U.S. Securities and Exchange Commission Washington,
D.C. 20549  FORM 40-F [Check one]  o
  
  REGISTRATION STATEMENT PURSUANT TO
  SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934.ý
  
  ANNUAL REPORT PURSUANT TO SECTION
  13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.  For the
  fiscal year ended December 31, 2002
  Commission
  File Number 1-13064  NOVA Chemicals Corporation (Exact name of Registrant as specified in its charter)  Alberta, Canada (Province or other jurisdiction of incorporation or organization)  None (Primary Standard Industrial Classification Code Number (if
applicable))  None (I.R.S. Employer Identification Number (if applicable))  645 Seventh Avenue S.W., Calgary, Alberta, Canada, T2P
5C6 (403) 750-3600 (Address and telephone number of Registrants principal executive
offices)  NOVA Chemicals Inc., 1550 Coraopolis Heights Road,
Moon Township, Pennsylvania, 15108 Attn: J.M. Lipton, President (412) 490-4000 (Name,
address (including zip code) and telephone number (including area code) of
agent for service in the United States)  Securities
registered or to be registered pursuant to Section 12(b) of the Act.  Title of each class
  
  Name of each exchange on
  which registeredCommon
  Shares of no par value
  
  New
  York Stock Exchange9.04%
  Preferred Securities
  due March 31, 2048
  
  New
  York Stock Exchange9
  1/2% Preferred Securities
  due December 31, 2047
  
  New
  York Stock Exchange
  Securities
registered or to be registered pursuant to Section 12(g) of the Act. None (Title of Class)  Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act. None (Title
of Class)  For
annual reports, indicate by check mark the information filed with this Form:  ý
  Annual
  information form
  ý
  Audited
  annual financial statements and related schedules  Indicate
the number of outstanding shares of each of the issuers classes of capital or
common stocks as of the close of the period covered by the annual report.  As
of December 31, 2002: 86,527,812 Common Shares were outstanding.  
  Indicate
by check mark whether the Registrant by filing the information contained in
this form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the
Exchange Act). If Yes is marked, indicate the file number assigned to the
Registrant in connection with such Rule.  Yeso
  82-
  
  
  Noý  Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days.  Yesý
  
  
  
  Noo 
 
   The
documents (or portions thereof) forming part of this Form 40-F are incorporated
by reference into the following registration statements under the Securities
Act of 1933, as amended:  Registration Statement on Form S-8 #33-47673 Registration Statement on Form S-8 #333-520 Registration Statement on Form S-8 #333-9076 Registration Statement on Form S-8 #333-9078 Registration Statement on Form S-8 #33-86218 Registration Statement on Form S-8 #33-77308 Registration Statement on Form S-8 #333-4740 Registration Statement on Form S-8 #333-11280 Registration Statement on Form S-8 #333-12910 Registration Statement on Form S-8 #333-101793 Registration Statement on Form F-9 #333-13824  UNDERTAKING
AND EXHIBITS  A.            Undertaking  Registrant
undertakes to make available, in person or by telephone, representatives to
respond to inquiries made by the commission staff, and to furnish promptly,
when requested to do so by the Commission staff, information relating to the
securities in relation to which the obligation to file an annual report on Form
40-F arises or to transactions in said securities.  B.            Documents Filed As Part of Report  1.             Annual Information Form for the
year ended December 31, 2002 2.             Audited financial statements and
related schedules 3.             Managements Discussion and
Analysis of Financial Condition and Results of Operations  C.            Exhibits  Attached
hereto are:  1.             Consent of Ernst & Young LLP 2.             Certification of principal
executive officer pursuant to 18 U.S.C. § 1350; and 3.             Certification of principal
financial officer pursuant to 18 U.S.C. § 1350.   2 
   CONTROLS AND PROCEDURES  Evaluation
of disclosure controls and procedures.Our chief executive officer
and our chief financial officer, after evaluating the effectiveness of the
companys disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a
date (the Evaluation Date) within 90 days before the filing date of this
annual report, have concluded that as of the Evaluation Date, our disclosure
controls and procedures were adequate and designed to ensure that material
information relating to us and our consolidated subsidiaries would be made
known to them by others within those entities.  Changes
in internal controls.There were no significant changes in our
internal controls or to our knowledge, in other factors that could
significantly affect our disclosure controls and procedures subsequent to the
Evaluation Date.  SIGNATURES  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
certifies that it meets all of the requirements for filing on Form 40-F
and has duly caused this annual report to be signed on its behalf by the
undersigned, thereto duly authorized.  Registrant
  NOVA Chemicals CorporationBy (Signature)
  /s/ Susan J WrightName and Title
  Susan J. Wright, Vice-President
  and Corporate SecretaryDate
  April 7, 2003   3 
   CERTIFICATIONS  I, Jeffrey M. Lipton, certify that:  1.             I
have reviewed this annual report on Form 40-F of NOVA Chemicals
Corporation;  2.             Based
on my knowledge, this annual report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual report;  3.             Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;  4.             The
registrants other certifying officer and I are responsible for establishing
and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules l3a-14 and 15d-14)
for the registrant and have:  a)             designed such disclosure controls
and procedures to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual report is
being prepared;  b)            evaluated the effectiveness of the
registrants disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation Date); and  c)             presented in this annual report our
conclusions about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;  5.             The
registrants other certifying officer and I have disclosed, based on our most
recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (and persons performing the equivalent function):  a)             all significant deficiencies in the
design or operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material weaknesses in
internal controls; and  b)            any fraud, whether or not material,
that involves management or other employees who have a significant role in the
registrants internal controls; and  6.             The
registrants other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.  Date: April 7, 2003
  /s/ Jeffrey  M. LiptonJeffrey M. LiptonChief Executive Officer(Principal Executive
  Officer)  
   1, Larry A. MacDonald, certify that:  1.             I
have reviewed this annual report on Form 40-F of NOVA Chemicals
Corporation;  2.             Based
on my knowledge, this annual report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual report;  3.             Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;  4.             The
registrants other certifying officer and I are responsible for establishing
and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules l3a-14 and 15d-14)
for the registrant and have:  a)             designed such disclosure controls
and procedures to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual report is
being prepared;  b)            evaluated the effectiveness of the
registrants disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation Date); and  c)             presented in this annual report our
conclusions about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;  5.             The
registrants other certifying officer and I have disclosed, based on our most
recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (and persons performing the equivalent
function):  a)             all significant deficiencies in the
design or operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material weaknesses in
internal controls; and  b)            any fraud, whether or not material,
that involves management or other employees who have a significant role in the
registrants internal controls; and  6.             The
registrants other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.  Date: April 7, 2003
  /s/ Larry A. MacDonaldLarry A. MacDonaldChief Financial Officer(Principal Financial
  Officer)


March 4, 2003

LOGO

NOVA Chemicals Corporation

ANNUAL INFORMATION FORM

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LOGO
®


TABLE OF CONTENTS

|                                                                                    |                                                        | Page                                         
|----------------------------------------------------------------------------------- | ------------------------------------------------------ | ---------------------------------------------
|TRADEMARKS                                                                          |                                                        | 2                                            
|U.S. DOLLAR REPORTING                                                               |                                                        | 3                                            
|FORWARD-LOOKING INFORMATION                                                         |                                                        | 3                                            
|THE CORPORATION                                                                     |                                                        | 4                                            
|                                                                                    | HISTORICAL DEVELOPMENT                                 |                                              
|                                                                                    | RECENT DEVELOPMENTS                                    |                                              
|                                                                                    | SUBSIDIARIES OF NOVA CHEMICALS                         |                                              
|                                                                                    | NOVA CHEMICALS' SUBSIDIARIES AND ASSOCIATED COMPANIES  |                                              
|                                                                                    | BUSINESS                                               |                                              
|                                                                                    |                                                        | General                                      
|                                                                                    |                                                        | Production Facilities                        
|                                                                                    |                                                        | Product Flow Chart                           
|                                                                                    |                                                        | Facility Profile                             
|                                                                                    |                                                        | Olefins/Polyolefins                          
|                                                                                    |                                                        | Styrenics                                    
|                                                                                    |                                                        | Methanex  Equity Investment                 
|                                                                                    | DISTRIBUTION OF PRODUCTS                               |                                              
|                                                                                    |                                                        | Geographic Distribution of Revenue by Segment
|                                                                                    | LOGISTICS                                              |                                              
|                                                                                    | COMPETITION                                            |                                              
|                                                                                    | PATENTS, LICENSES AND TRADEMARKS                       |                                              
|                                                                                    | TECHNOLOGY                                             |                                              
|                                                                                    |                                                        | Olefins/Polyolefins                          
|                                                                                    |                                                        | Styrenics                                    
|                                                                                    | RESEARCH AND DEVELOPMENT                               |                                              
|                                                                                    |                                                        | Olefins/Polyolefins                          
|                                                                                    |                                                        | Styrenics                                    
|                                                                                    | GOVERNMENT REGULATION AND ENVIRONMENTAL PROTECTION     |                                              
|                                                                                    | EMPLOYEE AND LABOUR RELATIONS                          |                                              
|                                                                                    | FOREIGN OPERATIONS                                     |                                              
|                                                                                    | PROPERTIES                                             |                                              
|                                                                                    | LEGAL PROCEEDINGS                                      |                                              
|SELECTED CONSOLIDATED FINANCIAL INFORMATION                                         |                                                        | 25                                           
|                                                                                    | THREE YEAR SELECTED CONSOLIDATED FINANCIAL INFORMATION |                                              
|                                                                                    | DIVIDENDS                                              |                                              
|MANAGEMENT DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS |                                                        | 26                                           
|MARKET FOR SECURITIES                                                               |                                                        | 26                                           
|                                                                                    | COMMON SHARES                                          |                                              
|                                                                                    | PREFERRED SECURITIES                                   |                                              
|MANAGEMENT OF NOVA CHEMICALS                                                        |                                                        | 26                                           
|                                                                                    | DIRECTORS                                              |                                              
|                                                                                    | EXECUTIVE OFFICERS                                     |                                              
|                                                                                    | BOARD OF DIRECTORS                                     |                                              
|                                                                                    | COMMITTEES OF THE BOARD OF DIRECTORS                   |                                              
|ADDITIONAL INFORMATION                                                              |                                                        | 30                                           

TRADEMARKS

|LOGO | ® is a registered trademark of NOVA Brands Ltd., authorized use/utilisation autorisée.
|---- | --------------------------------------------------------------------------------------

Advanced SCLAIRTECH and SCLAIRTECH are trademarks of NOVA
Chemicals.ARCEL® is a registered trademark of NOVA Chemicals Inc.
DYLARK® is a registered trademark of NOVA Chemicals Inc.
DYLITE® is a registered trademark of NOVA Chemicals Inc.
NAS® is a registered trademark of NOVA Chemicals Inc.
NOVACAT T is a trademark of NOVA Chemicals.
SCLAIR ASTute is a trademark of NOVA Chemicals.
STYROSUN® is a registered trademark of NOVA Chemicals Inc. in the United States and Mexico, and a registered trademark of NOVA Chemicals (International) S.A.
elsewhere.
ULTRA LOW is a trademark of NOVA Chemicals Inc.
ZYLAR® is a registered trademark of NOVA Chemicals (Canada) Ltd./NOVA Chimie (Canada) Ltée.; authorized use/utilisation autorisée.
ZYNTAR® is a registered trademark of NOVA Chemicals Inc.

Responsible
Care® is a registered trademark of the Canadian Chemical Producers' Association in Canada and is a registered service mark of the American Chemistry Council in the United
States.

INNOVENE®
is a registered trademark of BP p.l.c.
UNIPOL® is a registered trademark of The Dow Chemical Company.

2

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U.S. DOLLAR REPORTING

ALL AMOUNTS IN THIS ANNUAL INFORMATION FORM ARE EXPRESSED IN U.S. DOLLARS, EXCEPT AS SPECIFICALLY NOTED OTHERWISE.

FORWARD-LOOKING INFORMATION

The information in this Annual Information Form contains forward-looking statements with respect to NOVA Chemicals Corporation ("NOVA Chemicals"),
its subsidiaries and affiliated companies. By their nature, these forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those
contemplated by the forward-looking statements. These risks and uncertainties include: 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; 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; performance of Methanex Corporation; risks of a further prolonged economic downturn;
uncertainties associated with the North American, European and Asian economies; and other risks detailed from time to time in the publicly filed disclosure documents and securities commissions reports
of NOVA Chemicals and its subsidiaries or affiliated companies. Implementation of announced price increases depends on many factors, including feedstock costs, market conditions and the supply/demand
balance for each particular product. Successful price increases are typically phased in over several months, vary from grade to grade and can be reduced in magnitude during the
implementation period.

3

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THE CORPORATION

NOVA Chemicals' principal business is the production and marketing of petrochemicals. NOVA Chemicals operates two commodity chemical businesses:
olefins/polyolefins and styrenics. The olefins/polyolefins business produces ethylene, polyethylene and a variety of chemical and energy products (commonly known as co-products). The styrenics
business produces styrene monomer and styrenic polymers. NOVA Chemicals operates major olefins/polyolefins production facilities near Joffre, Alberta and Corunna, Ontario. It has major styrene plants
located near Bayport, Texas and Sarnia, Ontario and polystyrene manufacturing facilities at various sites in the United States, Canada, the United Kingdom, the Netherlands and France. NOVA Chemicals
also owns approximately 37% of Methanex Corporation ("Methanex").

Where
used in this Annual Information Form, "NOVA Chemicals" or "the Corporation" mean NOVA Chemicals Corporation alone or together with its subsidiaries and affiliates, depending on the
context in which such terms are used.

HISTORICAL DEVELOPMENT

NOVA Chemicals Corporation

A brief description of the historical development of the Corporation follows:

NOVA
Chemicals' predecessor, NOVA Corporation of Alberta, was incorporated in 1954 by Special Act of the Legislative Assembly of the Province of Alberta. On May 10, 1994, NOVA
Corporation of Alberta filed articles of arrangement under the Business Corporations Act of Alberta (the "Act") to complete a reorganization pursuant to which it became a wholly owned subsidiary of
NOVA Corporation ("NOVA"), changed its name to NOVA Gas Transmission Ltd. and its common shareholders became the common shareholders of NOVA. At the same time, NOVA also became the parent corporation
of NOVA Chemicals Ltd. and NOVA Gas International Ltd.

On
July 2, 1998, NOVA and TransCanada PipeLines Limited ("TransCanada") completed a merger of equals by way of a plan of arrangement (the "Arrangement") under the Act. Under the
terms of the Arrangement, shareholders of NOVA exchanged each NOVA common share for 0.52 of a TransCanada common share. As part of the Arrangement, TransCanada distributed to its common shareholders,
including all of the former common shareholders of NOVA, all of the common shares of NOVA on the basis of 0.2 of a NOVA common share for each TransCanada common share. At the time of the distribution
of NOVA common shares, the only material asset of NOVA was all of the common shares of NOVA Chemicals Ltd.

As
a result of the Arrangement, NOVA continued to conduct the commodity chemical businesses through NOVA Chemicals Ltd., and TransCanada began to conduct the energy services businesses
formerly carried on by NOVA, through NOVA's former subsidiaries, NOVA Gas Transmission Ltd. and NOVA Gas International Ltd. The disclosure in this document relates only to the commodity chemical
businesses currently conducted by NOVA Chemicals and formerly conducted by NOVA.

On
December 31, 1998, NOVA Chemicals Ltd. changed its name to NOVA Chemicals Corporation. Effective January 1, 1999, NOVA Chemicals Corporation amalgamated with NOVA
Corporation under the Act and the resulting corporation adopted the name NOVA Chemicals Corporation.

Development of the Commodity Chemical Businesses



4

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5

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RECENT DEVELOPMENTS



6

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SUBSIDIARIES OF NOVA CHEMICALS

The following list includes all material subsidiaries of NOVA Chemicals as at March 4, 2003 and indicates their respective jurisdictions of incorporation
and the percentage of voting securities of each beneficially owned or over which control or direction is exercised by NOVA Chemicals:

|Name                                                   |  | Jurisdiction of
Incorporation |  | Percentage of
Voting Securities held
Directly or Indirectly |  
|------------------------------------------------------ |  | ----------------------------- |  | ----------------------------------------------------------- | -
|NOVA Chemicals (Canada) Ltd./NOVA Chimie (Canada) Ltée |  | Canada                        |  | 100                                                         | %
|NOVA Chemicals Holdings Inc.                           |  | Delaware, U.S.A.              |  | 100                                                         | %
|NOVA Chemicals Inc.(1)                                 |  | Delaware, U.S.A.              |  | 100                                                         | %
|NOVA Chemicals (International) S.A.                    |  | Switzerland                   |  | 100                                                         | %
|Novacor Chemicals Holdings B.V.                        |  | the Netherlands               |  | 100                                                         | %
|Novacor Chemicals Investments B.V.                     |  | the Netherlands               |  | 100                                                         | %
|NOVA Investments (U.S.) Inc.                           |  | Delaware, U.S.A.              |  | 100                                                         | %
|NOVA Petrochemicals Ltd.                               |  | Alberta, Canada               |  | 100                                                         | %





7

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NOVA CHEMICALS' SUBSIDIARIES AND ASSOCIATED COMPANIES

Intercorporate Relationships

The following chart summarizes NOVA Chemicals' simplified corporate structure showing principal operating entities and jurisdictions of incorporation:

LOGO

Dotted lines signify an indirect holding.
Methanex ownership percentage is approximate.

8

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BUSINESS

General

NOVA Chemicals operates two commodity chemical businesses: olefins/polyolefins and styrenics. The olefins/polyolefins business produces ethylene, polyethylene and
co-products. The styrenics business produces styrene monomer and styrenic polymers. NOVA Chemicals operates major olefins/polyolefins production facilities near Joffre, Alberta and Corunna, Ontario.
It has major styrene plants located near Bayport, Texas and Sarnia, Ontario and polystyrene manufacturing facilities at various sites in the United States, Canada, the United Kingdom, the Netherlands
and France.

Ethylene
and styrene are basic petrochemicals used to manufacture a wide variety of polymers and other chemical products. NOVA Chemicals produces polyethylene and polystyrene, primarily
from its internal ethylene and styrene production. NOVA Chemicals also has an equity interest and long-term tolling arrangements to acquire styrene from Lyondell Chemical Company
("Lyondell") on the U.S. Gulf Coast, and styrene purchase arrangements with Shell in Europe and with other parties in North America and Europe. In addition, in August 2002, NOVA Chemicals entered into
a long-term styrene monomer supply agreement pursuant to which BASF supplies styrene monomer to NOVA Chemicals in Europe in exchange for the supply of styrene monomer in the United States to
BASF from NOVA Chemicals' existing production and supply facilities. Ethylene and styrene in excess of NOVA Chemicals' internal consumption is sold to third parties.

The
polyethylene NOVA Chemicals produces includes high-density polyethylene ("HDPE"), low-density polyethylene ("LDPE") and linear low-density polyethylene ("LLDPE"). In addition,
NOVA Chemicals develops and markets high value added polyethylene polymers such as its resins made using Advanced SCLAIRTECH technology. The styrenic polymers NOVA Chemicals produces
include solid polystyrene ("SPS"), expandable polystyrene ("EPS") and high performance styrenics ("HPS"). Polyethylene and styrenic polymers are used in a wide range of applications including rigid
and flexible packaging, containers, plastic bags, plastic pipe, electronic appliances, television consoles, housing and automotive components, housewares and other industrial and
consumer goods.

NOVA
Chemicals' 2002 capital expenditures were $71 million, which included $43 million in the olefins/polyolefins business and $28 million in the styrenics business.

NOVA
Chemicals also owns approximately 46.9 million shares or approximately 37% of Methanex, the world's largest producer and marketer of methanol.

Production Facilities

The following two pages show NOVA Chemicals' production facilities as at December 31, 2002 and the interrelationship between them and their
principal products.

9

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Product Flow Chart

GRAPHIC

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Facility Profile(1)

|                                                       |       |  |                                              |                                            |                         |                                | 2002 Rated Capacity(1)                      
|------------------------------------------------------ | ----- |  | -------------------------------------------- | ------------------------------------------ | ----------------------- | ------------------------------ | --------------------------------------------
|
|Olefins/polyolefins (Western Canada)                   |       |  |                                             
|                                                       | 1.    |  | Joffre, Alberta                              |                                            | Ethane/Propane          |                                | Ethylene (E1)                               
|                                                       |       |  |                                              | Ethane/Propane
Ethane                      |                         | Ethylene (E2)
Ethylene (E3)(2) | 1,800
1,550                                 
|                                                       |       |  |                                              |                                            |                         | Co-products(3)                 | 770                                         
|                                                       |       |  |                                              | Ethylene                                   |                         | LLDPE (PE1)                    | 1,310                                       
|                                                       |       |  |                                              |                                            |                         | LLDPE & HDPE (PE2)             | 850                                         
|Olefins/polyolefins (Eastern Canada)                   |       |  |                                             
|                                                       | 2.    |  | Corunna, Ontario                             |                                            | Crude oil, condensates, |                                | Ethylene                                    
|                                                       |       |  |                                              | ethane, butane,
propane, naphtha,
gas oils |                         | Propylene                      | 750-875                                     
|                                                       |       |  |                                              |                                            |                         | Co-products(5)(6)              | 3,250-3,750                                 
|                                                       |       |  |                                              |                                            |                         |                                |                                             
|                                                       | 3.    |  | St. Clair River plant site,
Corunna, Ontario |                                            | Ethylene                |                                | LLDPE
HDPE                                  
|                                                       |       |  |                                              |                                            |                         |                                |                                             
|                                                       | 4.    |  | Mooretown, St. Clair Township,
Ontario       |                                            | Ethylene                |                                | HDPE
LDPE                                   
|                                                       |       |  |                                              |                                            |                         |                                |                                             
|TOTAL ETHYLENE PRODUCTION CAPACITY (Design Production) | 6,550 |  | 2,971                                       
|TOTAL POLYETHYLENE PRODUCTION CAPACITY                 | 3,660 |  | 1,660                                       
|Styrene Monomer                                        |       |  |                                              |                                            |                         |                                |                                             
|                                                       | 5.    |  | Bayport, Texas                               |                                            | Benzene, ethylene       |                                | Styrene                                     
|                                                       | 6.    |  | Sarnia, Ontario                              |                                            | Benzene, ethylene       |                                | Styrene                                     
|                                                       | 7.    |  | Channelview, Texas(7)                        |                                            | Benzene, ethylene       |                                | Styrene                                     
|TOTAL STYRENE PRODUCTION CAPACITY                      | 2,600 |  | 1,181                                       
|Styrenic Polymers                                      |       |  |                                              |                                            |                         |                                |                                             
|                                                       | 8.    |  | Beaver Valley Site, Pennsylvania(8)          |                                            | Styrene                 |                                | EPS, HPS, DYLARK and other styrenic polymers
|                                                       | 9.    |  | Belpre, Ohio                                 |                                            | Styrene                 |                                | Polystyrene                                 
|                                                       | 10.   |  | Berre, France                                |                                            | Styrene                 |                                | EPS                                         
|                                                       | 11.   |  | Breda, the Netherlands(9)                    |                                            | Styrene                 |                                | Polystyrene, EPS and HPS                    
|                                                       | 12.   |  | Carrington, United Kingdom(10)               |                                            | Styrene                 |                                | Polystyrene and EPS                         
|                                                       | 13.   |  | Chesapeake, Virginia(9)                      |                                            | Styrene                 |                                | Polystyrene and HPS polymers                
|                                                       | 14.   |  | Decatur, Alabama                             |                                            | Styrene                 |                                | Polystyrene                                 
|                                                       | 15.   |  | Montréal, Québec                             |                                            | Styrene                 |                                | Polystyrene                                 
|                                                       | 16.   |  | Painesville, Ohio                            |                                            | Styrene                 |                                | EPS                                         
|                                                       | 17.   |  | Ribécourt, France                            |                                            | Styrene                 |                                | EPS                                         
|                                                       | 18.   |  | Springfield, Massachusetts                   |                                            | Styrene                 |                                | Polystyrene and HPS polymers                
|TOTAL STYRENIC POLYMERS PRODUCTION CAPACITY            | 3,460 |  | 1,569                                       

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11

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Olefins/Polyolefins

The olefins/polyolefins business manufactures ethylene and polyethylene. As part of NOVA Chemicals' ethylene production process, and in the preparation of
feedstocks for this process, a number of chemical and energy co-products are also manufactured, including propylene, crude C4 hydrocarbons, C5 dienes, aromatics,
C9 resin oils, DCPD, hydrogen, fuels and carbon dioxide. Olefins/polyolefins revenue was $1.9 billion in 2002, which represented approximately 60% of NOVA Chemicals' total
2002 revenue (before intersegment eliminations). Olefins/polyolefins revenue for 2001 was $2.0 billion, which represented approximately 61% of NOVA Chemicals' total 2001 revenue (before
intersegment eliminations).



NOVA Chemicals has an annual production capacity of approximately 6.6 billion pounds of ethylene, a commodity chemical produced from natural gas liquids
and crude oil derived feedstocks. Ethylene is used in the manufacture of polyethylene, styrene, polystyrene and polyvinyl chloride, as well as chemical intermediates such as ethylene oxide, ethylene
glycol, ethylene dichloride and vinyl acetate. NOVA Chemicals produced approximately 5.4 billion pounds of ethylene in 2002 at its facilities in Joffre, Alberta and Corunna, Ontario.



NOVA Chemicals' has three ethylene production facilities at Joffre, E1, E2 and E3. These three plants have an annual production capacity of 1.6, 1.8 and
2.8 billion pounds of ethylene respectively, for a total combined capacity of 6.2 billion pounds. Production capacity at E3, which started up in August 2000, is shared by
NOVA Chemicals and Dow at a 55:45 ratio, bringing NOVA Chemicals' proprietary share of Joffre ethylene production capacity to 5.0 billion pounds. The combined co-product
production capacity of E1, E2 and E3 is approximately 770 million pounds ("mmlbs").

Ethylene
produced at E1 and E2 was originally sold under cost-of-service sales arrangements. The cost-of-service sales contract for E1 expired on December 31, 1998 and was
replaced by more market facing
contracts. These contracts included a tolling arrangement using part of the production capacity of E1 as well as sales contracts which use a pricing methodology which consists of a cost recovery
mechanism combined with a market-index component. The cost recovery mechanism allows NOVA Chemicals to recover almost all of its costs of production associated with the ethylene from E1 which
is sold to third parties. The market-index component allows NOVA Chemicals to earn a margin on the third party sales which fluctuates with market prices. Approximately 55% (0.87 billion
pounds) of the ethylene capacity at E1 is contracted to third parties with substantially all of the remaining 45% used to support NOVA Chemicals' polyethylene production.

Ethylene
produced at E2 has been sold under 20 year cost-of-service sales contracts with approximately 58% of production, net of resales, being sold to third parties. These
cost-of-service contracts are based on a pricing formula which allows NOVA Chemicals to recover, from third parties, a proportionate share of capital and operating costs (including feedstock,
fuel and depreciation) and financing costs (including debt amortization) plus a 20% after tax return on equity based on a deemed debt to equity ratio. Cost-of-service arrangements remain in place for
E2 until June 30, 2004. NOVA Chemicals is currently negotiating contractual arrangements with potential purchasers of ethylene from E2 for the post June 2004 period. Ethylene from
E2 which is not sold to third parties will be used internally by NOVA Chemicals.

NOVA Chemicals'
share of ethylene produced at E3 supports polyethylene production at PE2, which uses Advanced SCLAIRTECH technology and supplies ethylene to third parties under
long term sales agreements. Since 2000, NOVA Chemicals has contracts in place to market approximately 1.2 billion pounds per year of ethylene from E3 to third parties. The third party
contractual arrangements at E3 are similar to the market facing arrangements at E1.

All
of the ethylene plants at Joffre use ethane as primary feedstock. Ethane is supplied under medium to long-term ethane supply agreements with owners of natural gas liquids extraction
and fractionation plants located in Alberta. NOVA Chemicals has contracted for a supply of ethane with remaining terms of between five and 17 years. NOVA Chemicals balances its ethane
requirements with the supply and demand for ethane by using inventory and short-term spot purchases and sales. Further, in 2003, NOVA Chemicals will enhance its

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feedstock availability through the development of new sources of ethane. The first is from the Joffre ethane extraction facility, adjacent to the Joffre site, which is designed to extract natural gas
liquids from the fuel gas used at the Joffre site as well as from other sources. The second additional supply is expected to be available from technological modifications to existing extraction plants
which enable the extraction of additional volumes of ethane from the same volume of natural gas ("deep cuts").

In
addition to ethane, NOVA Chemicals now has the flexibility to use propane for a portion of the feedstock requirements of its Joffre ethylene plants. Propane cracking trials were
successfully conducted on Joffre's E1 plant and NOVA Chemicals has since installed propane injection facilities in all three ethylene plants. This will enable the Joffre site to optimize
cost and supply of feedstock whenever favourable market conditions exist.

NOVA Chemicals
will continue to look at opportunities to expand feedstock flexibility and supply in an effort to enhance operating flexibility and longer term
growth opportunities.

The
Alliance pipeline continues to transport natural gas containing natural gas liquids, including ethane, out of Alberta. This has reduced the potential supply of ethane in Alberta and
may limit major growth of petrochemicals in the Province.

As
part of the ethylene production process at Joffre, approximately 770 mmlbs of co-products are also manufactured. Co-products include hydrogen, propylene, crude
C4 hydrocarbons and C5 streams. NOVA Chemicals sells up to 85,000 metric tonnes of hydrogen annually to an Alberta based customer under a long-term
contract. Co-products, other than hydrogen, are shipped by railcar from Joffre to markets in Alberta, Ontario and the U.S. Gulf Coast.

NOVA
Chemicals owns interests in ethane and ethylene pipelines in Alberta, and ethane and ethylene storage facilities in Alberta and Ontario. NOVA Chemicals also owned a 20% interest in
the Cochin pipeline, which principally transports propane, ethane and ethylene from Alberta to markets in Ontario and the United States. In January 2002, NOVA Chemicals sold its 20%
interest in the Cochin pipeline for $64 million. The Cochin pipeline is an open access/common carrier pipeline. As such, NOVA Chemicals continues to have access to this pipeline to ship
products to eastern Canada. NOVA Chemicals manages part of its ethylene supply balance by transferring ethylene from Joffre to Corunna, Ontario via the Cochin pipeline.



In June 2000, ATCO Power Canada Ltd. ("ATCO"), EPCOR Power Development Corporation ("EPCOR") and NOVA Chemicals officially opened a natural-gas-fired
cogeneration power plant with a nominal installed annual peak capacity of 450 megawatts at NOVA Chemicals' production site at Joffre, Alberta. The power plant supplies the electrical and steam
needs for the entire Joffre petrochemical site, with excess power sold to Alberta's provincial power grid. The three companies jointly own the cogeneration facility, with ATCO serving as the facility
operator. The respective equity interests of the parties are 40% for each of ATCO and EPCOR and 20% for NOVA Chemicals.



The Corunna olefins facility, located near Sarnia, Ontario, has an annual production capacity of approximately 1.6 billion pounds of ethylene. The Corunna
olefins facility has the flexibility to process a wide range of hydrocarbon feedstocks including crude oil, condensates, ethane, propane, butane, naphtha and other gas oils to produce primary
petrochemicals for use by NOVA Chemicals' downstream operations and for sale to third parties. Virtually all ethylene production from the Corunna olefins facility is used internally by
NOVA Chemicals to produce polyethylene and styrene.

The
blend of feedstocks processed in the Corunna olefins facility determine the range of co-products obtained, with heavier feedstocks such as naphtha producing more co-products.
Co-products include benzene (used by NOVA Chemicals in the production of styrene), propylene, crude C4 hydrocarbons, C5 dienes, DCPD, aromatics,
C9 resin oils, hydrogen and fuels. Total volumes of co-products are in the range of 4.0-4.6 billion pounds per year.

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Feedstocks
for the Corunna olefins facility are obtained from a wide variety of sources. A substantial proportion of crude oil, the main feedstock, is sourced from western Canadian and
United States domestic producers and delivered via the Enbridge Inc. ("Enbridge") pipeline system. Condensate, a lighter feedstock than crude oil, yields a higher proportion of olefins
feedstocks versus fuel oil products. Crude oil and condensate feedstock are also sourced from outside North America with delivery via pipeline from Portland, Maine connecting to Enbridge's reversed
line No. 9 in Montreal, Quebec, providing Corunna with purchasing flexibility and less reliance on western Canadian crude and condensates. Ethane, propane, butane and naphtha are sourced from
western Canadian and local producers.



NOVA Chemicals has an annual production capacity, as at December 31, 2002, of approximately 3.7 billion pounds of polyethylene. Polyethylene is a
polymer produced from ethylene and is used in a wide variety of applications such as packaging, plastic pipe, blow-molded drums and plastic containers. NOVA Chemicals produced approximately
2.8 billion pounds of polyethylene in 2002. NOVA Chemicals produces polyethylene from ethylene supplied from its Joffre, Alberta and Corunna, Ontario facilities at three locations in Canada,
Joffre, Corunna and Mooretown, St. Clair Township, Ontario.

NOVA
Chemicals' first polyethylene plant located at Joffre, PE1, has an annual production capacity of approximately 1.3 billion pounds and produces LLDPE from ethylene supplied
from E1, E2 and E3. The plant utilizes UNIPOL® technology licensed from Dow. NOVA Chemicals pays no royalties for the use of this technology and independently sustains and
develops this technology as used in the NOVA Chemicals' facilities.

NOVA
Chemicals' polyethylene plant located near Mooretown has an annual production capacity of approximately 830 mmlbs and produces both LDPE and HDPE. Ethylene feedstock
is supplied from the Corunna olefins facility and from Joffre via the Cochin pipeline. This plant also uses the UNIPOL technology licensed from Dow for production of
HDPE resins and Dow's high pressure process for the production of LDPE resins. NOVA Chemicals pays no royalties for the use of this technology and independently sustains and develops
this technology as used in the NOVA Chemicals' facilities.

In
June 1994, NOVA Chemicals purchased DuPont's Canadian polyethylene business. Assets of the business included a polyethylene plant located at the St. Clair River plant site in
Corunna, the proprietary SCLAIRTECH technology and a global SCLAIRTECH technology licensing business. This plant has an
annual production capacity of approximately 670 mmlbs and produces both LLDPE and HDPE. Ethylene feedstock is supplied from the Corunna olefins facility and from Joffre via the
Cochin pipeline.

NOVA
Chemicals is committed to further developing the SCLAIRTECH technology and in December 1996 announced that it had developed Advanced SCLAIRTECH technology. Advanced SCLAIRTECH
solution-phase technology yields high performance polyethylene resins with several advantages over traditional polyethylene resins. A second polyethylene plant at Joffre, PE2, began commercial
production in July 2001 using Advanced SCLAIRTECH technology. The plant has a design capacity of 850 mmlbs per year. In 2001, a total of 188 mmlbs of polyethylene produced
at PE2 was sold from a product slate of 6 grades. In 2002, 410 mmlbs of polyethylene were sold and the number of grades increased to 16. These products compete with octene and
metallocene resins which are known for their toughness and processability. The PE2 plant is now running both proprietary Ziegler-Natta catalyst and single site catalysts. The final product
slate is expected to contain about 30 commercial grades.

In
May 2002, NOVA Chemicals launched its first octene-based LLDPE resins for film applications, made at PE2 at Joffre using Advanced SCLAIRTECH solution-phase technology.



In the third quarter of 2001, a linear alpha olefins ("LAO") plant was commissioned on NOVA Chemicals' Joffre, Alberta site by a predecessor of
BP Canada Chemical Company. NOVA Chemicals supplies ethylene to the LAO plant and receives linear alpha olefins for use by NOVA Chemicals' polyethylene facilities at a competitive cost,
contributing to the cost-efficiencies of the large-scale Joffre site.

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In September 2000, TransAlta Energy Corporation ("TransAlta") announced it had signed an agreement to build, own and operate a 440 megawatt cogeneration
plant near Sarnia, Ontario and acquire existing utility plants representing 210 megawatts from NOVA Chemicals, Dow and Bayer Inc. ("Bayer"). In October 2002, NOVA Chemicals, Bayer
and Dow completed the sale of their existing utility plants near Sarnia to TransAlta and began to purchase steam and power from TransAlta pursuant to the agreements made in September 2000. Full
commercial operation of TransAlta's new cogeneration plant is expected in the first quarter of 2003.

Styrenics

In December 1998, NOVA Chemicals expanded its styrenics business to include an additional 1.25 billion pounds of styrene capacity and an additional
1.7 billion pounds of polystyrene manufacturing capacity at plants in North America and Europe purchased from Huntsman. With the acquisition of Shell's European polystyrene assets in January
2000, NOVA Chemicals has 3.5 billion pounds of polystyrene capacity world wide. Styrenics revenue was $1.3 billion in 2002, which represented approximately 40% of
NOVA Chemicals' total 2002 revenue (before intersegment eliminations). Styrenics revenue for 2001 was $1.3 billion, which represented approximately 39% of NOVA Chemicals' total
2001 revenue (before intersegment eliminations).

With
two wholly owned styrene plants, and an equity position in Lyondell's PO/SM facility at Channelview, Texas, NOVA Chemicals has the capacity to produce 2.6 billion
pounds of styrene annually. Most of this styrene is used internally.

NOVA
Chemicals produces SPS (which comes in various forms including crystal and high impact), EPS (foamable resin beads) and HPS (SPS and styrene co-polymers and blends incorporating
additives such as color, flame retardants and UV-resistant stabilizers). Styrenic polymers are used in the manufacture of a wide range of consumer and industrial products including
electronics and food packaging, television consoles, computer peripherals, insulation foam for construction, medical applications and housewares.



NOVA Chemicals has a total rated production capacity of 2.6 billion pounds of styrene per year at sites in Sarnia, Ontario; Bayport, Texas; and
Channelview, Texas (equity position in one of the two facilities located at the Channelview site). The Sarnia facility has a rated capacity of 950 mmlbs per year of styrene production. Bayport
has a rated capacity of 1,250 mmlbs and Channelview provides 400 mmlbs of annual capacity. In addition, as part of the acquisition of ARCO's plastics business in 1996, NOVA Chemicals
entered into a tolling agreement with Lyondell (as successor to ARCO) for approximately 400 million additional pounds per year of styrene monomer
from the Channelview plant. The balance of NOVA Chemicals' styrene requirements are obtained through long-term contracts.

Styrene
is produced from benzene and ethylene. NOVA Chemicals supplies a portion of its internal requirements for these feedstocks and enters into other arrangements with third parties
for the remainder. To optimize the logistics costs of supplying styrene to its manufacturing facilities and to balance internal requirements between North America and Europe, NOVA Chemicals enters
into transatlantic product swaps with other producers. Additionally, NOVA Chemicals participates in the merchant market as a seller of styrene monomer to third parties.

All
of the ethylene and a significant portion of the benzene requirements for the Sarnia styrene facility are supplied from NOVA Chemicals' Corunna, Ontario olefins facility. The balance
of the benzene feedstock is obtained from nearby petroleum refineries. Except for some ethylene obtained through exchange, the balance of ethylene and all benzene for the Bayport and Channelview
facilities are obtained from external sources.

In
August 2002, NOVA Chemicals and BASF signed a long-term styrene monomer supply contract. The agreement commits NOVA Chemicals to supply styrene monomer to BASF's downstream
styrenics business in North America. In addition, the contract commits BASF to supply styrene monomer to NOVA Chemicals' European downstream styrenics business. The agreement gives both
producers a low-cost styrene monomer position for their respective SPS and EPS businesses. NOVA Chemicals plans to meet its supply commitment to BASF from existing facilities in North
America, including a planned 450 mmlb debottlenecking of its Bayport

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styrene plant. NOVA Chemicals' Bayport capacity will increase to 1.7 billion pounds in 2004 and total styrene monomer capacity will increase by about 17% to 3.05 billion pounds
per year.



NOVA Chemicals produces EPS at its Beaver Valley site at Monaca, Pennsylvania and at its Painesville, Ohio facility. Their total rated production capacity of
370 mmlbs ranks NOVA Chemicals as the largest EPS producer in North America. EPS resins are used in applications such as foam cups, insulation board and foam packaging. The EPS cup grade is
sold under the trademark DYLITE®. The Beaver Valley site also produces ARCEL moldable foam which contains polystyrene and polyethylene. This expandable bead is sold into the
protective packaging market. In 2001, ULTRA LOWEPS was introduced. This technology produces EPS with 50% less pentane than standard grades and 25% less than other low pentane EPS grades
without a sacrifice in product properties.

In
May 2001, NOVA Chemicals converted a portion of its existing EPS capacity to premium DYLITE cup and container bead production at its Beaver Valley site. This project has increased
Beaver Valley's DYLITE cup and container bead capacity by almost 60%. Total styrenic polymer production capacity at Beaver Valley remains at 405 mmlbs.



NOVA Chemicals produces HPS at its Springfield, Massachusetts and Chesapeake, Virginia facilities. Both facilities also produce SPS. Chesapeake is the location of
the research and technology center for HPS. Compounding assets at the Chesapeake site allow NOVA Chemicals to produce custom colour, as well as flame retardant and UV-resistant products. In addition,
NOVA Chemicals contracts with two compounders to manufacture HPS polymers. Current sales in the HPS business are in ignition resistant products used primarily for television cabinets and marketed
under the trademark ZYNTAR®, NAS® and ZYLAR® (high clarity styrene acrylic co-polymers and blends or alloys thereof, respectively) and enhanced
colouring UV SPS make up the balance of the HPS products.



NOVA Chemicals' SPS business has a total of five manufacturing facilities in North America (Belpre, Ohio; Chesapeake, Virginia; Decatur, Alabama;
Montréal, Québec; and Springfield, Massachusetts). Total styrenic polymer production capacity for North America is 1.8 billion pounds annually, consisting of
crystal polystyrene, impact polystyrene, HPS and DYLARK. In June 2001, NOVA Chemicals idled, and continues to idle, 100 mmlbs per year of SPS capacity at its Belpre, Ohio site.
Additionally, in September 2002, the SPS suspension reactors at Chesapeake, Virginia were shut down to reduce costs. These reactors had a production capacity of 100 mmlbs per year.

Crystal
polystyrene end-use applications include CD jewel boxes, food packaging, one-time-use foodservice ware (cups/plates/bowls/utensils), medical applications, fast-food/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.



The Beaver Valley site at Monaca, Pennsylvania also produces DYLARK which is a modified styrenic based polymer that provides ease of processing, performance at
elevated temperatures and foam adhesion for use in soft instrument panels in the global automotive industry.



The European styrenics business has four manufacturing sites. With the Huntsman acquisition, NOVA Chemicals acquired plants at Carrington, United Kingdom
and Ribécourt, France. With the Shell acquisition, NOVA Chemicals doubled its styrenic polymer production capacity in Europe with the acquisition of a second plant at Carrington and
plants at Berre, France and Breda, the Netherlands. The Shell acquisition

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also included a research and technology center located in Breda. Total rated styrenic polymer production capacity in Europe is 1.3 billion pounds annually. NOVA Chemicals is the third
largest producer of styrenic polymers in Europe.

NOVA
Chemicals has the capability to produce EPS at four of its European sites, with an aggregate capacity of 695 mmlbs, making it the largest producer of EPS in Europe.

In
October 2002, the EPS plant at Carrington was idled and will continue to be idled for an indefinite period. The idling reduces costs and reduces NOVA Chemicals' EPS production
capacity by 165 mmlbs per year. NOVA Chemicals' existing European EPS customers are being supplied from NOVA Chemicals' other European production facilities. The SPS plant
operations on the same site was not affected by this decision.

NOVA
Chemicals produces SPS at two of its European sites, Breda and Carrington, with an aggregate capacity of 610 mmlbs per year. NOVA Chemicals is the sixth largest producer of
SPS in Europe. In September 2002, two of the three existing SPS suspension reactors at Breda were shut down in order to reduce costs. The reactors had a product capacity of 55 mmlbs per year.
The Breda site also produces HPS.

NOVA
Chemicals does not produce any of its own styrene in Europe. It purchases styrene from third parties and has entered into transatlantic product swaps of NOVA Chemicals' produced
styrene to satisfy its styrene requirements. NOVA Chemicals has entered into a medium-term styrene purchase agreement with Shell, which provides feedstock for the former Shell plants.

Fribourg,
Switzerland is the commercial headquarters for the European styrenics business, international polyethylene sales and technology licensing. The Fribourg location houses
approximately 60 employees. The Breda technology center houses approximately 25 employees and centralizes all research, technology and product support activities for the European region.
A shared services center in Manchester, United Kingdom provides support functions such as finance, information technology, the Responsible Care® program, supply chain and human resources
and is staffed by approximately 30 employees.

Methanex  Equity Investment

In January 1994, NOVA Chemicals completed a series of transactions whereby it exchanged its methanol facilities for common shares of Methanex and purchased
additional Methanex common shares and common share installment receipts. As a result of these transactions, NOVA Chemicals became the largest shareholder in Methanex owning approximately 24% of its
common shares. During 2001, Methanex completed a substantial issuer bid for 18% of its outstanding common shares and subsequently commenced a normal course issuer bid for not more than 10% of the
"public float" of its common shares. NOVA Chemicals did not tender any of its common shares. As at December 31, 2002 NOVA Chemicals' holding in Methanex was 37.4%. In 2002, NOVA
Chemicals' interest in Methanex yielded earnings of $5 million (after-tax), compared with earnings of $11 million (after tax) for 2001. The decline was primarily due to a
write-off of Methanex's Fortier, Louisiana facility. This facility has been mothballed since 1999. NOVA Chemicals' share of this write-off is $27 million (after tax) based on
its 37.4% ownership. In July 2002, Methanex announced the commencement of a regular quarterly dividend to shareholders of $0.05 per share. The first quarterly dividend was paid
September 30, 2002 which resulted in NOVA Chemicals receiving $2.35 million. A second dividend of $2.35 million was paid on December 31, 2002. In
January 2003 Methanex announced a special dividend of $0.25 per share, payable February 14, 2003. NOVA Chemicals will receive approximately $12 million in the first
quarter of 2003 as a result of the special dividend.

Methanex
is the world's largest producer and marketer of methanol, which is used in the manufacture of formaldehyde, methyl tertiary butyl ether and acetic acid. Methanex produces
methanol at facilities located in North America, New Zealand and Chile.

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DISTRIBUTION OF PRODUCTS

NOVA Chemicals' products are marketed primarily through its sales force, with support from established distributors and traders. When products produced in Canada
are sold into the United States, NOVA Chemicals sells such products to its wholly owned subsidiary, NOVA Chemicals Inc., for resale through distribution arrangements. Distribution agreements
among NOVA Chemicals' affiliates provide for arm's length commissions.

European
and Asian sales are made by NOVA Chemicals' subsidiary, NOVA Chemicals (International) S.A., either directly or through distribution arrangements.

No
significant portion of NOVA Chemicals' 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.

Geographic Distribution of Revenue by Segment

The following table summarizes for the years ended December 31, 2002, 2001 and 2000, the geographic segments in which NOVA Chemicals sells its products and
the percentage of sales in such segment:

|                  |  | Percentage of Sales,
Year Ended December 31 |  
|----------------- |  | ------------------------------------------- | -
|
|
|Canada            |  | 35                                          | %
|United States     |  | 46                                          | %
|Europe and Others |  | 19                                          | %

LOGISTICS

NOVA Chemicals leases approximately 6,000 railcars from various companies for use in transportation and delivery of its polyethylene and polystyrene
products to customers in North America. NOVA Chemicals also owns approximately 350 railcars. Trucks are used for distributing products sold in bags and boxes and smaller loads of bulk
products. Transport ships are used to transport bulk product, mostly to Asia. NOVA Chemicals does not own or lease trucks or ships, but does pay transportation fees under short-term arrangements.

NOVA
Chemicals' feedstocks and co-products are produced in liquid or gaseous form, and are transported primarily by pipeline, but also in significant quantity by barge, truck and in rail
tank cars. NOVA Chemicals leases approximately 1,400 rail tank cars from various companies in order to transport feedstocks, co-products and styrene monomer.

COMPETITION

NOVA Chemicals competes with other commodity chemical producers on the basis of price, deliverability service, product quality and performance. Among NOVA
Chemicals' competitors are some of the world's largest 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 and low cost feedstocks.

Prices
for NOVA Chemicals' petrochemical and polymer products are determined by market factors like supply/demand balances and feedstock costs that are beyond NOVA Chemicals' control.
NOVA Chemicals generally sells these products at prevailing market prices but, on occasion, negotiates the current market price. One exception to product sales being made at prevailing market
prices is the sale of ethylene produced at E2.

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PATENTS, LICENSES AND TRADEMARKS

NOVA Chemicals owns directly, or licenses from affiliates, a large number of patents in Canada, the United States and other countries. NOVA Chemicals also owns,
or licenses through a wholly owned subsidiary, a number of trademarks which are used to identify various petrochemical products. While these patents and trademarks constitute valuable assets, NOVA
Chemicals does not regard any single patent or trademark as being material to its operations as a whole.

During
2002, 50 patent applications were filed in the name of NOVA Chemicals or its subsidiaries world wide. These include divisional and continuation patent applications as well
as national and regional patent applications (which may result in more than one issued patent). Forty-two of the applications were in the olefins/polyolefins field and eight were in the styrenics
field. World wide, during 2002, 33 patents were issued to NOVA Chemicals or its subsidiaries, 26 in the olefins/polyolefins field and seven in the styrenics field.

TECHNOLOGY

While a number of NOVA Chemicals' technologies are licensed from third parties, and are therefore subject to certain restraints concerning fields of use, NOVA
Chemicals actively maintains and supports all of its technologies to maintain its competitive position.

Olefins/Polyolefins

In November 2000, NOVA Chemicals announced the successful transition of its Advanced SCLAIRTECH technology Ziegler Natta (Z-N) catalyst to its
gas-phase plant, PE1, in Joffre, Alberta. The new drop-in catalyst NOVACAT T provides enhanced throughput, product range and properties when compared with conventional
Z-N catalysts in commercial gas-phase polyethylene production facilities.

Advanced
SCLAIRTECH technology yields high performance polyethylene resins with several advantages over traditional polyethylene resins. NOVA Chemicals' PE2 plant at Joffre was designed
to use Advanced SCLAIRTECH technology. PE2 began commercial production in July 2001 using Z-N catalysts adapted for use with the Advanced SCLAIRTECH technology platform. At the end of
2002, NOVA Chemicals was using Advanced SCLAIRTECH technology to produce 16 grades of resins for commercial sale.

In
December 2001, NOVA Chemicals began trial polymerizations using a single site catalyst with the Advanced SCLAIRTECH technology platform at Joffre. This catalyst combines the best
qualities of traditional Z-N catalysts and single site catalysts and creates polyethylene having significantly enhanced polymer properties. This represents a significant demonstration of the
commercial applicability of single site catalysts on the Advanced SCLAIRTECH technology platform. During 2002, additional commercial trials of NOVA Chemicals' single site technology were
successfully completed and extensive product performance trials were completed with selected development partners. The results of the trials met or exceeded expectations, and indicated that the
product performance was highly competitive to existing commercial benchmarks. On this basis, in 2003 NOVA Chemicals will proceed with commercial production of polyethylene using a single site
catalyst with the Advanced SCLAIRTECH technology platform at PE2.

In
April 2002, NOVA Chemicals announced the commercial introduction of a new group of premium octene copolymer polyethylene resins for film applications, called SCLAIR
ASTute FP120. These new resins are specifically for use in premium film applications, including food and specialty packaging, laminations and co-extrusions and heavy-duty shipping
sacks. The grades also meet U.S. Food & Drug Administration requirements for food contact.

In
February 2001, NOVA Chemicals and BP announced an agreement to jointly develop and commercialize advanced Z-N catalysts including NOVACAT T for gas-phase
polyethylene processes, including BP's INNOVENE® gas-phase process. During 2002, further enhancements to the NOVA Chemicals' NOVACAT T catalyst have been
commercially demonstrated, focusing on reactor rate improvements and extension of the product slate. In particular, NOVA Chemicals has commercialized new hexene resins for use in applications
demanding high puncture resistance, as well as growing the volume of LLDPE butene copolymers manufactured at the Joffre plant.

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In
July 2002, NOVA Chemicals and BP entered into an agreement under which NOVA Chemicals granted BP the rights to use and sub-license its proprietary single-site catalyst
technology. In turn, BP licensed its metallocene catalyst technology portfolio to NOVA Chemicals for use in polyethylene manufacturing. By working together, the companies expect to help
accelerate new technology advances that produce gas-phase polyethylene resins delivering both superior performance and value to customers. NOVA Chemicals and BP will
cooperate in both the sale of catalysts and the licensing of the combined portfolio of metallocene and single site catalysts.

NOVA
Chemicals' other polyethylene technologies include UNIPOL gas-phase polymerization technology. NOVA Chemicals independently sustains and develops this technology
as used in NOVA Chemicals' facilities. During 2002, nine new polyethylene grades were introduced at NOVA Chemicals' gas-phase plants. Six of these were LLDPE and three were HDPE
grades manufactured at the Moore, Ontario plant. These developments are one component of NOVA Chemicals' product development efforts across the full polyethylene asset base.

In
April 2002, NOVA Chemicals and Kubota Corporation ("Kubota") reached an agreement under which NOVA Chemicals licensed its ANK400 anti-coking technology to Kubota. Kubota will
manufacture and globally market the product to ethylene facilities for gas feedstock cracking applications. ANK400 is a new anti-coking furnace tube product that increases on-stream time for ethylene
furnaces. This new technology achieves an inner surface chemistry with a demonstrated ability to significantly reduce catalytic coking.

Styrenics

NOVA Chemicals also owns or has rights to a significant portfolio of styrenics technology, both in the fields of production and styrenics applications. Prior to
the Huntsman acquisition, NOVA Chemicals licensed technology from a number of other companies and developed its own technology for the polymerization of styrenic polymers. As part of the Huntsman and
Shell acquisitions, NOVA Chemicals acquired additional access to a broad range of styrenics technology and an experienced workforce with insight into the current and potential application of this
technology. The Shell workforce transferred to NOVA Chemicals is comprised of highly skilled researchers and technicians. With the Shell acquisition, NOVA Chemicals acquired substantive
additional product and process technology related to EPS manufacture as well as knowledge in polystyrene and HPS. The technologies acquired include the one-step process Shell technology for EPS
and polystyrene process technology relating to several HPS products.

In
May 2002, NOVA Chemicals announced that its STYROSUN® weather-resistant polystyrene was available in North America. STYROSUN is an ethylene propylene diene monomer
based high-impact polystyrene. In addition to its strength, it exhibits higher resistance to UV rays and oxidative deterioration than traditional styrene polymers. STYROSUN polystyrene is
available in extrusion and injection molding grades and is produced at NOVA Chemicals' manufacturing facility in Breda, the Netherlands. STYROSUN polystyrene is currently used in
numerous outdoor applications including telecommunications equipment, transportation and recreational vehicles, household appliances, placards, billboards and building and construction elements. In
addition, applications for UV-resistant STYROSUN polystyrene continue to grow in the wood replacement market for such applications as outdoor decking, porch railings and decorative molding.

In
June 2002, NOVA Chemicals announced new patent coverage on volatile organic compound free EPS technology. This technology has the potential to reduce the pentane content in EPS
to zero, using water instead of pentane. This would reduce the transportation hazards and air quality concerns associated with pentane. In addition, NOVA Chemicals will be increasing the
capacity of high margin products at its Beaver Valley site at Monaca, Pennsylvania. NOVA Chemicals will double the manufacturing capacity for ARCEL foam resin and increase capacity for
DYLARK engineering resins by 10 mmlbs per year. The total capital cost for the ARCEL and DYLARK resin expansions will be modest.

In
October 2002, NOVA Chemicals announced the commercialization of a new ZYLAR, a clear alloy of an acrylic co-polymer. The new ZYLAR 390 resin offers a significantly improved
balance of clarity and toughness and also offers enhanced chemical resistance. Potential applications for the impact-modified resin include medical devices, appliance parts, personal care products and
consumer electronics. ZYLAR 390 resin will initially be available in North America and Europe. One of the first applications for the new ZYLAR 390 resin is a surgical blood
filter canister.

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In
January 2003, NOVA Chemicals purchased Deltech Polymers Corporation's ("Deltech") polystyrene business at nominal cost. The purchase included Deltech's customer base and associated
technology for crystal polystyrene and methyl methacrylate-styrene copolymers and inventory of finished products. NOVA Chemicals did not acquire any production assets from Deltech
and has no environmental or employment liability with respect to the Deltech purchase.

In
January 2003, NOVA Chemicals announced the commercialization of a new advanced styrenic polymer. Designated FX550, the polystyrene resin offers high-impact and high-gloss
properties for applications such as small appliances and housewares.

RESEARCH AND DEVELOPMENT

NOVA Chemicals spent $32 million, $33 million and $31 million in the years 2002, 2001 and 2000 respectively, on research and development
activities. NOVA Chemicals also spent $7 million in 2002 and 2001 and $8 million in 2000 on technical support and activities relating to improvements of existing products.
NOVA Chemicals' operating budget for research and development for the year 2003 is $36 million and $9 million for technical support.

Olefins/Polyolefins

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

Currently,
the olefins/polyolefins business is supported by 173 technical and support staff working directly on the development of new technologies.

Styrenics

Since completion of the Shell acquisition in January 2000, NOVA Chemicals' styrenics business has operated three technical centers. In the United States,
technical centers are situated at the Beaver Valley site in Monaca, Pennsylvania and at Chesapeake, Virginia. In Europe, NOVA Chemicals has a technical center at Breda, the Netherlands. The styrenics
business also operates three pilot plants, one in the United States (the Beaver Valley site) and two in Europe (Ribécourt, France and Breda). These pilot plants are capable of
simulating mass and suspension polymerization, as well as synthesis of EPS and the compounding of specialty blends and alloys. The styrenics business also provides computer-aided design engineering
resources in
Southfield, Michigan and Chesapeake to support DYLARK resin automotive applications and HPS customers, respectively. Some longer-term styrenics research programs are also carried out from NOVA
Chemicals' research center in Calgary, Alberta.

The
styrenics business is supported by 123 technical and support staff working directly on the development of new technologies.

In
January 2002, NOVA Chemicals confirmed its commitment to polystyrene applications research with the official opening of a $5 million European styrenics technology center
in Breda. The Breda technology center provides NOVA Chemicals with the ability to develop new SPS, EPS and HPS styrenic polymers, support polystyrene converter customers in developing new applications
for EPS, SPS and HPS polymers and provides increased technical support to NOVA Chemicals' polystyrene manufacturing plants around the world.

GOVERNMENT REGULATION AND ENVIRONMENTAL PROTECTION

Like other companies in its industry, NOVA Chemicals is subject to extensive environmental laws and regulations at all levels of government concerning the
manufacture, processing and importation of certain petrochemical substances, air emissions, water discharges and the generation, handling, storage, transportation, treatment, disposal and clean-up of
waste materials.

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Although
NOVA Chemicals believes that its 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 risks of accidental discharges of hazardous materials, personal injury and property and environmental
damage. Furthermore, applicable environmental laws and regulations provide for substantial fines and criminal sanctions in the event of non-compliance. There can be no assurance that NOVA Chemicals
will not incur material costs or liabilities as a result of such occurrences or the enforcement of environmental laws.

Risk
of substantial environmental costs and liabilities is inherent in particular operations and products of NOVA Chemicals, as it is with other companies engaged in similar businesses,
and there can be no assurance that material costs and liabilities, including uninsured liabilities, will not be incurred with respect to future operations. NOVA Chemicals has liabilities and
obligations arising under applicable environmental laws and regulations in connection with discontinued operations, and in addition has specific contractual obligations with respect to pre-closing
environmental conditions at certain facilities divested by predecessor companies. Environmental investigations have been or are being conducted in accordance with governmental standards and guidelines
at such discontinued operations and facilities. Remedial work based on these investigations has commenced. A $12 million provision has been made in NOVA Chemicals' financial statements to cover
the estimated costs of remediation of discontinued sites. At some locations, NOVA Chemicals has negotiated agreements to recover a portion of these costs from third parties on the basis of their
previous activities.
NOVA Chemicals has also accrued $17 million towards the costs of future decommissioning and site restoration for currently operating facilities which have not yet been scheduled
for closure.

NOVA
Chemicals is currently involved in investigations and clean-ups under the U.S. Comprehensive Environmental Response, Compensation and Liability Act and comparable state
laws in several jurisdictions in connection with hazardous substances which in the past had been transported to third party disposal sites. NOVA Chemicals does not believe that its share of response
costs at any of such sites will, individually or in the aggregate, result in a material liability for NOVA Chemicals. It is possible that, based upon the nature of the hazardous substances generated
at existing and discontinued operations, NOVA Chemicals may be involved in investigations and clean-ups in the future.

From
time to time NOVA Chemicals has entered into various consent agreements or been subject to administrative orders for pollution abatement or remedial action in connection with its
businesses.

NOVA
Chemicals has operated an environmental audit program to determine regulatory compliance by its operating facilities since 1990. In September 1995, NOVA Chemicals developed a more
comprehensive safety, health, environment and risk audit program. NOVA Chemicals' Responsible Care Audit Program was evaluated by a leading international environment, health and safety consulting firm
in January 2002. On the basis of its review the consultant found that the Audit Program was progressive, soundly designed and effectively implemented, and concluded that it was highly rated when
compared to other programs with which the consultant was familiar.

NOVA
Chemicals has adopted the Responsible Care program as the basis for its overall safety, health, environment and risk program. The Responsible Care program is a comprehensive program
which was initiated by the Canadian Chemical Producers' Association ("CCPA") and has since been adopted by the American Chemistry Council ("ACC") in the United States as well as by chemical industry
associations in over 40 countries world wide. The Responsible Care program requires program participants to commit to the responsible management of the total life cycle of their products. NOVA
Chemicals has implemented the Responsible Care program in all its Canadian and U.S. operations. NOVA Chemicals is accelerating the implementation of the Responsible Care program in its
European operations and expects to achieve full implementation in 2003.

NOVA
Chemicals is active in a number of voluntary environmental initiatives to reduce emissions and wastes from its facilities. In addition to participation in the CCPA's National
Emissions Reduction Masterplan, NOVA Chemicals is also participating in Canada's Accelerated Reduction and Elimination of Toxics and Greenhouse Gas ("GHG") emissions management programs. Through an
aggressive GHG emissions management program and its participation in Canada's Voluntary Climate Change Challenge and Registry Program, NOVA Chemicals is committed to economically viable solutions to
climate change concerns, for example, NOVA Chemicals participation in the joint venture with ATCO and EPCOR to construct a natural-

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gas-fired cogeneration power plant at its production site at Joffre, Alberta. This project has substantially reduced GHG emissions when compared with continuing to supply the electrical needs of the
Joffre site from Alberta's primarily coal fired electrical generation facilities. NOVA Chemicals is also directly involved in the Canadian Chemical Industry's Environmental Performance Memoranda of
Understanding with the Federal, Ontario and Alberta governments.

In
December 2002, the Government of Canada announced its ratification of the Kyoto Protocol to the United Nations Framework Convention on Climate Change. The Kyoto Protocol requires
Canada to reduce its GHG emissions by 6% below 1990 levels by 2012. A detailed Implementation Plan ("Plan") is expected to be developed by the Canadian government through ongoing consultations with
provinces, territories, industry and other stakeholders within the next 18 months. The outcome of this Plan is uncertain and as a result NOVA Chemicals cannot estimate the effect on
future consolidated results of operations, cash flows or financial position. The Corporation remains engaged in discussions with those developing the Plan and continuously assesses the commercial
implications of the Kyoto Protocol for its markets around the world.

NOVA Chemicals
is participating in an initiative by the ACC to conduct research into the long range health and environmental impacts of chemicals. This participation is consistent
with NOVA Chemicals' Responsible Care commitment, and the resulting research will enable the chemicals industry to contribute to the scientific and public policy debates which impacts
legislation affecting the industry.

Environmental
capital expenditures for NOVA Chemicals, including pollution abatement and remedial programs, were $6 million in 2002 and $12 million in each of 2001 and 2000
and are estimated to be $14 million in 2003. Operating expenses relating to environmental protection were $12 million in 2002, $14 million in 2001 and $10 million in 2000
and are estimated to be $11 million in 2003. Total remedial expenditures to dismantle and remediate discontinued facilities and sites totaled $1 million in 2002 and $3 million in
each of 2001 and 2000. This figure is expected to be $2 million in 2003. NOVA Chemicals believes it has sufficient capital resources to meet all of its present and anticipated future
obligations under environmental protection legislation.

NOVA
Chemicals is actively involved in promoting public awareness of the benefits of plastics through its participation in various industry associations.

EMPLOYEE AND LABOUR RELATIONS

NOVA Chemicals currently employs approximately 4,300 full-time employees globally.

Collective
bargaining agreements with various unions, covering 518 of the approximately 3,775 North American employees, are in place at certain plants located in Ontario and the
United States. The term of a collective bargaining agreement involving 59 employees at NOVA Chemicals' styrene plant in Sarnia, Ontario will expire on January 31, 2004. The term of a collective
bargaining agreement involving 244 employees at NOVA Chemicals' Corunna, Ontario site will expire on March 31, 2004. A collective bargaining agreement involving 28 employees at
the polystyrene plant at Springfield, Massachusetts was negotiated in September 1999 and will expire on September 30, 2007. A collective bargaining agreement involving 187 employees at
the polystyrene plant at the Beaver Valley site in Monaca, Pennsylvania was negotiated in May 2001 and will expire on May 12, 2006.

Workforces
in Europe are significantly more unionized than their North American counterparts. European employment laws and regulations are more restrictive than in North America. These
factors operate to limit the flexibility of NOVA Chemicals' relations with its employees. Many of NOVA Chemicals' approximately 570 European employees are represented by works councils. A works
council, elected by the employees, represents employees' rights and interests, including rights to information and consultation relating to conditions of work, working hours, remuneration and vacation
entitlement.

NOVA
Chemicals provides medical, health, life insurance, pension plans and other benefits to its employees, which are comparable with other companies in the chemical industry where its
operations are located.

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FOREIGN OPERATIONS

Foreign operations are subject to various risks differing from those in Canada including political events, tax changes, labour difficulties, price controls and
other governmental actions. NOVA Chemicals actively addresses these risks as part of its risk management system.

With
the Huntsman and Shell acquisitions, NOVA Chemicals' exposure to foreign operations increased as a significant amount of the assets acquired are in Europe. In addition to the
economic risks of foreign operations, there are commercial, cultural and language differences that increase business risk.

NOVA
Chemicals sells its products world wide. NOVA Chemicals has established commercial headquarters in Switzerland to coordinate commercial activities outside of North America and
maintains representative offices in over 12 countries.

PROPERTIES

The "Facility Profile" on page 11 provides a description of NOVA Chemicals' production facilities. All production facilities are owned by NOVA Chemicals
(except Channelview, Texas in which NOVA Chemicals only has an equity position).

NOVA
Chemicals leases or owns in excess of 665,000 square feet of office space in numerous locations, mostly in North America. Its head office and Canadian operating center is located in
Calgary, Alberta. Its global and United States operating center is located in Pittsburgh, Pennsylvania. Its European operating center is in Fribourg, Switzerland.

In
March 2002, NOVA Chemicals completed the sale and leaseback of NOVA Chemicals' Calgary technology buildings and adjacent Corporation-owned lands. NOVA Chemicals
signed an 18 year lease with two five-year options to renew the lease. Ongoing operation of the technology center will not be impacted in any way.

LEGAL PROCEEDINGS

NOVA Chemicals is involved in litigation from time to time in the ordinary course of its business. In management's opinion none of such litigation is
material to NOVA Chemicals' financial condition or results of operations. The major legal proceedings against the Corporation are described below.

In
1987 a tank car containing butadiene owned by a subsidiary of Polysar, a predecessor of NOVA Chemicals, leaked and ignited while parked in New Orleans, Louisiana resulting in
the evacuation of nearby inhabitants. At no time did Polysar have care, custody or control over the butadiene or the tank car. A number of separate individual and class actions for damages for
personal injury and property damage were commenced against Polysar and others. The personal injury actions were consolidated into a single class action. The Louisiana Court decided to hear the matter
in a series of mini trials, two of which have been completed. Polysar was not found liable for any punitive damages but was found liable for 5% of the compensatory damages. Polysar could potentially
be liable for $5 million to $11 million. Although NOVA Chemicals' Writ Petition for Allowance of Appeal was denied by the Louisiana Supreme Court, NOVA Chemicals is in the
process of filing a further Writ Petition for Allowance of Appeal with the United States Supreme Court. The ACC, as well as several other organizations whose members engage in the transportation of
hazardous products, have agreed to file briefs in support of NOVA Chemicals.

In
January 2001, Husky Oil Operations Ltd. ("Husky") filed a statement of claim against NOVA Chemicals alleging breach of a natural gas supply agreement. Husky is claiming
Cdn. $30 million. NOVA Chemicals has filed a Statement of Defence and believes that it has meritorious defences to Husky's claims and intends to vigorously defend against such
litigation. Trial is set for September 2003.

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SELECTED CONSOLIDATED FINANCIAL INFORMATION

THREE YEAR SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected consolidated financial information for each of the three years in the three year period ended December 31, 2002 included in
NOVA Chemicals' 2002 Annual Report under the heading "Consolidated Six-Year Review" is incorporated by reference into this Annual Information Form.

DIVIDENDS

Payment of Dividends

Historically, NOVA Chemicals has paid dividends on its common shares at the rate of $0.10 Canadian per quarter. In 2002, NOVA Chemicals paid
$23 million in dividends on its common shares. There are currently no material contractual restrictions on NOVA Chemicals' ability to declare and pay dividends on its common shares. The
declaration and payment of dividends is at the discretion of the Board of Directors of NOVA Chemicals, which will consider earnings, capital requirements, the financial condition of NOVA Chemicals and
other relevant factors. It is, however, the Corporation's intention to retain most of its earnings to support current operations, further reduce debt and continue to pay dividends at
historic levels.

Dividend Record

NOVA Chemicals has paid the following dividends on common shares during the preceding three years:

|              |      |  | Dividends per share
|------------- | ---- |  | -------------------
|
|Common Shares | Cdn. |  | $                  

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MANAGEMENT DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NOVA Chemicals' Management Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2002 included in
NOVA Chemicals' 2002 Annual Report is incorporated by reference into this Annual Information Form.

MARKET FOR SECURITIES

COMMON SHARES

NOVA Chemicals' outstanding common shares are listed on the Toronto and New York stock exchanges.

The
closing price for NOVA Chemicals' common shares on the Toronto Stock Exchange on December 31, 2002 was Cdn. $28.89 and on March 4, 2003 was Cdn. $25.78.
The closing price on the New York Stock Exchange on December 31, 2002 was $18.30 and on March 4, 2003 was $17.42.

PREFERRED SECURITIES

NOVA Chemicals has preferred securities that are listed on the New York Stock Exchange. A principal amount of $382.5 million of these preferred securities
are listed.

NOVA
Chemicals pays distributions on its preferred securities on a quarterly basis, at an annual rate of 9.5% on the $210 million of preferred securities due 2047 and 9.04% on the
$172.5 million of preferred securities due 2048. NOVA Chemicals has the right to redeem the preferred securities at any time on or after
October 22, 2003 and January 26, 2004, respectively. These distributions are tax deductible. NOVA Chemicals has the right, under certain circumstances, to elect to defer payment of
distributions on the securities for up to 20 consecutive quarterly periods. No distributions have been deferred to date.

MANAGEMENT OF NOVA CHEMICALS

As a group, and based on information provided to NOVA Chemicals by each director and executive officer, all directors and executive officers of NOVA Chemicals
beneficially owned, directly or indirectly, or exercised control or direction over 836,030 common shares of NOVA Chemicals as at March 4, 2003, representing approximately .96% of the
outstanding common shares.

DIRECTORS

The following table and associated notes sets forth, in alphabetical order, the names of each director of NOVA Chemicals, their municipality of residence,
their principal occupations during the five preceding years and the period during which each director has served as a director of NOVA Chemicals or its predecessors. The terms of office of all
of the directors of NOVA Chemicals expire at the termination of the 2003 annual meeting, or until a successor is elected or appointed.

|Name and Municipality of Residence          |  | Period during which a director of NOVA Chemicals or its predecessor |  | Present principal occupation (including senior position currently held with NOVA Chemicals)(1)                   
|------------------------------------------- |  | ------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------
|JERALD ALLEN BLUMBERGHouston, Texas         |  | Since February 15, 2000                                             |  | Retired President and Chief Executive Officer, Ambar, Inc. (private oilfield services)                           
|DR. FRANK PETER BOERBoynton Beach, Florida  |  | Since February 21, 1991                                             |  | President and Chief Executive Officer, Tiger Scientific Inc. (science and technology, consulting and investments)
|JACQUES BOUGIE, O.C.Iles-des-Soeurs, Québec |  | Since June 14, 2001                                                 |  | Retired President and Chief Executive Officer, Alcan Inc. (international aluminum company)                       

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|JOANNE VANISH CREIGHTONSouth Hadley, Massachusetts |  | Since June 14, 2001     |  | President and Professor of English, Mount Holyoke College (higher education)                                                                                             
|-------------------------------------------------- |  | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ROBERT EMMET DINEEN, JR.New York, New York         |  | Since July 2, 1998      |  | Partner, Shearman & Sterling, Attorneys-at-Law                                                                                                                           
|LOUIS YVES FORTIER, C.C., Q.C.Westmount, Québec    |  | Since July 2, 1998      |  | Chairman and Senior Partner, Ogilvy Renault, Barristers and Solicitors                                                                                                   
|KERRY LLOYD HAWKINSWinnipeg, Manitoba              |  | Since July 2, 1998      |  | President of Cargill Limited and Chief Executive Officer of Canadian Operations, Cargill Limited (grain handling, transportation and processing of agricultural products)
|JEFFREY MARC LIPTONSewickley, Pennsylvania         |  | Since April 18, 1996    |  | President and Chief Executive Officer, NOVA Chemicals                                                                                                                    
|ARNOLD MARTIN LUDWICKMontréal, Québec              |  | Since February 15, 2000 |  | Retired Deputy Chairman, Claridge Inc. (investment holding company)                                                                                                      
|JAMES MALCOLM EDWARD NEWALL, O.C.Calgary, Alberta  |  | Since August 13, 1991   |  | Chairman of the Board, NOVA Chemicals                                                                                                                                    
|JANICE GAYE RENNIE, F.C.A.Edmonton, Alberta        |  | Since April 23, 1991    |  | Principal, Rennie and Associates (investment management)                                                                                                                 
|JAMES MARK STANFORDCalgary, Alberta                |  | Since December 3, 1999  |  | President, Stanford Resource Management, Inc. (investment management)                                                                                                    
|JOSEPH DALE THOMPSONEdmonton, Alberta              |  | Since July 2, 1998      |  | Chairman, PCL Construction Group Inc. (general construction contractors)                                                                                                 

EXECUTIVE OFFICERS

The following table and associated notes sets forth, in alphabetical order, the names of each executive officer of NOVA Chemicals, their municipality of
residence, their present positions within NOVA Chemicals and their principal occupations during the five preceding years.

|Name and Municipality of Residence                      |  | Present principal occupation(1)                                                          
|------------------------------------------------------- |  | -----------------------------------------------------------------------------------------
|JEFFREY MARC LIPTONSewickley, Pennsylvania              |  | President and Chief Executive Officer                                                    
|LAWRENCE ALLAN MACDONALDCrescent Township, Pennsylvania |  | Senior Vice President and Chief Financial Officer                                        
|JACK STEPHEN MUSTOESewickley, Pennsylvania              |  | Senior Vice President, Legal and General Counsel                                         
|SHEILA HELEN O'BRIEN, C.M.Sewickley, Pennsylvania       |  | Senior Vice President, Human Resources, Public Affairs, Government and Investor Relations
|CHRISTOPHER DANIEL PAPPASSewickley, Pennsylvania        |  | Senior Vice President and President, Styrenics                                           

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|ALBERT TERENCE POOLEPittsburgh, Pennsylvania |  | Executive Vice President, Corporate Strategy and Development
|-------------------------------------------- |  | ------------------------------------------------------------
|DALE HOWARD SPIESSNevillewood, Pennsylvania  |  | Senior Vice President and President, Olefins/Polyolefins    
|JOHN LAW WHEELERPittsburgh, Pennsylvania     |  | Senior Vice President and Chief Information Officer         

|Notes: |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | (1) | Information provided with respect to the principal occupation of each director and executive officer is based on information furnished to NOVA Chemicals. All of the above directors and executive officers have held their
present principal occupations or held executive positions with the same or associated firms for the past five years, except as indicated below. Where used "NOVA" means NOVA Corporation as it existed before the Arrangement, or any
predecessor.
|       |     | J. A. Blumberg                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |     | J. Bougie, O.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |     | J. M. Lipton                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |     | A. M. Ludwick                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |     | L. A. MacDonald                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |     | J. E. Newall, O.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |     | S. H. O'Brien, C.M.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |     | C. D. Pappas                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |     | A. T. Poole                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |     | J. G. Rennie F.C.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |     | D. H. Spiess                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |     | J. M. Stanford                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |     | J. D. Thompson                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |     | J. L. Wheeler                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

BOARD OF DIRECTORS

The Board of Directors is responsible for managing the business and affairs of NOVA Chemicals. It establishes the overall policies and standards for NOVA
Chemicals. The directors are kept informed of NOVA Chemicals' operations at meetings of the Board and its Committees and through reports and analyses prepared by and discussions with management.

The
Board of Directors meets on a regularly scheduled basis. In addition, communications between the directors and management occur apart from regularly scheduled Board and Committee
meetings.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established four standing Committees and has delegated certain responsibilities to each of those Committees. Each Committee has been
mandated to perform certain advisory functions, make recommendations and report to the Board.

The
Board of Directors of NOVA Chemicals does not have an Executive Committee. The four standing Committees of the Board of Directors are the Corporate Governance Commitee, the Audit,
Finance and Risk Committe, the Human Resources Committee and the Public Policy and Responsible Care Committee. A brief summary of the Committee mandates follows.

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The
Corporate Governance Committee of the Board is responsible for the composition, compensation and governance of the Board of Directors of NOVA Chemicals and recommends to the Board
nominees for election or appointment to the Board. In addition, this Committee is responsible for maintaining an effective working relationship between the Board of Directors and management of NOVA
Chemicals. The Corporate Governance Committee is composed of Messrs. Newall (Chairman), Blumberg, Bougie, Dineen, Fortier and Stanford.

The
Audit, Finance and Risk Committee of the Board reviews and inquires into matters affecting the financial reporting of NOVA Chemicals, the system of internal accounting and financial
controls and procedures and NOVA Chemicals' financial audit procedures and plans; recommends the approval of the issuance of debt securities; oversees the policies and practices of NOVA Chemicals
relating to risk management strategies; recommends to the Board of NOVA Chemicals the appointment and remuneration of the external auditors and approves the mandate and appointment of internal
auditors; is responsible for the proper and orderly funding, administration and investment of the trust funds associated with NOVA Chemicals' savings and profit sharing plans and pension plans; and
reviews with management and reports to the Board on the financing plans and objectives of NOVA Chemicals. The Audit, Finance and Risk Committee is composed of Messrs. Hawkins (Chairman),
Dineen, Ludwick and Thompson and Ms. Rennie. In February 1999 the Blue Ribbon Committee issued a report on Improving the Effectiveness of Corporate Audit Committees. In December 1999 the
Securities and Exchange Commission ("SEC") and the Auditing Standards Board adopted rules in response to the Blue Ribbon Committee's recommendations. The Audit, Finance and Risk Committee is aligned
with these rules.

Throughout
2000 and early 2003, the SEC adopted additional rules with respect to corporate governance. The Board has determined that Mr. Ludwick and Ms. Rennie are "audit
committee financial experts" as defined by the SEC, are independent from management as described in Item 7(d)(3)(iv) of Schedule 14A of the Securities and Exchange Act and are
"unrelated" as that term is defined in the Toronto Stock Exchange ("TSX") Corporate Governance Guidelines, including the TSX proposed amendments published in April 2002 and November 2002 (the
"TSX Proposals").

The
TSX Proposals include a new guideline that all members of a corporation's audit committee should be financially literate and at least one member should have accounting or related
financial expertise. Under the TSX suggested definitions of "financial literacy" and "accounting or related financial expertise", all of the Audit, Finance and Risk Committee members are financially
literate and each of Mr. Ludwick and Ms. Rennie have financial expertise.

The
Human Resources Committee of the Board is responsible for overseeing policies and practices of NOVA Chemicals with respect to its human resources. The Committee reviews
recommendations for the appointment of persons to senior executive positions, considers terms of employment including succession
planning and matters of compensation. The Committee recommends to the Board the goals and objectives used to determine executive leadership compensation, evaluates the executive leadership team's
performance and makes recommendations to the Board with respect to awards under the Management Incentive Plan and the Option Plan and is responsible for the proper and orderly administration of NOVA
Chemicals' savings and profit sharing plans and pension plans, other than matters relating to the funding and investment of the plans' trust funds. The Human Resources Committee is composed of
Messrs Stanford (Chairman), Blumberg, Hawkins, Dr. Boer and Ms. Creighton.

The
Public Policy and Responsible Care Committee of the Board is responsible for overseeing the policies and practices of NOVA Chemicals relating to its Responsible Care audit and the
environment, occupational health and safety, communications, corporate contributions, public policy matters and NOVA Chemicals' relationships with all of its stakeholders. The Public Policy and
Responsible Care Committee is composed of Dr. Boer (Chairman), Messrs. Bougie, Fortier, Ludwick and Thompson and Mmes. Creighton and Rennie.

In
December 1996, a Technology Advisory Committee was created to advise NOVA Chemicals on its research strategy. The Technology Advisory Committee consists of two directors of
NOVA Chemicals, Dr. Boer and Mr. Blumberg (Co-chairs); Mr. Christopher D. Pappas, Senior Vice President and President, Styrenics of NOVA Chemicals;
Mr. Paul Clark (Co-chair), Vice President, Research and Technology of NOVA Chemicals; Mr. Gerry Dyer, retired Research and Development Director, DuPont Canada Inc.; and
three world-class

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research scientists, Dr. Musa Kamal, Professor, McGill University, Dr. Kurt Zilm, Professor, Yale University and Dr. Robert Waymouth, Professor, Stanford University.

ADDITIONAL INFORMATION

Additional information, including directors' and officers' remuneration and indebtedness, principal holders of NOVA Chemicals' securities, options to purchase
securities and interests of insiders in material transactions, is contained in NOVA Chemicals' Management Information Circular with respect to the 2003 Annual Meeting of Shareholders.

Additional
financial information is provided in the 2002 audited comparative Consolidated Financial Statements, together with the auditors' report thereon, included in NOVA Chemicals'
2002 Annual Report.

A
copy of NOVA Chemicals' 2002 Annual Report and its Management Information Circular referred to above, as well as additional copies of this Annual Information Form and of any
subsequent interim financial statements of NOVA Chemicals, may be obtained by any person without charge by writing to:



Copies
of any other documents not referred to above that are incorporated by reference into a preliminary short form prospectus or a short form prospectus of NOVA Chemicals when the
securities of NOVA Chemicals are in the course of a distribution pursuant to a preliminary short form prospectus or a short form prospectus filed in respect of such distribution may also be obtained
by any person without charge by writing to the Corporate Secretary at the above-noted address.

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2002CONSOLIDATED
FINANCIAL REPORT  SELECTED
QUARTERLY FINANCIAL INFORMATION  THREE MONTHS ENDED (UNAUDITED; MILLIONS
  OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
  
  2002
  
  2001MAR 31
  
  JUNE 30
  
  SEPT 30
  
  DEC 31
  
  MAR 31
  
  JUNE 30
  
  SEPT 30
  
  DEC 31OPERATING RESULTSRevenue
  
  $
  662
  
  777
  
  806
  
  846
  
  $
  964
  
  833
  
  743
  
  654Operating income (loss)
  
  $
  (53
  )
  1
  
  (1
  )
  (18
  )
  $
  (4
  )
  (11
  )
  (80
  )
  (100
  )Net income (loss)
  
  $
  (23
  )
  (14
  )
  (5
  )
  (39
  )
  $
  24
  
  3
  
  (57
  )
  (98
  )Earnings (loss) per share Basic
  
  $
  (0.35
  )
  (0.25
  )
  (0.14
  )
  (0.56
  )
  $
  0.18
  
  (0.07
  )
  (0.76
  )
  (1.23
  ) Diluted
  
  $
  (0.35
  )
  (0.25
  )
  (0.14
  )
  (0.56
  )
  $
  0.17
  
  (0.07
  )
  (0.76
  )
  (1.23
  )Weighted-average common shares outstanding (millions)
  
  86.0
  
  86.3
  
  86.4
  
  86.5
  
  84.9
  
  85.3
  
  85.7
  
  85.7  1 
   CONSOLIDATED
SIX - YEAR REVIEW  (MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS,
  RATIOS AND MISCELLANEOUS DATA)(1)
  
  2002
  
  2001
  
  2000
  
  1999
  
  1998
  
  1997OPERATING RESULTSRevenue
  
  $
  3,091
  
  3,194
  
  3,916
  
  2,808
  
  2,075
  
  2,285Operating income (loss)
  
  $
  (71
  )
  (195
  )
  414
  
  305
  
  103
  
  229Net income (loss)
  
  $
  (81
  )
  (128
  )
  302
  
  253
  
  18
  
  111Total assets
  
  $
  4,154
  
  4,359
  
  4,754
  
  4,559
  
  3,580
  
  2,687CAPITALIZATIONCurrent bank loans
  
  $
  3
  
  14
  
  28
  
  
  
  
  
  57Long-term debt(2)
  
  1,212
  
  1,508
  
  1,423
  
  1,525
  
  1,297
  
  726Shareholders equity(3)
  
  1,561
  
  1,614
  
  1,926
  
  1,964
  
  1,512
  
  1,173Total capitalization
  
  $
  2,776
  
  3,136
  
  3,377
  
  3,489
  
  2,809
  
  1,956CASH FLOW DATAPlant, property and equipment additions
  
  $
  71
  
  168
  
  440
  
  620
  
  367
  
  223Cash from operations
  
  $
  359
  
  278
  
  351
  
  395
  
  198
  
  227Net debt additions (repayments)(4)
  
  $
  (307
  )
  68
  
  (72
  )
  219
  
  502
  
  23SUPPLEMENTAL EARNINGS MEASURESNet income (loss) to common shareholders before unusual items(5)
  
  $
  (106
  )
  (202
  )
  287
  
  124
  
  28
  
  152Net income (loss) to common shareholders after unusual items
  
  $
  (112
  )
  (161
  )
  266
  
  217
  
  16
  
  111DATA PER COMMON SHARE(6)Earnings (loss) before unusual items(5) Basic
  
  $
  (1.24
  )
  (2.37
  )
  3.23
  
  1.34
  
  0.30
  
  1.65 Diluted
  
  $
  (1.24
  )
  (2.37
  )
  3.06
  
  1.32
  
  0.30
  
  1.65Earnings (loss) after unusual items Basic
  
  $
  (1.30
  )
  (1.88
  )
  3.00
  
  2.35
  
  0.17
  
  1.21 Diluted
  
  $
  (1.30
  )
  (1.88
  )
  2.84
  
  2.26
  
  0.17
  
  1.21Common shareholders equity at year-end(3)(7)
  
  $
  12.40
  
  13.05
  
  16.52
  
  15.58
  
  12.96
  
  12.75RATIOSReturn on average common equity(8)
  
  (10.4
  )%
  (16.5
  )%
  21.2
  %
  9.9
  %
  2.3
  %
  12.2
  %Debt to total capitalization(4)
  
  43.8
  %
  48.5
  %
  42.9
  %
  43.7
  %
  46.2
  %
  40.0
  %Funds flow coverage of financial charges(9)
  
  2.7x
  
  1.7x
  
  6.0x
  
  4.2x
  
  3.6x
  
  5.3xMISCELLANEOUS DATAEmployees at year-end(10)
  
  4,300
  
  4,600
  
  4,700
  
  4,700
  
  4,200
  
  3,400Closing share price(11)
  TSX (Cdn$)
  
  28.89
  
  30.75
  
  28.10
  
  28.25
  
  20.00
  
  N/ANYSE(U.S.$)
  
  18.30
  
  19.27
  
  18.81
  
  19.31
  
  13.06
  
  N/A  
 (1)For all periods
prior to July 2, 1998, Canadian dollar amounts have been restated inU.S.dollars using an
exchange rate of $1.00Canadian=U.S.$0.68. (2)Includescurrentportionof long-term
debt. (3)1997is net of
advances to parent and affiliates. (4)Includescurrent bank
loans. (5)Unusual items
were $(6) million in 2002, $41 million in 2001, $(21) million in 2000 (see page
53 of the Management Discussion and Analysis for a complete listing). Unusual
items were $93 million in 1999 ($(12) millionrestructuring charge, $(60)
millionloss on hedges, $(19) millionNOVAChemicals share
of a Methanex restructuring charge, and $184 milliongain onsaleof Dynegy Inc.
preferred shares), $(12) million in 1998restructuring charge, $(41) million in
1997 ($(39) millionNOVAChemicals shares of a Dynegy
Inc. restructuring charge and $(2) millionother). (6)86million
weighted-average commonsharesoutstanding in 2002 (85
million in 2001, 89 million in 2000, 93 million in 1999, and 92 million in all
other comparative periods). (7)1998to 2002,
inclusive, assume theretractablepreferred shares were
exchanged for 8.5 million common shares. (8)Net income (loss)
to commonshareholdersbefore unusual items divided by average common
equity (excluding preferredsecuritiesand retractable preferred
shares). 1997 average common equity is net of advances to parent and
affiliates. (9)Fundsfrom operations
plus interestexpense(net) less interest income
divided by gross interest expense. (10)1999 includes the addition of
Shell employees; 1998 includes the addition of Huntsman employees. (11)NOVAChemicals was
launched as anindependentpublicly traded company on
July 2, 1998. As a result, no comparable share price information is available
prior to that date.  2 
   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 is also
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 code of ethics can be viewed onNOVAChemicals 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. 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 non-management 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
  Larry A. MacDonaldPresident
  & Chief Executive Officer
  Senior
  Vice President & Chief Financial OfficerMarch 4, 2003Calgary, Canada  3 
   AUDITORS
REPORT  To the Shareholders of NOVA Chemicals Corporation We have audited the consolidated balance
sheets ofNOVAChemicals
Corporation as at December 31, 2002, 2001, and 2000 and the consolidated
statements of income (loss) and reinvested earnings and cash flow for each of
the years in the three-year period ended December 31, 2002. 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 and United States generally accepted auditing
standards. 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. In our opinion, these
consolidated financial statements present fairly, in all material respects, the
financial position ofNOVAChemicals
Corporation as at December 31, 2002, 2001, and 2000 and the results of its
operations and its cash flow for each of the years in the three-year period
ended December 31, 2002 in accordance with Canadian generally accepted
accounting principles.   Ernst & YoungLLPChartered
  AccountantsMarch 4, 2003Calgary, Canada  4 
   CONSOLIDATED
STATEMENTS OF INCOME (LOSS) AND REINVESTED EARNINGS  YEAR ENDED DECEMBER 31
  (MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
  
  2002
  
  2001
  
  2000REVENUE
  
  $
  3,091
  
  $
  3,194
  
  $
  3,916Feedstock and operating costs
  
  2,661
  
  2,901
  
  2,960Depreciation and amortization
  
  266
  
  230
  
  188Selling, general and administrative
  
  176
  
  191
  
  197Research and development
  
  39
  
  40
  
  39Restructuring charges (Note 16)
  
  20
  
  27
  
  1183,162
  
  3,389
  
  3,502Operating income (loss)
  
  (71
  )
  (195
  )
  414Interest expense (net) (Notes 4 and 9)
  
  (87
  )
  (88
  )
  (45
  )Equity in earnings of affiliates (Note 6)
  
  5
  
  14
  
  32Other gains (Note 17)
  
  59
  
  58
  
  32(23
  )
  (16
  )
  19Income (loss) before income taxes
  
  (94
  )
  (211
  )
  433Income tax recovery (expense) (Note 18)
  
  13
  
  83
  
  (131
  )NET INCOME (LOSS)
  
  $
  (81
  )
  $
  (128
  )
  $
  302Reinvested earnings, beginning of year
  
  740
  
  924
  
  814Repurchased shares (Note 13)
  
  
  
  
  
  (109
  )Change in accounting policy (Note 2)
  
  
  
  
  
  (24
  )Common share dividends
  
  (23
  )
  (23
  )
  (23
  )Preferred securities dividends and distributions
  
  (31
  )
  (33
  )
  (36
  )Reinvested earnings, end of year
  
  $
  605
  
  $
  740
  
  $
  924Weighted-average number of common shares outstanding (millions)
  
  86
  
  85
  
  89Earnings (loss) per common share (Note 13) Basic
  
  $
  (1.30
  )
  $
  (1.88
  )
  $
  3.00 Diluted
  
  $
  (1.30
  )
  $
  (1.88
  )
  $
  2.84  See accompanying Notes to Consolidated
Financial Statements.  5 
   CONSOLIDATED
BALANCE SHEETS  DECEMBER 31
  (MILLIONS OF U.S. DOLLARS)
  
  2002
  
  2001
  
  2000ASSETSCurrent assetsCash and cash equivalents
  
  $
  14
  
  $
  10
  
  $
  27Accounts receivable (Note 4)
  
  249
  
  362
  
  451Inventories (Note 5)
  
  321
  
  279
  
  533584
  
  651
  
  1,011Investments and other assets (Note 6)
  
  537
  
  549
  
  447Plant, property and equipment, net (Note 7)
  
  3,033
  
  3,159
  
  3,296$
  4,154
  
  $
  4,359
  
  $
  4,754LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesBank loans
  
  $
  3
  
  $
  14
  
  $
  28Accounts payable and accrued liabilities (Note 8)
  
  562
  
  437
  
  617Long-term debt installments due within one year (Note 9)
  
  1
  
  186
  
  17566
  
  637
  
  662Long-term debt (Note 9)
  
  1,211
  
  1,322
  
  1,406Deferred credits (Note 10)
  
  816
  
  786
  
  7602,593
  
  2,745
  
  2,828Contingencies and commitments (Notes 9, 11, 21 and 23)SHAREHOLDERS EQUITYPreferred securities (Note 11)
  
  383
  
  383
  
  383Retractable preferred shares (Note 12)
  
  198
  
  198
  
  198Common shares (Note 13)
  
  484
  
  472
  
  460Cumulative translation adjustment
  
  (109
  )
  (179
  )
  (39
  )Reinvested earnings
  
  605
  
  740
  
  9241,561
  
  1,614
  
  1,926$
  4,154
  
  $
  4,359
  
  $
  4,754  See accompanying Notes to Consolidated
Financial Statements.   Kerry L. Hawkins, Director
  Jeffrey M. Lipton, Director  6 
   CONSOLIDATED
STATEMENTS OF CASH FLOW  YEAR ENDED DECEMBER 31
  (MILLIONS OF U.S. DOLLARS)
  
  2002
  
  2001
  
  2000OPERATING ACTIVITIESNet income (loss)
  
  $
  (81
  )
  $
  (128
  )
  $
  302Depreciation and amortization
  
  266
  
  230
  
  188Future income taxes (recovery) (Note 18)
  
  8
  
  (4
  )
  93Other (gains) losses (net of current tax)
  
  (39
  )
  
  
  60Equity in earnings of affiliates
  
  (5
  )
  (14
  )
  (32
  )Methanex dividends received
  
  4
  
  
  
  Asset write-downs
  
  
  
  10
  
  Funds from operations
  
  153
  
  94
  
  611Changes in non-cash working capital (Note 19)
  
  206
  
  184
  
  (260
  )Cash from operations
  
  359
  
  278
  
  351INVESTING ACTIVITIESProceeds on sales of assets and investments
  
  82
  
  
  
  741Shell acquisition (Note 3)
  
  
  
  
  
  (212
  )Plant, property and equipment additions
  
  (71
  )
  (168
  )
  (440
  )Turnaround costs, long-term investments and other assets
  
  (18
  )
  (156
  )
  (8
  )Changes in non-cash working capital (Note 19)
  
  
  
  (16
  )
  (186
  )(7
  )
  (340
  )
  (105
  )FINANCING ACTIVITIESIncrease (decrease) in current bank loans
  
  (11
  )
  (14
  )
  28Proceeds on liquidation of swap positions
  
  13
  
  27
  
  Long-term debt additions
  
  
  
  302
  
  170Long-term debt repayments
  
  (2
  )
  (61
  )
  (385
  )Increase (decrease) in revolving debt
  
  (294
  )
  (159
  )
  115Preferred securities dividends and distributions
  
  (31
  )
  (33
  )
  (36
  )Common shares issued
  
  11
  
  12
  
  4Common shares repurchased
  
  
  
  
  
  (150
  )Common share dividends
  
  (23
  )
  (23
  )
  (23
  )Changes in non-cash working capital (Note 19)
  
  (11
  )
  (6
  )
  (1
  )(348
  )
  45
  
  (278
  )Increase (decrease) in cash and cash equivalents
  
  4
  
  (17
  )
  (32
  )Cash and cash equivalents, beginning of year
  
  10
  
  27
  
  59Cash and cash equivalents, end of year
  
  $
  14
  
  $
  10
  
  $
  27  See accompanying Notes to Consolidated
Financial Statements.  7 
   NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (amounts inU.S.dollars,
unless otherwise noted)  1.             BASIS OF PRESENTATION  NOVAChemicals is incorporated under the laws of
Alberta, Canada. Where used in these financial statements, NOVA Chemicals or the Corporation 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. These consolidated financial
statements have been prepared by management on the historical cost basis 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 24, United States Generally
Accepted Accounting Principles. The Corporation measures and
reports its consolidated financial statements inU.S.dollars.  2.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Changes in Accounting Policies On January 1, 2002,NOVAChemicals adopted the following new accounting
standards as prescribed by the Canadian Institute of Chartered Accountants (CICA), which had no significant effect on the
Corporations financial position or results of operations.  Stock-based
Compensation and Other Stock-based Payments- The
new recommendations encourage, but do not require, the use of a fair-value
based method to account for stock-based awards granted to employees. The Corporation
has chosen not to apply the fair-value method of accounting and continues to
utilize the intrinsic-value method of accounting for stock options where
compensation expense, if any, is measured based on the excess of the market
price of the stock over the options exercise price on the date of grant. As
options are generally granted at the market price on the date of grant, no
compensation cost results. When the fair-value based method is not used, pro
forma disclosures must be provided as if compensation cost had been measured
using the fair-value method. These disclosures are provided in Note 14. UnderNOVAChemicals equity appreciation plan, units are
redeemable for cash. Accordingly, compensation cost is measured as the excess
of the quoted market value of the Corporations common shares over the
redemption price of the units and recognized in income based on vesting
provisions.  8 
   Foreign
Currency Translation-
The new recommendations regarding
accounting for foreign currency translation eliminated the deferral and
amortization of unrealized translation gains and losses on foreign denominated
monetary items with a fixed life. NOVA Chemicals foreign denominated monetary items with a fixed life are primarily
Canadian denominated debt. As the debt is designated as a partial hedge of the
Corporations Canadian assets, the resulting unrealized foreign exchange gains
or losses are deferred in a separate component of shareholders equity entitled
cumulative translation adjustment.  Goodwill and
Other Intangible Assets
- The new recommendations
regarding accounting for goodwill and other intangible assets require that new
and existing goodwill and indefinite life intangible assets be tested annually
for impairment, and not be subject to amortization. Intangible assets with a
finite useful life are subject to amortization over their useful life. NOVA
Chemicals prior business combinations
have not resulted in any goodwill being recorded and the Corporations intangible
assets are primarily comprised of patents with finite useful lives.  Cost of Service Under the terms of certain sales agreements,
the Corporation sells ethylene on a take-or-pay basis, for a price determined
by a cost-of-service formula that includes the cost of fuel and feedstock,
operating expenses, depreciation, income taxes, return on capital and realized
foreign exchange gains or losses in respect of debt service. The return on
capital includes a 20% after-tax return on equity based on a deemed debt to
equity ratio.  Cash and Cash Equivalents Short-term investments extending not greater
than 30 days are considered to be cash equivalents, and are recorded at cost,
which approximates current market value.  Foreign Currency Translation The Corporations foreign operations are
considered self-sustaining and are translated intoU.S.dollars using the current rate method.
Resulting translation gains or losses are deferred in the cumulative
translation adjustment account until there is a realized reduction of the
investment in the foreign operations. NOVAChemicals foreign denominated monetary items,
principally Canadian denominated debt, are translated at the current rate of
exchange and the resulting unrealized foreign exchange gains or losses are deferred
in the cumulative translation adjustment account as the Canadian dollar debt is
designated as a partial hedge of the Corporations Canadian assets.  Hedging Activities The Corporation sells petrochemical products
at prices denominated in various currencies, purchases energy commodities,
invests in foreign operations and issues short and long-term debt, including
amounts in foreign currencies. These activities result in exposures to
fluctuations in foreign currency exchange rates, commodity prices and interest
rates.NOVAChemicals
manages these exposures by entering into contractual arrangements
(derivatives), which reduce (hedge) the exposure by creating offsetting
positions. Derivative instruments are used only for hedging purposes and are
linked to specific assets and liabilities on the balance sheet or to specific
firm commitments or forecasted transactions. They are not utilized for trading
or speculative purposes. NOVAChemicals has U.S., Canadian and European-based petrochemical
operations. The Corporation manages its exposure to fluctuations in these
exchange rates by using forward exchange  9 
   contracts. Gains or losses realized on
settlement of the forward exchange contracts are recognized in income in the
same period as the related expenditures. NOVAChemicals 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 against adverse
short-term price movements. Occasionally, longer-term positions will be taken
to manage price risk for anticipated supply requirements. Gains or losses
realized on the settlement of commodity-based instruments are recognized in
income in the same period as the related revenues or expenditures. NOVAChemicals periodically 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. The amounts paid or
received are recorded as an adjustment to interest expense on the hedged debt
instrument. Gains or losses on termination
or liquidation of derivative instruments are deferred as current or non-current
assets or liabilities on the balance sheet, as appropriate, and are amortized
to income in the period in which the underlying hedged transaction is
recognized.  Inventories Inventories are carried at the lower of cost and net realizable value.
Cost is determined on a first-in, first-out basis with no allocation of fixed
production overhead.  Investments Investments in affiliates, over which the Corporation exercises
significant influence, but not control, are accounted for by the equity method.
Under this method, the investment is carried at cost plus the related share of
undistributed earnings, less dividends received. Other investments, except
investments in joint ventures, are carried at cost.  Joint Ventures NOVAChemicals
applies the proportionate consolidation method of accounting for its
investments in joint venture operations. Under the proportionate consolidation
method, NOVA Chemicals records, on a line-by-line basis within
its financial statements and notes, its pro rata share of the joint ventures
assets, liabilities, revenues, expenses and cash flows.  Plant, Property and Equipment
(PP&E) NOVAChemicals PP&E consists primarily of manufacturing equipment, land and buildings 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 ofPP&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 net realizable value. Future removal and site
restoration costs are provided for on a straight-line basis over the expected
remaining economic lives of the assets.  10 
   Depreciation Plant and equipment are depreciated on a straight-line basis at annual
rates ranging from 3% to 40%. These rates are designed to write the assets off
over their estimated useful lives. The Alberta ethylene plants and the hydrogen
plant are depreciated over the lives of the related sales agreements.  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 of commercial service. Any revenues earned during this period are recorded
as a reduction in deferred start-up costs. These costs are amortized over a five-year
period, commencing on the date of commercial service.  Income Taxes Cost-of-service activities operate under billing structures that allowNOVA Chemicals to recover related income tax costs from customers based on
the taxes payable method. NOVA Chemicals records income tax expense on these
operations equal to recoverable amounts. For non-cost-of-service
operations, effective January 1, 2000, 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. Under the liability method,
future income taxes are also provided on the difference between the accounting
and tax basis of equity investments. One of these differences results from
recording equity earnings for accounting purposes. Accordingly, income tax
expense is provided on equity earnings. The effect, on January 1,
2000, of adopting the liability method was to increase the carrying value of
plant, property and equipment and future income tax liabilities by$297
million and $353 million, respectively, and to reduce
shareholders equity by $56 million.  Employee Future Benefits On January 1, 2000,NOVA
Chemicals adopted the CICA recommendations regarding accounting for employee future benefits, which
required that assets be measured at fair value and liabilities be measured at
market discount rates. The accounting change resulted in a $51
million increase in a net employee future benefit asset that will be amortized
as a reduction to pension and post-retirement expense over the estimated
average remaining service lifetime of the employee group (EARSL).  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 the employees provide services.
Adjustments arising from plan amendments and changes in assumptions are
amortized on a straight-line basis overEARSL. Adjustments arising
from experience gains and losses are amortized over EARSL when they exceed 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. For purposes of calculating the expected
return on plan assets, pension assets are revalued at fair value.  11 
   The cost of defined
contribution benefits is expensed as earned by employees.NOVA Chemicals makes contributions in accordance with 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 services.  Deferred Share Unit Plans Units issued under the Plans are calculated based on annual management
incentive awards or director fees. The cost of the units earned is expensed as
employees and directors provide services. Any adjustments to the value of the
units as a result of expected changes inNOVA Chemicals common
stock value are amortized on a straight-line basis over the estimated average
remaining service lifetime of individuals participating in the Plans.  Earnings Per Share The treasury stock method, adopted on January 1, 2001, 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 Securitization transactions are recorded as sales of assets based on the
transfer of control to the purchaser. Transactions recorded in this manner
result in the removal of the sold assets from the Corporations balance sheet.
Costs associated with securitization transactions, net of servicing fees, are
reflected with 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 have
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 Costs associated with research and development activities are expensed
as incurred.  Measurement Uncertainty The preparation of these consolidated financial statements in conformity
withGAAP 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, currency
exchange rates, interest rates, changes in economic conditions and regulatory
changes.  Comparative Figures Certain comparative figures have been reclassified to conform to the
current years presentation.  12 
   3.ACQUISITION  On January 31, 2000, the Corporation acquired Royal Dutch/Shells
European polystyrene operations (Shell) for$185
million plus working capital of $27 million. The acquisition was accounted
for using the purchase method, with the purchase price and related costs
allocated as follows:  (MILLIONS
  OF DOLLARS)
  
  2000Net assets acquired at
  assigned valuesNet current assets
  
  $
  27Plant, property and equipment
  
  210Other assets
  
  11$
  248Cash consideration
  
  $
  212Transaction and integration
  costs
  
  36$
  248  4.ACCOUNTS RECEIVABLE  DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Trade
  
  $
  173
  
  $
  154
  
  $
  262Other
  
  53
  
  74
  
  133Allowance for doubtful
  accounts(1)
  
  (8
  )
  (13
  )
  (10
  )218
  
  215
  
  385Income taxes receivable
  
  31
  
  147
  
  66$
  249
  
  $
  362
  
  $
  451  
 (1)The Corporations special
purpose entity maintains an allowance for doubtful accounts of $5 million at December
31, 2002 (2001 and 2000$10 million) related to securitized trade
receivables.  Accounts Receivable Securitizations The Corporation sells undivided interests in certain trade accounts
receivable pursuant to revolving securitization transactions in which servicing
responsibilities are retained. The receivables are sold at a discount
approximating the purchasers financing cost of issuing commercial paper backed
by the accounts receivable. The sale of receivables is reflected as a reduction
of accounts receivable and as operating cash flows. As collections reduce
previously sold interests, new accounts receivable are sold, to a maximum
amount equal to the lesser of eligible receivables or$195
million. Recourse on sold receivables is limited to the receivables and certain
reserves provided to cover credit losses and dilution (such as discounts taken
by customers, rebates and other non-cash reductions). The current
securitization agreements expire September 23, 2003 and are renewable for a
further one-year term. Information regarding the
Corporations securitization programs is as follows:  DECEMBER 31
  (MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)
  
  2002
  
  2001
  
  2000Amount sold at end of year(1)
  
  $
  163
  
  $
  154
  
  $
  195Loss, dilution and other
  reserves (as a% of eligible accounts receivable)
  
  17
  %
  16
  %
  7
  %Interest expense, net of
  servicing fees
  
  $
  4
  
  $
  7
  
  $
  11  
 (1)At December 31, 2002, $11
million (2001$24 million and 2000$nil) is reflected in accrued liabilities as
amounts repayable under the facility due to decreases in accounts receivable
balances (see Note 8).  13 
   One of the
Corporations securitization transactions involves the use of a special purpose
entity (SPE).
Information regarding the cash flows between the Corporation and the SPE are as follows:  DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Repayment of securitization
  proceeds
  
  $
  (6
  )
  $
  (26
  )
  $
  Proceeds from collections
  reinvested in revolving period securitizations(1)
  
  $
  1,289
  
  $
  1,410
  
  $
  1,562Servicing fees received
  
  $
  2
  
  $
  2
  
  $
  2Other cash flows received
  
  $
  74
  
  $
  48
  
  $
  153  
 (1)Collections received by theSPEon accounts
receivable previously sold are used to purchase interests in new accounts receivable.  5.INVENTORIES  DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Materials and supplies
  
  $
  39
  
  $
  38
  
  $
  38Raw materials
  
  121
  
  93
  
  172Finished goods
  
  161
  
  148
  
  323$
  321
  
  $
  279
  
  $
  533  6.INVESTMENTS AND OTHER ASSETS  YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000INVESTMENT
  
  EQUITY
  EARNINGS
  
  INVESTMENT
  
  EQUITY
  EARNINGS
  
  INVESTMENT
  
  EQUITY
  EARNINGSMethanex Corporation(1)(2)
  
  $
  399
  
  $
  5
  
  $
  397
  
  $
  14
  
  $
  400
  
  $
  32Other investments(3)
  
  27
  
  
  
  17
  
  
  
  17
  
  Other assets(4)
  
  111
  
  
  
  135
  
  
  
  30
  
  $
  537
  
  $
  5
  
  $
  549
  
  $
  14
  
  $
  447
  
  $
  32  
 (1)
  Equity earnings includes a $33 million before-tax charge (2001$3
  million and 2000$nil) representingNOVAChemicals
  share of Methanexs restructuring charges.(2)
  Dividends received of $4 million (2001 and 2000$nil) are recorded as
  a reduction in the Corporations investment.(3)
  Includes an investment of $15 million in a special purpose entity with
  respect to the accounts receivable securitization program described in Note
  4.(4)
  See schedule on the following page.  Methanex Corporation In 2002, Methanex completed a normal course issuer bid for repurchase of
up to 10% of its outstanding common shares.NOVA Chemicals did not tender any of its shares and as a result, the
Corporations holding in Methanex rose to 37.4% at December 31, 2002
(200135.8% and 200029.2%). The market value of NOVA Chemicals investment
in Methanex shares at December 31, 2002 was approximately $393
million (2001 $260 million and 2000 $302
million). After deducting future income taxes of $33 million, the book
value of NOVA Chemicals net investment in Methanex was $366
million on December 31, 2002.  14 
   The following is summarized financial information for Methanex:  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Revenue
  
  $
  1,009
  
  $
  1,149
  
  $
  1,061Operating expenses and
  depreciation
  
  $
  850
  
  $
  1,024
  
  $
  866Net income(1)
  
  $
  26
  
  $
  71
  
  $
  145  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Current assets
  
  $
  754
  
  $
  576
  
  $
  664Plant, property, and
  equipment and other assets
  
  1,065
  
  1,117
  
  1,140Current liabilities
  
  (142
  )
  (265
  )
  (137
  )Long-term liabilities
  
  (773
  )
  (493
  )
  (622
  )Shareholders equity
  
  $
  904
  
  $
  935
  
  $
  1,045  YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Cash inflows (outflows)
  from:Operating activities
  
  $
  190
  
  $
  376
  
  $
  216Financing activities
  
  $
  70
  
  $
  (188
  )
  $
  (78
  )Investing activities
  
  $
  (171
  )
  $
  (83
  )
  $
  (63
  )  
 (1)
  2002 includes an $86 million asset restructuring charge (2001$11
  million and 2000$nil).  Purchase Price Excess The cost of the Corporations investment in Methanex exceeded its share
of the underlying net book value at acquisition date. Purchase price excess is
recorded as part of the cost of the investment and is amortized over twenty
years. Amortization expense was $5 million in 2002 (2001 $6
million and 2000  $8 million). At December 31, 2002, the
unamortized purchase price excess was $58 million after
consideration of Methanexs share buy-back programs (2001  $64
million and 2000  $81 million).  Other Assets Other assets are comprised of the following:  DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Restricted cash on
  retractable preferred shares (Note 12)
  
  $
  45
  
  $
  78
  
  $
  Deferred debt issue costs(1)
  
  17
  
  16
  
  8Deferred start-up costs(2)
  
  14
  
  18
  
  Other
  
  35
  
  23
  
  22$
  111
  
  $
  135
  
  $
  30  
 (1)
  Debt issue costs are amortized on a straight-line basis over the terms
  of the related debt instruments.(2)
  Start-up costs consist of the unamortized portion of operating costs,
  net of incidental revenues, incurred during the pre-operating period on constructed
  assets, which were deferred until commercial production levels were achieved
  in 2001.  15 
   Petrochemical Joint Ventures NOVAChemicals owns
a 50% interest in an ethylene plant and a 20% interest in a cogeneration
facility located at Joffre, Alberta. In addition, the Corporation has a 50%
interest in the Fort Saskatchewan Ethylene Storage Limited Partnership and a
33.3% interest in an ethane gathering system in Alberta. The following is summarized
financial information forNOVA
Chemicals interests in these
joint ventures, which the Corporation reports on a line-by-line basis in its
accounts:  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Revenue
  
  $
  171
  
  $
  144
  
  $
  61Operating expenses,
  depreciation and income taxes
  
  (161
  )
  (138
  )
  (48
  )Net income
  
  $
  10
  
  $
  6
  
  $
  13   DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Current assets
  
  $
  21
  
  $
  20
  
  $
  31Plant, property and
  equipment and other assets
  
  489
  
  514
  
  562Current liabilities
  
  (22
  )
  (25
  )
  (37
  )Long-term liabilities
  
  (28
  )
  (28
  )
  (24
  )Venturers equity
  
  $
  460
  
  $
  481
  
  $
  532  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Cash inflows (outflows)
  from:Operating activities
  
  $
  34
  
  $
  31
  
  $
  19Financing activities
  
  $
  (1
  )
  $
  2
  
  $
  2Investing activities
  
  $
  (8
  )
  $
  (14
  )
  $
  (91
  )  NOVAChemicals also
owned a 20% interest in the Cochin Pipeline, which was sold in January 2002 for
cash proceeds of $64 million, resulting in an after-tax gain of $36
million.  7.PLANT, PROPERTY AND EQUIPMENT  DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Plant and equipment
  
  $
  4,847
  
  $
  4,818
  
  $
  4,218Land
  
  32
  
  33
  
  31Under construction
  
  55
  
  85
  
  7024,934
  
  4,936
  
  4,951Accumulated depreciation
  
  (1,901
  )
  (1,777
  )
  (1,655
  )Net book value
  
  $
  3,033
  
  $
  3,159
  
  $
  3,296  During 2002, the Corporation sold and leased back certain buildings for
total proceeds of$13 million, resulting in an after-tax gain of $3
million. The gain realized on the sale has been deferred and is being amortized
to income over the term of the lease, which is 18 years.  16 
   8.ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES  DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Accounts payableTrade
  
  $
  350
  
  $
  241
  
  $
  351Other
  
  25
  
  20
  
  31375
  
  261
  
  382Accrued liabilitiesInterest
  
  22
  
  21
  
  23Accounts receivable
  securitization programs(1)
  
  11
  
  24
  
  Deferred credit on hedges
  of former economic exposures(2)
  
  3
  
  16
  
  37Site clean-up and
  restoration
  
  3
  
  3
  
  4Dividends
  
  6
  
  7
  
  13Deferred hedging gains(3)
  
  8
  
  
  
  Other
  
  134
  
  105
  
  158187
  
  176
  
  235$
  562
  
  $
  437
  
  $
  617  
 (1)
  Represents amounts repayable pursuant to the Corporations accounts
  receivable securitization programs (see Note 4).(2)
  Represents the portion of deferred credit on hedges of former economic
  exposures maturing within one year (see Notes 10 and 23).(3)
  Represents the portion of deferred gains realized on liquidation of
  natural gas option positions to be recognized within one year (see Notes 10
  and 23).  9.LONG-TERM DEBT  DECEMBER 31 (MILLIONS OF DOLLARS,
  UNLESS OTHERWISE NOTED)
  
  
  
  2002
  
  2001
  
  2000MATURITY
  
  DEBT
  
  AVERAGE
  YEAR-END
  INTERESTRATE(1)
  
  DEBT
  
  AVERAGE
  YEAR-END
  INTERESTRATE(1)
  
  DEBT
  
  AVERAGE
  YEAR-END
  INTERESTRATEUnsecured debentures and
  notes
  
  2005 to 2028
  
  $
  633
  
  7.3
  %
  $
  632
  
  7.3
  %
  $
  642
  
  7.4
  %Unsecured loans
  
  2004
  
  
  
  
  
  295
  
  2.9
  %
  454
  
  6.1
  %Medium-term notes
  
  2006 to 2009
  
  550
  
  6.0
  %
  550
  
  3.7
  %
  250
  
  7.4
  %Other unsecured debt
  
  2004 to 2020
  
  29
  
  6.2
  %
  31
  
  6.3
  %
  77
  
  7.5
  %1,212
  
  
  
  1,508
  
  
  
  1,423Less installments due
  within one year
  
  
  
  (1
  )
  
  
  (186
  )
  
  
  (17
  )$
  1,211
  
  
  
  $
  1,322
  
  
  
  $
  1,406  
 (1)Average year-end interest
rates include the effects of interest rate swaps (see Note 23).  Unsecured Debentures and Notes These debentures and notes are unsecured borrowings which rank pari passuin all respects with other
unsecured and unsubordinated debt of the Corporation. Terms of the outstanding
unsecured debentures and notes are as follows:  17 
   DECEMBER 31 (MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)
  
  
  
  2002
  
  2001
  
  2000MATURITY
  
  STATED
  INTEREST RATE
  
  DEBT
  
  DEBT
  
  DEBT2005(1)
  
  7.0
  %
  $
  100
  
  $
  100
  
  $
  1002010(2)
  
  7.85
  %
  158
  
  157
  
  1672025(3)
  
  7.875
  %
  100
  
  100
  
  1002026(4)
  
  7.0
  %
  150
  
  150
  
  1502028(5)
  
  7.25
  %
  125
  
  125
  
  125$
  633
  
  $
  632
  
  $
  642  
 (1)
  Not callable by the Corporation or redeemable by the holders prior to
  maturity.(2)
  $250 million Canadian; callable at the option of the Corporation at
  any time.(3)
  Callable at the option of the Corporation on or after September 15,
  2005.(4)
  Redeemable at the option of the holders on August 15, 2003.(5)
  Redeemable at the option of the holders on August 15, 2008.  Unsecured Loans The Corporation has a committed credit facility from a syndicate of
Canadian andU.S. banks. The facility provides for a floating
rate revolving line of credit and the issuance of letters of credit, to a
maximum of $310 million. The facility expires in April
2004 and is renewable, in April 2003, for a further 364-day period extending to
April 2005. If not renewed in April 2003, the credit facility expires in April
2004. Obligations under the credit facility rank pari passuwith all other unsecured and unsubordinated debt
of the Corporation. At December 31, 2002NOVA Chemicals was in compliance with all required financial covenants under
the credit facility.  Medium-Term Notes The notes are unsecured borrowings ranking pari passuwith all other unsecured and unsubordi-nated debt
of the Corporation. The$300 million 7% notes are due in May 2006 and
are not callable by the Corporation or redeemable by the holders prior to
maturity. The $250 million 7.4% notes are due in April 2009
and are callable by the Corporation at any time.  Repayment Requirements Repayment requirements in respect of long-term debt are as follows:  (MILLIONS
  OF DOLLARS)2003
  
  $
  12004
  
  2005
  
  1022006
  
  3022007
  
  2Thereafter
  
  805$
  1,212  Interest Expense  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Interest on long-term debt
  
  $
  80
  
  $
  96
  
  $
  98Interest on bank loans and
  securitizations
  
  5
  
  8
  
  10Other
  
  5
  
  4
  
  2Gross interest expense
  
  90
  
  108
  
  110Interest capitalized during
  plant construction
  
  
  
  (18
  )
  (59
  )Interest income
  
  (3
  )
  (2
  )
  (6
  )Interest expense (net)
  
  $
  87
  
  $
  88
  
  $
  45  18 
   10.DEFERRED CREDITS  DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Future income taxes (Notes
  2 and 18)
  
  $
  611
  
  $
  615
  
  $
  601Pension and post-retirement
  benefit obligations
  
  92
  
  83
  
  68Deferred hedging gains(1)
  
  40
  
  24
  
  Site clean-up and
  restoration
  
  27
  
  26
  
  31Deferred share unit plan
  obligations
  
  16
  
  13
  
  8Deferred credit on hedges
  of former economic exposures(2)
  
  
  
  3
  
  20Other
  
  30
  
  22
  
  32$
  816
  
  $
  786
  
  $
  760  
 (1)Represents the long-term
portion of deferred gains realized on liquidation of natural gas option
positions (2002$9 million; 2001 and 2000$nil) and fixed for floating interest
rate swaps (2002$31 million; 2001 $24million and 2000$nil) (see Notes 8 and
23). (2)Represents the long-term
portion of deferred credit on hedges of former economic exposures (see Notes 8
and 23).  11.PREFERRED SECURITIES  On January 26, 1999 and October 22, 1998,NOVA Chemicals issued $172.5 million and $210
million of preferred securities due March 31, 2048 and December 31, 2047,
respectively. The securities are callable by the Corporation at any time on or
after January 26, 2004 and October 22, 2003, respectively. Distributions on these
securities are payable at annual rates of 9.04% and 9.50%, respectively, and
are deductible for tax purposes by the Corporation. The after-tax distributions
are charged to reinvested earnings. The Corporation may, subject to certain conditions,
elect to defer distributions for a period of up to 20 consecutive quarters. No
distributions relating to the securities have been deferred to date. The Corporation may elect to
pay the maturity amount, the redemption amount and the deferred distributions
by delivering to a trustee, preferred shares, common shares or other equity
securities ofNOVA Chemicals. The trustee would then sell the
delivered securities and pay cash to the holders of the preferred securities.
The principal amount has been classified as equity as the Corporation has the
unrestricted ability to settle the amount by issuing its own equity securities.  12.RETRACTABLE PREFERRED SHARES  In connection with the
acquisition of styrenics assets from Huntsman Corporation on December 31, 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 have the right to exchange the shares (a
retraction) for NOVA Chemicals common shares (plus preferred shares
if the market value of such common shares is less than $198
million). During 2001 and 2002, certain
changes were made to the terms of the retractable preferred shares and related
stockholder agreements giving the Corporation the right to call the retractable
preferred shares on or after December 15, 2001. These changes effectively
provide the Corporation with the right to repurchase the retractable preferred
shares prior to any retraction intoNOVA Chemicals common
shares. If the Corporation does not exercise its repurchase rights prior to
October 1, 2003, the market-based exchange rate at which the retractable
preferred shares may be retracted into NOVA Chemicals common
shares (and, accordingly, the effective price at which the common shares would
be issued) will be fixed on that date. The number of NOVA Chemicals common shares issuable upon a retraction remains limited to a
maximum of 8.5 million shares with the  19 
   balance of the obligation, if any, met through the issuance ofNOVA Chemicals preferred shares. The dividend rate on the retractable
preferred shares is 2% per year. Coincident with making the
above changes,NOVA Chemicals entered into a total return swap,
which terminates on October 1, 2003, with respect to the retractable preferred
shares. Under the terms of the total return swap: (i) the counterparty pays NOVA Chemicals the total return on the retractable preferred shares
(dividends plus positive changes in equity value of the preferred shares,
capped at $191 million until termination or sale at which
time any such positive changes are not capped) and (ii) NOVA Chemicals pays the counterparty a spread to LIBOR as well as any negative changes in the equity value of the retractable
preferred shares. NOVAChemicals is obligated under the swap to
provide margin (cash, government securities or a letter of credit) equal to 20%
of the original notional amount of $191 million, which is currently satisfied by a
letter of credit. In addition, the Corporation is also obligated under the swap
to provide margin equal to the difference between the original notional amount
and the current notional amount of $180 million, which will be reduced to $126
million as of April 1, 2003. This margin is currently satisfied by posting
restricted cash. If the equity value of the retractable preferred shares
decreases by 5% or more at anytime, the Corporation is required to post
additional margin. If the equity value of the retractable preferred shares
increases by 5% or more, any excess collateral will be returned to NOVA Chemicals. Changes in equity value of the retractable preferred shares
during the term of the swap will be determined based on changes in the average
price of the outstanding 9.04% and 9.50% preferred securities issued by NOVA Chemicals (see Note 11). IfNOVA Chemicals defaults on other debt with an aggregate principal amount of $25
million or more, or the closing price of the Corporations common shares is U.S. $15.00 or less, or upon certain other credit events, the counterparty
will have the right to sell the retractable 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
most recent adjusted notional equity value of the retractable preferred shares
(in the event the difference was negative). Subsequent to the termination of
the swap, NOVA Chemicals may, at its option, repurchase the
retractable preferred shares for $198 million plus accrued and unpaid dividends.  13.COMMON SHARES  Authorized Unlimited number of voting common shares without par value.  Issued and Outstanding(MILLIONS
  OF DOLLARS, EXCEPT NUMBER OF SHARES)
  
  2002
  
  2001
  
  2000Beginning of year
  
  85,778,788
  
  $
  472
  
  84,884,333
  
  $
  460
  
  92,543,746
  
  $
  497Repurchased shares(1)
  
  
  
  
  
  
  
  
  
  (8,000,000
  )
  (41
  )Issued for cash on exercise
  of stock options
  
  749,024
  
  12
  
  894,455
  
  12
  
  340,587
  
  4End of year(2)
  
  86,527,812
  
  $
  484
  
  85,778,788
  
  $
  472
  
  84,884,333
  
  $
  460  
 (1)NOVAChemicals
repurchased 8 million of its common shares on the Toronto Stock Exchange for
$150 million in 2000. (2)Stated common share capital
for legal purposes at December 31, 2002 is $1,656 million.  20 
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Shares Reserved for Future Issue  DECEMBER 31
  (NUMBER OF SHARES)
  
  2002
  
  2001
  
  2000Under the employee
  incentive stock option plan(1)(2)
  
  11,244,963
  
  11,993,987
  
  12,888,442Under the director
  compensation plan
  
  47,800
  
  47,800
  
  47,800Under the terms of the
  retractable preferred share agreement (Note 12)
  
  8,500,000
  
  8,500,000
  
  8,500,00019,792,763
  
  20,541,787
  
  21,436,242  
 (1)Under the employee incentive
stock option plan, options are outstanding to officers and employees to
purchase 8,625,532 shares at prices ranging from $14.247 to $36.00 (Canadian $)
per share with expiration dates between February 25, 2003, and March 6, 2012. A
total of 2,619,431 common shares are reserved but unallocated. See Note 14 for
further details regarding the plan. (2)On May 15, 2000, shareholders
approved an increase in the number of common shares reserved for issuance under
the employee incentive stock option plan, to 13 million common shares.  Earnings Per Share  The following table outlines the calculation of basic and diluted
earnings (loss) per share:  YEAR ENDED DECEMBER 31
  
  2002
  
  2001
  
  2000BASIC
  
  DILUTED
  
  BASIC
  
  DILUTED
  
  BASIC
  
  DILUTEDNet income (loss)
  
  $
  (81
  )
  $
  (81
  )
  $
  (128
  )
  $
  (128
  )
  $
  302
  
  $
  302Preferred securities
  dividends and distributions
  
  (31
  )
  (31
  )
  (33
  )
  (33
  )
  (36
  )
  (36
  )Net income (loss) available
  to common shareholders  basic
  
  $
  (112
  )
  $
  (112
  )
  $
  (161
  )
  $
  (161
  )
  $
  266
  
  $
  266Add back preferred share
  dividends
  
  
  
  
  
  
  
  
  
  
  
  14Net income (loss) available
  to common shareholders  diluted
  
  
  
  $
  (112
  )
  
  
  $
  (161
  )
  
  
  $
  280Weighted-average common
  shares outstanding
  
  86.3
  
  86.3
  
  85.4
  
  85.4
  
  88.7
  
  88.7Add dilutive effects(1)Stock options
  
  
  
  
  
  
  
  
  
  
  
  1.2Convertible preferred
  shares
  
  
  
  
  
  
  
  
  
  
  
  8.5Weighted-average common
  shares for earnings per share calculation
  
  86.3
  
  86.3
  
  85.4
  
  85.4
  
  88.7
  
  98.4Earnings (loss) per common
  share
  
  $
  (1.30
  )
  $
  (1.30
  )
  $
  (1.88
  )
  $
  (1.88
  )
  $
  3.00
  
  $
  2.84  
 (1)Convertible preferred shares
and stock options representing 17 million common shares have been excluded from
the computation of diluted earnings per share for the year ended December 31,
2002 (200116 million) as their impact would be anti-dilutive.  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 plan expires in May 2009, but is subject
to shareholder re-confirmation at the sixth annual meeting following the date
of approval.  21 
   14. STOCK-BASED
COMPENSATION  Employee Incentive Stock Option Plan The Corporation may grant options to its employees for up to 13 million
common shares. The exercise price of each option equals the closing market
price on the Toronto Stock Exchange 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. A summary of the status of
the Corporations employee incentive stock option plan as of December 31, 2002,
2001 and 2000, and changes during the years ended on those dates is presented
below:  2002
  
  2001
  
  2000OPTIONS
  
  WEIGHTED-AVERAGE
  EXERCISE PRICE(CANADIAN
  $)
  
  OPTIONS
  
  WEIGHTED-AVERAGE
  EXERCISE PRICE(CANADIAN
  $)
  
  OPTIONS
  
  WEIGHTED-AVERAGE
  EXERCISE PRICE(CANADIAN
  $)Outstanding at beginning of
  year
  
  8,558,109
  
  $
  25.648
  
  8,003,725
  
  $
  24.762
  
  6,833,957
  
  $
  24.152Granted
  
  855,900
  
  $
  34.319
  
  1,547,350
  
  $
  28.182
  
  1,612,900
  
  $
  26.762Exercised
  
  (749,024
  )
  $
  23.613
  
  (894,455
  )
  $
  21.813
  
  (340,587
  )
  $
  21.182Cancelled
  
  (39,453
  )
  $
  30.713
  
  (98,511
  )
  $
  28.267
  
  (102,545
  )
  $
  27.490Outstanding at end of year
  
  8,625,532
  
  $
  26.662
  
  8,558,109
  
  $
  25.648
  
  8,003,725
  
  $
  24.762Exercisable at end of year
  
  6,116,910
  
  $
  25.159
  
  5,404,057
  
  $
  24.193
  
  5,022,804
  
  $
  23.125  The following table summarizes information about employee incentive
stock options outstanding at December 31, 2002:  OPTIONS
  OUTSTANDING
  
  OPTIONS
  EXERCISABLERANGE OF EXERCISE PRICES (CANADIAN $)
  
  NUMBER
  OUTSTANDING
  
  WEIGHTED-
  AVERAGE
  REMAINING
  CONTRACTUAL
  LIFE (YEARS)
  
  WEIGHTED-
  AVERAGE
  EXERCISE PRICE
  (CANADIAN $)
  
  NUMBER
  EXERCISABLE
  
  WEIGHTED-
  AVERAGE
  EXERCISE PRICE
  (CANADIAN $)$14.247  $18.376
  
  504,709
  
  1.5
  
  $
  16.811
  
  504,709
  
  $
  16.811$20.234  $21.225
  
  997,400
  
  3.5
  
  $
  20.749
  
  997,400
  
  $
  20.749$24.950  $26.346
  
  3,520,293
  
  6.3
  
  $
  25.732
  
  3,187,905
  
  $
  25.682$28.050  $36.000
  
  3,603,130
  
  7.5
  
  $
  30.587
  
  1,426,896
  
  $
  30.0278,625,532
  
  
  
  
  
  6,116,910  The Corporation uses the intrinsic-value method of accounting for
stock-based compensation awards granted to employees, where compensation
expense, if any, is measured based on the excess of the market price of the
stock over the option exercise price on the date of grant. As options are
generally granted at the market price on the date of grant, no compensation
cost results. Had compensation cost for stock options been determined and
expensed based on the fair-value method, the pro forma amounts, on the following
page, would have resulted:  22 
   YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
  
  2002
  
  2001
  
  2000Net income (loss)As reported
  
  $
  (81
  )
  $
  (128
  )
  $
  302Pro forma
  
  $
  (92
  )
  $
  (134
  )
  $
  293Earnings (loss) per share 
  basicAs reported
  
  $
  (1.30
  )
  $
  (1.88
  )
  $
  3.00Pro forma
  
  $
  (1.43
  )
  $
  (1.95
  )
  $
  2.90Earnings (loss) per share 
  dilutedAs reported
  
  $
  (1.30
  )
  $
  (1.88
  )
  $
  2.84Pro forma
  
  $
  (1.43
  )
  $
  (1.95
  )
  $
  2.78  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 in 2002, 2001, and
2000:  WEIGHTED-AVERAGE
  ASSUMPTIONS
  
  2002
  
  2001
  
  2000Expected dividend yield
  %
  
  1.0
  
  1.0
  
  1.0Expected volatility
  %
  
  39.1
  
  39.6
  
  42.5Risk-free interest rate
  %
  
  3.38
  
  5.65
  
  5.58Expected life
  years
  
  2 1/2
  
  2 1/2
  
  2 1/2Fair value of options
  granted during the year
  U.S.
  
  $
  5.57
  
  $
  5.16
  
  $
  5.36  Equity Appreciation Plan  The Corporation has an equity appreciation plan in which units are
granted to key employees. The redemption price of a unit is determined by the
closing price 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. The value of a unit on the redemption date is the difference between the
price of the Corporations common shares on that date and the redemption price. At December 31, 2002, the
mark-to-market value of the vested units was approximately$1
million (2001  $1
million and 2000  $nil).  15. 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, prior to the relevant performance period, to receive all or a portion of
their management incentive award or fees, respectively, in deferred share units
(DSUs). The amount of the management
incentive award that a key employee elects to have participate in theDSUP will be converted to an equivalent number of DSUs based on the average closing price 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 theDSUP will be converted to an equivalent number of DSUs based on the average closing price 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.  23 
   The units are exercisable
upon retirement or termination from the Corporation. A summary of the status of
the Corporations deferred share unit plans as of December 31, 2002, 2001 and
2000, and changes during the years ended on those dates is presented below:  EMPLOYEE DEFERRED SHARE UNITS
  
  2002
  
  2001
  
  2000UNITS
  
  WEIGHTED-AVERAGEPURCHASE PRICE
  (U.S. $)
  
  UNITS
  
  WEIGHTED-AVERAGEPURCHASE PRICE
  (U.S. $)
  
  UNITS
  
  WEIGHTED-AVERAGEPURCHASE PRICE
  (U.S. $)Cumulative amount at
  beginning of year
  
  352,393
  
  $
  16.52
  
  280,454
  
  $
  15.88
  
  156,446
  
  $
  13.14Earned
  
  65,622
  
  $
  19.14
  
  91,063
  
  $
  18.48
  
  124,008
  
  $
  19.35Redeemed
  
  (38,901
  )
  $
  16.53
  
  (19,124
  )
  $
  16.52
  
  
  
  Cumulative amount at end of
  year
  
  379,114
  
  $
  16.97
  
  352,393
  
  $
  16.52
  
  280,454
  
  $
  15.88  NON-EMPLOYEE DIRECTOR DEFERRED SHARE UNITS
  
  2002
  
  2001
  
  2000UNITS
  
  WEIGHTED-AVERAGE
  PURCHASE PRICE(CANADIAN $)
  
  UNITS
  
  WEIGHTED-AVERAGE
  PURCHASE PRICE(CANADIAN $)
  
  UNITS
  
  WEIGHTED-AVERAGE
  PURCHASE PRICE(CANADIAN $)Cumulative amount at
  beginning of year
  
  44,040
  
  $
  28.91
  
  27,806
  
  $
  29.24
  
  15,539
  
  $
  30.13Earned
  
  13,343
  
  $
  33.16
  
  16,234
  
  $
  28.34
  
  23,288
  
  $
  28.45Redeemed
  
  
  
  
  
  
  
  
  
  (11,021
  )
  $
  28.83Cumulative amount at end of
  year
  
  57,383
  
  $
  29.90
  
  44,040
  
  $
  28.91
  
  27,806
  
  $
  29.24  The amount expensed in aggregate in 2002 related to the award of units
was approximately$4 million (2001  $5 million and 2000  $4 million).  16.RESTRUCTURING CHARGES  During 2002,NOVA Chemicals took several actions to streamline
its operations and reduce costs. Several high-cost reactors were shut down or
temporarily idled, certain capital projects were cancelled, and staff reduction
and relocation programs were initiated. As a result of these activities, NOVA Chemicals recognized $20 million in restructuring costs. The
Corporation expects these restructuring actions to be substantially complete by
the end of 2003. Restructuring charges in 2001
and 2000 related to organizational changes involving plant closures, write-downs
of certain non-productive assets and severance activities. All actions related
to these restructuring activities have been substantially completed. At December 31, 2002,$27
million related to restructuring activities is included in other accrued liabilities
(see Note 8).  17.OTHER GAINS  YEAR ENDED
  DECEMBER 31(MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000BEFORE-TAX
  
  AFTER-TAX
  
  BEFORE-TAX
  
  AFTER-TAX
  
  BEFORE-TAX
  
  AFTER-TAXGain on sale of 20%
  interest in Cochin Pipeline
  
  $
  59
  
  $
  36
  
  $
  
  
  $
  
  
  $
  
  
  $
  IRSsettlement
  
  
  
  
  
  58
  
  44
  
  
  
  Gain on sale of investment
  in Dynegy Inc.
  
  
  
  
  
  
  
  
  
  32
  
  21$
  59
  
  $
  36
  
  $
  58
  
  $
  44
  
  $
  32
  
  $
  21  24 
   18.  INCOME TAXES  Income tax (recovery) expense varies from amounts computed by applying
the Canadian federal and provincial statutory income tax rates to income (loss)
before income taxes, as shown below:  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Income (loss) before income
  taxes
  
  $
  (94
  )
  $
  (211
  )
  $
  433Statutory income tax rate
  
  39.24
  %
  42.12
  %
  44.62
  %Computed income tax
  (recovery) expense
  
  $
  (37
  )
  $
  (89
  )
  $
  193Increase (decrease) in
  taxes resulting from:Manufacturing and
  processing deduction
  
  3
  
  4
  
  (29
  )Lower effective foreign tax
  rates
  
  8
  
  25
  
  (4
  )Lower effective tax rate on
  equity in earnings of affiliates
  
  (2
  )
  (3
  )
  (5
  )Non-provision of future
  income taxes on cost-of-service operations(1)
  
  8
  
  8
  
  9Lower tax rate on gain
  related to tax settlement(2)
  
  
  
  (10
  )
  Income tax rate adjustments(3)
  
  
  
  (17
  )
  (29
  )Other
  
  7
  
  (1
  )
  (4
  )Income tax (recovery)
  expense
  
  $
  (13
  )
  $
  (83
  )
  $
  131Current income tax
  (recovery) expense
  
  $
  (21
  )
  $
  (79
  )
  $
  38Future income tax (recovery)
  expense
  
  8
  
  (4
  )
  93Income tax (recovery)
  expense
  
  $
  (13
  )
  $
  (83
  )
  $
  131  
 (1)Certain agreements for
cost-of-service operations provide for the recovery of income taxes from
customers. The Corporation records income tax expense on these operations equal
to the amounts recoverable under the agreements, resulting in no effect on net
income. Some agreements limit the recoverable amount to current taxes payable.
Accordingly, the provision for income taxes excludes future income tax
recoveries relating to these operations. Cumulative unrecorded future income
taxes payable amounted to $6 million at December 31, 2002 (2001$13 million and
2000$17 million). (2)In 2001,NOVAChemicals
recorded a $58 million gain ($44 million after-tax) related to a settlement
with theIRS. (3)As a result of Canadian
federal and provincial tax rate reductions in 2001 and 2000, income tax rates
on future tax liabilities have been reduced.  The principal temporary difference in calculating future income taxes,
for both cost-of-service and non-cost-of-service operations, relates to
deductions for tax purposes in respect of plant, property and equipment in
excess of depreciation provided for in the accounts. Future tax liabilities
resulting from these temporary differences have been reduced by the tax
benefits associated with unused tax losses. The following table outlines
the income tax (recovery) expense arising from Canadian and Foreign operations:  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Income (loss) before income
  taxesCanadian
  
  $
  (35
  )
  $
  (19
  )
  $
  402Foreign
  
  (59
  )
  (192
  )
  31$
  (94
  )
  $
  (211
  )
  $
  433Current income tax
  (recovery) expenseCanadian
  
  $
  (17
  )
  $
  (46
  )
  $
  25Foreign
  
  (4
  )
  (33
  )
  13(21
  )
  (79
  )
  38Future income tax
  (recovery) expenseCanadian
  
  19
  
  18
  
  77Foreign
  
  (11
  )
  (22
  )
  168
  
  (4
  )
  93Total income tax (recovery)
  expense
  
  $
  (13
  )
  $
  (83
  )
  $
  131  25 
  19.CHANGES IN NON-CASH WORKING CAPITAL  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Accounts receivable
  
  $
  113
  
  $
  89
  
  $
  (225
  )Inventories
  
  (42
  )
  254
  
  (153
  )Accounts payable and
  accrued liabilities
  
  125
  
  (180
  )
  54Changes in non-cash working
  capital
  
  196
  
  163
  
  (324
  )Reclassification and other
  items not having a cash effect
  
  (1
  )
  (1
  )
  (123
  )Changes in non-cash working
  capital having a cash effect
  
  $
  195
  
  $
  162
  
  $
  (447
  )These changes relate to the
  following activities:Operating
  
  $
  206
  
  $
  184
  
  $
  (260
  )Investing
  
  
  
  (16
  )
  (186
  )Financing
  
  (11
  )
  (6
  )
  (1
  )Decrease (increase) in
  working capital
  
  $
  195
  
  $
  162
  
  $
  (447
  )  Interest and Income Tax Payments Third-party interest payments were$86 million in 2002 (2001
 $108 million and 2000  $106 million). Income tax payments (receipts)
were $(176) million in 2002 (2000  $(13)
million and 2000  $207 million).  20.EMPLOYEE FUTURE BENEFITS  Pension Plans NOVAChemicals
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 and are partially indexed to inflation for some plans.
Actuarial reports are prepared regularly by independent actuaries for
accounting and funding purposes. The Corporation funds the plans using a
valuation based on the projected unit credit method and the plans assets
consist primarily of publicly traded equity and fixed income securities. Plan
assets are measured at fair value, while pension obligations are discounted
using current yield rates of bonds with terms to maturity that approximate the
duration of the Corporations pension liabilities. Pension and post-retirement
expense (included in operating and selling, general and administrative costs)
for all significant plans consisted of the following:  PENSION PLANS
  
  POST-RETIREMENT PLANSYEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000
  
  2002
  
  2001
  
  2000Current service cost
  
  $
  16
  
  $
  17
  
  $
  13
  
  $
  2
  
  $
  1
  
  $
  1Interest cost on projected
  benefit obligations
  
  25
  
  26
  
  21
  
  3
  
  3
  
  3Expected return on plan
  assets
  
  (26
  )
  (25
  )
  (22
  )
  
  
  
  
  Prior service cost
  
  2
  
  2
  
  
  
  
  
  
  
  Actuarial loss
  
  1
  
  
  
  
  
  
  
  
  
  Amortization of transition
  obligation
  
  (5
  )
  (4
  )
  (4
  )
  
  
  
  
  Amortization of
  settlement/curtailment (gain)/loss
  
  
  
  1
  
  (4
  )
  
  
  
  
  Net total of other
  components
  
  
  
  1
  
  
  
  1
  
  2
  
  1Net expense
  
  $
  13
  
  $
  18
  
  $
  4
  
  $
  6
  
  $
  6
  
  $
  5  26 
   The status of all significant defined benefit pension and
post-retirement plans is as follows:  PENSION PLANS
  
  POST-RETIREMENT PLANSYEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000
  
  2002
  
  2001
  
  2000Change in benefit
  obligationsBenefit obligation at
  beginning of year
  
  $
  388
  
  $
  372
  
  $
  286
  
  $
  50
  
  $
  38
  
  $
  31Current service cost
  
  16
  
  17
  
  13
  
  2
  
  1
  
  1Interest cost
  
  25
  
  26
  
  21
  
  3
  
  3
  
  3Experience (gain) loss
  
  (1
  )
  9
  
  28
  
  
  
  10
  
  6Plan amendments
  
  1
  
  
  
  9
  
  
  
  
  
  Business combination(1)
  
  2
  
  
  
  45
  
  
  
  
  
  Settlement/curtailment(2)
  
  (1
  )
  
  
  (7
  )
  
  
  
  
  Special termination
  benefits
  
  
  
  2
  
  
  
  
  
  1
  
  Employee contributions
  
  9
  
  2
  
  2
  
  
  
  
  
  Benefits paid
  
  (19
  )
  (21
  )
  (14
  )
  (2
  )
  (2
  )
  (2
  )Foreign currency exchange
  rate changes
  
  10
  
  (19
  )
  (11
  )
  
  
  (1
  )
  (1
  )Net benefit obligation at
  end of year
  
  $
  430
  
  $
  388
  
  $
  372
  
  $
  53
  
  $
  50
  
  $
  38Change in plan assetsFair value of plan assets
  at beginning of year
  
  $
  329
  
  $
  357
  
  $
  300
  
  $
  
  
  $
  
  
  $
  Actual return on plan
  assets
  
  (28
  )
  3
  
  38
  
  
  
  
  
  Employer and employee contributions
  
  22
  
  10
  
  10
  
  
  
  
  
  Business combination(1)
  
  
  
  
  
  43
  
  
  
  
  
  Settlement/curtailment(2)
  
  (1
  )
  
  
  (7
  )
  
  
  
  
  Benefits paid
  
  (19
  )
  (21
  )
  (14
  )
  
  
  
  
  Foreign currency exchange
  rate changes
  
  9
  
  (18
  )
  (11
  )
  
  
  
  
  Net total of other
  components
  
  
  
  (2
  )
  (2
  )
  
  
  
  
  Fair value of plan assets
  at end of year
  
  $
  312
  
  $
  329
  
  $
  357
  
  $
  
  
  $
  
  
  $
  Funded statusPlan assets in excess
  (deficiency) of benefit obligation
  
  $
  (118
  )
  $
  (59
  )
  $
  (15
  )
  $
  (53
  )
  $
  (50
  )
  $
  (38
  )Unrecognized net
  transitional (asset) obligation
  
  (44
  )
  (48
  )
  (55
  )
  10
  
  10
  
  12Unrecognized prior service
  cost
  
  8
  
  9
  
  9
  
  
  
  
  
  Unrecognized net actuarial
  loss
  
  105
  
  49
  
  22
  
  13
  
  14
  
  5Net amounts recognized in
  the consolidated balance sheets
  
  $
  (49
  )
  $
  (49
  )
  $
  (39
  )
  $
  (30
  )
  $
  (26
  )
  $
  (21
  )Assumptions as at December
  31Discount rate
  
  6.4
  %
  6.4
  %
  7.0
  %
  6.8
  %
  7.0
  %
  7.3
  %Assumed long-term rate of
  return on plan assets
  
  7.7
  %
  7.8
  %
  7.5
  %
  
  
  
  
  Rate of increase in future
  compensation
  
  3.1
  %
  3.8
  %
  4.5
  %
  3.7
  %
  3.0
  %
  4.3
  %Long-term health care
  inflation(3)
  
  
  
  
  
  
  
  5.0
  %
  4.8
  %
  4.7
  %  
 (1)The benefit obligations and
plan assets assumed in the Shell acquisition are reflected beginning in 2000. (2)Effective January 1, 2000,NOVAChemicals offered
a defined contribution arrangement to its Canadian employees. Employees could
opt to convert their defined pension benefits accumulated under certain
Canadian plans to the new defined contribution option on an irrevocable basis.
This change was accounted for as a settlement of a portion of the defined
benefit arrangements. (3)Ultimate trend rate, expected
to be achieved in 2010. The assumed health care cost trend rate used to measure
the 2003 expected cost of benefits covered by the plans is approximately 10%.  27 
   NOVAChemicals maintains multiple pension plans
including several plans for which accumulated benefit obligations exceed the
fair value of assets. The accumulated benefit obligations and the fair value of
assets for these plans were $426 million and $308 million,
respectively, at December 31, 2002 (2001  $305 million and $246
million, respectively and 2000 $63 million and $30 million,
respectively).  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 accumulated post-retirement
benefit obligation by an additional$2 million at December 31,
2002 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 $2 million and $4 million for Canadian
and U.S. plans, respectively.  Defined Contribution Arrangements NOVAChemicals 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 in 2002 was $6 million (2001  $6 million and 2000  $7 million).  21.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. The Corporation leases office
space, railcar and other equipment under various operating leases. The minimum
lease payments are approximately$536 million in total with
annual amounts of $41 million in 2003, $40
million in 2004, $37 million in 2005, $35
million in 2006, $33 million in 2007, and $350
million thereafter. Rental expense under operating leases in 2002 was $55
million (2001  $58
million and 2000  $49
million). The Corporation has entered
into agreements for the purchase of minimum amounts of feed-stock and other raw
materials for short- and long-term supply. The resulting obligations, based on
year-end market prices, are approximately$6,650 million in total
with annual amounts of $1,477 million in 2003, $642
million in 2004, $643 million in 2005, $640
million in 2006, $508 million in 2007, and $2,740
million thereafter. In addition to the future
site clean-up and restoration costs which have been accrued (Notes 8 and 10),
costs will be incurred in the future for plant sites when they are sold or are
no longer used in the Corporations operations. The liability with respect to
these costs is estimated to be approximately$59
million.  28 
   22.SEGMENTED INFORMATION  The Corporation determines its reportable segments based on the
structure of its operations, which are primarily focused in two principal
business segments  olefins/polyolefins and styrene/polystyrene (styrenics).
These operations involve the production and marketing of ethylene and
polyethylene resins, and styrene monomer and styrenic polymers, respectively.  Financial Information by Business
Segment  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000RevenueOlefins and polyolefins
  
  $
  1,930
  
  $
  2,014
  
  $
  2,228Styrenics
  
  1,305
  
  1,314
  
  1,866Intersegment eliminations
  
  (144
  )
  (134
  )
  (178
  )$
  3,091
  
  $
  3,194
  
  $
  3,916DepreciationOlefins and polyolefins
  
  $
  166
  
  $
  132
  
  $
  86Styrenics
  
  100
  
  98
  
  102$
  266
  
  $
  230
  
  $
  188Operating income (loss)Olefins and polyolefins
  
  $
  67
  
  $
  57
  
  $
  439Styrenics
  
  (118
  )
  (225
  )
  93Restructuring charges
  
  (20
  )
  (27
  )
  (118
  )$
  (71
  )
  $
  (195
  )
  $
  414Net income (loss)Olefins and polyolefins
  
  $
  (5
  )
  $
  (2
  )
  $
  258Styrenics
  
  (102
  )
  (181
  )
  42Equity investments
  
  5
  
  11
  
  23Other
  
  21
  
  44
  
  (21
  )$
  (81
  )
  $
  (128
  )
  $
  302Plant, property and
  equipment additionsOlefins and polyolefins
  
  $
  43
  
  $
  125
  
  $
  401Styrenics
  
  28
  
  43
  
  39$
  71
  
  $
  168
  
  $
  440DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000AssetsOlefins and polyolefins
  
  $
  1,923
  
  $
  1,960
  
  $
  2,198Styrenics
  
  1,643
  
  1,638
  
  1,937Investment in Methanex
  
  399
  
  397
  
  400Corporate and other(1)
  
  189
  
  364
  
  219$
  4,154
  
  $
  4,359
  
  $
  4,754  
 (1)Amounts include
all cash and cash equivalents.  29 
   Financial Information by Geographic
Area  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Revenue(1)Canada
  
  $
  1,081
  
  $
  1,236
  
  $
  1,318United States
  
  1,410
  
  1,408
  
  1,805Europe and other
  
  600
  
  550
  
  793$
  3,091
  
  $
  3,194
  
  $
  3,916Export sales from Canadian
  operationsUnited States
  
  $
  748
  
  $
  694
  
  $
  801Europe and other
  
  113
  
  137
  
  206$
  861
  
  $
  831
  
  $
  1,007Operating income (loss)(2)Canada
  
  $
  11
  
  $
  (75
  )
  $
  409United States
  
  (85
  )
  (31
  )
  (4
  )Europe and other
  
  3
  
  (89
  )
  9$
  (71
  )
  $
  (195
  )
  $
  414Equity in earnings of
  affiliatesCanada
  
  $
  5
  
  $
  14
  
  $
  32DECEMBER
  31 (MILLIONS OF DOLLARS)Assets(2)Canada
  
  $
  2,055
  
  $
  2,237
  
  $
  2,467United States
  
  1,090
  
  1,189
  
  1,242Europe and other
  
  583
  
  520
  
  578Investments
  
  426
  
  413
  
  467$
  4,154
  
  $
  4,359
  
  $
  4,754  
 (1)Based on location
of customer. (2)Based on location
of the operating facilities.  23.FINANCIAL INSTRUMENTS  Financial Instrument Fair Values Financial instrument fair values represent a reasonable approximation of
amountsNOVA 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 balance sheets for cash and cash equivalents, accounts receivable, bank
loans, and accounts payable and accrued liabilities approximate their fair
value. Fair values and carrying amounts for long-term debt are as follows:  CARRYING AMOUNT
  
  ESTIMATED FAIR VALUE(1)DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000
  
  2002
  
  2001
  
  2000Long-term debt(2)
  
  $
  1,212
  
  $
  1,508
  
  $
  1,423
  
  $
  1,134
  
  $
  1,410
  
  $
  1,389  
 (1)The fair value of long-term
debt is based on quoted market prices, where available. If market prices are
not available, fair values are estimated using discounted cash flow analyses,
based onNOVAChemicals current incremental borrowing rates for similar borrowing
arrangements. (2)Includes debt installments due
within one year.  30 
   Foreign Exchange Risk Management NOVAChemicals has U.S., Canadian and European-based petrochemical operations. As a result, a
portion of the Corporations expenditures are incurred in Canadian dollars. NOVA Chemicals manages its exposure to fluctuations in the Canadian/U.S. dollar exchange rate by using forward exchange contracts. The outstanding forward
contracts to deliverU.S. dollars and receive Canadian dollars are as
follows:  DECEMBER 31
  (MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)
  
  2002
  
  2001
  
  2000Foreign exchange forwardsNotional amount
  
  $
  100
  
  $
  640
  
  $
  1,235Average exchange rate per
  Cdn dollar
  
  $
  0.70
  
  $
  0.70
  
  $
  0.70Estimated fair value(1)
  
  $
  (13
  )
  $
  (86
  )
  $
  (108
  )Carrying value (see Notes 8
  and 10)
  
  $
  (3
  )
  $
  (19
  )
  $
  (57
  )  
 (1)Unrealized loss. The fair
values of these instruments are estimated based on quoted market prices of
comparable contracts, adjusted for maturity differences.  Effective December 31, 1999 the Corporation changed its functional
currency to theU.S. dollar. The underlying U.S. dollar exposure originally being hedged by forward contracts then in
place no longer existed. As a result, at December 31, 1999, the Corporation
wrote off the estimated fair value of these hedges, represented by the
difference between the average contracted (74¢) and average forward (70¢)
exchange rates on the hedging contracts in the program. This resulted in a $95
million before-tax ($60 million after-tax) charge to earnings in
1999 and the recording of a deferred credit on the balance sheet (see Notes 8
and 10). Effective January 1, 2000,NOVA Chemicals redesignated its forward contracts as hedges of Canadian
dollar costs. The hedged rates equal the forward rates as of December 31, 1999
and average one Canadian dollar = U.S.
70¢ over the hedging period,
which extends to March 2003.  Commodity Price Risk Management NOVAChemicals uses
commodity-based derivatives to hedge a portion of 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.  31 
   At December 31, 2002, 2001, and 2000, the notional volume and estimated
fair value of outstanding derivative contracts for natural gas are as follows:  DECEMBER 31
  
  
  
  2002
  
  2001
  
  2000Pricing swapsNotional volume
  
  GJmillions
  
  3.2
  
  12.0
  
  15.2Weighted-average price perGJ
  
  Cdn.
  
  $
  5.92
  (2)
  $
  6.89
  (2)
  $
  1.84
  (3)Estimated fair value(1)
  
  U.S.millions
  
  $
  (2
  )
  $
  21
  
  $
  34Carrying value
  
  U.S.millions
  
  $
  
  
  $
  
  
  $
  Term to maturity
  
  Months
  
  1-10
  
  1-10
  
  1-12Basis swapsNotional volume
  
  mcf millions
  
  113.0
  
  3.0
  
  19.8Weighted-average basis
  differential per mcf
  
  U.S.
  
  $
  0.47
  (4)
  $
  0.02
  (4)
  $
  0.35
  (5)Estimated fair value(1)
  
  U.S.millions
  
  $
  (10
  )
  $
  (1
  )
  $
  3Carrying value
  
  U.S.millions
  
  $
  
  
  $
  
  
  $
  Term to maturity
  
  Months
  
  1-34
  
  1-10
  
  1-12OptionsNotional volume  calls
  
  mcf millions
  
  1.1
  
  20.5
  
  19.2Notional volume  puts
  
  mcf millions
  
  68.1
  
  36.6
  
  Weighted-average price per
  mcf  calls
  
  U.S.
  
  $
  4.10
  
  $
  4.93
  
  $
  7.48Weighted-average price per
  mcf  puts
  
  U.S.
  
  $
  2.32
  (6)
  $
  2.67
  
  Estimated fair value(1)
  
  U.S.millions
  
  $
  (1
  )
  $
  6
  
  $
  36Carrying value
  
  U.S.millions
  
  $
  
  
  $
  
  
  $
  Term to maturity
  
  Months
  
  1-34
  
  1-22
  
  1-3  
 (1)Unrealized gain (loss). (2)The Corporation pays floating
prices and receives fixed prices from the counterparty. (3)The Corporation pays fixed
prices and receives floating prices from the counterparty. (4)The Corporation will pay or
receive the difference between theNYMEXmarket price and
theU.S.export market price, plus a fixed differential established in the
contract. (5)The Corporation will pay or
receive the difference between the market price for intra-Alberta gas delivery
and the export market price, less a fixed differential established in the
contract. (6)The Corporation will pay the
difference between theNYMEXmarket price and the contract
price (if lower than market).  At December 31, 2002, 2001 and 2000, the notional volume and estimated
fair value of outstanding derivative contracts for crude oil, refined products,
and alternative feedstock are as follows:  DECEMBER 31
  
  
  
  2002
  
  2001
  
  2000Notional volume
  
  bbls millions
  
  13.8
  
  10.8
  
  4.8Weighted-average price per
  bbl(1)
  
  U.S.
  
  $
  29.84
  
  $
  29.05
  
  $
  26.97Estimated fair value(2)
  
  U.S.millions
  
  $
  8
  
  $
  (4
  )
  $
  6Carrying value
  
  U.S.millions
  
  $
  
  
  $
  
  
  $
  Term to maturity
  
  Months
  
  1-48
  
  1-60
  
  1-12  
 (1)Crude oil swaps, options,
collars. (2)Unrealized gain (loss).  32 
   In 2002,NOVA Chemicals liquidated certain natural gas option positions used in
collar-based hedging strategies that were in place to manage the cost of the
Corporations natural gas feedstock supply, resulting in a pre-tax gain of $17
million. The gain has been deferred on the balance sheet (see Notes 8 and 10)
and will be recognized in income over the remaining terms of the related
feedstock purchase commitments, from January 2003 to March 2005.  Interest Rate Risk Management NOVAChemicals periodically
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 2002, a series of
interest rate swaps on $550 million (2001 - $650
million and 2000 - $nil)
of fixed-rate debt were liquidated, resulting in pre-tax gains of $13
million (2001 - $27 million and 2000 - $nil).
The gains have been deferred and will be recognized in income as a reduction of
interest expense over the terms of the related debt instruments, which mature
in 2005, 2006 and 2009 (see Note 10). At December 31, 2002, no interest rate
swaps are outstanding.  Credit Risk Management Credit exposure on financial instruments arises from the possibility
that a counterparty to an instrument in whichNOVA Chemicals is entitled to receive payment of an unrealized gain fails to
perform. NOVA Chemicals only transacts with counterparties
having a minimum credit rating of A for its foreign exchange and interest rate
instruments and a minimum credit rating of BBB for its commodity risk
management instruments. A limit on contingent exposure has been established 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 any counterparties that it currently
transacts with will fail to meet their obligations. At December 31, 2002, 2001,
and 2000, NOVA Chemicals credit exposure was $nil
for foreign currency and interest rate instruments, and $4
million (2001 - $27
million and 2000 - $89
million) for commodity-based instruments. 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. The
Corporation manages its credit risk relating to these receivables through
credit approval and monitoring procedures.  33 
   24.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 CanadianGAAP, which, in some respects, are different from
those used in the United States. The effect of these differences on the
Corporations consolidated net income (loss) and balance sheet are as follows:  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Net income (loss) in
  accordance with CanadianGAAP
  
  $
  (81
  )
  $
  (128
  )
  $
  302Add (deduct) adjustments
  for:Start-up costs(1)
  
  3
  
  (11
  )
  (6
  )Foreign exchange derivative
  instruments and hedging activity(2)
  
  15
  
  14
  
  (31
  )Other derivative
  instruments and hedging activity(2)
  
  5
  
  10
  
  Future income taxes(3)
  
  
  
  29
  
  (29
  )Inventory costing(4)
  
  1
  
  (2
  )
  6Preferred securities
  distributions(5)
  
  (23
  )
  (23
  )
  (23
  )Equity in earnings (losses)
  of affiliates(6)
  
  (4
  )
  1
  
  (10
  )Other
  
  1
  
  1
  
  2Net income (loss) in
  accordance withU.S.
  GAAP
  
  $
  (83
  )
  $
  (109
  )
  $
  211Earnings (loss) per share
  usingU.S. GAAP Basic
  
  $
  (1.05
  )
  $
  (1.39
  )
  $
  2.23 Diluted
  
  $
  (1.05
  )
  $
  (1.39
  )
  $
  2.14Comprehensive income (loss)
  (net of tax (expense) recovery)(7)Net income (loss) in
  accordance withU.S.
  GAAP
  
  $
  (83
  )
  $
  (109
  )
  $
  211Unrealized foreign exchange
  gains (losses) on translation of self- sustaining foreign operations (less
  tax of $nil, $nil and $nil)
  
  70
  
  (140
  )
  (88
  )Fair value of cash flow
  hedging instruments (less tax of $(15) and $17)(2)
  
  26
  
  (30
  )
  Equity in comprehensive
  income (loss) of affiliates (less tax of $(1) and $1)(6)
  
  7
  
  (4
  )
  Minimum pension liability
  (less tax of $1)
  
  (1
  )
  
  
  Comprehensive income (loss)
  in accordance withU.S.
  GAAP
  
  $
  19
  
  $
  (283
  )
  $
  123Accumulated other
  comprehensive loss(7)Unrealized foreign exchange
  losses on translation of self-sustaining foreign operations
  
  $
  (130
  )
  $
  (200
  )
  $
  (60
  )Fair value of cash flow
  hedging instruments(2)
  
  (4
  )
  (30
  )
  Equity in comprehensive
  income (loss) of affiliates(6)
  
  3
  
  (4
  )
  Minimum pension liability(9)
  
  (1
  )
  
  
  Accumulated other
  comprehensive loss
  
  $
  (132
  )
  $
  (234
  )
  $
  (60
  )  DECEMBER 31
  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Balance sheet items in
  accordance withU.S.
  GAAPCurrent assets(2)(4)(8)
  
  $
  626
  
  $
  716
  
  $
  1,108Investments and other
  assets(1)(6)(9)
  
  492
  
  496
  
  412Plant, property and
  equipment (net)(1)
  
  3,007
  
  3,131
  
  3,267Current liabilities(2)(8)
  
  (577
  )
  (725
  )
  (765
  )Long-term debt(2)Preferred securities(5)
  
  (383
  )
  (383
  )
  (383
  )Other long-term debt
  
  (1,234
  )
  (1,323
  )
  (1,406
  )Deferred credits(2)(3)(9)
  
  (790
  )
  (771
  )
  (782
  )Retractable preferred
  shares
  
  (198
  )
  (198
  )
  (198
  )Common shareholders equity
  
  $
  943
  
  $
  943
  
  $
  1,253  34 
   
 (1)Start-up
Costs -CanadianGAAPprovides that when an entity
starts up a new facility, expenditures incurred during the pre-operating period
may be deferred when certain criteria are met. UnderU.S. GAAP, all costs
(except interest on constructed assets) associated with start-up activities
must be expensed as incurred. See Note 6 for information on the Corporations
start-up costs.  (2)Derivative
Instruments and Hedging Activities -CanadianGAAPdoes not require
the recognition of derivative instruments on the consolidated balance sheet at
fair values. UnderU.S. GAAP, entities must follow the
recommendations of Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities, which requires
the recognition of all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings
or recognized in other comprehensive income until the hedged item is recognized
in earnings. For derivatives that are designated and qualify as hedging
instruments, the Corporation documents the hedging strategy, including hedging
instrument and hedged item, based on the risk exposure being hedged. Based upon
the designated hedging strategy, effectiveness of the hedge in offsetting the
hedged risk is assessed at inception and on an ongoing basis during the term of
the hedge. The ineffective portion of a derivatives change in fair value is
immediately recognized in earnings. The application ofSFASNo. 133 forU.S. GAAPreporting results
in differences related to foreign exchange, commodity-based and other
derivative instruments used by the Corporation. For information regarding the
Corporations use of derivatives and hedging activities, see Note 23.  (3)Future Income
Taxes -CanadianGAAPpermits recognition of the
impact of changes in tax laws and rates on the measurement of future income tax
assets and liabilities in the period in which the tax laws and rates are
considered to be substantively enacted. UnderU.S. GAAPrules, the impact
of tax rate changes on future income tax assets and liabilities is only
recognized on enactment of the change in tax law and rates.  (4)Inventory
Costing -CanadianGAAPallows fixed
overhead costs associated with production activities to be expensed during the
period, whereasU.S. GAAPrequires an allocation of fixed
production overhead to inventory.  (5)Compound
Financial Instruments -CanadianGAAPrequires the
classification and recording of a financial instrument, or its component parts,
as a liability or equity in accordance with the substance of the contractual
arrangements governing the instrument.U.S. GAAPrequires that no
portion of the proceeds from issuance of convertible debt securities be
attributed to the conversion feature and classified as equity. Accordingly, the
Corporations preferred securities discussed in Note 11 are accounted for as
debt underU.S. GAAPand the related distributions as interest expense.  (6)Equity in
Earnings (Losses) of Affiliates -NOVAChemicals share
of adjustments to financial information and results of operations of equity
investments to comply withU.S.accounting principles.  (7)Comprehensive
Income -U.S. GAAP SFASNo. 130, Reporting
Comprehensive Income, requires the presentation of a statement containing the
components of comprehensive income and the accumulated balance of other
comprehensive income. Comprehensive income includes all changes in equity
during the period including items that are not in net income. This statement is
not required under CanadianGAAP.  (8)Accounts
Receivable Securitizations -During 2001, the CanadianGAAPstandard
pertaining to accounting and reporting transfers of financial assets was
amended to be substantially the same as theU.S. GAAPstandard,SFASNo. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities  a replacement ofSFASNo. 125.
Accordingly, in 2002 and 2001, the Corporations Canadian accounts receivable
securitization program qualified for off-balance sheet treatment forU.S. GAAPpurposes. This
program did not meet the off-balance sheet criteria in 2000.  (9)Minimum
Pension Liability -SFASNo. 87, Employers Accounting
for Pensions, requires an employer to record an additional minimum liability (AML) if the unfunded
accumulated benefit obligation exceeds the accrued pension liability or if
there is a prepaid pension asset with respect to the plan. If anAMLis recognized, an
intangible asset, in an amount not exceeding the unrecognized prior service
cost, is also recognized. The excess of theAML, over the intangible asset,
if any, is charged to other comprehensive income, net of income tax effects. At
December 31, 2002, anAMLand an intangible asset, in
the amount of $8 million and $6 million, respectively, have been recognized,
resulting in a charge of $1 million (net of tax) to other comprehensive income.  Other Disclosures Stock-based Compensation -SFAS No. 123, Accounting for Stock-Based Compensation, defines a fair-value based
method of accounting for employee stock options and encourages the use of this
method to account for stock compensation plans. It does, however, permit an
entity to continue to measure compensation cost using the intrinsic-value based
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, (APB 25). Entities using
the intrinsic-value method must disclose pro forma net income (loss) and
earnings (loss) per share assuming the fair-value method had been applied. NOVA Chemicals has elected to follow APB 25 and related
interpretations in accounting for employee stock options. Options are issued at
the market price on date of grant and therefore, under APB 25, no compensation expense has been recorded.  35 
   The following table outlines
the impact on the CorporationsU.S. GAAP results, had
compensation expense for the stock option plan been determined based on the
fair-value method as prescribed under SFAS No. 123:  YEAR ENDED
  DECEMBER 31 (MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)
  
  2002
  
  2001
  
  2000Net income (loss)As reported
  
  $
  (83
  )
  $
  (109
  )
  $
  211Pro forma
  
  $
  (94
  )
  $
  (115
  )
  $
  202Earnings (loss) per share 
  basicAs reported
  
  $
  (1.05
  )
  $
  (1.39
  )
  $
  2.23Pro forma
  
  $
  (1.18
  )
  $
  (1.46
  )
  $
  2.13Earnings (loss) per share 
  dilutedAs reported
  
  $
  (1.05
  )
  $
  (1.39
  )
  $
  2.14Pro forma
  
  $
  (1.18
  )
  $
  (1.46
  )
  $
  2.05  U.S. Accounting Developments In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest
Entities, which addresses consolidation requirements for interests in a
variable interest entity. As qualifying special-purpose entities subject to the
reporting requirements of SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, are not subject to the provisions of the Interpretation, it is
not anticipated that this Interpretation will have an impact on the
Corporations financial position upon adoption. In November 2002, theFASB issued Interpretation No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. The Interpretation elaborates on the existing disclosure requirements
for most guarantees and requires that, at the time a company issues a
guarantee, it must recognize an initial liability for the fair value of the
obligations it assumes under the guarantee. The recognition and measurement
provisions apply on a prospective basis to guarantees issued or modified after
December 31, 2002. It is not anticipated that this Interpretation will have an
impact on the Corporations financial position upon adoption. In June 2002, theFASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which addresses financial
accounting and reporting for costs associated with exit or disposal activities.
This Statement requires that a liability for costs associated with an exit or
disposal activity be recognized when the liability is incurred, as opposed to
at the date of an entitys commitment to an exit plan as under previous rules. SFAS No. 146 is effective for the Corporations 2003 fiscal
year. It is not anticipated that this Statement will have an impact on the
Corporations financial position upon adoption. In June 2001, theFASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This statement requires the fair value of a liability
for an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of the fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. The requirements are effective January 1, 2003 and, based on
current circumstances, the Corporation expects that the existing site clean-up
and restoration liability is adequate (see Notes 8 and 10).   36


MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS  All financial information is inU.S.dollars
unless otherwise indicated.  This discussion should be read in
conjunction with information contained in the consolidated financial statements
and the notes thereto. The consolidated financial statements have been prepared
in accordance with Canadian generally accepted accounting principles (GAAP). The
effect of significant differences between Canadian and United StatesGAAPhave been
disclosed in Note 24 to the consolidated financial statements.  OVERVIEW  NOVAChemicals
Corporation derives its revenues, earnings and cash flow from two commodity
chemical businesses: Olefins/Polyolefins and Styrenics. Our Olefins/Polyolefins
business produces ethylene, polyethylene and chemical and energy co-products.
Our Styrenics business produces styrene monomer and styrenic polymers. We
operate major olefins/polyolefins production facilities near Joffre, Alberta
and Corunna, Ontario. We have major styrene facilities located near Bayport,
Texas and Sarnia, Ontario. Our styrenic polymers manufacturing facilities are
located at sites in the United States, Canada, the United Kingdom, the
Netherlands and France. Ethylene and styrene are
basic petrochemicals used to manufacture a wide variety of polymers and other
chemical products. We produce polyethylene and styrenic polymers, primarily
from our internal ethylene and styrene production. We also have an equity
interest and long-term tolling arrangements to acquire styrene from Lyondell
Chemical Companys Channelview, Texas plant on the United States Gulf Coast (USGC), and styrene purchase arrangements with Shell Chemical Company, BASF Corporation and other parties in North America and Europe. Ethylene and
styrene in excess of our internal consumption are sold to third parties. In
addition, we engage in various swap transactions with other producers of
ethylene and styrene, which provide us producer economics in regions where we
have limited or no styrene monomer production capability.  1 
   The following table
summarizes the average benchmark prices for our principal products and raw
materials and industry capacity utilization rates for the periods shown below.
Average benchmark prices are not intended to be actual prices realized by us or
any other petrochemical company.  2002
  
  ANNUALFIRST
  QUARTER
  
  SECOND
  QUARTER
  
  THIRD
  QUARTER
  
  FOURTH
  QUARTER
  
  2000
  
  2001
  
  2002BENCHMARK
  PRINCIPAL PRODUCT PRICES (PER POUND):Ethylene(1)
  
  $
  0.19
  
  $
  0.23
  
  $
  0.23
  
  $
  0.24
  
  $
  0.30
  
  $
  0.26
  
  $
  0.22Polyethylene
  (weighted-average)(2)
  
  0.33
  
  0.36
  
  0.41
  
  0.42
  
  0.42
  
  0.39
  
  0.38Styrene(3)
  
  0.26
  
  0.33
  
  0.36
  
  0.35
  
  0.40
  
  0.31
  
  0.33Polystyrene
  (weighted-average)(4)
  
  0.37
  
  0.48
  
  0.52
  
  0.49
  
  0.54
  
  0.44
  
  0.47BENCHMARK
  RAW MATERIAL PRICES:NYMEXNatural Gas (per mmBTU)(5)
  
  $
  2.38
  
  $
  3.37
  
  $
  3.26
  
  $
  3.99
  
  $
  3.91
  
  $
  4.38
  
  $
  3.25AECO/NYMEXbasis differential (per mmBTU)(6)
  
  0.28
  
  0.54
  
  1.17
  
  0.63
  
  0.52
  
  0.30
  
  0.66WTICrude Oil (per barrel)
  
  21.64
  
  26.24
  
  28.27
  
  28.15
  
  30.20
  
  25.97
  
  26.08Benzene (per gallon)(3)
  
  0.86
  
  1.25
  
  1.38
  
  1.28
  
  1.38
  
  1.02
  
  1.19INDUSTRY
  CAPACITY UTILIZATION RATES (%):North American:Ethylene(7)
  
  81.8
  
  82.9
  
  84.3
  
  79.4
  
  93.4
  
  84.0
  
  82.1Polyethylene(8)
  
  86.0
  
  89.2
  
  85.8
  
  81.5
  
  89.2
  
  81.6
  
  85.6Styrene(7)
  
  82.2
  
  97.4
  
  86.8
  
  82.5
  
  93.2
  
  75.3
  
  87.3Polystyrene(8)
  
  79.7
  
  84.5
  
  80.3
  
  75.1
  
  89.5
  
  74.9
  
  79.9Western European:Polystyrene(7)
  
  88.6
  
  90.7
  
  87.7
  
  85.5
  
  89.5
  
  80.4
  
  88.1  
 (1)Source: Chemical Market Associates, Inc. (CMAI) USGCNet Transaction
Price. (2)Average benchmark
prices weighted according toNOVAChemicals sales volume mix in
North America. Source for benchmark prices:Townsend Polymer Services
Information, Inc. (TPSI). (3)Source:CMAI Contract
Market. (4)Average benchmark
prices weighted according toNOVAChemicals sales volume mix in
North America and Europe. Includes solid and expandable polystyrene, but
excludes high performance styrenic polymers,DYLARKand other
styrenic polymers. Source for benchmark prices:TPSI. (5)Source:NYMEXHenry Hub-3-Day
Average Close (NYMEX). (6)AECOrepresents the
weighted-average one month spot price at AECOC andNOVAInventory
Transfer price as published in theCanadian Gas Price Reporter. (7)Source:CMAIandNOVAChemicals. (8)Source: American Plastics Council andNOVAChemicals.  2 
   Factors Affecting Financial
Performance  Generally, the market for commodity chemical products has grown at rates
faster than general economic growth rates. Our products are cyclical and
sensitive to changes in the balance between supply and demand, the price of raw
materials and the level of general economic activity. Historically, these
markets have experienced alternating periods of capacity additions resulting in
over-capacity and declining prices and margins  called troughs  followed by
tight supply, increasing prices and margins  called peaks. Our profitability is closely
tied to product pricing and feedstock costs, which are, in turn, largely
influenced by energy costs and market supply and demand. The principal
feedstocks used in our Olefins/Polyolefins business are natural gas liquids and
crude oil or crude oil derivatives. We produce benzene, a derivative of crude
oil, for use in our Styrenics business to produce styrene monomer. The following table
illustrates how changes in various factors would increase our profitability,
assuming all other factors were held constant. Changes in the opposite
direction would have the opposite effect.  POTENTIAL
  IMPACT TO NOVA CHEMICALS PROFITABILITY OF:
  
  (MILLIONS OF DOLLARS  ESTIMATED)
  
  (BILLIONS OF
  POUNDS)ANNUAL PRE-TAX
  INCOME INCREASE
  
  ANNUAL AFTER-TAX
  INCOME INCREASE
  
  PRODUCTION
  CAPACITY(1)Increase ofU.S. 1¢ per pound in profit marginEthylene(2)
  
  $
  48
  
  $
  31
  
  4.8Polyethylene
  
  37
  
  24
  
  3.7Styrene(3)
  
  31
  
  20
  
  3.1Styrenic Polymers  North
  America(4)
  
  22
  
  14
  
  2.2Styrenic Polymers  Europe(4)
  
  13
  
  8
  
  1.3Propylene
  
  10
  
  6
  
  1.0Decrease in cost of natural
  gas byU.S. 10¢ per mmBTU
  
  11
  
  7
  
  Decrease in cost of benzene
  byU.S. 5¢ per gallon
  
  20
  
  13
  
  Decrease in Canadian dollar
  of 1¢ vs.U.S. dollar(5)
  
  6
  
  6
  
  Increase in Euro of 1¢ vs.U.S. dollar
  
  2
  
  2
  
  Increase in Methanexs annual
  net income of $10 million
  
  4
  
  3
  
    
 (1)  Estimate based on
current production capacity assuming utilization of 100%. On average in 2002,
our ethylene plants operated at 82% of capacity, our polyethylene plants
operated at 78% of capacity, our styrene plants operated at 73% of capacity,
and our styrenic polymer plants operated at 68% of capacity. (2)  Excludes
cost-of-service third party sales. (3)  Includes 500
million pounds of long-term purchase agreements. (4)  Includes solid
polystyrene and expandable polystyrene. (5)  Canadian dollar
costs are hedged until March 2003 at which time we will be exposed to Canadian
dollar exchange rate fluctuations.  3 
   Olefins/Polyolefins Business  Petrochemical
and Feedstock Economics  Our largest volume product is ethylene, which
is central to the production of both polyethylene and styrene monomer.
Seventy-five percent of our ethylene is produced at our Joffre, Alberta plant,
primarily from ethane which is extracted from natural gas. The remaining
twenty-five percent of our ethylene is manufactured at our Corunna, Ontario
plant in a flexi-cracker that is fed with crude oil, crude oil derivatives
and/or natural gas derived feedstocks.  Joffre,
Alberta - Our Joffre ethylene production facility is the
largest in the world and has, on average, a lower cost of production than other
ethane/propane plants in North America. We call this our Alberta Advantage.
Our Alberta Advantage is comprised of three key elements:  Natural gas - Alberta natural gas
prices have historically been significantly below those on the USGC and are expected to remain below USGC market prices by a differential that reflects
the relative transportation costs of moving natural gas from Western Canada to
the U.S. Midwest and Eastern
markets;  Ethane extraction, gathering, and transportation - Alberta is home to large scale ethane extraction plants and an efficient
gas gathering and transportation infrastructure; and  Ethylene conversion - our three ethylene
plants enjoy large economies of scale and energy efficiency compared to USGC
ethylene crackers.  Historically, our Alberta Advantage has
averaged approximately 6¢ per pound as compared to ethane/propane ethylene
production facilities on theUSGC. In 2002, the Alberta Advantage was approximately 4¢ per pound, down
from about 5¢ per pound in 2001 and 10¢ per pound in 2000. The Alberta
Advantage was lower in 2002 as compared to 2001 due to lower USGC ethane pricing that resulted from surplus USGC
ethane caused by a slowdown in
industrial demand. In 2000, the Alberta Advantage produced a historically
higher than average 10¢ per pound cost advantage. While the Alberta Advantage
will likely fluctuate from year to year, we expect that the structural advantages
associated with gas transportation and the efficiency gained from large scale
facilities will enable us to maintain a significant cost advantage over our USGC
competitors. All of the ethylene plants at
Joffre use ethane as their primary feedstock. Ethane is extracted and delivered
under medium to long-term contracts with natural gas liquids extraction and
fractionation plants located in Alberta. We purchase natural gas and swap it to
replace the energy value of the ethane extracted from the gas stream. We manage
our ethane requirements by using our inventories and short-term spot purchases.
All of our polyethylene produced at the Joffre facility is manufactured from
internally produced ethylene.  Corunna,
Ontario - Depending on market conditions, our Corunna
ethylene plant has the flexibility to optimize part of its feedstock slate by
switching between natural gas liquids, crude oil and crude oil derivatives.
Feedstock decisions are determined by using a model that calculates the most
profitable mix of end products that can be produced from the most optimal
feedstock slate. Feedstocks for our Corunna
olefins facility are obtained from a wide variety of sources. The majority of
the feedstocks are crude oils and condensates, with the remainder being propanes
and butanes. The crude oils are supplied from western Canadian producers via
pipeline, from the United States, and from overseas. Condensate, a lighter
feedstock than crude oil, yields a higher proportion of olefins feedstocks
versus fuel oil products and is sourced primarily from outside North America.  NOVA CHEMICALS CORPORATION Annual Report 2002  4 
   Propanes and butanes are sourced from western
Canadian and local producers, as well asU.S.sources. All of the polyethylene produced at
the Mooretown and St. Clair River facilities is manufactured from internally
produced ethylene. Financial results in our
Olefins/Polyolefins business are driven in large part by polyethylene sales.
Polyethylene is a globally traded commodity product with established merchant
markets. When polyethylene demand increases, the polyethylene supply and demand
balance tightens, which usually leads to higher prices. Peak market conditions
for polyethylene margins typically exist when nameplate operating rates for
polyethylene are above 90% for a sustained period of time.  Styrenics Business - Petrochemical and
Feedstock Economics  Styrene is produced from benzene and ethylene.
We supply a portion of our internal requirements for these feedstocks and enter
into other arrangements with third parties for the remainder. All of the
ethylene and a majority of the benzene requirements for our Sarnia styrene
facility are supplied from our Corunna, Ontario olefins facility. The balance
of the benzene feedstock is obtained from nearby petroleum refineries. Except
for some ethylene obtained through exchange, ethylene and benzene for the
Bayport and Channelview facilities are obtained from external sources. Our
global styrenic polymer feedstock requirements can currently be satisfied
through internal styrene monomer production. Where styrene monomer is
geographically dislocated, we may use a series of transatlantic swap
arrangements with other producers to position the monomer where we need it. Profitability in our
Styrenics business is driven by styrene monomer because worldwide production
capacity for polystyrene and other monomer derivatives exceeds that of styrene
monomer. Peak market conditions for styrenics typically exist when nameplate styrene
monomer operating rates are above 92% for a sustained period of time. At this
operating rate, price usually moves independent of feedstock costs causing
margin expansion. Three separate acquisitions
of styrenics assets fromARCO, Huntsman and Shell contributed to our long position in styrene, with
more monomer than we require for our own polystyrene production. Our current
annual styrene monomer production capacity, together with long-term supply
contracts, exceeds our annual requirements for styrenic polymers production by
approximately one billion pounds. When demand for styrene and polystyrene
weakens, we are forced to sell excess styrene at low spot prices, which
negatively impacts our profit margins. In a tight market, our long styrene
position secures styrene for the optimum balance of styrene monomer and
styrenic polymer sales. As a result, in peak conditions, a long styrene monomer
position provides a source of earnings leverage. In 2002, we signed a
long-term styrene monomer contract withBASFCorporation under which we supply styrene
monomer feedstock to BASFs styrenics business in the North American region
and, in turn, BASF supplies
styrene monomer to our European Styrenics business. This provides both
companies with styrene monomer at producer economics. To fulfill this
requirement, we announced a 450 million pound debottlenecking of our Bayport
styrene monomer plant. In 2002, our Styrenics
business focused on eliminating high cost production. We closed our 100 million
pound suspension polystyrene reactor in Chesapeake, Virginia, bringing our
total polystyrene closures over the last two years to 330 million pounds of
North American capacity. In 2002, we also shut down suspension solid
polystyrene reactors at our Breda facility in the Netherlands and eliminated 55
million pounds, or 8%, of our European polystyrene capacity. This shutdown is
expected to reduce fixed costs by about$2 million annually and improve the efficiency of the Breda facility. We
also idled our Carrington, United Kingdom expandable polystyrene, or EPS, facility, resulting in a reduction of 165
million pounds, or 24%, of our European EPS production. This is expected to generate a fixed-cost reduction of
approximately $3 million
annually.  5 
   RESULTS
OF OPERATIONS  2002 COMPARED TO 2001  Our financial performance in 2002 improved
over 2001 but remained challenging due to continued excess supply in our
Olefins/Polyolefins and Styrenics businesses. While lower average prices led to
lower revenues during 2002, overall demand for our products increased, which
lead to higher sales volumes and higher margins. Total revenue decreased$103 million, or 3%, from $3,194 million in 2001 to $3,091 million in 2002. However, lower average
feedstock prices combined with improved volumes resulted in our EBITDA increasing by $153 million, or 247%, from $62
million in 2001 to $215 million
in 2002. Our net loss to common shareholders decreased to $112 million in 2002 from a $161 million loss in 2001. Similarly, our net
loss to common shareholders before unusual items decreased to a $106 million loss from a $202 million loss in 2001. For a discussion of
unusual items, see Supplemental Earnings Measures.  Olefins/Polyolefins Segment Polyethylene sales volumes for
2002 and 2001 follow: (MILLIONS OF POUNDS)
  
  2002
  
  2001NOVAPOL®ResinsJoffreLLDPE
  
  1,229
  
  1,129MooreLDPE
  
  265
  
  265MooreHDPE
  
  349
  
  381SCLAIR®Resins
  
  592
  
  617AdvancedSCLAIRTECHtechnology resins
  
  410
  
  188Total
  
  2,845
  
  2,580  Revenues -Revenues from our Olefins/Polyolefins business
decreased $84 million, or 4%,
from $2,014 million in 2001 to $1,930 million in 2002. The decrease was
primarily due to lower average sales prices. Our North American sales volumes
were up approximately 15% and international sales volumes were down
approximately 16%. The net result for our 2002 polyethylene sales volumes was a
10% increase over 2001 levels. The majority of this increase was from the sales
of Advanced SCLAIRTECH technology
resins in the United States.  Feedstock
and Operating Costs -Feedstock
and operating costs decreased $135
million, or approximately 9%, from $1,581 million in 2001 to $1,446
million in 2002. Average prices for natural gas and crude oil were flat to down
versus 2001 levels. Despite additional costs for the Advanced SCLAIRTECH
technology polyethylene plant, our fixed
costs declined due to other cost reduction efforts.  SegmentEBITDA-In our Olefins/Polyolefins business, segment EBITDA, or operating income before depreciation and
amortization, increased $44
million, or 23%, from $189
million in 2001 to $233million in
2002. The increase resulted from higher sales volumes. While average margins
were similar in both 2001 and 2002, the trends were quite different. During
2001, margins deteriorated through the year, bottoming out in the fourth
quarter. In 2002, margins generally increased through the first three quarters,
but fell off somewhat in the fourth quarter.  6 
   The following table provides a reconciliation
from operating income toEBITDA.  (MILLIONS OF DOLLARS)
  
  2002
  
  2001Operating income
  
  $
  67
  
  $
  57Depreciation and amortization
  
  166
  
  132EBITDA
  
  $
  233
  
  $
  189  Net Loss -Our Olefins/Polyolefins business reported a
net loss of $5 million in 2002,
compared to a net loss of $2
million in 2001.  Total ethylene and
polyethylene sales volumes were up 11% over 2001. The 2002 results were
impacted by higher depreciation costs due to the full year operation of our new
Advanced SCLAIRTECH technology
polyethylene plant. In response to higher
feedstock prices, we withdrew a polyethylene temporary voluntary allowance in
January 2003, making a previously announced price increase effective immediately.
In addition, we announced several price increases, which are scheduled to take
effect in the first quarter of 2003. Implementation of announced price
increases depends on many factors, including feedstock costs, market conditions
and the supply/demand balance for each particular product. Successful price
increases are typically phased in over several months, vary from
grade-to-grade, and can be reduced in magnitude during the implementation
period. Benchmark price indices sometimes lag behind price increase
announcements due to the timing of publication. Ethylene operating rates are
expected to increase because no significant new capacity is expected before
2005. During 2003, approximately 6% of North American ethylene capacity is
expected to be lost to planned turnarounds. In addition, The Dow Chemical
Company has announced that they will close two of their higher-cost ethylene
plants, representing 2.5 billion pounds, or 3%, of North American ethylene
capacity, by the end of 2003. Polyethylene producer inventories and customer
inventories are at low levels and feedstock costs remain high, which are
expected to support recent price increase announcements. The improvement of
industrial production, combined with little new North American capacity in the
next three years, is expected to improve operating rates further.  Styrenics Segment Styrenics sales volumes for
2002 and 2001 follow:  (MILLIONS OF POUNDS)
  
  2002
  
  2001Styrene monomer(1)
  
  1,256
  
  1,014Polystyrene
  
  2,180
  
  2,282High performance styrenics includingDYLARK and other
  
  281
  
  314Total
  
  3,717
  
  3,610  
 (1)Third party sales only.  Revenues -Revenues from our Styrenics business decreased
$9 million, or 1%, from $1,314 million in 2001 to $1,305million in 2002. While styrenics prices
in many segments increased year over year, the product mix across our Styrenics
portfolio offset these increases. Total styrenics sales volumes in 2002,
including both styrene monomer and styrenic polymers, were up 3% from 2001.
Sales volumes of our styrenic polymers were lower in 2002 than in 2001.  7 
   Feedstock and Operating Costs -Feedstock and operating costs decreased $105 million, or approximately 8%, from $1,320 million in 2001 to $1,215 million in 2002. Benzene marker prices
in North America rose over 97% from a low of $0.70 per gallon at the end of 2001 to $1.38 per gallon at the end of 2002. Although benzene benchmark prices
increased year over year, our realization of the full amount of this cost is
delayed, since we use a FIFO inventory
costing methodology. Average benchmark prices for ethylene decreased from $0.26 in 2001 to $0.22 in 2002.  SegmentEBITDA-In our Styrenics business, segment EBITDA
in 2002 was a loss of $18 million versus a loss of $127 million in 2001. The improvement over 2001
was due mainly to higher margins resulting from higher industry capacity
utilization rates and lower average feedstock costs. In addition to better
margins, our Styrenics business improved its performance by implementing
several cost cutting initiatives, including asset rationalization and
restructurings.  The following table provides a reconciliation
from operating income to EBITDA.  (MILLIONS OF DOLLARS)
  
  2002
  
  2001Operating income
  
  $
  (118
  )
  $
  (225
  )Depreciation and amortization
  
  100
  
  98EBITDA
  
  $
  (18
  )
  $
  (127
  )  Due to higher industry utilization rates, 2002
was a stronger year for styrene monomer. In 2001, market conditions for styrene
monomer were weak, and we were forced to reduce our own styrene monomer
production to meet minimum purchase obligations. This resulted in higher fixed
costs per pound on our produced styrene monomer. In addition, we sold higher
cost purchased monomer into a weak styrene monomer market. The negative impact
on margins was approximately$65 million in 2001. In 2002, we did not reduce monomer production rates
in our plants to meet minimum supply obligations so the impact of our long
styrene monomer position was neutral.  Net Loss -Our Styrenics business recorded a net loss of $102 million in 2002, compared to a net loss of
$181 million in 2001. Margins
improved in 2002, as feedstock costs were lower than 2001. In addition, we
achieved $9 million (after-tax)
in synergies related to Shells European solid polystyrene and expandable
polystyrene businesses acquired in 2000. In the first quarter of 2003,
our Styrenics business announced several price increases in response to rising
feedstock costs. These price increases, which we expect to implement in the
first quarter of 2003, were announced for styrene monomer and effectively all
of our styrenic polymer product lines in North America and Europe.
Implementation of announced price increases depends on many factors, including
feedstock costs, market conditions and the supply/demand balance for each
particular product. Successful price increases are typically phased in over
several months, vary from grade-to-grade, and can be reduced in magnitude
during the implementation period. Benchmark price indices sometimes lag behind
price increase announcements due to the timing of publication. Polystyrene
producer and customer inventories are at low levels and feedstock costs remain
high, providing producers with support for recent price increase announcements. In addition to the capacity
that we closed or idled in 2001 and 2002, in January 2003, we acquired the
polystyrene customer list from Deltech Polymers Corporation when they chose to
cease production of 140 million pounds of polystyrene, removing an additional
2% of North American production capacity. We are supplying their customers from
our existing facilities.BASFalso announced North American polystyrene capacity reductions of 12%, or
an additional 2.4% of total North American capacity.  8 
   In 2002, global styrene
monomer operating rates averaged 90% of nameplate capacity due to several
planned and unplanned outages during the year. In comparison, the rates in 2001
and 2000 were 88% and 91%, respectively. Operating rates in 2002 were similar
to 2000 when our styrene monomer business experienced relatively high margins.
However in 2002, margins expanded in the first half of the year on a tighter
supply/demand balance but could not withstand the rapidly increasing benzene
prices and weaker demand in the second half of year. Global polystyrene
operating rates were 80% in 2002 compared to 75% in 2001. Inventory levels of
styrene monomer were very low at the end of 2002 due to inventory depletion
which occurred throughout the supply chain in the second half of 2002.  Other Items  The following items have not been discussed in
the Olefins/Polyolefins or the Styrenics business segments.  Methanex
Investment -Our share
of Methanexs earnings before unusual items was $32 million in 2002, compared with $14 million in 2001. Our share of Methanexs earnings after unusual items
was $5 million in 2002, compared
to $11 million in 2001. This
includes unusual items of $27
million in 2002 and $3 million in
2001. Global methanol prices improved throughout 2002, and the market remained
tight. Supply limitations and a recovery in demand contributed to higher
methanol prices in the second half of the year.  Methanex
Investment  (MILLIONS OF DOLLARS)
  
  2002
  
  2001Equity earnings (after-tax)
  
  $
  32
  
  $
  14Unusual items (after-tax)
  
  (27
  )
  (3
  )Net equity earnings
  
  $
  5
  
  $
  11  Other
Operating Expenses -Depreciation
and amortization expense increased by $36 million, or 16%, from $230
million in 2001 to $266 million
in 2002. The increase was primarily the result of additional depreciation
associated with the full year operation of our new Advanced SCLAIRTECH technology polyethylene plant and related
infrastructure. Selling, general and administrative expenses decreased $15 million, or 8%, from $191 million in 2001, to $176 million in 2002 due to continued cost
reduction and streamlining efforts. Research and development expenses decreased
slightly from $40 million in 2001
to $39 million in 2002.  Restructuring
and Other Unusual Items -Unusual items in 2002 consisted of a gain on the sale of our interest in
the Cochin Pipeline, restructuring charges related to streamlining our
operations, our proportional share of a Methanex write-down associated with a
plant closure, and benefit from a reduction of an accrual for site restoration
costs. The net amount of these unusual items was a $6 million loss in 2002. This compares with an
unusual gain of $41 million in
2001 relating primarily to an IRS settlement
and the effect of legislated reductions in Canadian tax rates.  Interest
Expense (Net) -Net
interest expense decreased slightly from $88 million in 2001 to $87million
in 2002. A decrease in interest expense due to a reduction in outstanding debt
was largely offset by an increase due to not capitalizing interest in 2002. In
2001, we capitalized $18 million
of interest costs relating to the Joffre expansion.  Income Taxes
-Income tax
recoveries declined to $13
million in 2002 from $83 million
in 2001 due to reduced losses in 2002 as well as additional tax benefits from
unusual items in 2001.  9 
   Net Loss  For 2002, we reported a net loss of$81 million, compared to a net loss of $128 million in 2001. Our financial performance
in 2002 improved over 2001 but remained challenging due to continued excess
supply in our Olefins/Polyolefins and Styrenics businesses. During 2002, demand
for our products increased, leading to higher sales volumes and higher margins.  RESULTS
OF OPERATIONS  2001 COMPARED TO 2000  Our financial performance in 2001 declined
significantly from 2000 due to weak customer demand and soft sales volumes in
our Olefins/Polyolefins and Styrenics businesses. These factors forced cuts in
prices to maintain market share, which coupled with volatile feedstock pricing,
resulted in margin decline of$663 million in 2001, compared to the margin improvement of $307 million in 2000. Total revenue decreased $722 million, or 18%, from $3,916 million in 2000 to $3,194 million in 2001. Our EBITDA decreased $658 million, or 91%, from $720
million in 2000 to $62 million in
2001. Our net loss to common shareholders decreased to $161 million in 2001 from income of $266 million in 2000. Our net loss to common
shareholders before unusual items was $202 million in 2001, compared to net income of $287 million in 2000. See Supplemental
Earnings Measures.  Olefins/Polyolefins Segment Polyethylene sales volumes for
2001 and 2000 follow:  (MILLIONS OF POUNDS)
  
  2001
  
  2000NOVAPOLResinsJoffreLLDPE
  
  1,129
  
  1,327MooreLDPE
  
  265
  
  318MooreHDPE
  
  381
  
  452SCLAIRResins
  
  617
  
  603AdvancedSCLAIRTECH
  technology resins
  
  188
  
  Total
  
  2,580
  
  2,700  Revenues - Revenue
from our Olefins/Polyolefins business decreased $214 million, or 10%, from $2,228
million in 2000 to $2,014 million
in 2001. The decrease was primarily due to lower average sales prices. Total
2001 polyethylene sales volumes were down 4% from 2000 due to slowing demand.
Overall, polyethylene volumes in North America were up 3% and international
volumes were down 44%.  Feedstock
and Operating Costs - Feedstock and operating costs increased $170 million, or 12%, from $1,411 million in 2000 to $1,581 million in 2001. Higher natural gas and
utility costs, coupled with lower co-product pricing, more than offset any
benefit of lower crude oil costs.  SegmentEBITDA- In
our Olefins/Polyolefins business, segment EBITDA decreased $336 million, or
64%, from $525 million in 2000 to
$189 million in 2001. Demand for
polyethylene started to fall off in 2000. The effects of slowing demand were
compounded by new ethylene and polyethylene capacity and record high feedstock
costs in the first part of the year. In addition, results for the second half
of the year reflect our new Advanced SCLAIRTECH technology polyethylene plant costs. The plant focused on new product
development and commercialization and did not produce maximum volume.  10 
   The following table provides a
reconciliation from operating income to EBITDA.  (MILLIONS OF DOLLARS)
  
  2001
  
  2000Operating income
  
  $
  57
  
  $
  439Depreciation and amortization
  
  132
  
  86EBITDA
  
  $
  189
  
  $
  525  Net Loss -Our Olefins/Polyolefins business recorded a
net loss of $2 million in 2001,
compared to net income of $258
million in 2000. Our Olefins/Polyolefins business experienced approximately
$100 million in additional depreciation,
interest and other fixed costs with the completion of the capital expansion at
Joffre, Alberta. We ran our third ethylene cracker and our new Advanced SCLAIRTECH
technology polyethylene facility at
planned start up rates. Margins were also hurt by weak market conditions, which
significantly impacted the price we were able to obtain from sales of initial
polyethylene production at the new facility.  Styrenics Segment Styrenics
sales volumes for 2001 and 2000 follow:  (MILLIONS OF POUNDS)
  
  2001
  
  2000Styrene(1)
  
  1,014
  
  1,276Polystyrene
  
  2,282
  
  2,731High performance styrenics includingDYLARK and other
  
  314
  
  304Total
  
  3,610
  
  4,311  
 (1)Third party sales only.  Revenues - Revenues
from our Styrenics business decreased $552 million, or 30%, from $1,866
million in 2000 to $1,314 million
in 2001, reflective of market conditions during 2001. The decrease in revenues
was due to both lower volumes and prices. Prices declined in all business
areas, and total sales volumes decreased 16% from 2000 levels.  Feedstock
and Operating Costs - Feedstock and operating costs decreased $229 million, or approximately 15%, from $1,549 million in 2000 to $1,320 million in 2001. The major drivers in
the decline in costs were reduced production and lower sales volumes. Benchmark
prices for our major feedstocks, ethylene and benzene, also decreased in 2001,
however we did not see the full effect of this decline until 2002 because we
use a FIFO inventory-costing methodology.  SegmentEBITDA- In
our Styrenics business, segment EBITDA in 2001 was a loss of $127
million versus earnings of $195
million in 2000. The significant decline from 2000 was in part due to lower
volumes. In addition, the margins declined as a result of lower prices and flat
feedstocks, as described above.  The following table provides a reconciliation
from operating income to EBITDA.  (MILLIONS OF DOLLARS)
  
  2001
  
  2000Operating income
  
  $
  (225
  )
  $
  93Depreciation and amortization
  
  98
  
  102EBITDA
  
  $
  (127
  )
  $
  195  11 
   Net Income
(Loss) - In 2001, our Styrenics business recorded a net
loss of $181 million, compared to
net income of $42 million in
2000. Our Styrenics business experienced lower demand and softening margins
throughout the year as a result of ongoing economic weakness in North America
and Europe, as well as customer inventory depletion. In 2000, we acquired
Shells European solid polystyrene and expandable polystyrene business. We
achieved $9million (after-tax) of
synergies from this transaction in 2001 with $13 million (after-tax) achieved against the three-year target of $19 million (after-tax).  Other Items  The following items have not been discussed in
the Olefins/Polyolefins or the Styrenics business segments.  Methanex
Investment -Our share
of Methanexs earnings before unusual items was $14 million in 2001, as compared to $23 million in 2000. 2001 results included a $3 million charge for our portion of a
restructuring charge resulting in earnings after unusual items of $11 million compared with earnings of $23 million in 2000. Methanol prices improved
in the first half of 2001 as the methanol supply/demand balance tightened. By
mid-year 2001, demand for methanol, and therefore pricing, began to fall due to
the global economic slowdown. In 2001, methanol demand declined by an estimated
5%. The average realized price for methanol fell from a level of $225 per metric tonne in the first quarter of
2001 to $115 per metric tonne in
the fourth quarter of 2001.  Methanex
Investment  (MILLIONS OF DOLLARS)
  
  2001
  
  2000Equity earnings (after-tax)
  
  $
  14
  
  $
  23Unusual items (after-tax)
  
  (3
  )
  Net equity earnings
  
  $
  11
  
  $
  23  Other
Operating Expenses - Depreciation and amortization expense
increased by $42million, or 22%,
from $188 million in 2000 to $230 million in 2001, due to the completion of
the Joffre expansion in mid-2001. There was a reduction of $6 million in selling, general and
administration in 2001 due to cost reduction efforts. Research and development
expenses increased $1 million
from 2000 due to spending on improving product performance characteristics and
production processes.  Restructuring
and Other Unusual Items - Unusual items resulted in
a $41 million net gain
(after-tax) in 2001, as compared to a $21 million net loss in 2000. Unusual items in 2001 included a $44 million (after-tax) gain regarding
settlements with the Internal Revenue Service on foreign tax credits for prior
years, a $17 million benefit
related to the impact of legislated reductions in Canadian provincial income
tax rates on future tax liabilities, a fourth quarter $17 million (after-tax) charge related to restructuring
and our proportional share of a Methanex plant write-down. Our restructuring
charge in 2001 related to employee severance costs, as well as project and
other asset write-offs. This charge was significantly lower than the
restructuring charge in 2000 of $71
million (after-tax), which included a plant closure at Joliet, Illinois, other
line closures and related employee severance. In 2000, a further $29 million benefit from reductions in Canadian
provincial income tax rates on future tax liabilities and a $21 million after-tax gain on sale of Dynegy
Inc. preferred shares brought the unusual items to a $21 million net loss.  Interest
Expense (Net) - Net interest expense increased to $88 million in 2001 from $45 million in 2000, primarily due to the completion
of the Joffre, Alberta expansion. The total interest expense in 2000 was lower
because we capitalized interest during the construction period.  12 
   Income Taxes
- Income taxes declined by $214 million in 2001 from an expense of $131 million in 2000 to a recovery of $83 million in 2001 due to the significant
reduction in earnings from operations during the year.  Net Income (Loss) In 2001, we reported a net loss of$128 million, compared to net income of $302 million in 2000. Business conditions were
difficult in 2001 and reflect the trough environment the chemical industry was
experiencing. Weak customer demand and soft sales volumes reduced prices. This,
coupled with volatile feedstock pricing, resulted in margin decline of $663 million in 2001, compared to margin
improvement of $307 million in
2000.  LIQUIDITY
AND CAPITAL RESOURCES  Our principal sources of liquidity are cash
flows from operations, accounts receivable securitization programs and borrowings
under our revolving credit facility. Our principal uses of cash are capital
expenditures and debt service.  Cash Flow Funds generated from operations improved
significantly from 2001 to 2002. During 2001, we took steps to generate cash
and reduce debt. This focus continued into 2002 and resulted in significant
reductions in working capital, fixed costs and capital spending. We also sold
non-strategic assets, the most significant of which was our 20% interest in the
Cochin Pipeline. Additionally, we received a substantial tax refund in 2002. As
a result of our improved business performance and our focus on cash flow
maximization, we reduced debt by$307 million during 2002. A summary of the cash inflows
and outflows, which contributed to our debt reduction, is shown below:  (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000INFLOWSFunds generated from operations
  
  $
  153
  
  $
  94
  
  $
  611Reduction (increase) in operating working capital
  
  206
  
  184
  
  (260
  )Cash generated from operations
  
  359
  
  278
  
  351Asset sale proceeds
  
  82
  
  
  
  741Other
  
  24
  
  39
  
  4Total inflows
  
  465
  
  317
  
  1,096OUTFLOWSCapital expenditures
  
  (71
  )
  (168
  )
  (440
  )Turnaround costs, long-term investments and other assets
  
  (18
  )
  (156
  )
  (8
  )Shell acquisition
  
  
  
  
  
  (212
  )Common share buy-back program
  
  
  
  
  
  (150
  )Dividends and distributions
  
  (54
  )
  (56
  )
  (59
  )Increase in non-operating working capital
  
  (11
  )
  (22
  )
  (187
  )Total outflows
  
  (154
  )
  (402
  )
  (1,056
  )Reduction (increase) in cash
  
  (4
  )
  17
  
  32DEBT (ADDITION) REDUCTION
  
  $
  307
  
  $
  (68
  )
  $
  72   13 
   Inflows of
Cash -Funds from
operations improved to $153
million in 2002 from $94 million
in 2001, but remained substantially below the $611 million generated in 2000. We reduced operating working capital by $206 million in 2002 by receiving $182 million of tax refunds and improving cash
flow cycle time, or CFCT, which
is measured as operating working capital divided by average daily sales. We
reduced our operating working capital requirements from 60 days of sales at the
end of 2000, to 39 days of sales at the end of 2001 to 20 days of sales at the
end of 2002. If we had maintained our 2001 year-end operating working capital
days of sales levels, we would have tied up $170 million more in operating working capital at the end of 2002. We
expect CFCT to average between 25
to 30 days over the long term. We expect to receive approximately $20 million in tax refunds in early 2003. In
total, we generated $359 million
in cash from operations versus $278
million in 2001 and $351 million
in 2000. We also received$82 million of cash from the sale of
non-strategic assets during 2002. The sale of our 20% interest in the Cochin
Pipeline generated $64 million
and other asset sales contributed $18
million. In the third quarter of 2002,
Methanex announced the commencement of a regular quarterly dividend to
shareholders of$0.05 per
share. We received approximately $4
million in the second half of the year from this regular dividend. On January
27, 2003, Methanex also announced a special dividend of $0.25 per share. Our share was approximately $12 million and was received on February 14,
2003. This is the first special dividend that Methanex has issued and is reflective
of a strong methanol market. These dividend payments will have no tax impact
because dividends from one taxable Canadian company to another taxable Canadian
company are tax-free. In accordance with standard equity accounting, the
receipt of this dividend was recorded as a reduction in our investment in
Methanex. We received$33 million in cash related to the margin
account for the retractable preferred shares (see Note 12 to the consolidated
financial statements). The amount of restricted cash required to be on deposit
is dependent upon the market value of our 9.04% and 9.50% preferred securities.  Outflows of
Cash -We reduced our
capital spending program to $71
million during 2002 compared to the $168 million spent in 2001 and the $440 million spent in 2000. If business conditions improve, we will have
a capital spending program of between $125 million to $150
million in 2003 focused primarily on sustaining capital and small growth
projects. We also spent $27
million in 2002 on scheduled maintenance of plants, known as turnarounds. We
expect to spend approximately $18
million on scheduled turnarounds in 2003.  Commitments We have various commercial commitments,
including operating leases for office space and railcars and unconditional
purchase obligations related to minimum amounts of feedstock and other raw
materials purchased pursuant to agreements entered into to secure short and
long-term supply. While we have some fixed price raw materials agreements,
prices are typically based on market or a cost plus basis and fluctuate with
changes in the underlying raw material indices. Obligations have been
calculated using year-end pricing for purposes of the chart on the following
page.  14 
   Contractual
Cash Obligations  (MILLIONS OF DOLLARS)
  
  PAYMENTS
  DUE BY PERIODTOTAL
  
  2003
  
  2004-2005
  
  2006-2007
  
  AFTER 2007Long-term debt(1)
  
  $
  1,215
  
  $
  4
  
  $
  102
  
  $
  304
  
  $
  805Operating leases(2)
  
  536
  
  41
  
  77
  
  68
  
  350Unconditional purchase obligations(3)
  
  6,650
  
  1,477
  
  1,285
  
  1,148
  
  2,740Total contractual cash obligations
  
  $
  8,401
  
  $
  1,522
  
  $
  1,464
  
  $
  1,520
  
  $
  3,895  
 (1)Includes current portion and
bank loans. (2)Includes property, railcar and
other equipment. (3)We could
mitigate the impact of excess quantities of raw materials and feedstock
commodities resulting from fixed purchase commitments by reselling these
products at market prices.  Liquidity We meet our short-term liquidity needs through
cash flows from operations, our accounts receivable securitization programs and
borrowings under our revolving credit facility. In addition, we continue to
consider the sale of certain non-strategic assets.  Credit
Facility -We have a
two-year committed revolving credit facility of $310 million expiring April 3,
2004. Financial covenants related to this facility are as follows:  COVENANT
  
  REQUIREMENTMinimumEBITDA to Interest:(1)12 months ending December 31, 2002
  
  0.75
  : 1.012 months ending March 31, 2003
  
  1.50
  : 1.012 months ending June 30, 2003
  
  2.00
  : 1.012 months ending September 30, 2003
  
  2.50
  : 1.012 months ending December 31, 2003
  
  3.00
  : 1.012 months ending March 31, 2004
  
  3.50
  : 1.0Maximum Debt to Total Capitalization:
  
  55
  %Minimum Shareholders Equity:
  
  $1.4
  billion plus 50% of positive earnings  
 (1)Interest includes
preferred share dividends and distributions.  At December 31, 2002, we had$20 million of letters of credit outstanding
under the revolving credit facility, and $290 million of available borrowing capacity. We are in compliance with
all covenants under the revolving credit facility. We are currently in
discussions with the bank syndicate for purposes of amending and extending this
credit facility.  Accounts
Receivable Securitization -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. The programs were renewed during 2002 until
September 23, 2003. We sell trade accounts receivable to third parties, on a
revolving basis, to a maximum of $195
million (see Note 4 to the consolidated financial statements). At December 31,
2002, $163 million in receivables
were sold under the programs. Of this amount, $103 million was sold via a special purpose entity, or 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 financial
statements. We conduct no other business through SPEs.  15 
   Total Return
Swap -In connection
with the acquisition of styrenics assets from Huntsman Corporation on December
31, 1998, our subsidiary, NOVA Chemicals
Inc., issued retractable preferred shares with a liquidation preference of $198 million as partial consideration. Holders
of the retractable preferred shares have the right to exchange the shares (a
retraction) for our common shares (plus preferred shares if the market value
of such common shares is less than $198 million). During 2001 and 2002, certain
changes were made to the terms of the retractable preferred shares and related
stockholder agreements giving us the right to call the retractable preferred
shares on or after December 15, 2001. These changes effectively provide us with
the right to repurchase the retractable preferred shares prior to any
retraction into our common shares. If we do not exercise our repurchase rights
prior to October 1, 2003, the market-based exchange rate at which the
retractable preferred shares may be retracted into our common shares (and,
accordingly, the effective price at which the common shares would be issued)
will be fixed on that date. The number of our common shares issuable upon a
retraction remains limited to a maximum of 8.5 million shares with the balance
of the obligation, if any, met through the issuance of preferred shares. The
dividend rate on the retractable preferred shares is 2% per year. Coincident with making the
above changes, we entered into a total return swap, which terminates on October
1, 2003, with respect to the retractable preferred shares. Under the terms of
the total return swap: (i) the counterparty pays us the total return on the
retractable preferred shares (dividends plus positive changes in equity value
of the preferred shares, capped at$191 million until termination or sale at which time any such positive
changes are not capped) and (ii) we pay the counterparty a spread to LIBOR
as well as any negative changes in the
equity value of the retractable preferred shares. We are obligated under the
swap to provide margin (cash, government securities or a letter of credit)
equal to 20% of the original notional amount of$191 million, which is currently satisfied by a
letter of credit. In addition, we are also obligated under the swap to provide
margin equal to the difference between the original notional amount and the
current notional amount of $180
million, which will be reduced to $126
million as of April 1, 2003. This margin is currently satisfied by posting
restricted cash. If the equity value of the retractable preferred shares
decreases by 5% or more at any time, we are required to post additional margin.
If the equity value of the retractable preferred shares increases by 5% or
more, any excess collateral will be returned to us. Changes in equity value of
the retractable preferred shares during the term of the swap will be determined
based on changes in the average price of the outstanding 9.04% and 9.50%
preferred securities issued by us. If we default on other debt
with an aggregate principal amount of$25 million or more or the closing price of our common shares is $15.00 or less or upon certain other credit
events, the counter-party will have the right to sell the retractable 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 most recent adjusted notional equity value of the
retractable preferred shares (in the event the difference was negative).
Subsequent to the termination of the swap, we may, at our option, repurchase
the retractable preferred shares for $198 million plus accrued and unpaid dividends.  16 
   Capitalization Our debt to total capitalization declined in
2002 to 43.8% from 48.5% in 2001. Our target is to average about 40% debt to
total capitalization over the course of the commodity chemical cycle. Under
CanadianGAAP, our
preferred securities due 2047 and 2048 are accounted for as equity. We had only$4 million of current debt outstanding at
December 31, 2002. Our $150
million of 7% debentures due August 15, 2026 are putable to us at par at the
option of the holders on August 15, 2003, but continue to be classified as
long-term debt as we have sufficient capacity available on our long-term credit
facility to repay these debentures should the holders exercise their option.  Financial
Ratios  DECEMBER 31 (MILLIONS OF DOLLARS, EXCEPT WHERE NOTED)
  
  2002
  
  2001
  
  2000Long-term debt (1)
  
  $
  1,215
  
  $
  1,522
  
  $
  1,451Shareholders equity
  
  1,561
  
  1,614
  
  1,926Total capitalization
  
  $
  2,776
  
  $
  3,136
  
  $
  3,377Debt to total capitalization
  
  43.8
  %
  48.5
  %
  42.9
  %Interest coverage (deficiency) on long-term debt (2)
  
  (0.1
  )x
  (1.7
  )x
  4.8
  x  
 (1)   Includes current portion and bank loans. (2)   Interest coverage (deficiency) on long-term
debt is equal to net income (loss) before interest expense on long-term debt
and income taxes divided by annual interest requirements on long-term debt.  Credit Ratings Our current senior unsecured debt ratings are as
follows:DBRS BBB
(low)(stable); Standard & Poors - BB+ (stable); and Moodys - Ba2 (stable). During
2002, Moodys and Standard & Poors downgraded our credit ratings. Moodys
lowered our corporate credit rating to Ba2 from Baa3 and Standard & Poors
lowered our rating to BB+ from BBB-. Both Moodys and Standard & Poors
changed their outlook from negative to stable. The downgrades had no material
impact on any of our lending arrangements.  SUPPLEMENTAL
EARNINGS MEASURES  In addition to providing earnings measures in
accordance with CanadianGAAP, we present certain supplemental earnings measures. These are earnings
before interest, taxes, depreciation and amortization (EBITDA) and net income (loss) to common shareholders
before unusual items. These measures do not have any standardized meaning
prescribed by Canadian GAAP and
are, therefore, unlikely to be comparable to similar measures presented by
other companies.  EBITDA This measure is provided to assist investors
in determining our ability to generate cash from operations.EBITDAcan be determined from the consolidated
statements of income (loss) by adding back income taxes, interest expense,
other gains, equity in the earnings (losses) of affiliates, depreciation and
amortization and restructuring charges to net income (loss).  Net Income (Loss) to Common Shareholders
Before Unusual Items This measure is provided to assist investors
in assessing earnings performance from ongoing operations. Certain items such
as gains and losses from sales of assets and restructuring charges are excluded
if they are not considered to be in the ordinary course of business. A listing
of unusual items (after-tax) for the periods presented is as follows:  17 
   YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000Net income (loss) to common shareholders before unusual items
  
  $
  (106
  )
  $
  (202
  )
  $
  287Unusual items:Restructuring charges
  
  (15
  )
  (17
  )
  (71
  )Tax settlements withIRS
  
  
  
  44
  
  Methanex asset write-down and restructuring charges
  
  (27
  )
  (3
  )
  Reductions in income tax rates on future tax liabilities
  
  
  
  17
  
  29Gain on sale of Dynegy Inc. preferred shares
  
  
  
  
  
  21Gain on sale of assets
  
  36
  
  
  
  Total unusual items
  
  $
  (6
  )
  $
  41
  
  $
  (21
  )Net income (loss) to common shareholders after unusual items
  
  $
  (112
  )
  $
  (161
  )
  $
  266  Changes to Supplemental Earnings Measures in
2003 Effective March 28, 2003, newSECrules with respect to non-GAAP financial measures will come into effect.
These rules will not permit the exclusion of certain items when presenting non-GAAP
financial measures. Had we been
following these rules during the periods presented in this report, the
following items would not be excluded when presenting EBITDA and net income (loss) to common shareholders
before unusual items: restructuring charges, tax settlements with IRS, Methanex asset write-down and restructuring
charges, and reductions in income taxes on future tax liabilities. Accordingly,
the following amounts would have been reported:  YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)
  
  2002
  
  2001
  
  2000EBITDA
  
  $
  195
  
  $
  35
  
  $
  602Net income (loss) to common shareholders before unusual items
  
  $
  (148
  )
  $
  (161
  )
  $
  245Earnings (loss) per share before unusual items: Basic
  
  $
  (1.71
  )
  $
  (1.89
  )
  $
  2.76 Diluted
  
  $
  (1.71
  )
  $
  (1.89
  )
  $
  2.49  DIVIDENDS
AND DISTRIBUTIONS  Common Share Dividends Historically, we have paid dividends on our
common shares at the rate of$0.10 Canadian dollars per quarter. In 2002, we paid $23 million in dividends on our common shares.
There are currently no material contractual restrictions on our ability to
declare and pay dividends on our common shares. The declaration and payment of
dividends is at the discretion of our Board of Directors, which will consider
earnings, capital requirements, our financial condition and other relevant
factors. It is, however, our intention to retain most of our earnings to
support current operations, further reduce our debt, and continue to pay
dividends at historic levels.  Preferred Securities Distributions We pay distributions on our preferred
securities on a quarterly basis, at an annual rate of 9.50% on the$210 million of preferred securities due 2047
and 9.04% on the $172.5 million
of preferred securities due 2048. We have the right to redeem the preferred
securities at any time on or after October 22, 2003 and January 26, 2004,
respectively. Distributions are tax deductible and deducted from income when
determining diluted earnings per share. We have the right, under certain
conditions, to elect to defer payment of distributions on the securities for up
to 20 consecutive quarterly periods. No distributions have been deferred to
date.  18 
   Retractable Preferred Share Dividends We pay 2% annual dividends on the$198 million retractable preferred shares.
These dividends are deducted from income when determining diluted earnings per
share. Holders of the retractable preferred shares have the right to exchange
the shares (a retraction) for our common shares (plus preferred shares if the
market value of such common shares is less than $198 million). The market based exchange
rate at which the retractable preferred shares may be retracted into our common
shares (and accordingly the effective price at which the common shares would be
issued) will be determined on October 1, 2003.  APPLICATION
OF CRITICAL ACCOUNTING ESTIMATES  TheSECrecently issued a new rule, Application of Critical Accounting
Policies, which requires companies to provide additional disclosure and
commentary on those accounting estimates considered most critical to the
application of their accounting policies. This rule considers accounting
estimates to be critical if they are important to the companys financial
condition and results, and require significant judgment and estimation on the
part of management in their application. We believe the following
represent the estimates most critical to the application of our accounting
policies. Management has discussed the development and selection of these
critical accounting estimates with the Audit, Finance and Risk Committee of our
Board of Directors and the Audit, Finance and Risk Committee has reviewed our
disclosure relating to such estimates in this Management Discussion and
Analysis of Financial Condition and Results of Operations.  Plant, Property and Equipment (PP&E) A judgmental aspect of accounting forPP&Einvolves determining whether an
impairment of our assets exists. This assessment is critical due to its
potential impact on our earnings. Canadian and United States accounting
standards require that if the sum of the future cash flows together with the
residual value expected to result from a companys assets, undiscounted and
without interest charges, is less than the reported value of the asset, an
asset impairment must be recognized in the financial statements by a charge to
earnings. Our Olefins/Polyolefins
business has an established long-term record of profitability and, based on
current asset carrying values and expected future cash flows, we have concluded
the carrying value of its assets is appropriate. Our Styrenics business has not
been as profitable and has recently reduced production capacity due to poor
market conditions, temporarily idled theEPSunits at our Carrington, United Kingdom plant
as well as shut down several reactors in Europe and North America. We
determined that the undiscounted sum of the expected future cash flows from our
Styrenics plants significantly exceeded the recorded value of those plants, so
we did not recognize impairment in accordance with Canadian and U.S.
GAAP. Our estimate of future cash
flows is based on historical operating performance and the assumption that the
business cycle pattern will continue in the future. Historically, there have
been peaks in earnings performance, characterized by a tight supply/demand
balance and improving margins, followed by trough periods when supply exceeds
demand and lower margins result. We have assumed that we will earn margins in
the future that are similar to margins earned in the past and that we will have
a similar cost structure. In addition, we are able to
choose from alternative methods of depreciation. We have chosen the
straight-line method rather than other methods, such as unit of production,
because the straight-line method is more conservative and requires less
estimation and judgment.  19 
   Environmental Liabilities CanadianGAAPrequires companies to provide for future plant
decommissioning and site restoration costs through charges to income when those
costs are reasonably determinable. We accrue these costs for active plants and
those plants no longer used in our operations. At December 31, 2002, we had $29 million of accumulated reserve for these
activities. Decommissioning and site
restoration costs for plant sites that have been divested or are no longer in
use are expected to be approximately$12 million. We have fully reserved for these costs and believe the
reserve to be adequate. For currently operating plant
sites, approximately$17
million has been accrued in anticipation of potential plant decommissioning and
site restoration. We have undertaken a preliminary evaluation of the costs to
conduct decommissioning and site restoration required to satisfy our
commitments to Responsible Care®, contractual requirements and
environmental legislation upon termination of operations at these plant sites. Based upon the preliminary
evaluation, we anticipate that a further$59 million may be required to decommission and restore all operating
plants following termination of operations. Since 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, since the value of salvage, degree of natural attenuation, evolution
of new technologies and potential future land uses may mitigate future
environmental liabilities and potential costs. In aggregate, we have
estimated$88 million may
be required to complete all decommissioning and restoration activities, net of
salvage value. We are accruing this liability evenly over the remaining useful
life of the plants, resulting in an annual charge to income of approximately $2 million.  Pensions CanadianGAAPrequires that actuarial gains and losses be
recognized in our income using a systematic and consistent methodology. We have
chosen to 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. We
chose this alternative because it avoids recognizing into income large
unrealized gains or losses in individual years. Immediate recognition of such
gains and losses would introduce misleading volatility into our earnings.
Cumulative unrealized actuarial gains and losses have ranged from a $61 million gain at December 31, 1999 to a $105 million loss at December 31, 2002. We also make assumptions
concerning factors such as mortality, termination, retirement, rate of increase
in future compensation and discount rate, as well as the expected return on
plan assets. These assumptions can impact our pension obligations and pension
expense. We use the latest published mortality rate tables and select other
assumptions in line with our actual experience. The expected return on plan
assets reflects our estimate of asset returns over the life of the pension
plans, not our actual return in any given year. Changes in these assumptions
would need to be dramatic to cause a material impact to our pension obligation
or pension expense amounts. For example, a 1% change in the expected return on
plan assets would only impact earnings by approximately$2 million after-tax.  20 
   We contributed$11 million to all of our defined benefit
pension plans in 2002 based on valuations filed with various pension regulators
in various countries. Funding for our pension plans is largely driven by the
Canadian pension plans since they constitute the vast majority of our pension
plan assets and obligations. Since we are not required to file another
valuation with the pension regulators in Canada until 2005, we do not
anticipate our 2003 contributions will vary significantly from 2002 levels. If
equity markets do not recover by 2005, we will be required to increase our
contributions at that time.  ACCOUNTING
STANDARDS  On January 1, 2002, we adopted the following
new accounting standards as prescribed by the Canadian Institute of Chartered
Accountants:  Stock-Based Compensation and Other
Stock-Based Payments The new recommendations encourage, but do not
require, the use of the fair-value based method to account for stock-based
awards granted to employees. We chose not to apply the fair-value method and
continue to use the intrinsic-value method, where compensation expense, if any,
is measured based on the excess of the market price of the stock over the
options exercise price on the date of grant. As options are generally granted
at the market price on the date of grant, no compensation cost results. See
Note 14 to our consolidated financial statements for the pro forma amounts that
would have resulted had compensation expense for stock options been determined
based on the fair-value method.  Foreign Currency Translation The new recommendations eliminated the
deferral and amortization of unrealized translation gains and losses on foreign
denominated monetary items with a fixed life. Our Canadian denominated debt is
designated as a partial hedge of our Canadian assets, and the resulting
unrealized foreign exchange gains or losses are deferred in a separate
component of shareholders equity entitled cumulative translation adjustment.  Goodwill and Other Intangible Assets The new recommendations require that new and
existing goodwill and indefinite life intangible assets be tested annually for
impairment, and not be subject to amortization. Intangible assets with a finite
useful life are subject to amortization over their useful life. Our prior
business combinations did not result in any goodwill being recorded and our
intangible assets are primarily comprised of patents with finite useful lives. The adoption of these
standards had no significant effect on our financial position or results of
operations. At present, no new Canadian accounting standards will require
implementation that would materially impact our financial statements in 2003.  DISCLOSURE
OF MARKET AND REGULATORY RISK  The Audit, Finance and Risk Committee of our
Board of Directors regularly reviews foreign exchange, interest rate and
commodity hedging activity and monitors compliance with our hedging policy. Our
policy prohibits the use of financial instruments for speculative purposes and
limits hedging activity to the underlying net economic exposure. For further details on our
hedging activities, see Note 23 to the consolidated financial statements.  21 
   Foreign Exchange Hedging We conduct business in various countries where
certain revenues and expenses are determined in currencies other than theU.S.dollar. See chart under Factors
Affecting Financial Performance on page 38 for our exposure to the Canadian
dollar and Euro. Our earnings exposure to the Canadian dollar is hedged,
through March 2003, with forward contracts to fix the exchange rate. The
Canadian dollar averaged $0.64
per U.S. dollar in 2002, which
was lower than the fixed rates in the forward contracts. As a result, after-tax
earnings in 2002 were $33 million
lower than they would have otherwise been. The remaining$100 million of forward contracts in the
program at December 31, 2002 will mature during the first quarter of 2003. The
unrecognized after-tax mark-to-market loss on these hedges is $7 million based on a 63¢ Canadian dollar on
December 31, 2002. We do not intend to renew this hedging program. We have not hedged our
exposure to fluctuations in the Euro.  Commodity Hedging and Feedstock Acquisition We manage our exposure to fluctuating
commodity prices on our physical feedstock requirements by varying our mix of
fixed and floating price contracts and by entering into commodity futures
contracts, swaps and options. The extent to which hedging instruments are used
depends on market conditions and requires adherence to our hedging policy. We
also limit our positions in futures markets to our proprietary feedstock
requirements and do not use hedging instruments for speculative purposes. Our feedstock acquisition
team manages our position in the volatile natural gas and crude markets in an
effort to moderate the risks of fluctuations in feedstock prices to lower
overall feedstock costs. As a result of our hedging activities, after-tax
earnings in 2002 increased by$9 million compared to $55
million in 2001. On December 31, 2002, the unrecognized after-tax mark-to-market
value of all commodity positions was a net gain of $8 million which includes an $11 million gain (after-tax) in the fourth
quarter from certain natural gas positions. As a result, we received cash
payments of $17 million
(before-tax) during the fourth quarter. These gains will be amortized to income
over the remaining terms of the related feedstock purchase commitments from
January 2003 to March 2005.  Interest Rate Hedging We use interest rate swaps to manage our mix
between fixed and floating interest rate exposure. During 2002, we monetized a
before-tax gain of$13
million on swaps entered into in 2001. The gain is being amortized over the
life of the series of related debt that extends to May 2006 and April 2009. Of
the gain, $12 million remained
deferred at December 31, 2002. At December 31, 2002, 98% of
our debt had fixed interest rates averaging 6.7%; and 2% of our debt had
floating interest rates averaging 4.4%.  Credit Risk Management We are exposed to credit risk on financial
instruments given the possibility a counterparty to an instrument in which we
are entitled to receive payment of an unrealized gain fails to perform. We only
transact with counterparties having an appropriate credit rating for the risk
involved. A limit on contingent exposure has been established for each
counterparty based on the counterpartys credit rating. Credit exposure is
managed through credit approval and monitoring procedures. Counterparty risk is
reviewed with the Audit, Finance and Risk Committee. Concentration of credit risk
can result primarily from our receivables, as certain customer groups are
located in the same geographic area and operate in the same industry. We manage
our credit risk relating to these receivables through credit approval and monitoring
procedures.  22


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