' Corunna facility. As a result, Corunna's commodity feedstocks and manufactured ethylene, co-products and polyethylene finished goods inventory have been written down to their estimated net realizable values, and a charge of $129 million was recorded in Feedstock and operating costs in 2008.

F-29

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

5.     INVESTMENTS AND OTHER ASSETS

---

(1)

Includes an investment of $15 million (2007—$15 million) in an affiliated special purpose entity with respect to the accounts receivable securitization program described in Note 3. Also includes an $11 million (2007—$11 million) investment in sEnergy, classified as available-for-sale securities with no published market price and recorded at cost and other miscellaneous investments classified as available-for-sale securities with no published market price and recorded at cost. In 2008, an impairment charge of $5 million was charged to Restructuring charges (see Note 13) for the investment in common shares of Envirokare Tech Inc. In 2007, NOVA Chemicals investment in common shares of Envirokare Tech, Inc. was $4 million, classified as available-for-sale securities and recorded at fair market value.



(2)

$5 million (2007—$5 million) of the advances is subordinated to certain notes receivable.



(3)

Classified as loans and receivables. See Note 20.



(4)

See schedule of Other Assets below.

Other Assets

Other assets are comprised of the following:

---

(1)

Start-up costs consist of the unamortized portion of costs incurred in 2006 and 2005 associated with the start-up of the Corunna facility after the maintenance turnaround and expansion and modernization project, as well as the unamortized portion of operating costs, net of incidental revenues, incurred during the pre-operating period on constructed assets at Joffre, Alberta.



(2)

Note receivable in connection with the sale of the Chesapeake, Virginia, facility in 2007. The note bears interest at 8.75%, requires a balloon payment in November 2012 and is secured by the Chesapeake, Virginia, facility.



(3)

Classified as loans and receivables. See Note 20.



(4)

Classified as held-for-trading. See Note 20.

F-30

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

5.     INVESTMENTS AND OTHER ASSETS (Continued)

Joint Ventures

On Oct. 1, 2005, the Corporation contributed its European styrenic polymer assets, comprised of manufacturing facilities, accounts receivable and inventory, to the NOVA Innovene joint venture with Innovene (now INEOS) in exchange for a 50% interest in the joint venture. The joint venture produces styrenic polymers from NOVA Chemicals' contributed plants and INEOS' contributed plants. NOVA Chemicals accounted for its contribution to the joint venture as an exchange of 50% of its contributed non-monetary productive assets for a 50% interest in similar productive assets of INEOS. Consequently, the exchange was recorded at the carrying value of the assets given up, with no gain or loss recognized.

On Oct. 1, 2007, NOVA Chemicals' expanded its existing 50:50 European joint venture with INEOS (renamed INEOS NOVA joint venture), to include NOVA Chemicals' STYRENIX assets and other North American styrenic polymer assets and INEOS' North American styrene monomer and styrenic polymer assets. The Corporation contributed its STYRENIX property, plant and equipment with a book value of $250 million and other North American styrenic polymer assets and working capital with a book value of $150 million to the joint venture in exchange for a 50% interest in the joint venture. The joint venture produces styrenic polymers from NOVA Chemicals' contributed plants and INEOS' contributed plants. The exchange of 50% of its contributed non-monetary productive assets for a 50% interest in similar assets of INEOS was recorded at the carrying value of the assets given up, with no gain or loss recognized.

Prior to expanding the INEOS NOVA joint venture, NOVA Chemicals sold to the European joint venture 50% of its styrene monomer requirements and certain styrenic polymer products for distribution in Europe. During 2007 and 2006, NOVA Chemicals recognized revenues of $207 million and $254 million, respectively, from the sale of these products to the European joint venture.

Subsequent to expanding the INEOS NOVA joint venture, NOVA Chemicals sells benzene and ethylene to the joint venture for use in manufacturing styrene monomer. During 2008 and 2007, NOVA Chemicals recognized revenues of $328 million and $76 million, respectively, from the sale of these products to the joint venture.

NOVA Chemicals has provided a guarantee of $25 million to a financial institution to secure various obligations of the INEOS NOVA joint venture.

F-31

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

5.     INVESTMENTS AND OTHER ASSETS (Continued)

In 2006, the Corporation formed a 50:50 joint venture with Dietrich Metal Framing (a Worthington Industries company) called Accelerated Building Technologies, LLC (ABT). This joint venture develops and manufactures durable, energy-saving composite construction products and systems using NOVA Chemicals' expandable polystyrene (EPS) technology and steel. Each party contributed cash and/or equipment of $1 million to form the joint venture. NOVA Chemicals intends to acquire Dietrich's 50% interest in ABT. NOVA Chemicals is reviewing this proposed acquisition with International Petroleum Investment Company (IPIC) pending closing of the Arrangement.

On Oct. 1, 2005, the Corporation and Grupo IDESA formed a 50:50 joint venture in Mexico called NOVIDESA, S.A. de C.V. The joint venture produces EPS from an existing Grupo IDESA facility for construction and packaging applications in the growing Mexican market. It also produces applications such as insulating concrete forms (ICFs) and distributes INEOS NOVA's solid polystyrene in Mexico.

In addition to its interests in recently formed joint ventures, NOVA Chemicals owns a 50% interest in the Joffre E3 ethylene plant, a 50% interest in LRM Industries, LLC (a 50:50 joint venture with Envirokare Composite Corp. (a subsidiary of Envirokare Tech Inc.) and a 20% interest in a cogeneration facility located at Joffre, Alberta.

On May 1, 2008, NOVA Chemicals signed a letter of intent with Reliance Industries Limited to form a building and construction joint venture. The proposed new joint venture plans to leverage NOVA Chemicals' green building and construction technology to design, engineer and build a range of high-efficiency structures for the Indian sub-continent. The proposed joint venture is on hold until the potential transaction with IPIC is completed (see Note 23 Subsequent Events). Through December 31, 2008, NOVA Chemicals has contributed $8 million to the proposed joint venture.

The following is summarized financial information for NOVA Chemicals' interests in its joint ventures:

F-32

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

5.     INVESTMENTS AND OTHER ASSETS (Continued)

 

6.     PROPERTY, PLANT AND EQUIPMENT

---

(1)

See Note 8 for discussion of the collateral provided under the committed credit facility.



(2)

Assets under construction are not depreciated until they are available for commercial production.



(3)

Accumulated depreciation for plant and equipment at Dec. 31, 2008, was $3,736 million (Dec. 31, 2007—$4,077 million). Accumulated depreciation for assets under capital lease at Dec. 31, 2008, was $9 million (Dec. 31, 2007—$8 million).

During 2004, the Corporation sold its 100% interest in an ethylene delivery system in Alberta and entered into a pipeline transportation agreement to lease back the pipeline. Net cash proceeds of $19 million were received from the sale, resulting in a gain of $19 million. The gain realized on the sale has been deferred (see Note 9) and is being amortized to income on a straight-line basis over the term of the pipeline transportation agreement, which expires in 2016.

F-33

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

7.     ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

---

(1)

Classified as other financial liabilities. See Note 20.



(2)

Classified as held-for-trading. See Note 20.



(3)

Balance at Dec. 31, 2008 is net of a $5 million margin call.



(4)

Represents the current portion of deferred gains realized on the 2003 sale of a 50% interest in Fort Saskatchewan Ethylene Storage Limited Partnership. The deferred gain is being recognized in income (loss) on a straight-line basis over the 20-year storage contract entered into immediately following the sale.



(5)

2007 includes $43 million of unsecured notes payable, bearing interest at 4.5% per annum.



(6)

2007 was restated to reclassify $20 million from Accounts receivable. See Notes 2 and 3.

F-34

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

8.     LONG-TERM DEBT

---

(1)

Classified as other financial liabilities (excluding obligations under capital leases 2008—$16 million and 2007—$18 million). See Note 20.



(2)

Composed primarily of non-recourse joint venture secured debt (2008—$17 million and 2007—$22 million), whereby security is limited to NOVA Chemicals' net investment in the Joffre co-generation joint venture, and obligations under capital leases (2008—$16 million at 2.69% and 2007—$18 million at 6.85%). The non-recourse joint venture debt is classified as other financial liabilities. See Note 20.



(3)

Certain deferred debt discount and issuance costs and deferred gains on interest swaps have been reclassified as of Jan. 1, 2007, on a prospective basis in accordance with CICA Section 3855. See Note 2.

Unsecured Debentures and Notes

The remaining debentures and notes are unsecured borrowings, which rank pari passu in all respects with other unsecured and unsubordinated debt of the Corporation.

F-35

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

8.     LONG-TERM DEBT (Continued)

Terms of the outstanding unsecured debentures and notes are as follows:

---

(1)

$250 million Canadian dollars; callable at the option of the Corporation at any time.



(2)

Callable at the option of the Corporation at any time.



(3)

LIBOR + 3.125%; 5.72% at Dec. 31, 2008 (7.8625% at Dec. 31, 2007).



(4)

Callable at the option of the Corporation on or after Sep. 15, 2005.



(5)

Redeemed at the option of the holders on Aug. 15, 2008.

Revolving Credit Facilities

As of Dec. 31, 2008, the Corporation had $683 million of revolving credit facilities which expire on the following dates: $68 million on Mar. 31, 2009; $65 million on Mar. 20, 2010; $350 million on June 30, 2010; $100 million on Mar. 20, 2011; and $100 million expiring as follows: $30 million on Mar. 20, 2010; $30 million on Sep. 20, 2011; and $40 million on Sep. 20, 2013. As of Dec. 31, 2008, NOVA Chemicals had utilized $184 million of the facilities, of which $40 million was in the form of letters of credit.

As of Dec. 31, 2007, the Corporation had $590 million of revolving credit facilities which had the following expiration dates: $100 million on Mar. 31, 2008; $65 million on Mar. 20, 2010; $325 million on June 30, 2010; and $100 million on Mar. 20, 2011. As of Dec. 31, 2007, NOVA Chemicals had utilized $156 million of the facilities, of which $50 million was in the form of letters of credit.

Indentures on NOVA Chemicals' public debt allow for up to 10% of consolidated net tangible assets to be secured without having to secure the public debt. If consolidated net tangible assets (defined in accordance with the indentures and calculated on a quarterly basis) fall below $3.5 billion, access to the $350 million revolving credit facility will be reduced proportionately. Effective Feb. 25, 2009, the availability on the $350 million revolving credit facility was reduced by $25 million. The revolving credit facility size remains at $350 million and future consolidated net tangible assets calculations could restore full availability.

F-36

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

8.     LONG-TERM DEBT (Continued)

The $68 million and the $350 million revolving credit facilities, the total return swap and NOVA Chemicals Accounts Receivable Securitization programs are governed by financial covenants which NOVA Chemicals is required to comply with on a quarterly basis. The covenants require a maximum net debt-to-cash flow ratio of 5:1 and a minimum interest coverage ratio of 2:1. At Dec. 31, 2008, the Company was in compliance with these financial covenants. NOVA Chemicals has negotiated amendments to these financial covenants that provide relief to give the Company access to its major credit line during the first half of 2009, subject to complying with certain conditions which include amending the Accounts Receivable Securitization programs' financial covenants to mirror the amended covenants of the revolving credit facilities; securing $100 million in additional financing by Feb. 28, 2009; and securing an additional $100 million by June 1, 2009. The covenants were amended for the quarter ending Mar. 31, 2009 to exclude the quarter ending Dec. 31, 2008, results and include the quarter ending Mar. 31, 2008, results. NOVA Chemicals' ability to maintain compliance with these financial covenants is dependent on various factors, certain of which are outside the Company's control. Such factors include future industry and capital market conditions, impacts of planned restructuring activities and results of ongoing negotiations with the Company's core group of banks and other sources of financing. The Corporation anticipates that further amendments to its debt covenants will be required with an effective date no later than June 30, 2009. These amendments are expected to be required due to the continuing effect of the large loss incurred in the fourth quarter of 2008 on compliance with the rolling twelve-month cash flow and interest coverage ratio limits. If NOVA Chemicals breaches these covenants or other covenants it could result in a default and in the case of the revolving credit facilities, permit the lenders to declare all amounts outstanding to be due and payable and to terminate all commitments to extend further credit.

Refer to Note 23 for amendments to existing credit facilities and new credit facilities secured subsequent to Dec. 31, 2008.

$1.2 billion (2007—$1.2 billion) in net book value of assets in Canada, including real estate, is pledged as collateral for the $350 million facility. The remaining credit facilities are unsecured.

Medium-Term Notes

The notes are unsecured borrowings ranking pari passu with all other unsecured and unsubordinated debt of the Corporation. The $250 million 7.4% notes are due in April 2009 and are redeemable by the Corporation at any time. The Company currently expects that its year-end liquidity position, coupled with core bank support, new sources of financing secured subsequent to year-end (see Note 23) and internal actions taken to conserve cash will put the Company in a position to address this bond maturity.

Series A Preferred Shares and Total Return Swap

In connection with the acquisition of styrenics assets from Huntsman Corporation in 1998, a subsidiary of the Corporation issued retractable preferred shares with a liquidation preference of $198 million as partial consideration. Holders of the retractable preferred shares originally had the right to exchange the shares (a retraction) for NOVA Chemicals' common shares (plus preferred shares if the market value of such common shares was less than $198 million) on or after Apr. 1,

F-37

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

8.     LONG-TERM DEBT (Continued)

2001. In September 2005, the terms of the retractable preferred shares were amended to eliminate this right. In connection with this amendment, the retractable preferred shares were redesignated as Series A preferred shares. Additionally, the dividend rate was reduced from 2% to 0.5% in December 2005.

NOVA Chemicals has the right to repurchase the Series A preferred shares at any time; however, any such repurchase may obligate NOVA Chemicals to pay an early termination fee under the terms of the total return swap discussed below.

NOVA Chemicals also entered into a total return swap with respect to the Series A preferred shares, which was scheduled to terminate on Oct. 31, 2008, but was renegotiated for a one-year period expiring Oct. 31, 2009. On the initial closing date of the total return swap in 2001, the counterparty through its hedge providers purchased the Series A preferred shares from Huntsman Corporation for $191 million plus accrued unpaid dividends. NOVA Chemicals subsequently reduced the equity notional amount of the total return swap to $126 million. On settlement of the total return swap at the end of the term, NOVA Chemicals will owe the counterparty the difference between the actual sale price received by the counterparty for the Series A preferred shares and the equity notional amount if the sale price is less that the equity notional amount. In February 2009, the total return swap was amended (see Note 23). Upon termination of the total return swap, NOVA Chemicals expects that it will exercise its right to repurchase the Series A preferred shares for a net price equal to the equity notional amount.

Under the terms of the total return swap: (i) the counterparty pays NOVA Chemicals the total return on the Series A preferred shares (periodic dividends plus positive changes in the equity value of Series A preferred shares upon termination of the swap); and (ii) NOVA Chemicals pays the counterparty a spread to LIBOR, as well as any negative changes in the equity value of the Series A preferred shares upon termination of the swap. All periodic dividends, changes in equity value of the Series A preferred shares and interest payments are charged to earnings as incurred.

If the average price of the outstanding 6.5% medium-term notes due 2012 decreases by a certain amount at any time, NOVA Chemicals is required to post maintenance collateral. Once the margin-posting requirement is triggered, if the average price increases by 5% or more, any excess collateral may be returned to NOVA Chemicals. If the average price decreases by 5% or more, NOVA Chemicals would be required to post additional margin. Cash collateral of $45 million has been provided to the counterparty as of Dec. 31, 2008, and is included in Restricted cash on the Consolidated Balance Sheets. Refer to Note 23 for amendments to the total return swap subsequent to Dec. 31, 2008.

If NOVA Chemicals defaults on other debt of at least $25 million and upon certain other events, the counterparty would have the right to sell the Series A preferred shares to a third party and terminate the swap. NOVA Chemicals would then owe the counterparty the difference between the actual sale price received by the counterparty and the equity notional amount if the sale price is less than the equity notional amount. If the sale price is greater than the equity notional amount, the counterparty would owe NOVA Chemicals the difference between the sale price and the equity notional amount. Subsequent to such termination of the swap, NOVA Chemicals may, at its option, repurchase the preferred shares for $198 million plus accrued and unpaid dividends. In

F-38

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

8.     LONG-TERM DEBT (Continued)

December 2008, NOVA Chemicals amended the terms of the total return swap to eliminate the stock price trigger by which the counterparty would have had the right to terminate the swap.

The total return swap was scheduled to terminate on Oct. 31, 2008. However, in September 2008, NOVA Chemicals and the counterparty agreed to extend the term until Oct. 31, 2009. Because the term expires within the next 12 months, the Series A preferred shares were classified under Long-term debt due within one year on the Consolidated Balance Sheets presented on page 79 of this Annual Report. Subsequent to year-end, the term of the agreement was further extended (see Note 23).

Repayment Requirements

Repayment requirements in respect of long-term debt are as follows:

Interest Expense

F-39

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

9.     DEFERRED CREDITS AND LONG-TERM LIABILITIES

---

(1)

Represents the long-term portion of deferred gains realized on the 2003 sale of a 50% interest in Fort Saskatchewan Ethylene Storage Limited Partnership. The deferred gain is being recognized in income (loss) on a straight-line basis over the 20-year storage contract entered into immediately following the sale.



(2)

Represents the long-term portion of a deferred gain realized on the sale of an ethylene pipeline system. See Note 6.



(3)

Classified as held-for-trading. See Note 20.



(4)

Classified as other financial liabilities.



(5)

2008 includes $34 million of unsecured notes payable, bearing interest at 4.5% per annum.

F-40

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

10.   COMMON SHARES

Shares Reserved for Future Issue

---

(1)

Under the employee incentive stock option plan, options are outstanding to officers and employees to purchase 2,544,533 shares at prices ranging from $25.10 to $58.24 (Canadian dollar TSX pricing) and 1,296,826 shares at prices ranging from $31.05 to $47.00 (US dollar NYSE pricing) per share, with expiration dates between Mar. 4, 2009, and Feb. 7, 2018. A total of 3,237,376 common shares are reserved but unallocated. See Note 11 for further details regarding the plan.



(2)

A total of 13 million common shares was approved by shareholders for issuance under the employee incentive stock option plan. No changes have been made since this approval.

On Feb. 23, 2009, the Company entered into an agreement with International Petroleum Investment Company (IPIC) providing for the acquisition by IPIC of all of NOVA Chemicals' outstanding common shares for cash consideration of U.S. $6.00 per share (see Note 23).

Net (Loss) Income per Share

The following table outlines the calculation of basic and diluted net (loss) income per common share:

---

(1)

A total of 4.0 million stock options have been excluded from the computation of diluted earnings per share for the year ended Dec. 31, 2008 (2007—1.0 million and 2006—2.1 million), as their impact would not be dilutive.

F-41

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

10.   COMMON SHARES (Continued)

Shareholder Rights Plan

In May 1999, NOVA Chemicals' shareholders approved a shareholder rights plan where one right was issued for each outstanding common share. The rights remain attached to the shares and are not exercisable until the commencement or announcement of a takeover bid for NOVA Chemicals' common shares or until a person acquires 20% or more of NOVA Chemicals' common shares. The rights plan expires in May 2009.

11.   STOCK-BASED COMPENSATION

In 2006, the Corporation adopted accounting recommendations related to stock-based awards granted to employees who are eligible for retirement at the grant date or will be eligible before the end of the vesting period. Application of this recommendation results in acceleration of the recognition of stock-based compensation expenses (see Note 2).

Employee Incentive Stock Option Plan

The Corporation may grant options to its employees for up to 13 million common shares. During 2005, the Corporation amended its Employee Incentive Stock Option Plan such that options may be granted which are exercisable based on the Corporation's New York Stock Exchange (NYSE) common share price. Accordingly, the exercise price of an option may equal the closing market price on the Toronto Stock Exchange (TSX) or the NYSE of the Corporation's common stock on the date of grant. Options may be exercised over a 10-year period, and generally 25% of the options vest at the grant date with further vesting of 25% in each of the next three years.

All options granted since Jan. 1, 2002, are accounted for using the fair-value method. The fair value of stock options are expensed over their vesting period and reflected in earnings as the related services are provided, with a corresponding amount recorded to contributed surplus. On exercise of options for common shares, amounts previously recorded to contributed surplus for compensation costs are transferred to the common share account. On retirement or cancellation of options, amounts previously recorded to contributed surplus for compensation costs are transferred to reinvested earnings (deficit). The Corporation uses the Black-Scholes option-pricing model to calculate the fair value of options at the date of grant.

Options may be settled by issuance of common shares or retired, whereby the option premium (the differential between the market price and the exercise price) is paid in cash. Amounts paid are recorded as a charge to reinvested earnings (deficit), net of related tax benefits. Options also may be settled periodically as share appreciation rights (SARs), whereby the option premium is settled by issuance of common shares. Options settled by issuance of shares are cancelled, whereas options settled by other means are returned to the unallocated pool of options available for issue.

F-42

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

11.   STOCK-BASED COMPENSATION (Continued)

A summary of the status of the Corporation's employee incentive stock option plan for options based on TSX pricing, as of Dec. 31, 2008, 2007 and 2006, and changes during the years then ended is presented below:

---

(1)

In 2008, 1,164 shares were issued to settle options exercised as SARs (2007—135,573 and 2006—67,366).

The following table summarizes information about employee incentive stock options, based on TSX pricing, outstanding at Dec. 31, 2008:

F-43

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

11.   STOCK-BASED COMPENSATION (Continued)

A summary of the status of the Corporation's employee incentive stock option plan, for options based on NYSE pricing, as of Dec. 31, 2008, 2007 and 2006, and changes during the years then ended is presented below:

The following table summarizes information about employee incentive stock options, based on NYSE pricing, outstanding at Dec. 31, 2008:

In 2008, 2007 and 2006, the Corporation recognized total compensation cost of $2 million, $2 million and $9 million, respectively, for stock-based employee compensation awards.

F-44

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

11.   STOCK-BASED COMPENSATION (Continued)

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for stock options granted:

Equity Appreciation Plan

The Corporation has an equity appreciation plan in which units are granted to employees. The redemption price of a unit is determined by the closing market price on the NYSE of the Corporation's common shares on the date of grant. Units may be redeemed for cash over a 10-year period, and generally 25% of the units vest at the grant date with further vesting of 25% in each of the next three years. In accordance with EIC 162 (see Note 2), the stock-based compensation expense is accelerated for units granted to employees who are eligible for retirement at the grant date or will be eligible before the end of the vesting period. The value of a unit on the redemption date is the difference between the closing price of the Corporation's common shares on that date and the redemption price.

At Dec. 31, 2008, there was no mark-to-market value of the vested units as the share price of NOVA Chemicals' stock at Dec. 31, 2008, fell below the grant price of all outstanding equity appreciation units. At Dec. 31, 2007, the mark-to-market value of the vested units was approximately $27 million. The entire liability was classified as current as of Dec. 31, 2007.

F-45

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

11.   STOCK-BASED COMPENSATION (Continued)

A summary of the status of the Corporation's equity appreciation plan as of Dec. 31, 2008, 2007 and 2006, and changes during the years then ended is presented below:

The following table summarizes information about equity appreciation units outstanding at Dec. 31, 2008:

Restricted Stock Unit Plan

The Restricted Stock Unit Plan is a phantom stock plan wherein the value of a restricted stock unit (RSU) is determined by the value of the Corporation's common shares on the vesting date and is paid to employees in cash or open market shares at the Corporation's discretion. The value of an RSU is determined using the NYSE price for U.S. residents and the TSX price for residents of all other countries. Generally, the units vest and proceeds are distributed three years from the grant date. The value of any common share dividends declared during the vesting period is credited to each RSU account. The value of the RSUs is expensed over the vesting period and is marked to market. In accordance with EIC 162 (see Note 2), the stock-based compensation expense is accelerated for units granted to employees who are eligible for retirement at the grant date or will be eligible before the end of the vesting period.

F-46

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

11.   STOCK-BASED COMPENSATION (Continued)

A summary of the status of the Corporation's restricted stock unit plan as of Dec. 31, 2008, 2007 and 2006, and changes during the years then ended is presented below:

The mark-to-market liability for the RSU plan was $6 million at Dec. 31, 2008 (2007—$26 million). Of the total liability, $1 million (2007—$7 million) was classified as current.

In November 2005, NOVA Chemicals entered into forward transactions with the intent to effectively neutralize the mark-to-market impact of the Equity Appreciation Plan and the Restricted Stock Unit Plan. See Note 20.

12.   DEFERRED SHARE UNIT PLANS

Under the Corporation's Deferred Share Unit Plans (DSUP), key employees and non-employee directors may elect on an annual basis to receive all or a portion of their management incentive award or fees, respectively, in deferred share units (DSU's).

The amount of the management incentive award that a key employee elects to have participate in the DSUP will be converted to an equivalent number of DSU's based on the average closing price, on the TSX for Canadian employees and on the NYSE for U.S. employees, of NOVA Chemicals' common shares for the last five consecutive trading days of the month of December prior to the performance period.

The amount of fees that a non-employee director elects to have participate in the DSUP will be converted to an equivalent number of DSU's based on the average closing price, on the TSX or NYSE, of NOVA Chemicals' common shares for the last five consecutive trading days preceding the end of each fiscal quarter in which the fees are earned. The units are redeemable upon retirement, departure or termination from the Corporation (see Note 7).

F-47

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

12.   DEFERRED SHARE UNIT PLANS (Continued)

A summary of the status of the Corporation's deferred share unit plans as of Dec. 31, 2008, 2007 and 2006, and changes during the years ended on those dates is presented below:

 

The liability for the DSUP was $3 million at Dec. 31, 2008 (2007—$22 million). The total liability is classified as current.

13.   RESTRUCTURING CHARGES

2008

In 2008, NOVA Chemicals recorded restructuring charges of $37 million before-tax ($33 million after-tax) related to the following:

•

$17 million impairment charge related to certain joint venture and equity investments;



•

$9 million related to costs incurred for capital projects which will not be pursued at this time;



•

$6 million related to restructuring charges related to actions taken to reduce costs, including the elimination of information technology positions in North America, of which $1 million has been paid related to severance costs for employees; and



•

$5 million related to actions taken by the INEOS NOVA joint venture, including severance costs related to reductions at the Bayport facility, of which $1 million has been paid related to severance costs for employees.

F-48

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

13.   RESTRUCTURING CHARGES (Continued)

2007

In 2007, NOVA Chemicals recorded restructuring charges of $86 million before-tax ($55 million after-tax) related to the following:

•

$7 million associated with the elimination of approximately 90 positions in the U.S. and Europe. As of Dec. 31, 2008, $5 million of the severance costs had been paid to employees.



•

In September 2007, NOVA Chemicals announced that it had acquired the exclusive production rights from Sterling Chemicals' Texas City, Texas, styrene plant on behalf of the INEOS NOVA joint venture. These rights were assigned to INEOS NOVA on Oct. 1, 2007. In November 2007, Sterling Chemicals announced its plans to permanently shut down the Texas City plant as a result of INEOS NOVA's nomination of zero production volumes. As a result, NOVA Chemicals recorded a $29 million restructuring charge which represents NOVA Chemicals' 50% share of the charge. Sterling is responsible for all related plant closure and severance costs.



•

INEOS NOVA announced its plans to shut down the Montréal, Quebec, polystyrene site by the end of 2007. NOVA Chemicals recorded a $3 million charge related to its share of closure and severance costs incurred by the INEOS NOVA joint venture. No asset write-down was necessary as there was no remaining book value for this plant. As of Dec. 31, 2008, substantially all of the severance costs were paid to employees.



•

INEOS NOVA announced that it would cease polystyrene production at its Belpre, Ohio, polystyrene plant and permanently shut down the plant in 2008. As a result, NOVA Chemicals recorded $32 million, its share of the impairment charge, as an increase in accumulated depreciation. In addition to the plant write-down, a $3 million charge was recorded related to NOVA Chemicals' share of the severance costs associated with the closure of this plant. As of Dec. 31, 2008, $1 million of these closure costs were paid.



•

$3 million of restructuring charges related to additional actions taken in Europe by the INEOS NOVA joint venture. As of Dec. 31, 2008, substantially all of the severance costs were paid.

The remaining $9 million relates to INEOS NOVA and NOVA Chemicals' other restructuring actions to reduce costs.

2006

In 2006, NOVA Chemicals recorded a restructuring charge of $985 million before-tax ($861 million after-tax) related to the following:

•

The Company recorded an impairment charge of $860 million related to the STYRENIX business unit assets. The STYRENIX business unit included the Styrene Monomer, North American Solid Polystyrene and NOVA Innovene European joint venture segments. The STYRENIX business unit had not been profitable due to poor market conditions, and in recent years leading up to the impairment charge both NOVA Chemicals and the NOVA Innovene joint venture had reduced production capacity through plant closures. In July 2006, NOVA Chemicals announced it would investigate various alternatives for the STYRENIX business unit, including sale, formation of a joint venture with other producers, or spin out. NOVA Chemicals

F-49

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

13.   RESTRUCTURING CHARGES (Continued)

assessed the recoverability of the STYRENIX assets and determined that the carrying value exceeded the estimated future cash flows from these assets. Based on this analysis, the fair market value of these STYRENIX facilities was determined to be $242 million. In October 2007, the STYRENIX business unit assets were contributed to the INEOS NOVA joint venture (see Note 5).

•

NOVA Chemicals restructured its North American operations to better align resources and reduce costs. As a result, the Company recorded a $53 million restructuring charge related to severance, pension and other employee-related costs. Of this amount, $10 million related to one-time pension curtailment and special termination benefits. Of the remaining $43 million, $39 million had been paid as of Dec 31, 2008.



•

NOVA Innovene permanently closed its Carrington, UK, solid polystyrene facility in October 2006. The Company recorded a restructuring charge of $56 million related primarily to non-cash asset write-downs of the plant including $8 million related to total expected severance and other departure costs. As of Dec. 31, 2008, substantially all of the severance and other departure costs were paid.



•

A $15 million charge was recorded related to the accrual of total expected severance costs for the Chesapeake, Virginia, polystyrene plant, which was closed in 2006. As of Dec. 31, 2008, $10 million had been paid to former employees.



•

$1 million of restructuring costs related to actions taken by NOVA Innovene were accrued.

Impairment charges totaling $907 million during 2006 related to non-cash write-downs of plant and equipment were recorded as an increase in accumulated depreciation.

Restructuring activities are a corporate responsibility and are classified accordingly as Corporate in segmented reporting.

14.   OTHER (LOSSES) GAINS

---

(1)

The Corporation sold the land and plant facility at Chesapeake, Virginia which had ceased operations in June 2006.

F-50

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

15.   INCOME TAXES

Income tax expense (recovery) varies from amounts computed by applying the Canadian federal and provincial statutory income tax rates to income (loss) before income taxes as shown in the following table:

---

(1)

In 2007, the Federal Canadian Government (2006—Alberta and Federal Canadian Governments) enacted a tax rate reduction, which reduced income tax accruals for future tax liabilities by $65 million (2006—$60 million). These benefits have been recorded as a reduction of income tax expense.



(2)

The tax benefit of certain costs have not been recorded due to the uncertainty that tax benefits will be realized prior to the expiration of the loss carryforwards in the U.S.



(3)

As a result of the change in functional currency on Oct. 1, 2008 (see Note 20), NOVA Chemicals recorded $111 million of income primarily related to foreign exchange. This amount is not taxable, so income taxes are $25 million lower than would be expected. In addition to this, foreign exchange losses will be recorded for tax purposes that are not recorded for book purposes, resulting in a tax benefit of $31 million.



(4)

NOVA Chemicals has a tax reserve, which is available to settle periodic tax disputes and ongoing tax adjustments. NOVA Chemicals assesses this reserve from time to time for adequacy and in 2007 and 2008 determined that it was over-provided.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

15.   INCOME TAXES (Continued)

The following table outlines the principal temporary differences comprising the future income tax assets:

The following table outlines the principal temporary differences comprising the future income tax liabilities:

At Dec. 31, 2008, the Corporation has U.S. Federal net operating loss carryforwards (NOL's) of $587 million. The U.S. NOL's will begin to expire in 2021 and fully expire in 2028. In addition, NOVA Chemicals has $271 million of NOL's in Switzerland, with expiration dates from 2009 to 2014.

The Company's valuation allowance of $299 million at Dec. 31, 2008, relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss and credit carryforwards in the U.S. and Switzerland.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

15.   INCOME TAXES (Continued)

The following table outlines the income tax (recovery) expense arising from Canadian and Foreign operations:

16.   EMPLOYEE FUTURE BENEFITS

Pension Plans

NOVA Chemicals sponsors both defined benefit and defined contribution pension arrangements.

Defined benefit pensions at retirement are mainly related to years of service and remuneration during the last years of employment with some plans having limited or conditional indexing provisions. One plan has provisions whereby the benefits are related to career average salaries. Actuarial reports are prepared regularly by independent actuaries for accounting and funding purposes using the projected unit credit method. The last actuarial valuation for all significant plans in the United States and Canada was as of Dec. 31, 2007 and Dec. 31, 2006, respectively.

Plan assets are measured at fair value while pension obligations are discounted using current yield rates of high quality corporate bonds with terms to maturity that approximate the duration or projected cash flows of the Corporation's pension liabilities. The plans' assets consist of publicly traded equity and fixed income securities or units of publicly traded pooled or mutual funds. The Corporation used a measurement date of Dec. 31 for its pension and post-retirement plans.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

16.   EMPLOYEE FUTURE BENEFITS (Continued)

On Sep. 28, 2007, NOVA Chemicals amended certain U.S. defined benefit plans. The amendments provided for benefits to be frozen as of Jan. 1, 2008, and provided transition relief to plan participants meeting certain age and service requirements. At the same time, NOVA Chemicals also enhanced benefits under one of its U.S. defined contribution plans. The defined benefit option of certain Canadian pension plans was closed to new entrants on Jan. 1, 2000.

The transition of certain plans to INEOS NOVA in 2008, the restructuring that occurred in 2007 (see Note 13) and the defined benefit pension plan amendments described above triggered one or more of the following charges (benefits) during 2008 and 2007: a curtailment charge (benefit), a special termination charge and a settlement charge. A curtailment charge (benefit) results from either the termination of employment earlier than previously assumed or the significant reduction in future benefit accruals and requires the immediate recognition of unrecognized amounts that were scheduled to be reflected in future accounting periods. A special termination charge results from the enhancements provided under the voluntary programs (e.g., additional years of age and service). A settlement charge results when the total lump sums paid during a given year exceed a certain threshold. In 2006, the North American restructuring and redesign of certain European plans triggered one or more of the aforementioned charges (benefits). The impact of these charges is reflected in the tables on pages 112 and 113.

Upon commencement of the NOVA Innovene joint venture (subsequently expanded to include North American assets and renamed INEOS NOVA joint venture) in October 2005, the defined benefit pension plans of each pre-joint venture entity were transferred to the NOVA Innovene joint venture with the financial responsibility for pre-close assets and liabilities retained by the pre-joint venture company and the financial responsibility for post-close assets and liabilities assumed by the NOVA Innovene joint venture. There is a specific arrangement to identify and apportion the pre- and post-close assets and liabilities. Therefore, the amounts presented in the defined benefit pension tables represent NOVA Chemicals' assets and obligations, for which it has provided an indemnity, and its share of the post-close assets and obligations of NOVA Innovene subsequent to Oct. 1, 2005.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

16.   EMPLOYEE FUTURE BENEFITS (Continued)

The tables below also include NOVA Chemicals' 50% share of the assets, obligation and expense associated with the plans in the INEOS NOVA joint venture that were contributed by INEOS and NOVA Chemicals effective Apr. 1, 2008.

Pension and post-retirement expense (included in Feedstock and operating costs and Selling, general and administrative costs) for all significant defined benefit plans consisted of the following:

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

16.   EMPLOYEE FUTURE BENEFITS (Continued)

The status of all significant defined benefit pension and post-retirement plans is as follows:

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

16.   EMPLOYEE FUTURE BENEFITS (Continued)

---

(1)

NOVA Chemicals establishes an appropriate long-term rate of return for each plan's assets which reflects asset allocations within each plan as well as independent views of long-term rate of return expectations for each asset class.



(2)

Ultimate trend rate, expected to be achieved by 2013 for Canadian plans and 2014 for U.S. plans. The assumed health care cost trend rate used to measure the 2008 expected cost of benefits covered by the plans is 8% on average.

The plans are presented on the basis of accrued benefit obligations, rather than accumulated benefit obligations. The accrued benefit obligations and fair value of assets for NOVA Chemicals' pension plans in which the accrued benefit obligations exceed the fair value of plan assets, as of each year end, are shown below:

Expected benefit payments for the defined benefit pension plans and the post-retirement plans are as follows:

Post Employment Benefits

NOVA Chemicals recorded a liability of $5 million in 2008 (2007 and 2006—$5 million) for the following: health and welfare benefit continuation to disabled individuals and dependents until the earliest of the disabled's attainment of age 65, death or recovery; short-term disability income continuation; and COBRA continuation for medical and dental benefits. This liability is not included in the table above. A formal actuarial valuation is performed at least every three years with the most current valuation having been performed as of Dec. 31, 2008.

In 2009, funding for the defined benefit pension plans is expected to range between $40 million and $50 million.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

16.   EMPLOYEE FUTURE BENEFITS (Continued)

Defined Benefit Plan Assets

The investment strategy for the defined benefit plans is determined by the trustees for each plan after taking into consideration the plan structure, nature of the liabilities, the funded status and cash flow requirements of the plan; the size of the assets; and the financial situation of the Corporation and its ability to withstand fluctuations in pension contributions. For the significant plans, asset-liability modeling has been utilized to assist in setting the investment strategy. The assets of each plan are invested in a variety of traditional financial instruments such as equities and fixed income securities using a combination of active and passive strategies. Although the Corporation does not consider derivatives a separate asset class, they are permitted in order to manage the allocation of investments across asset classes, markets and currencies. However, under no circumstances can they be used for speculative purposes or have the effect of leveraging the assets.

While most of the benefits of diversification are achieved by allocating across different asset classes, the Corporation also believes it may be appropriate to further diversify by using multiple investment managers and employing different management styles within an asset class.

The Canadian and U.S. plans are the most significant to the Corporation with 81% of total pension assets. The asset allocation for these pension plans at the end of 2008 and 2007, and the target allocation for 2009, by asset category, follow. This information has been aggregated within a geographic segment as asset allocations are similar for the Canadian and U.S. plans.

North American Plans

The investment strategies for the pension plans in Europe (which are sponsored by INEOS NOVA) differ significantly across countries and from the North American plans. The different strategies reflect considerable variations in plan membership, plan liability structure, pension arrangements and plan asset size. Some European plans are re-insured with the investment strategy and asset allocation determined or heavily influenced by the re-insurer.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

16.   EMPLOYEE FUTURE BENEFITS (Continued)

Post-Retirement Benefits Other than Pensions

The Corporation provides medical care and life insurance benefits to eligible retirees and their dependents in North America. The Corporation accrues the cost of providing post-retirement benefits as the employees provide services. Post-retirement costs are funded as they are incurred.

A 1% increase in the health care inflation rate would have increased the post-retirement benefit obligation by an additional $5 million at Dec. 31, 2008, for Canadian plans and $5 million for U.S. plans. A 1% decrease in the same health care inflation rate would have decreased the post-retirement benefit obligation by $4 million and $4 million for the Canadian and U.S. plans, respectively.

Defined Contribution Arrangements

NOVA Chemicals has a number of defined contribution arrangements providing pension benefits to certain groups of employees. The total expense for the Corporation's contribution to these plans was $14 million in 2008 (2007 and 2006—$8 million). In 2009, NOVA Chemicals expects to fund its defined contribution plans by approximately $10 million.

17.   ASSET RETIREMENT OBLIGATIONS

The Corporation's asset retirement obligations are comprised of expected costs to be incurred upon termination of operations and the closure of active manufacturing plant facilities. The total undiscounted amount of estimated cash flows expected to be incurred on closure of active plants in 25 to 40 years is between $225 million and $250 million. In arriving at the estimated asset retirement obligation, a credit-adjusted risk-free rate of 10.5% was used to discount the estimated future cash flows. The estimated asset retirement obligation liability of $20 million at Dec. 31, 2008, will increase, or accrete, each year over the lives of active plants until it equals the $225 million to $250 million expected to be incurred on closure of the plants.

18.   CONTINGENCIES AND COMMITMENTS

Various lawsuits and claims are pending by and against the Corporation. It is the opinion of management that final determination of these claims will not materially affect the financial position or operating results of the Corporation.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

18.   CONTINGENCIES AND COMMITMENTS (Continued)

The Corporation leases office space and transportation equipment under various operating leases. The minimum lease payments are approximately $454 million in total with annual amounts of $51 million in 2009, $48 million in 2010, $42 million in 2011, $39 million in 2012, $36 million in 2013, and $238 million thereafter. Rental expense under operating leases was $54 million in 2008 (2007—$61 million and 2006—$62 million).

The Corporation has entered into agreements for the purchase of minimum amounts of feedstock and other raw materials for short- and long-term supply. The resulting obligations, based on year-end market prices, are approximately $6,724 million in total with annual amounts of $1,757 million in 2009, $797 million in 2010, $504 million in 2011, $496 million in 2012, $496 million in 2013 and $2,674 million thereafter.

The Corporation is obligated under several long-term ethylene and benzene feedstock supply agreements to supply INEOS NOVA with up to 441 million pounds of ethylene and 60 million gallons of benzene annually. The agreements run through December 2022.

19.   SEGMENTED INFORMATION

NOVA Chemicals considers both qualitative and quantitative factors in determining reportable segments. Before applying quantitative analyses, NOVA Chemicals aggregates the business segments with similar economic characteristics and business segments with similarities in each of the following areas: nature of the product and service, nature of the production process, type or class of customer, methods used to distribute the products or provide the services and, if applicable, the nature of the regulatory environment. Based on the aggregation of the operating segments, NOVA Chemicals performs quantitative tests based on revenue, profit and loss and assets.

In 2007, NOVA Chemicals reviewed its reportable business segments as a result of the commencement of the expansion of its then existing European joint venture with INEOS to include the North American STYRENIX assets (see Note 5). Based on results of the quantitative and qualitative analyses performed, NOVA Chemicals reduced the number of reportable segments from seven to five. NOVA Chemicals has collapsed the former STYRENIX segments (styrene monomer, North American polystyrene and European joint venture) into one segment to reflect the way in which the chief operating decision maker receives information to allocate resources and assess performance prospectively. This change does not impact the operation of the business units or the previously reported financial position, results of operations or cash flows. Prior periods have been restated accordingly.

(1) Joffre Olefins

Products:    Ethylene and co-products, including propylene, crude C4 and crude C5 hydrocarbons and hydrogen.

Applications:    Ethylene is used internally by NOVA Chemicals to produce polyethylene or sold to third-parties who use ethylene to produce polyethylene and other products.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

19.   SEGMENTED INFORMATION (Continued)

(2) Corunna Olefins

Products:    Ethylene and co-products, including propylene, crude C4 hydrocarbons, C5 dienes, dicyclopentadiene, aromatics, C9 resin oils, hydrogen and fuels. Feedstock mix determines the type and volume of co-products manufactured.

Applications:    Ethylene is used internally by NOVA Chemicals to produce polyethylene or sold to customers who use the ethylene to make other products. Chemical co-products are building blocks that are used by customers to make items such as tires, carpet and clothing fibers and household goods. Energy co-products are primarily used by customers for fuel.

(3) Polyethylene

Products:    LLDPE, LDPE, HDPE and Advanced SCLAIRTECH (AST) PE.

Applications:    Polyethylene is sold to customers for production of a variety of end-use industrial and consumer products. Consumer products include packaging film, plastic bags, bottles and toys. Industrial applications include storage drums, industrial wrap, retail packaging and building products.

(4) Performance Styrenics

Products:    EPS and Styrenic Performance Polymers, as well as downstream business ventures. None of these products exceed the quantitative threshold for separate reportable segments.

Applications:    EPS is sold to customers who make products for end-use applications including packaging for food and consumer products and insulation for the building and construction industry. Customers for Styrenic Performance Polymers make protective packaging, automotive interiors, food packaging, consumer goods, appliances and components for the construction industry.

(5) INEOS NOVA Joint Venture

Products:    Styrene, North American SPS, European EPS and SPS, ZYLAR® and NAS® resins.

Applications:    Styrene is used internally by INEOS NOVA to produce styrenic polymers or sold to customers who use styrene to produce styrenic polymers and other products such as synthetic rubber and unsaturated polyesters. SPS is sold to customers who make products for end-use applications including electronics and food packaging, small appliances and construction components. EPS is sold to customers who make products for end-use applications including packaging for food and consumer products and insulation for the building and construction industry. ZYLAR and NAS are high-clarity styrene acrylic co-polymers and blends or alloys thereof with added strength. They are used in medical applications, clear household appliance applications and computer housings.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

19.   SEGMENTED INFORMATION (Continued)

Corporate

Corporate includes all stock-based compensation and profit sharing costs, all unrealized gains and losses on the stock-based forward transaction and mark-to-market feedstock derivatives and all restructuring and corporate operating costs. Beginning in the first quarter of 2007, NOVA Chemicals ceased allocating interest, income taxes or corporate operating costs to the business segments. Prior periods have been revised to reflect this change. Operating costs include corporate depreciation.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2.

Segment performance is evaluated based on adjusted EBITDA, a measure of profit or loss. In 2008, NOVA Chemicals changed its definition of adjusted EBITDA to exclude the non-cash mark-to-market impact of feedstock derivatives. Prior periods have been restated to reflect this change.

NOVA Chemicals accounts for intersegment sales and transfers as if the sales or transfers were to third-parties, that is, at current market price.

The following tables provide information for each segment:

---

(1)

Third-party.  

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

19.   SEGMENTED INFORMATION (Continued)

---

(1)

Before intersegment eliminations.  

---

(1)

Net income (loss) before interest expense, income taxes, depreciation and amortization, other gains and losses, mark-to-market feedstock derivatives and restructuring charges.  

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

19.   SEGMENTED INFORMATION (Continued)

 

 

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

19.   SEGMENTED INFORMATION (Continued)

 

Geographic Information

---

(1)

Based on location of customer.  

---

(1)

Based on location of operating facility.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS

Categories of Financial Assets and Financial Liabilities

Carrying amounts and net gains/(losses) of NOVA Chemicals' financial instruments are classified into the following categories:

 

Financial Instrument Fair Values

Financial instrument fair values represent a reasonable approximation of amounts NOVA Chemicals would have received or paid to counterparties to unwind positions prior to their maturity. NOVA Chemicals has no plans to unwind these positions prior to maturity and has no significant exposure to any individual customer or counterparty.

The carrying amounts reported on the Consolidated Balance Sheets for Cash and cash equivalents (included in the held-for-trading category), loans and receivables and other financial liabilities

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

(excluding Long-term debt) approximate their fair value. Fair values and carrying amounts for long-term debt are as follows:

---

(1)

Includes debt installments due within one year.



(2)

The fair value of long-term debt is based on quoted market prices, where available. The Preferred shares cannot be valued from a market perspective, therefore the value is based on their notional value, less cash collateral posted.

Foreign Exchange Risk Management

NOVA Chemicals has U.S., Canadian and European-based petrochemical operations which expose the Company to both translation and transaction effects resulting from changes in currency exchange rates. Through Sep. 30, 2008, all of NOVA Chemicals operations were considered self-sustaining and were translated into U.S. dollars for reporting purposes using the current rate method. Resulting translation gains or losses were deferred in AOCI until there was a realized reduction of the net investment in the foreign operation.

Through Sep. 30, 2008, NOVA Chemicals functional currency was the Canadian dollar which exposed the Corporation to currency risks from its investing, financing and operating activities. The Company has established a policy which provides a framework for foreign currency management, hedging strategies and defines approved hedging instruments. Hedging instruments may be used to minimize the gains and losses due to short-term foreign currency exchange rate fluctuations. The exposure that may be hedged in accordance with the Company's foreign exchange policy is limited to operational transaction exposure and is generally used only to balance out NOVA Chemicals' cash positions. Foreign currency risks resulting from the translation of assets and liabilities of foreign operations into NOVA Chemicals' functional currency were generally not hedged; however, the Company may have hedged this risk under certain circumstances.

Foreign currency risks may also result from certain investing activities such as the acquisition and disposal of investments in foreign companies, and may be caused by financial liabilities in foreign currencies and loans in foreign currencies that are extended to affiliated entities for financing purposes. In recent years, these risks generally have not been hedged.

NOVA Chemicals' subsidiaries and affiliated entities generally execute their operating activities in their respective local currencies. NOVA Chemicals historically has not used currency derivatives to hedge such payments.

At December 31, 2008, NOVA Chemicals had no outstanding foreign currency derivative instruments. At Dec. 31, 2007, NOVA Chemicals had an outstanding foreign currency swap for the purpose of balancing the Company's cash position. The swap was set up to buy $63 million Canadian dollars (sell $63.6 million U.S. dollars) for value on Dec. 31, 2007, and sell $63 million

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

Canadian dollars (buy $63.6 million U.S. dollars) on Jan. 2, 2008. The fair value of the swap was not material to the Consolidated Financial Statements.

At Dec. 31, 2008 and 2007, INEOS NOVA also had several short-term foreign currency swaps outstanding maturing through Jan. 29, 2009 and Feb. 29, 2008, respectively. NOVA Chemicals' 50% share of the swaps fair value was not material to the Consolidated Financial Statements.

In the third quarter of 2008, the INEOS NOVA joint venture obtained independent financing through a North American accounts receivable securitization program. This significantly eliminated the joint venture's reliance on NOVA Chemicals to fund operations. As a result of this change in circumstances, NOVA Chemicals undertook a review of the functional currency exposure of all of its businesses and concluded that the currency exposures of its Canadian entities predominately are now U.S. dollars. Accordingly, as required by generally accepted accounting principles, NOVA Chemicals commenced recording transactions in its Canadian operations using U.S. dollars as the functional currency effective Oct. 1, 2008. This results in all foreign currency impacts of holding Canadian dollar denominated financial assets and liabilities being recorded through the income statement rather than being included in translation gains and losses deferred in AOCI. NOVA Chemicals accounted for this change prospectively and any amounts that had been previously deferred in AOCI continue to be included in AOCI unless there is a realized reduction in the net investment in the Canadian entities. The translated amounts on Sep. 30, 2008, became the historical basis for all items as of Oct. 1, 2008. NOVA Chemicals' continues to hold investments in joint ventures and other subsidiaries with differing functional currencies and these will continue to be classified as self-sustaining operations, with translation gains and losses deferred in AOCI.

Impacts of the change in functional currency during 2008 are as follows:

Transaction currency effects occur when NOVA Chemicals or one of its subsidiaries incurs monetary assets or liabilities in a currency different from its functional currency. Prior to the change in functional currency, these transaction gains and losses were recorded in Feedstock and operating cost (2008—$14 million gain) and Selling, general and administrative expenses (2008—$23 million gain) in the Consolidated Statements of Income (Loss). After Oct. 1, 2008, NOVA Chemicals presented the impact of the change in functional currency ($117 million gain) on a separate line in the Consolidated Statements of Income (Loss).

NOVA Chemicals' investing, financing and operating activities continue to be exposed to currency risks which effective Oct. 1, 2008, includes both translation and transaction effects. NOVA Chemicals is currently reviewing the need to amend its foreign exchange policy in order to better manage foreign currency risks in the current economic environment.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

As of Dec. 31, 2008, NOVA Chemicals had a net monetary liability position of $857 in non-U.S. dollar currencies. Each 1% weakening (strengthening) of the Canadian dollar against the U.S. dollar would decrease (increase) the value of the net liability by $7 million after-tax. Any change in the Euro would not be material.

Currency risks, as defined by CICA Section 3862, arise when a monetary financial instrument is denominated in a currency that is not the functional currency.

Stock Price Volatility Risk Management

In 2005, the Corporation entered into cash-settled share forward transactions to manage its exposure to fluctuations in its stock-based compensation costs related to its two cash-settled stock-based incentive compensation plans (the restricted stock unit plan and the equity appreciation plan). Compensation costs associated with the plans fluctuate as a result of changes in the market price of the Corporation's common stock. The Corporation entered into forward transactions for a total of 3,612,100 notional common shares with an average forward price of U.S. $45.66 and an average execution price of $37.56. The forward transactions were to be cash-settled at the end of a three-year term (November 2008), or at any time prior to that date, at the option of the Corporation, based on the difference between the Corporation's common stock price on the NYSE and the average execution price.

In September 2008, the Company extended the forward transactions to November 2009 at a forward price of $40.17 and an average execution price of $37.56. Accrued interest for the initial three-year term totaling $29 million was paid in November 2008 and one of the forward transactions (1,300,000 shares) was settled in January 2009 for $42 million. Interest for the additional one-year term on the remaining forward transaction will be accrued and payable by the Company on settlement. The remaining forward transaction (2,312,100 shares) contains stock price triggers which allow the counterparty to terminate the agreement if NOVA Chemicals stock price is $8 or less for three consecutive trading days commencing on Feb. 1, 2009. This stock price trigger was met and the counterparty elected to terminate the agreement on Feb. 4, 2009. NOVA Chemicals paid the counterparty $88 million on Feb. 12, 2009. Refer to Note 23.

If the Corporation's common stock price is in excess of the average execution price, an unrealized gain is recorded and if the Corporation's common stock price is below the average execution price, an unrealized loss is recorded. Unrealized gains and losses associated with the share forward transactions are recorded as part of Selling, general and administrative expenses, offsetting unrealized losses or gains on the cash-settled stock-based incentive compensation plans. At Dec. 31, 2008, the mark-to-market value of the share forward transactions was an unrealized loss of $118 million (Dec. 31, 2007—$19 million unrealized loss), resulting in a liability. At Dec. 31, 2008 and 2007, this liability is reported in Accounts payable and accrued liabilities.

The transactions were initially entered into to effectively give NOVA Chemicals the same economic effect as if it had borrowed money, purchased NOVA Chemicals' common shares and held them as assets. As NOVA Chemicals' stock price changes, the mark-to-market impact related to the stock-based compensation liability is offset by the mark-to-market impact related to the forward contracts until such time as NOVA Chemicals' stock price falls below the grant price of the stock-

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

based compensation units. Due to the recent decline in the company's share price, these forward transactions are no longer an effective economic hedge.

Commodity Price Risk Management

NOVA Chemicals uses commodity-based derivatives to manage its exposure to price fluctuations on crude oil, refined products and natural gas transactions. The instruments are used to moderate the risk of adverse short-term price movements. Occasionally, longer-term positions will be taken to manage price risk for anticipated supply requirements. The extent to which commodity-based derivatives are used depends on market conditions and requires adherence to the Company's hedging policy. NOVA Chemicals limits its positions in futures markets to proprietary feedstock requirements and does not use derivative instruments for speculative purposes.

Commodity swaps are sometimes used and designated as fair value hedges intended to hedge the fair value of NOVA Chemicals' crude inventory against changes in the market price. At inception of a hedging relationship, the Company documents the relationship between the hedging instrument and the hedged item, its risk management objective and its strategy for undertaking the hedge. The Company also requires a documented assessment, both at hedge inception and on an ongoing basis, of whether or not the derivatives that are used in hedging transactions are highly effective in offsetting the changes in the fair value of the hedged items. As of Dec. 31, 2008, the Company had no outstanding commodity-based derivatives designated as fair value hedges. Open commodity-based derivatives as of Dec. 31, 2007, used to hedge NOVA Chemicals' crude inventory value matured in January 2008 and were not material. Unrealized gains and losses on derivative instruments designated and qualifying as fair value hedging instruments, as well as the offsetting unrealized gains and losses on the hedged items, are included in income in the same accounting period. There was no hedge ineffectiveness recognized in consolidated net income during 2007.

In addition, the Company utilizes options, swaps and futures instruments as economic hedges of commodity price exposures, but either do not meet the hedge accounting criteria of CICA Section 3865 or are not designated as qualifying hedges. Gains and losses on commodity-based derivatives are included in Feedstock and operating costs in the Consolidated Statements of Income (Loss).

At Dec. 31, 2008, 2007 and 2006, there are no outstanding derivative contracts for natural gas or benzene.

The notional volume and fair value of outstanding derivative contracts for crude oil, refined products, and alternative feedstock that do not qualify for hedge accounting are as follows:

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

---

(1)

2008 includes 5.9 million bbls (2007—5.5 million) of crude contracts and 9.2 million bbls (2007—8.3 million) of LPG contracts.



(2)

Unrealized gain (loss) determined using standard pricing models with market-based inputs, including energy futures price profiles and counterparty price curves.

At Dec. 31, 2007, the notional volume and estimated fair value of outstanding derivative contracts for crude oil, refined products, and alternative feedstock that do qualify for hedge accounting are as follows:

---

(1)

2007 includes 0.75 million bbls crude contracts.



(2)

Estimated fair values determined by calculating mark-to-market value of hedge positions using market-based energy futures price profiles and counterparty price curves.

F-71

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

Variable feedstocks are the single largest component of NOVA Chemicals' costs and account for 70-80% of the total cost of its products. NOVA Chemicals' primary feedstocks include ethane, propane, butane, crude oil, benzene and natural gas. Feedstock costs heavily influence the price of the Company's products and recently feedstock cost volatility has led to rapid changes in product prices.

The following table illustrates how changes in various feedstock costs could affect NOVA Chemicals' after-tax income and other comprehensive income assuming all other factors are held constant. The sensitivity is based on 2008 actual consumption volumes and the periodic effects are determined by relating a reasonably possible change in the risk variables.

Interest Rate Risk Management

Interest rate risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Changes in the market interest rates of long-term debt with fixed interest rates only affects net income if such debt is measured at fair value. All of NOVA Chemicals fixed-rate long-term debt is carried at amortized cost and therefore is not subject to interest rate risk.

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to minimize its interest costs. When deemed appropriate, NOVA Chemicals enters into interest rate swap agreements to manage its interest rate price risk exposure on certain fixed-rate debt. The agreements generally involve the receipt of fixed-rate amounts in exchange for floating-rate LIBOR-based payments over the terms of the related debt. In 2008 and 2007, the Company had no floating-for-fixed interest rate swaps outstanding. In 2006, the Company had floating-for-fixed interest rate swaps outstanding on $300 million of medium-term notes, which expired upon repayment of the related debt in May 2006.

In prior years, a series of interest rate swaps on $550 million of fixed-rate debt were liquidated, resulting in a before-tax gain of $40 million in total. The gains have been deferred and are being recognized in income (loss) as a reduction of interest expense over the terms of the related debt instruments, of which $300 million matured in 2006 and $250 million matures in 2009. As a result of NOVA Chemicals' adoption of CICA Section 3865, on Jan. 1, 2007 the deferred gain of

F-72

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

$4 million was reclassified, on a prospective basis, from Accounts payable and accrued liabilities and Deferred credits and long-term liabilities to Long-term debt.

For the disclosure of market risks, CICA Section 3862 requires a sensitivity analysis that shows the effects of reasonably possible changes in relevant risk variables on after-tax income and other comprehensive income. The periodic effects are determined by relating the reasonably possible changes in the risk variables to the balance of financial instruments at the reporting date. For purposes of this analysis, long-term debt balances as of Dec. 31, 2008, were used.

Changes in market interest rates would affect interest expense of NOVA Chemicals' variable rate, long-term debt which is included in the sensitivity analysis calculation.

At Dec. 31, 2008, if interest rates at that date had been 0.5% higher, with all other variables held constant, after-tax income and other comprehensive income for the year would have been $5 million lower, arising mainly as a result of higher interest expense on variable rate borrowings.

Liquidity Risk Management

Liquidity risk is the risk that the Company will not have sufficient funds available to meet its liabilities. NOVA Chemicals seeks to maintain liquidity within a targeted range in the form of cash and undrawn revolving credit facilities to position the Company to make scheduled cash payments, pay down debt, ensure ready access to capital, and assist in the solvency and financial flexibility of Company operations. Adjustments to the liquidity reserve are made upon changes to economic conditions, anticipated future debt maturities, underlying risks inherent in Company operations and capital requirements to maintain and grow operations. Liquidity total $573 million at Dec. 31, 2008, and $552 at Dec. 31, 2007. NOVA Chemicals primary objective has always been to focus on and monitor liquidity and cash flow. In the past, NOVA Chemicals monitored capital on the basis of the net debt-to-capitalization ratio. This ratio was a financial covenant required to be maintained for two of NOVA Chemicals' five revolving credit facilities. This requirement was eliminated in March 2008 and was replaced with a net debt-to-cash flow covenant (see Note 8).

F-73

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

NOVA Chemicals' financial liabilities mature as follows:

Repayment of amounts due within one year may be funded by cash flows from operations, cash on-hand, accounts receivable securitization programs, undrawn revolving credit facilities and internal actions taken to reduce costs and conserve cash. Capital market transactions may also be used in managing the balance between maturing obligations and available liquidity. The Company has amended two revolving credit facilities providing covenant relief through the first half of 2009 subject to complying with certain conditions (see Note 8 and Note 23). The Company's future liquidity is dependent on these actions and many other factors such as cash generated from ongoing operations, internal actions taken to reduce costs and conserve cash and other potential sources of financing (see Note 23).

Credit Risk Management

Counterparty credit risk on financial instruments arises from the possibility that a counterparty to an instrument in which NOVA Chemicals is entitled to receive payment fails to perform on its obligations under the contract. This includes any cash amounts owed to the Company by those counterparties, less any amounts owed to the counterparty by the Company where a legal right of offset exists and also includes that fair value of contracts with individual counterparties which are recorded in the Consolidated Financial Statements.

For derivative financial instruments, NOVA Chemicals has established a limit on contingent exposure for each counterparty based on the counterparty's credit rating. Credit exposure is managed through credit approval and monitoring procedures. NOVA Chemicals does not anticipate that any counterparties it currently transacts with will fail to meet their obligations. At Dec. 31, 2008 and Dec. 31, 2007, NOVA Chemicals had no credit exposure for foreign currency,

F-74

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   FINANCIAL INSTRUMENTS (Continued)

interest rate or share-based instruments. At Dec. 31, 2008, NOVA Chemicals had $1 million credit exposure for commodity-based instruments (Dec. 31, 2007—$20 million).

In order to manage credit and liquidity risk, NOVA Chemicals invests only in highly rated instruments that have maturities of six months or less. Limits on the term of an investment, the type of investment and concentration limits per institution are established. Typically NOVA Chemicals invests only in overnight bank term deposits.

Trade credit risk includes an unexpected loss in cash and earnings if a customer is unable to pay its obligations or the value of security provided declines. Concentration of credit risk relates primarily to the Corporation's receivables, as certain customer groups are located in the same geographic area and operate in the same industry. NOVA Chemicals monitors receivables based on two such concentrations: North America and Europe. At Dec. 31, 2008, approximately 82% of the Corporation's receivables were from North American customers and 18% were from customers in Europe. Trade receivables over 30 days were up from 1% at Dec. 31, 2007, to 5% at Dec. 31, 2008 of total trade receivables. NOVA Chemicals does not consider its trade receivables to be impaired. There is no current indication as of Dec. 31, 2008, that the debtors will not meet their obligations, but NOVA Chemicals continues to monitor all trade receivables. Bad debt write-offs during 2008 were also immaterial and in line with prior years' experience. The Corporation manages its credit risk relating to trade receivables through credit approval and monitoring procedures. NOVA Chemicals establishes and reviews limits for all active customers. Such limits are based on trade information, payment history, credit score, credit rating and financial analysis, where possible. All credit limits are subject to evaluation and revision at any time based on changes in levels of credit worthiness; sales orders cannot be processed unless a credit limit has been properly approved. Customer credit risk ratings range from low (companies with investment grade bond ratings and very strong financial conditions) to high business risk (companies with an unstable financial condition, a strong possibility of failure and slow payment). Accounts rated low to medium risk are reviewed and approved every twelve months. Upper level management approval is needed for customers with existing credit limits above $5 million. Accounts rated high risk are reviewed every six months. It is sometimes necessary to increase existing credit limits to accommodate rapid price increases. In those cases, NOVA Chemicals may grant temporary credit limit increases of up to 25%, subject to meeting certain conditions. High risk and high business risk accounts are not eligible for temporary credit limit increases. Customer accounts may be placed on "credit watch" when a slow payment trend is noticed and the account balance consistently goes beyond the approved payment terms or when credit limit review reveals the customer's financial condition is weakening. If necessary, NOVA Chemicals can utilize credit insurance programs to ensure payment. NOVA Chemicals may also request collateral when a customer does not meet the financial qualifications for the size credit limit requested or there is a political or economical risk of selling in a certain country. The most prominent forms of security used by NOVA Chemicals are letters of credit and personal or corporate guarantees. Letters of credit must be issued through acceptable banks with international standing. At Dec. 31, 2008, NOVA Chemicals held collateral of approximately $10 million in a combination of letters of credit and personal guarantees from various customers.

The maximum exposure to credit risk is represented by the carrying amounts of the financial assets classified as loans and receivables in Note 20.

F-75

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

Reconciliation to Accounting Principles Generally Accepted in the United States

The Corporation prepares its consolidated financial statements in accordance with Canadian GAAP, which, in some respects, are different from U.S. GAAP. The effect of these differences on the Corporation's Consolidated Statements of Net Income (Loss) and Consolidated Balance Sheets are as follows:

F-76

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

---

(1)

Start-up Costs.    Canadian GAAP provides that when starting up a new facility or entity, expenditures incurred during the pre-operating period may be deferred when certain criteria are met. Under U.S. GAAP, all costs (except interest on constructed assets) associated with start-up activities must be expensed as incurred. See Note 5 for information on the Corporation's start-up costs.



(2)

Derivative Instruments and Hedging Activities.    CICA Section 3855 harmonizes Canadian and U.S. GAAP by establishing standards for recognition and measurement of financial assets, liabilities and non-financial derivatives. CICA Section 3865 harmonizes Canadian GAAP with U.S. GAAP SFAS No. 133 by establishing standards for when and how hedge accounting may be applied and recorded. See Note 2 for further details. Certain differences that existed before the implementation of the above standards on Jan. 1, 2007, pertaining to the termination of interest rate swaps in 2002 continue to be reconciling items between Canadian GAAP and U.S. GAAP. The 2008 U.S GAAP adjustment was a loss of $1 million (2007—$(1); 2006—$(2)). U.S. GAAP SFAS No. 157 establishes a framework for measuring the fair value of financial assets and liabilities. In October 2008, FASB Staff Position No. FAS 157-3 was issued to clarify the application of SFAS No. 157. In particular SFAS 157 requires a company to consider its own credit risk and the credit risk of a counterparty when determining the fair value of a derivative instrument. Canadian Emerging Issues Committe issued EIC-173 in January 2009 which harmonized this aspect of SFAS 157 with Canadian GAAP. Because EIC-173 was not effective for Canadian GAAP until Jan. 12, 2009, and NOVA Chemicals elected not to early adopt this standard, a GAAP difference exists at Dec. 31, 2008. As a result the Company has recognized $18 million in income ($13 million after-tax) during 2008 to properly reflect credit risk valuation adjustments on its mark-to-market feedstock derivatives, as required by SFAS No. 157. For information regarding the Corporation's use of derivatives and hedging activities under Canadian GAAP, see Note 20.

F-77

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(3)

Inventory Costing.    Prior to Jan. 1, 2008, Canadian GAAP allowed fixed overhead costs associated with production activities to be expensed during the period; whereas, U.S. GAAP requires an allocation of fixed production overhead to inventory. On Jan. 1, 2008, NOVA Chemicals adopted CICA 3031 (see Note 1), which harmonizes Canadian GAAP and U.S. GAAP in accounting for inventories. Therefore, as of Jan. 1, 2008, no further U.S. GAAP difference exists.



(4)

Stock-based compensation.    Under Canadian GAAP, the Employee Incentive Stock Option Plan is measured using a fair-value-based method, while the Equity Appreciation Plan and the Restricted Stock Unit Plan are classified as liability instruments and are marked-to-market based on intrinsic value. U.S. GAAP, SFAS No. 123(R), Accounting for Share-Based Payment, effective Jan. 1, 2006, requires the share-based compensation transactions to be accounted for using a fair-value-based method, such as the Black-Scholes method. The Company has adopted this standard using a modified prospective application. The fair value of awards classified as liability instruments must be remeasured at fair value subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period. The cumulative effect for the periods prior to Dec. 31, 2005, of $5 million after-tax has been charged to reinvested earnings (deficit) at Jan. 1, 2006.



(5)

Income Taxes.    Beginning Jan. 1, 2007, FIN 48, Accounting for Uncertainty in Income Taxes, became effective for U.S. GAAP reporting. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized. An entity is required to recognize the best estimate of a tax position if that position is more likely than not to be sustained upon examination, based solely on the technical merits of the position. NOVA Chemicals adopted the provisions of FIN 48 on Jan. 1, 2007, at which time a FIN 48 liability of $36 million was recognized by reclassifying $34 million out of deferred tax liability and $4 million from the current tax liability. This resulted in a $6 million increase in the liability for unrecognized tax benefits and was accounted for as a reduction to the Jan. 1, 2007, U.S. GAAP balance in reinvested earnings. During 2007, these differences have reversed and resulted in a $6 million decrease in tax expense for U.S. GAAP purposes. NOVA Chemicals has a tax reserve, which is available to settle periodic tax disputes and ongoing tax adjustments. NOVA Chemicals assesses this reserve from time to time for adequacy and in 2008, determined that it was over-provided. As a result, the FIN 48 liability was reduced to $19 million. It is NOVA Chemicals' policy to recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. At Dec. 31, 2008, NOVA Chemicals had approximately $3 million accrued for the payment of interest and penalties.



(6)

Restructuring.    Due to differences in the cost basis, under U.S. GAAP, of certain assets for which an impairment charge has been recorded (see Note 13), the resulting charge is lower under U.S. GAAP.



(7)

Pension Liability Adjustment.    In 2006, for U.S. GAAP reporting, SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)—became effective. SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through accumulated other comprehensive income. At Dec. 31, 2006, the Corporation recognized an additional pension and post-retirement liability of $124 million, resulting in a charge of $82 million (net of tax) to accumulated other comprehensive income. At Dec. 31, 2007, NOVA Chemicals increased its SFAS No. 158 pension and post-retirement liability by $66 million, resulting in a charge of $45 million (net of tax) to OCI. At Dec. 31, 2008, NOVA Chemicals increased its SFAS No. 158 pension and post-retirement liability by $23 million, resulting in a charge of $34 million (net of tax) to accumulated OCI.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(8)

Joint Ventures.    NOVA Chemicals accounts for its interests in joint ventures using the proportionate consolidation method under Canadian GAAP. As permitted by specific United States Securities and Exchange Commission exemptions, adjustments to reflect equity accounting, as required under U.S. GAAP, have not been made. The equity method would not result in any changes in NOVA Chemicals' net income (loss) or shareholders' equity; however, all assets, liabilities, revenue, expenses, and most cash flow items would decrease when compared with the amounts that are presented using proportionate consolidation.



(9)

Certain comparative figures have been reclassified to conform with current periods' presentation.

F-79

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-81

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-82

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-83

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-84

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-85

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-86

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-87

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-88

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-89

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-90

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

F-91

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   NEW ACCOUNTING PRONOUNCEMENTS (Continued)

23.   SUBSEQUENT EVENTS

Forward Transactions (see Note 20)

The Company had share forward transactions to manage its exposure to fluctuations in its stock-based compensation costs related to stock-based compensation plans. Prior to Dec. 31, 2008,

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

23.   SUBSEQUENT EVENTS (Continued)

NOVA Chemicals agreed to terminate one of the forward transactions for 1,300,000 notional common shares. This forward transaction was cash settled for $42 million in January 2009.

The counterparty had the election to settle the remaining forward transaction for 2,312,100 notional common shares if the closing price of NOVA Chemicals' common shares on any three consecutive trading days commencing Feb. 1, 2009 was U.S. $8 or less. The stock price trigger was met and the counterparty elected to terminate the agreement on Feb. 4, 2009. NOVA Chemicals paid the counterparty $88 million on Feb. 12, 2009.

Total Return Swap (see Note 8)

The total return swap was amended on Feb. 22, 2009 to extend the termination date through June 30, 2010 and reduce the equity notional amount. Of the $52 million cash collateral posted as of Feb. 22, 2009 ($45 million as of Dec. 31, 2008 plus $7 million provided from Jan. 1, 2009 through Feb. 22, 2009), $51 million was applied to the $126 million equity notional amount to reduce the equity notional amount to $75 million. The remaining $1 million cash collateral was returned to NOVA Chemicals.

Credit Facilities (see Note 8)

On Jan. 28, 2009, the $68 million facility expiring on Mar. 15, 2009 was reduced to $33 million.

The $33 million facility described above, the $350 million facility expiring June 30, 2010, the total return swap and NOVA Chemicals' Accounts Receivable Securitization programs are governed by financial covenants which require quarterly compliance. The covenants require a maximum net debt-to-cash flow ratio of 5:1 and a minimum interest coverage ratio of 2:1 computed on a rolling twelve-month basis. At Dec. 31, 2008, the Company was in compliance with these financial covenants. Effective Jan. 28, 2009, NOVA Chemicals amended these financial covenants for the quarter ending Mar. 31, 2009, to exclude the quarter ending Dec. 31, 2008, results and include the quarter ending Mar. 31, 2008, results. These amendments provide relief to give the Company access to its major credit lines during the first half of 2009, subject to complying with certain conditions subsequent which include the following:

•

amending the Accounts Receivable Securitization programs' financial covenants to mirror the amended covenants for the revolving credit facilities, which was completed on Feb. 13, 2009 (see Accounts Receivable Securitization Programs below);



•

securing $100 million in additional financing by Feb. 28, 2009, which was completed on Feb. 22, 2009 (see $150 Million Financing below); and



•

securing an additional $100 million by June 1, 2009 of which $50 million was secured as part of the $150 Million Financing.

The Company anticipates that further amendments to its debt covenants will be required with an effective date no later than June 30, 2009. These amendments are expected to be required due to the continuing effect of the large loss incurred in the fourth quarter of 2008 on compliance with the rolling twelve-month cash flow and interest coverage ratio limits.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

23.   SUBSEQUENT EVENTS (Continued)

Accounts Receivable Securitization Programs (see Note 3)

On Feb. 13, 2009, NOVA Chemicals amended the financial covenants of its U.S. and Canadian Accounts Receivable Securitization programs to mirror the amended covenants for the revolving credit facilities. In addition, the maximum amount of the programs was reduced from $300 million to $190 million and the expiration date was changed to February 2010. As of Mar. 5, 2009, $119 million was sold under the programs.

$150 Million Financing

On Feb. 22, 2009, the Company secured a $150 million revolving credit facility with Export Development Canada (EDC), and a syndicate of three Canadian banks that expires on June 30, 2010. This $150 million exceeds the $100 million of new financing required to be raised by Feb. 28, 2009 as a condition subsequent to the covenant relief referred to above. The $50 million of excess financing may be used toward meeting the additional $100 million of financing required by June 1, 2009 as a condition subsequent of the same covenant relief. This new revolving credit facility is governed by the same quarterly financial covenants as the $33 million and $350 million revolving credit facilities, the total return swap and NOVA Chemicals' Accounts Receivable Securitization programs.

International Petroleum Investment Company (IPIC)

On Feb. 23, 2009, the Company entered into an arrangement agreement (the Arrangement Agreement) with IPIC providing for the acquisition by IPIC of all of NOVA Chemicals' outstanding common shares for cash consideration of U.S. $6.00 per share (Canadian $7.52 per share based on an exchange rate of 1.2541), subject to the satisfaction or waiver of certain conditions discussed below. The acquisition would be implemented by way of court-approved plan of arrangement under the Canada Business Corporations Act (the Arrangement). The actual Canadian equivalent cash consideration per share will vary based on the exchange rate.

The total value of the Arrangement, including assumption of NOVA Chemicals' net debt obligations, is approximately U.S. $2.3 billion.

In connection with the Arrangement, IPIC provided a $250 million unsecured backstop credit facility (the Backstop Facility) to NOVA Chemicals. The Backstop Facility may only be used as a single draw to assist the Corporation in repaying the $250 million, 7.4% notes due on Apr. 1, 2009. The maximum amount that can be drawn on the Backstop Facility is limited to $250 million less NOVA Chemicals liquidity above $175 million on Apr. 1, 2009. The amount drawn and all related interest and fees will be payable upon expiration of the facility on June 30, 2010. The Backstop Facility is governed by the same quarterly financial covenants as the $33 million and $350 million revolving credit facilities, the total return swap, the new $150 million financing and NOVA Chemicals' Accounts Receivable Securitization programs. NOVA Chemicals anticipates that further amendments to its debt covenants for all these facilities will be required with an effective date no later than June 30, 2009, as discussed in Credit Facilities above.

The Arrangement will be subject to court and regulatory approval and other conditions, including the approval by holders of at least 66²/3% of the shares represented in person or by proxy at a

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

23.   SUBSEQUENT EVENTS (Continued)

special meeting of NOVA Chemicals' shareholders to be held on Apr. 14, 2009. The completion of the Arrangement would be expected to occur upon receipt of all final regulatory approvals.

The Arrangement is not subject to any financing condition. The Arrangement Agreement provides for a termination fee of $15 million payable by NOVA Chemicals to IPIC in certain circumstances, including where NOVA Chemicals' Board of Directors changes its support for the Arrangement or NOVA Chemicals terminates the Arrangement Agreement to enter into a transaction agreement with a third party. In certain circumstances where the Arrangement Agreement is terminated, including under any circumstances where NOVA Chemicals' shareholders do not approve the Arrangement, the Company may be required to reimburse up to a maximum of $3 million of IPIC's expenses incurred in connection with the Arrangement Agreement. In addition, if the Arrangement Agreement is terminated under certain circumstances, including where NOVA Chemicals' Board of Directors changes its support for the Arrangement or NOVA Chemicals terminates the Arrangement Agreement to enter into a transaction agreement with a third party, then the Backstop Facility would be terminated and any amounts outstanding thereunder would need to be repaid, including any unpaid interest. In addition, under the Backstop Facility the Company would need to pay an additional termination fee under such circumstances equal to (i) $5 million dollars or (ii) if any amounts are outstanding under the Backstop Facility 2.5% of such amount. NOVA Chemicals has also agreed to pay an upfront fee equal to $7.5 million and a commitment fee of up to approximately $254,000 with respect to the Backstop Facility. The upfront fee and the commitment fee are payable upon the maturity date or other termination of the Backstop Facility.

Terms and conditions of the amended total return swap, amended credit facilities, amended Accounts Receivable Securitization programs, $150 million financing and the Backstop Facility reflect market conditions.

Additional Financing Plans

On Feb. 22, 2009, NOVA Chemicals agreed to jointly develop a financing plan with certain of its existing lenders. The plan would only be implemented if the Arrangement (referred to above) or an alternative transaction to acquire NOVA Chemicals was not completed. The Financing Plan would provide for the refinancing of all or part of the Company's existing debt and the raising of incremental liquidity. Pursuant to the Financing Plan, NOVA Chemicals would issue both debt securities and equity securities or other hybrids in one or more financings or public or private offerings. The Company has agreed with certain of its existing lenders that such issuance of equity or equity-like securities would be intended to raise net proceeds of not less than $300 million.

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NOVA CHEMICALS CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF NET (LOSS) INCOME
(unaudited, millions of U.S. dollars)

Notes to the Consolidated Financial Statements appear on pages F-101 to F-121.

F-96

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NOVA CHEMICALS CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
(unaudited, millions of U.S. dollars)

Notes to the Consolidated Financial Statements appear on pages F-101 to F-121.

F-97

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NOVA CHEMICALS CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, millions of U.S. dollars)

Notes to the Consolidated Financial Statements appear on pages F-101 to F-121.

F-98

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NOVA CHEMICALS CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited, millions of U.S. dollars)

---

(1)

One-time credit on Jan. 1, 2008 to opening retained earnings and a corresponding increase in opening inventory of $47 million ($39 million after-tax).

Notes to the Consolidated Financial Statements appear on pages F-101 to F-121.

F-99

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NOVA CHEMICALS CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(unaudited, millions of U.S. dollars)

Notes to the Consolidated Financial Statements appear on pages F-101 to F-121.

F-100

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited, millions of U.S. dollars, unless otherwise noted)

        These interim Consolidated Financial Statements do not include all of the disclosures included in NOVA Chemicals' annual Consolidated Financial Statements and should be read in conjunction with the Consolidated Financial Statements for the year ended Dec. 31, 2008.

        On Feb. 23, 2009, NOVA Chemicals entered into an Arrangement Agreement with International Petroleum Investment Company (IPIC) providing for the acquisition by IPIC of all of NOVA Chemicals' outstanding common shares for cash consideration of $6.00 per share. On July 6, 2009, IPIC completed the acquisition of NOVA Chemicals by way of a plan of arrangement (the Arrangement) under the Canada Business Corporations Act, and pursuant to the Arrangement, a wholly-owned subsidiary of IPIC acquired all of the issued and outstanding common shares of NOVA Chemicals for $6.00 per share in cash. NOVA Chemicals common shares were delisted from the NYSE and TSX on July 6, 2009. The purchase price of the Arrangement, including assumption of NOVA Chemicals' net debt obligations, was approximately $2.8 billion. NOVA Chemicals elected to use push-down accounting under CICA 1625, Comprehensive Revaluation of Assets and Liabilities which resulted in the Company's assets and liabilities being comprehensively revalued to be consistent with the values recorded by IPIC in accordance with business combination accounting standards. In this respect, NOVA Chemicals applied for the first time and prospectively, the principles of CICA 1582, Business Combinations, in connection with push-down accounting. As a result, the carrying values of all identifiable assets and liabilities have been adjusted to their respective estimated fair values on July 6, 2009. All fair value adjustments are provisional pending completion of valuations to support the fair values of NOVA Chemicals assets and liabilities as of July 6, 2009, and are subject to change. Although NOVA Chemicals continues as the same legal entity after the IPIC acquisition, the accompanying consolidated balance sheets, statements of net (loss) income, cash flows, changes in shareholders' equity and statements of comprehensive (loss) income are presented for two periods: Predecessor and Successor, which relate to the period preceding and succeeding the IPIC acquisition. These separate periods are presented to reflect the new accounting basis established for NOVA Chemicals as of July 6, 2009, and highlight the fact that the financial information for such periods has been prepared under two different historical-cost bases of accounting. The Successor portion of the financial statements also reflects equity contributions from IPIC. See Note 2 for further disclosure of the IPIC acquisition.

1.     SIGNIFICANT ACCOUNTING POLICIES

These interim Consolidated Financial Statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), using the same accounting policies as set out in Note 2 to the Consolidated Financial Statements for the year ended Dec. 31, 2008, on pages 83 to 92 of the 2008 Annual Report, except as follows.

NOVA Chemicals periodically reviews the estimated useful lives of property, plant and equipment and makes adjustments when appropriate. During July 2009, NOVA Chemicals reassessed the remaining useful lives of its plant and equipment which resulted in increasing the majority of the estimated useful lives to 20 years. Depreciation expense recorded during the third quarter of 2009 based on revalued property, plant and equipment and revised estimated useful lives was $25 million lower than if original estimated useful lives were retained.

F-101

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

1.     SIGNIFICANT ACCOUNTING POLICIES (Continued)

Certain comparative figures have been restated to conform with the current periods' presentation.

F-102

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

1.     SIGNIFICANT ACCOUNTING POLICIES (Continued)

NOVA Chemicals adopted CICA 3064 on Jan. 1, 2009. Assets such as pre-production costs and start-ups costs, which no longer meet the definition of intangible assets as prescribed by CICA 3064 were removed from the balance sheet and in accordance with CICA 1506, Accounting Changes, these changes have been applied retrospectively. The effect of the restatement at Dec. 31, 2007 was to decrease Other non-current assets by $40 million, decrease Future income tax liability by $11 million, decrease Accumulated other comprehensive income by $4 million and increase Reinvested deficit by $25 million. The after-tax impact to the net income in the third quarter of 2008 was a $2 million benefit.

F-103

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

1.     SIGNIFICANT ACCOUNTING POLICIES (Continued)

The following summarizes the impact of the adoption of CICA 3064 in the periods presented:

Accounting Standards and Interpretations Not Yet Adopted

Certain Canadian accounting standards and interpretations have been issued that are not required to be adopted until after Sep. 30, 2009, and have not been early adopted by NOVA Chemicals. Pronouncements which may have a future impact on NOVA Chemicals accounting policies or on the presentation of the Consolidated Financial Statements are amendments to CICA 3855, Financial Instruments—Recognition and Measurement, which provide guidance on application of the effective interest method; and amendments to CICA 3862, Financial Instruments—Disclosures, which require enhanced disclosures for financial instruments including classification of fair value measurements and methods using a fair value hierarchy and, when a valuation technique is used, the assumptions used in determining fair value of each class of financial assets or liabilities. The amendments are not required to be adopted by NOVA Chemicals until January 2010 and December 2009, respectively, and are currently being evaluated.

In February 2008, the Canadian Accounting Standards Board confirmed that the use of IFRS will be required for interim and annual financial statements in 2011 for publicly accountable profit-oriented enterprises. IFRS will replace Canada's current GAAP for listed companies and other profit-oriented enterprises that are responsible to large or diverse groups of stakeholders. Companies will be required to provide one year of comparative data in accordance with IFRS.

During 2008, NOVA Chemicals established a project team to develop its IFRS changeover plan. A number of sub-teams were formed to begin the diagnostic phase of the project. The diagnostic phase includes the assessment of differences between Canadian GAAP and IFRS; options available under IFRS; potential system changes required; and effects on internal controls and processes. The Company will continue to investigate the impact of IFRS convergence in 2009 and has provided disclosure of its convergence plan and anticipated effects of IFRS on its financial statements, on a qualitative basis, in its 2008 annual MD&A on page 63 of its 2008 annual report.

F-104

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

2.     IPIC ACQUISITION

As discussed on page 14, on July 6, 2009, IPIC acquired 100% of NOVA Chemicals outstanding common shares for consideration of $6.00 per share. NOVA Chemicals elected to use push-down accounting under CICA 1625, Comprehensive Revaluation of Assets and Liabilities and as a result, these interim consolidated financial statements have been prepared to reflect the purchase price adjustments arising from this transaction. The IPIC acquisition has been accounted for in accordance with CICA 1582. The effects of these provisional adjustments on each of the Company's major classes of assets, liabilities and shareholders' equity accounts are as follows:

---

(a)

The revaluation adjustment arising from the application of push-down accounting based on the fair value of NOVA Chemicals assets and liabilities is classified to Contributed surplus. Future income taxes have been recorded based on the statutory tax rate of the various tax jurisdictions to which the fair value adjustments are attributable. Tax rates range between 10% and 39% and valuation allowances are applied as necessary. The tax bases of the Company's assets and liabilities did not change as a result of the IPIC acquisition or the application of push-down accounting.

F-105

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

2.     IPIC ACQUISITION (Continued)

(b)

Reclassification of previously issued common shares, retained earnings and accumulated other comprehensive income on application of push-down accounting. NOVA Chemicals removed the balance in common shares of $508 million as of July 6, 2009, before push-down adjustments, and recorded the cash paid by IPIC to acquire all of NOVA Chemicals issued and outstanding common shares for $499 million.



(c)

IPIC converted $350 million of interim debt financing to common shares at closing of the acquisition. Related accrued interest and fees totaling $17 million ($12 million after-tax) on the interim debt financing were forgiven by IPIC and reclassified to Contributed surplus.

This allocation is provisional pending completion of the valuations and is subject to change. The final valuation will be based on the actual net tangible and intangible assets that existed as of the closing date of the IPIC transaction. Any final adjustments will change the allocations of purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a change to the consolidated financial statements as of Sep. 30, 2009, including a change to contributed surplus. In accordance with CICA 1582, the $906 million excess of the acquisition date fair values of NOVA Chemicals identifiable assets and liabilities over the total purchase consideration is considered a bargain purchase by IPIC and is recorded as a component of Contributed surplus.

Acquired trade receivables

The fair value of trade receivables acquired by IPIC on July 6, 2009 is $376 million ($392—gross contractual amounts receivable, less $16 million estimated contractual cash flows not expected to be collected).

Intangible assets

NOVA Chemicals identified intangible assets of $83 million and favorable third-party supply contracts of $18 million. All identified intangible assets were determined by management to have finite lives and include licenses and technology with estimated remaining useful lives ranging from 11—20 years. None of the identified intangible assets are expected to have a residual value at the end of their respective useful lives and are being amortized on a straight-line basis over their estimated useful lives. Amortization expense for the Successor period ended Sep. 30, 2009 was $1 million.

Favorable/Unfavorable third-party contracts

Favorable third-party supply contracts and unfavorable third party sales contracts were recorded at fair value and are being amortized on a straight-line basis over the remaining contract terms, which range between 6—10 years.

F-106

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

2.     IPIC ACQUISITION (Continued)

Property, plant and equipment

Property, plant and equipment was recorded at fair value. Property, plant and equipment is being amortized on a straight-line basis over the following estimated useful lives:

Pension plans

In accordance with push-down accounting requirements, accrued pension benefit assets and obligations were calculated using best estimate assumptions and all plan assets were valued at fair value. Any previously existing unamortized net actuarial gain (loss), unamortized past service cost, unamortized transitional obligation or unamortized transitional asset were eliminated, resulting in the accrued benefit asset or liability being the difference between the accrued benefit obligation and the fair value of plan assets.

Deferred gains

Deferred gains represent amounts realized on the sale of certain investments and other long-term assets that were being amortized as adjustments to Feedstock and operating costs. IPIC has not assumed any obligation at the close of the acquisition with respect to the deferred gain balances, therefore they were removed from the balance sheet on July 6, 2009.

Long-term debt

NOVA Chemicals senior notes were valued based on market prices on July 6, 2009. The fair value adjustments for all other long-term debt were not material. The Company also removed all long-term debt transaction costs which were included in both Other non-current assets and Long-term debt on the consolidated balance sheet.

3.     INVENTORIES

The amount of inventory costs included in Feedstock and operating costs and Depreciation and amortization during the three months ended Sep. 30, 2009 and Dec. 31, 2008, was $0.9 billion and $1.4 billion, respectively.

F-107

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

4.     LONG-TERM DEBT

---

(1)

Five facilities totaling $765 million: $150 million due Mar. 31, 2010, $350 million ($346 million available) due Mar. 31, 2010, $100 million due Mar. 31, 2010, $65 million due Mar. 20, 2010, and $100 million (tranches: $30 million due Mar. 20, 2010; $30 million and $40 million, due Mar. 31, 2010). Effective Oct. 15, 2009, the undrawn $150 million facility was terminated.



(2)

Callable at the option of the Company at any time.



(3)

NOVA Chemicals posted $52 million cash collateral as of Feb. 22, 2009 ($45 million as of Dec. 31, 2008 included in Restricted cash on the consolidated balance sheets, plus $7 million provided from Jan. 1, 2009 through Feb. 22, 2009), $51 million was applied to the $126 million equity notional amount to reduce the equity notional amount to $75 million. The remaining $1 million cash collateral was returned to NOVA Chemicals.

On Oct. 16, 2009, NOVA Chemicals issued $350 million of 8.375% senior notes due 2016 at an issue price of 99.34%, and $350 million of 8.625% senior notes due 2019 at an issue price of 99.168%. The 2016 notes and 2019 notes have an effective yield to maturity of 8.5% and 8.75%, respectively. Net proceeds from the offering were $681 million (after deducting discounts of $5 million and fees of $14 million). The net proceeds were used to repay $242 million outstanding under the Company's $350 million secured revolving credit facility and $254 million outstanding under NOVA Chemicals bilateral credit facilities. The remaining cash balance of $185 million will be used to repay the total return swap when it terminates in March 2010 and for general corporate purposes. The notes were made available in a private offering that was exempt from the registration requirements of the Securities Act of 1933 (the "Securities Act") and were offered only to "qualified institutional buyers" as defined in Rule 144A under the Securities Act and outside the United States in reliance on Regulation S under the Securities Act. The notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration except pursuant to an applicable exemption from the

F-108

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

4.     LONG-TERM DEBT (Continued)

registration requirements of the Securities Act and applicable state securities laws. NOVA Chemicals has agreed to file a registration statement with the Securities and Exchange Commission ("SEC") within 90 days after the issuance of the notes relating to a registered offer to exchange the notes for substantially identical notes and cause such registration statement to be declared effective within 180 days after the notes were issued. Under existing SEC interpretations, subject to certain requirements, the exchange notes will be freely transferable by holders of such notes other than affiliates of the Company.

Prior to July 6, 2009, IPIC provided the Company with $350 million of interim debt financing that was converted into common equity at the closing of the IPIC Transaction. Related accrued interest and fees totaling $17 million ($12 million after-tax) on the interim debt financing were forgiven by IPIC and reclassified to Contributed surplus. NOVA Chemicals removed the balance in common shares of $508 million as of July 6, 2009, before push-down adjustments, and recorded the cash paid by IPIC to acquire all of NOVA Chemicals issued and outstanding common shares for $499 million.

The $350 million secured revolving credit facility, the total return swap and NOVA Chemicals' accounts receivable securitization programs are governed by financial covenants which require quarterly compliance. The covenants require a maximum net debt-to-cash flow ratio of 5:1 and a minimum interest coverage ratio of 2:1 computed on a rolling 12-month basis.

During the second quarter of 2009, NOVA Chemicals negotiated the following amendments to the financial covenants:

•

removing the maximum net debt-to-cash flow ratio and minimum interest coverage ratio covenants for the quarters ending June 30, 2009, Sep. 30, 2009 and Dec. 31, 2009; and



•

adding a minimum consolidated cash flow covenant which requires NOVA Chemicals to maintain consolidated cash flow, based on a calculation as determined in the loan agreement, that is positive for the quarter ending June 30, 2009, and that is not less than $50 million for each of the quarters ending Sep. 30, 2009 and Dec. 31, 2009, and that the minimum consolidated cash flow required can be reduced by cash proceeds received from new equity contributed by IPIC through the remainder of 2009 (excluding the equity contributions made on July 6, 2009 discussed above). NOVA Chemicals was in compliance with this covenant at Sep. 30, 2009.

All lenders party to NOVA Chemicals' revolving credit facilities, the total return swap and NOVA Chemicals' accounts receivable securitization programs gave their consent to the change of control effective July 6, 2009 upon closing of the IPIC transaction.

F-109

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

5.     INTEREST EXPENSE

6.     RESTRUCTURING CHARGES

In the third quarter of 2009, NOVA Chemicals recorded $18 million before-tax ($14 million after-tax) of restructuring charges as follows:

•

$18 million of severance and other employee related costs due to restructuring activities across the Company, $1 million of the severance and other employee related costs have been paid. All of the third quarter restructuring charges were incurred by the Successor.

In the second quarter of 2009, NOVA Chemicals recorded $34 million before-tax ($34 million after-tax) of restructuring charges as follows:

•

$31 million related to NOVA Chemicals' decision to exit the DYLARK engineering resin business. The restructuring charge included a $17 million impairment charge related to the DYLARK resin business unit assets, $3 million for severance and other employee related costs, and $11 million for other related exit costs. As of Sep. 30, 2009, $2 million of the severance and other employee related costs have been paid;



•

$2 million of severance costs related to the continued restructuring of NOVA Chemicals' Performance Styrenics segment; and



•

$1 million for a pension plan settlement charges incurred by the INEOS NOVA joint venture.

In the first quarter of 2009, NOVA Chemicals recorded $8 million before-tax ($8 million after-tax) of restructuring charges as follows:

•

$8 million of severance and other employee related costs related to Performance Styrenics restructuring which is intended to strengthen the business and reduce fixed costs by 40%. As of Sep. 30, 2009, $5 million of the severance costs have been paid to employees.

There were no restructuring charges in the third quarter of 2008.

F-110

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

6.     RESTRUCTURING CHARGES (Continued)

In the second quarter of 2008, NOVA Chemicals recorded $5 million before-tax ($4 million after-tax) of restructuring charges as follows:

•

$3 million of severance and other employee costs related to the elimination of approximately 24 information technology positions in North America. As of Sep. 30, 2009, $2 million of the severance costs have been paid to employees;



•

$2 million related to actions taken by the INEOS NOVA joint venture, including $1 million of severance costs related to reductions at the Bayport facility and $1 million of other non-cash restructuring charges. As of Sep. 30, 2009, none of the severance costs have been paid to employees.

There were no restructuring charges in the first quarter of 2008.

7.     INCOME TAXES

F-111

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

8.     PENSIONS AND OTHER POST-RETIREMENT BENEFITS

The total defined benefit cost related to pension benefits recognized in each of the three month periods ended Sep. 30, 2009 and Sep. 30, 2008 was $7 million and $6 million, respectively. The total defined benefit cost related to pension benefits recognized during the nine months ended Sep. 30, 2009 and Sep. 30, 2008 was $35 million and $19 million, respectively. The defined benefit cost recognized during the first quarter of 2009 and the second quarter of 2009 includes settlement charges of $8 million and $7 million, respectively, which were triggered by lump-sum distributions.

The total defined benefit cost related to other post-retirement benefits recognized in each of the three month periods ended Sep. 30, 2009 and Sep. 30, 2008 was $2 million and $2 million, respectively. The total defined benefit cost related to other post-retirement benefits recognized during the nine months ended Sep. 30, 2009, and Sep. 30, 2008 was $5 million and $4 million, respectively.

The expected long-term rate of return on plan assets is 7.5% for the nine months ended Sep. 30, 2009 and the nine months ended Sep. 30, 2008.

Employer Contributions

NOVA Chemicals contributed $8 million during the quarter ending Sep. 30, 2009 and $12 million during the quarter ended Sep. 30, 2008, to its defined benefit pension plans. NOVA Chemicals contributed $3 million during the quarter ended Sep. 30, 2009, and $3 million during the quarter ended Sep. 30, 2008, to its defined contribution plans. NOVA Chemicals contributed $26 million and $30 million during the nine months ended Sep. 30, 2009 and Sep. 30, 2008, respectively, to its defined benefit pension plans. NOVA Chemicals contributed $10 million and $11 million during the nine months ended Sep. 30, 2009 and Sep. 30, 2008, respectively, to its defined contribution plans.

For the year ending Dec. 31, 2009, funding for the defined benefit plans is expected to range between $30 and $40 million as employees accrue additional pension benefits and special payments are made to cover the shortfall between assets and obligations. Contributions to defined contribution plans for 2009 are expected to be $12 million.

9.     SEGMENTED INFORMATION

Refer to pages 116 and 117 of the Consolidated Financial Statements for the year ended Dec. 31, 2008, in the 2008 Annual Report for the description of each segment and accounting policies for segment reporting. Mark-to-market adjustments on NOVA Chemicals' open feedstock derivative positions are recorded as part of Corporate results until the positions are realized. Once realized, any income effects are recorded in business results.

F-112

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

9.     SEGMENTED INFORMATION (Continued)

The following tables provide information for each segment.

---

(1)

See Note 1 for discussion of the prior period restatement due to the adoption of CICA 3064 in the first quarter of 2009.

F-113

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

9.     SEGMENTED INFORMATION (Continued)

---

(2)

See Note 1 for discussion of the prior period restatement due to the adoption of CICA 3064 in the first quarter of 2009.

 

10.   CONTINGENCIES

NOVA Chemicals is involved in litigation from time to time in the ordinary course of business. Among these items is a claim for approximately $120 million by Dow Chemical Canada ULC and its European affiliate concerning the Company's third ethylene plant. The Company has counterclaimed in the same action for an amount well in excess of the Dow claim. Although management does not believe that the claims against the Company have merit, there can be no assurance on the outcome of any litigation.

F-114

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

11.   FINANCIAL RISK MANAGEMENT

Change in Functional Currency

As required by GAAP, NOVA Chemicals commenced recording transactions in its Canadian operations using U.S. dollars as the functional currency effective Oct. 1, 2008. This results in all foreign currency impacts of holding Canadian dollar denominated financial assets and liabilities being recorded through the income statement rather than being included in translation gains and losses deferred in AOCI. NOVA Chemicals accounted for this change prospectively and any amounts that had been previously deferred in AOCI continue to be included in AOCI unless there is a realized reduction in the net investment in the Canadian entities. The translated amounts on Sep. 30, 2008 became the historical basis for all items as of Oct. 1, 2008. NOVA Chemicals continues to hold investments in joint ventures and other subsidiaries with differing functional currencies and these will continue to be classified as self-sustaining operations, with translation gains and losses deferred in AOCI.

12.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

F-115

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

12.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

---

(1)

Start-up Costs.    Prior to Jan. 1, 2009, Canadian GAAP provided that when an entity starts up a new facility or entity, expenditures incurred during the pre-operating period may be deferred when certain criteria are met. Under U.S. GAAP, all costs (except interest on constructed assets) associated with start-up activities must be expensed as incurred. On Jan. 1, 2009, NOVA Chemicals adopted CICA 3064 (see Note 1), which harmonizes Canadian GAAP and US GAAP in accounting for start-up costs. Prior period have been restated to reflect this change.



(2)

Stock-Based Compensation.    Under Canadian GAAP, the Employee Incentive Stock Option Plan is measured using a fair-value based method, while the Equity Appreciation Plan and the Restricted Stock Unit Plan are classified as liability instruments and are marked to market based on intrinsic value. U.S. GAAP, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Compensation—Stock Compensation, requires the share-based compensation transactions be accounted for using a fair-value based method, such as the Black Scholes method. The fair value of awards classified as liability instruments must be re-measured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period. All stock-based compensation plans were terminated upon closing of the IPIC transaction.



(3)

Pension Liability Adjustment.    FASB ASC Topic 715, Compensation—Retirement Benefits, requires an employer to recognize the overfunded or underfunded status of a defined benefit post-retirement plan (other than a multi-employer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through accumulated other comprehensive income (loss). As a result of the revaluation due to the IPIC acquisition as discussed in Note 2, all previously unrecognized FASB ASC Topic 715 amounts were recorded on the Canadian GAAP balance sheet, resulting in no Canadian GAAP/U.S. GAAP differences at Sep. 30, 2009. In the future, differences are expected. During the nine months ended Sept. 30, 2008, NOVA Chemicals decreased its FASB ASC Topic 715 pension and post-retirement liability as a result of transferring certain pension plans to INEOS NOVA, by $9 million, resulting in a credit of $6 million (net of tax) to other comprehensive income.



(4)

Income Taxes.    FASB ASC Section 740-10-25, Income Taxes—Overall—Recognition, clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized. An entity is required to recognize the best estimate of a tax position if that position is more

F-116

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

12.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

likely than not to be sustained upon examination, based solely on the technical merits of the position. NOVA Chemicals has a tax reserve, which is available to settle periodic tax disputes and ongoing tax adjustments. NOVA Chemicals assesses this reserve from time to time for adequacy and during the first quarter of 2009, the reserve was increased by $1 million to $20 million. During the second and third quarters of 2009 and first nine months of 2008, no changes to the liability for uncertain tax positions was necessary. It is NOVA Chemicals' policy to recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. At Sept. 30, 2009, NOVA Chemicals had approximately $4 million accrued for the payment of interest and penalties.

(5)

Derivative Instruments and Hedging Activities.    CICA 3855 harmonizes Canadian and U.S. GAAP by establishing standards for recognition and measurement of financial assets, liabilities and non-financial derivatives. CICA 3865 harmonizes Canadian GAAP with U.S. GAAP FASB ASC Topic 815, Derivatives and Hedging, by establishing standards for when and how hedge accounting may be applied and recorded. Certain differences that existed before the implementation of the above standards on Jan. 1, 2007, pertaining to the termination of interest rate swaps in 2002, continue to be reconciling items between Canadian GAAP and U.S. GAAP. U.S. GAAP FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a framework for measuring the fair value of financial assets and liabilities. In October 2008, FASB ASC paragraph 820-10-65-2, Fair Value Measurements and Disclosures—Overall—Transition and Open Effective Date Information, was issued to clarify the application of FASB ASC Topic 820. In particular, FASB ASC Topic 820 requires a company to consider its own credit risk and the credit risk of a counterparty when determining the fair value of a derivative instrument. Canadian GAAP issued EIC-173 in January 2009 which harmonized this aspect of FASB ASC Topic 820 with Canadian GAAP. Because EIC-173 was not effective for Canadian GAAP until Jan. 12, 2009, and NOVA Chemicals elected not to early adopt this standard, a GAAP difference existed at Dec. 31, 2008. As a result, the Company recognized $18 million in income ($12 million after-tax) during 2008 to properly reflect credit risk valuation adjustments on its mark-to-market feedstock derivatives, as required by FASB ASC Topic 820.



(6)

Joint Ventures.    NOVA Chemicals accounts for its interests in joint ventures using the proportionate consolidation method under Canadian GAAP. As permitted by specific U.S. SEC exemptions, adjustments to reflect equity accounting, as required under U.S. GAAP, have not been made. The equity method would not result in any changes in NOVA Chemicals' net income (loss) or shareholders' equity; however, all assets, liabilities, revenue, expenses and most cash flow items would decrease when compared to the amounts that are presented using proportionate consolidation.

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

12.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

12.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

F-119

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

12.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

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NOVA CHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited, millions of U.S. dollars, unless otherwise noted)

12.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

Accounting Standards and Interpretations Not Yet Adopted

Certain US accounting standards and interpretations have been issued that are not required to be adopted until after Sep. 30, 2009, and have not been early adopted by NOVA Chemicals. Pronouncements which may have a future impact on NOVA Chemicals accounting policies or on the presentation of the Consolidated Financial Statements are Amendments to FASB Interpretation No. 46, and Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140. These new standards are not required to be adopted by NOVA Chemicals until Jan. 1, 2010 and are currently being evaluated.

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PROSPECTUS

NOVA Chemicals Corporation

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OFFER TO EXCHANGE

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Up to $350,000,000 aggregate principal amount of our
Senior Notes due 2016, which have been registered under
the Securities Act of 1933, for any and all of our
outstanding Senior Notes due 2016.

Up to $350,000,000 aggregate principal amount of our
Senior Notes due 2019, which have been registered under
the Securities Act of 1933, for any and all of our
outstanding Senior Notes due 2019.

 

Until the date that is 90 days after the date of this prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters with respect to their unsold allotments or subscriptions.

                        , 20        

 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.    Indemnification of Directors and Officers

        NOVA Chemicals is incorporated under the Business Corporations Act (New Brunswick).

        Under the Business Corporations Act (New Brunswick), we may indemnify a present or former director or officer or a person who acts or acted at our request as a director or officer of a body corporate of which we are or were a shareholder or creditor, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of us or that body corporate, if the director or officer acted honestly and in good faith with a view to our best interests, and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable ground for believing that his conduct was lawful. Such indemnification may be in connection with an action by or on behalf of our corporation or body corporate only with court approval. A director or officer is entitled to indemnification from us as a matter of right if he was substantially successful on the merits, fulfilled the conditions set forth above, and is fairly and reasonably entitled to indemnity.

        The by-laws of NOVA Chemicals provide that the corporation shall indemnify a director or officer of the corporation, a former director or officer of the corporation or an individual who acts or acted at the corporation's request as a director or officer, or an individual acting in similar capacity of another entity, and his heirs, executors and administrators and other legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal, administrative, investigative or other proceeding to which he is involved because of that association with the corporation or other entity, if

•

he acted honestly and in good faith with a view to the best interests of the corporation or other entity for which he acted as a director or officer or in a similar capacity at the corporation's request, as the case may be; and



•

in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.

        The corporation may also indemnify such person in such other circumstances as the Business Corporations Act (New Brunswick) permits or requires.

        The corporation may purchase and maintain insurance for the benefit of any of the foregoing persons against such liabilities and in such amounts as the board may from time to time determine and as is permitted by the Business Corporations Act (New Brunswick).

        The corporation is also authorized to execute agreements evidencing its indemnity in favor of the foregoing persons to the full extent permitted by law. We have entered into indemnity agreements with each of our current directors containing provisions that may require us and from time to time, certain of our affiliates, to, among other things, indemnify such directors against certain liabilities that may arise by reason of their status or service as our directors, and obtain the approval of a court, if required, to meet such indemnity obligations. The directors are entitled to reimbursement for time spent responding to or testifying in connection with any proceedings involving us, tax gross-up payments to the extent such directors are not entitled to certain tax deductions related to the indemnification payments, and reimbursement of their expenses incurred as a result of any proceeding against them as to which they could be indemnified, provided that any expenses not actually incurred shall be repaid. The right to indemnification will only apply where the director acted honestly and in good faith with a view to the best interest of the entity that it serves and, in the case of a criminal or administrative

II-1

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action, had reasonable grounds for believing that his conduct was lawful. The indemnity agreements further provide that we shall be the indemnitor of first resort and that we are required to advance the full amount of expenses incurred by the directors.

        In addition to these indemnification obligations, we purchase and maintain insurance for the benefit of directors. See Exhibits 10.3 and 10.4 for the form of indemnity agreement.

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Item 21.    Exhibits and Financial Statement Schedules

(a)    Exhibits

II-3

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(1)

Incorporated by reference from the Report on Form 6-K of NOVA Chemicals Corporation filed on August 6, 2009

(2)

Incorporated by reference from Exhibit 7.1 to the Registration Statement on Form F-9 of NOVA Chemicals Corporation, File No. 333-6108

(3)

Incorporated by reference from Exhibit 7.1 to the Registration Statement on Form F-10 of NOVA Chemicals Corporation, File No. 333-113038

(4)

Incorporated by reference from the Report on Form 6-K of NOVA Chemicals Corporation filed on November 1, 2005

(5)

Incorporated by reference from Schedule B to Material Change Report filed as Exhibit 99.1 to the Report on Form 6-K of NOVA Chemicals Corporation filed on February 25, 2009

*

Filed herewith.

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Item 22.    Undertakings

        The undersigned registrant hereby undertakes:

        (1)   to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)

to include any prospectus required by Section 10(a)(3) of the Securities Act of 1993;



(ii)

to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and



(iii)

to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

        (2)   that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

        (3)   to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

        (4)   to file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A.4 of Form 20-F at the start of any delayed offering or throughout a continuous offering;

        (5)   to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of a registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, NOVA Chemicals Corporation has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in City of Moon Township, Commonwealth of Pennsylvania, on December 21, 2009.

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POWER OF ATTORNEY

        Each person whose signature appears below hereby constitutes and appoints Randy G. Woelfel and Todd D. Karran, and each of them the true and lawful attorneys-in-fact and agents of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, including any filings pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and anything necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute, or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 21, 2009.

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EXHIBIT INDEX

II-8

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(1)

Incorporated by reference from the Report on Form 6-K of NOVA Chemicals Corporation filed on August 6, 2009

(2)

Incorporated by reference from Exhibit 7.1 to the Registration Statement on Form F-9 of NOVA Chemicals Corporation, File No. 333-6108

(3)

Incorporated by reference from Exhibit 7.1 to the Registration Statement on Form F-10 of NOVA Chemicals Corporation, File No. 333-113038

(4)

Incorporated by reference from the Report on Form 6-K of NOVA Chemicals Corporation filed on November 1, 2005

(5)

Incorporated by reference from Schedule B to Material Change Report filed as Exhibit 99.1 to the Report on Form 6-K of NOVA Chemicals Corporation filed on February 25, 2009

*

Filed herewith.

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