If you believe, as the markets indicate most investors do, that crude oil prices will stay relatively high and remain priced well above North American natural gas on an energy equivalent basis, the future of NOVA Chemicals’ Alberta ethylene and polyethylene business looks truly exceptional.

The Alberta Advantage is a relative one; it defines how much better we will do than our average Gulf Coast based competitor. (There is a full discussion of the Alberta Advantage and its relationship to crude oil on page 31 of this report.)

It is quite clear that as crude oil prices have moved up, our Alberta Advantage has widened considerably. Figure 3 provides a basis for estimating the EBITDA likely to be earned from our Alberta business based on two inputs: the price of crude oil for the period and the average EBITDA margin earned by our competitors on the U.S. Gulf Coast.

In my view, high crude oil prices create an exceptional opportunity for our company. We should see returns, and hopefully equity multiples, much more like specialty chemical companies than the discounted multiples currently being applied to commodity chemical companies.

Styrenics — Turnaround Underway

In the past, the quality of NOVA Chemicals’ ethylene and polyethylene business has often been masked by our very poor Styrenics business. Over the last two years we first created, then expanded a styrene and polystyrene joint venture with INEOS. The joint venture has led the industry in consolidating assets, taking 8% of capacity out of the European polystyrene market and 5% out of the U.S. polystyrene market.

The joint venture also acquired the rights to Sterling Chemicals’ styrene production which was subsequently shut down permanently in the fourth quarter of 2007. This action has eliminated 11% of North American styrene capacity and 3% of global capacity from the market. Other styrene and polystyrene capacity has also been idled, and most observers expect to see further capacity rationalization soon.

Analysts have often pointed to the high relative cost of benzene as a big part of the styrenics industry problem. Today, as a result of changing supply/demand balances, benzene-to-oil price ratios are down from abnormally high levels, and we believe they will stay down in the long-term historical range. Lower relative benzene costs means polystyrene is getting more and more competitive and is now at its best relative pricing in the last decade versus polypropylene, its most common substitute. The polypropylene market is four-times larger than the polystyrene market so a relatively modest volume shift out of polypropylene should make a big difference in demand growth for polystyrene.

It is clear to me that this business has nowhere to go but up. Our Styrenics unit results have improved by $120 million per year of EBITDA since 2005, and the joint venture is projected to be EBITDA positive in 2008 based on further cost reductions. The improvement to date has been achieved without much, if any, help from the market. We believe the fact that polystyrene is more competitive relative to other polymers will enable margins to improve at a faster rate than many expect. NOVA Chemicals’ significant leverage to increases in polystyrene chain margins is shown in Figure 4.

In our Performance Styrenics unit, investments in facilities, technology, product development and talent have generated exciting opportunities for our company. This year should be the beginning of increasingly valuable returns on our work.

The risk-to-reward ratio for our Performance Styrenics portfolio is excellent. We have no need for significant capital investment and we are already at breakeven EBITDA levels. The business has big upside potential and I believe we have the talent in place that will deliver
value — quickly.

Looking Forward

As I look to 2008, with full appreciation of the possibilities for continued financial system distress and a resulting economic slowdown, I remain convinced that the ethylene and polyethylene markets will continue to be strong and styrenics markets are likely to improve. The chemical industry as a whole experienced a wave of consolidation activity in 2007 and many analysts expect that trend to continue in 2008.

I hope you will conclude, as I do, that if you are looking for an opportunity that takes full advantage of high crude oil cost expectations for the future, you will find NOVA Chemicals a uniquely valuable investment in just about any U.S. and global economic environment. We have an ethylene cost advantage over other producers, outside of older plants in the Middle East, unique polyethylene technology and a series of high-return polyethylene growth projects that will be completed in the next two years. In Styrenics, we have taken out costs and restructured our business into a joint venture that will take out even more costs in the near future. Those actions, and improving market conditions, could have a big positive impact on our returns.

I believe we should continue to outperform our North American peers by a wide margin and therefore, this is a very good time to invest in NOVA Chemicals. My colleagues and I feel very proud that our company set many performance records in 2007. We also fully appreciate that our fundamental objective is to turn outstanding performance into extraordinary value growth for our shareholders.

I would like to close with my personal thanks to Ted Newall who served our company admirably as Chairman of our Board of Directors for many years and retired in 2007. We all wish him well.

Jeffrey M. Lipton

Chief Executive Officer
February 7, 2008