Issue Date: April 24, 2017 | Web Date: April 18, 2017
Nova will buy Williams’s ethylene plant
In its second big U.S. Gulf Coast deal in as many months, the Canadian petrochemical maker Nova Chemicals has agreed to buy Williams Partners’ Geismar, La., ethylene cracker and related assets for $2.1 billion.
Nova will get Williams’s 88% interest in the Geismar cracker, which in 2015 was expanded by 40% to a capacity of 900,000 metric tons per year. Saudi Basic Industries owns the other 12%.
Also included in the deal is Williams’s interest in an ethylene trading hub in Mont Belvieu, Texas, and more than 200 hectares of undeveloped adjacent land that Nova says “represents a significant opportunity for future growth.”
Last month, Nova formed a partnership with its European sister company Borealis and the French firm Total to build a $1.7 billion ethylene cracker near Total’s refinery in Port Arthur, Texas, and a polyethylene plant in Bayport, Texas.
Nova makes ethylene and polyethylene in Joffre, Alberta, and Sarnia, Ontario, but until now hadn’t succeeded in expanding its olefins business beyond Canada. Last year, the company started up a new polyethylene plant in Joffre. The company says it will decide later this year whether to build a new polyethylene plant in Sarnia.
Steve Lewandowski, vice president of global olefins at the consulting firm IHS Markit, says he was surprised to hear that Nova was the winning bidder for the Williams cracker after announcing the Total joint venture weeks earlier. “But it appears they are willing to do both,” he points out. “They are going to be big on the U.S. Gulf Coast.”
Lewandowski thinks Nova is paying a fair price for the assets. The Geismar plant, which supplies producers of polyethylene, vinyl chloride, and other ethylene derivatives, should be a moneymaker if the market for ethylene remains strong, as Lewandowski expects. Over the long term, Nova has the option of building a polyethylene plant on the site.
In a research note, Moody’s analyst Joseph Princiotta says the acquisition will give Nova expanded capacity and geographic diversification while weighing it with more debt. “But the impact is more likely to be a net positive over time,” he wrote.
Williams will continue to supply the Geismar facility with ethane feedstock after the transaction is completed. The company announced its intention to sell the cracker late last year to focus on its natural gas processing and distribution businesses.
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