Nova buying majority stake in olefins plant for $2.1 billion

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Williams Partners LP The Williams Olefins transaction is expected to close this summer.

In a major plastics feedstocks deal, Nova Chemicals Corp. will pay $2.1 billion for a majority stake in an olefins plant operated by Williams Partners LP in Geismar, La.

The deal for Williams Olefins LLC includes almost 525 acres of undeveloped land adjacent to the plant, and Williams’ interest in an ethylene trading hub in Mont Belvieu, Texas.

When the transaction closes, Nova and Williams will enter into a long-term arrangement for Williams to transport and supply ethane feedstock to support the plant.

The plant produces almost 2 billion pounds of ethylene annually and is located in the U.S. Gulf Coast region, which is North America’s largest refining and petrochemical production hub. The site has riverfront access, and the adjacent land represents a significant opportunity for future growth, Nova officials said in an April 17 news release.

Nova President and CEO Todd Karran said in the release that the deal “provides Nova with the opportunity to acquire an operating facility with immediate, positive cash flow, and with access to new customers and the benefits of an experienced workforce.”

Nova is based in Calgary, Alberta. Williams is based in Tulsa, Okla.

The Williams deal comes less than a month after Nova announced that it was forming a joint venture with Borealis AG and Total Petrochemicals that will include a new 1.35 billion pound-per-year capacity polyethylene resin unit in Bayport, Texas.

The proposed JV also will include a new 2.2 billion pound capacity ethylene cracker in Port Arthur, Texas, as well as Total’s existing 880 million pound capacity PE unit in Bayport. Nova is one of North America’s largest polyethylene producers.

“The last few weeks have been quite significant for Nova with the announcement of the JV with Borealis and Total and most recently with the announcement of the Williams deal,” market analyst Nick Vafiadis said in an email to Plastics News.

Vafiadis — who’s with the IHS Markit consulting firm in Houston — added that these moves “fortify [Nova’s] position as a cost-competitive producer in North America with access to global markets.”

Market analyst Steve Zinger also said that the deal was good for Nova because it “quickly — almost instantly — gives them access to U.S. Gulf Coast (USGC) ethane-based ethylene production which has recently become competitive, post-shale gas, with their main existing bases of ethylene/PE production in Canada.

“This is part of Nova’s strategy to expand their presence in North America to produce low-cost ethylene/PE and well compliments their recent announcement to jointly build a cracker/PE plant in Port Arthur & Bayport with Total,” said Zinger, who’s with the PCI Wood Mackenzie consulting form in Houston. “After completion of these two investments, Nova will become a major USGC and an even bigger North American ethylene/PE producer.”

He added that the deal also was good for Williams because chemicals “are not a core business for this primarily midstream company.

“Williams will use the proceeds to retire some uncomfortable levels of debt,” Zinger said. “And as part of the deal, Williams will also get a long-term ethane feedstock supply agreement to the Geismar cracker.”