EXHIBIT 99.1

CONSOLIDATED SIX-YEAR REVIEW

|(MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS, RATIOS AND MISCELLANEOUS DATA) |                | 2004 |       | 2003  |       | 2002  |       | 2001  |       | 2000  |       | 1999  |      
|----------------------------------------------------------------------------------- | -------------- | ---- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | -----
|Operating Results                                                                   |                |      |       |       |       |       |       |       |       |       |       |       |      
|Revenue                                                                             |                | $    | 5,270 |       | 3,949 |       | 3,091 |       | 3,194 |       | 3,916 |       | 2,808
|Operating income (loss)                                                             |                | $    | 264   |       | (75   | )     | (71   | )     | (195  | )     | 414   |       | 305  
|Net income (loss)                                                                   |                | $    | 262   |       | 28    |       | (81   | )     | (128  | )     | 302   |       | 253  
|Total assets                                                                        |                | $    | 5,047 |       | 4,413 |       | 4,154 |       | 4,359 |       | 4,754 |       | 4,559
|Capitalization                                                                      |                |      |       |       |       |       |       |       |       |       |       |       |      
|Current bank loans                                                                  |                | $    |      |       |      |       | 3     |       | 14    |       | 28    |       |     
|Long-term debt                                                                      |                |      | 1,516 |       | 1,101 |       | 1,212 |       | 1,508 |       | 1,423 |       | 1,525
|Less: Cash and cash equivalents                                                     |                |      | (245  | )     | (212  | )     | (14   | )     | (10   | )     | (27   | )     | (59  
|                                                                                    |                |      |       |       |       |       |       |       |       |       |       |       |      
|Net debt                                                                            |                | $    | 1,271 |       | 889   |       | 1,201 |       | 1,512 |       | 1,424 |       | 1,466
|Shareholders' equity                                                                |                |      | 1,691 |       | 1,890 |       | 1,561 |       | 1,614 |       | 1,926 |       | 1,964
|                                                                                    |                |      |       |       |       |       |       |       |       |       |       |       |      
|Total capitalization net of cash and cash equivalents                               |                | $    | 2,962 |       | 2,779 |       | 2,762 |       | 3,126 |       | 3,350 |       | 3,430
|                                                                                    |                |      |       |       |       |       |       |       |       |       |       |       |      
|Cash Flow Data                                                                      |                |      |       |       |       |       |       |       |       |       |       |       |      
|Plant, property and equipment additions                                             |                | $    | 242   |       | 130   |       | 71    |       | 168   |       | 440   |       | 620  
|Cash from operations                                                                |                | $    | 346   |       | 15    |       | 359   |       | 278   |       | 351   |       | 395  
|Net debt additions (repayments)                                                     |                | $    | 398   |       | (157  | )     | (307  | )     | 68    |       | (72   | )     | 219  
|EBITDA                                                                              |                | $    | 561   |       | 223   |       | 195   |       | 35    |       | 602   |       | 460  
|Data per Common Share                                                               |                |      |       |       |       |       |       |       |       |       |       |       |      
|Net income (loss)                                                                   |                |      |       |       |       |       |       |       |       |       |       |       |      
|                                                                                    |  Basic        |      | $     | 2.91  |       | (0.02 | )     | (1.30 | )     | (1.88 | )     | 3.00  |      
|                                                                                    |  Diluted      |      | $     | 2.71  |       | (0.02 | )     | (1.30 | )     | (1.88 | )     | 2.84  |      
|Common shareholders' equity at year-end(1)                                          |                | $    | 19.13 |       | 15.76 |       | 12.40 |       | 13.05 |       | 16.52 |       | 15.58
|Ratios                                                                              |                |      |       |       |       |       |       |       |       |       |       |       |      
|Return (loss) on average common equity(2)                                           |                |      | 19.1% |       | (9.8  | )%    | (14.5 | )%    | (13.2 | )%    | 18.1% |       | 7.4% 
|Net debt to total capitalization                                                    |                |      | 42.9% |       | 32.0% |       | 43.5% |       | 48.4% |       | 42.5% |       | 42.7%
|Funds flow coverage of financial charges(3)                                         |                |      | 5.0x  |       | 2.5x  |       | 2.7x  |       | 1.7x  |       | 6.0x  |       | 4.2x 
|Miscellaneous Data                                                                  |                |      |       |       |       |       |       |       |       |       |       |       |      
|Employees at year-end                                                               |                |      | 4,100 |       | 4,300 |       | 4,300 |       | 4,600 |       | 4,700 |       | 4,700
|Closing share price                                                                 |                |      |       |       |       |       |       |       |       |       |       |       |      
|                                                                                    |  TSX ($Cdn)   |      | $     | 56.70 |       | 35.04 |       | 28.89 |       | 30.75 |       | 28.10 |      
|                                                                                    |  NYSE ($U.S.) |      | $     | 47.30 |       | 26.95 |       | 18.30 |       | 19.27 |       | 18.81 |      
|Dividends and distributions                                                         |                |      |       |       |       |       |       |       |       |       |       |       |      
|Common shares                                                                       |                | $    | 28    |       | 25    |       | 23    |       | 23    |       | 23    |       | 25   
|Preferred securities and shares                                                     |                | $    | 10    |       | 29    |       | 31    |       | 33    |       | 36    |       | 36   

---

1

---





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 on NOVA Chemicals' website (www.novachemicals.com). Management believes the system of internal controls, review procedures and established
policies provide reasonable assurance as to the reliability and relevance of financial reports. Management also believes that NOVA Chemicals' operations are conducted in conformity with the law and
with a high standard of business conduct.

During
the past year, we have directed efforts to improve and document the design and operating effectiveness of internal control over external financial reporting. The results of this work have been
subjected to audit by the shareholders' auditors. As at year-end, we have reported that internal control over financial reporting is effective and NOVA Chemicals has achieved
U.S. Sarbanes-Oxley Act (SOX) 404 compliance one year in advance of requirements. In compliance with SOX 302, NOVA Chemicals' Chief Executive Officer and Chief Financial Officer will
provide to the Securities and Exchange Commission a certification related to NOVA Chemicals' annual disclosure document in the U.S. (Form 40-F). The same certification will
be provided to the Canadian Securities Administrators.

The
Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Board carries out this responsibility principally
through its Audit, Finance and Risk Committee. The Committee, which consists solely of 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.

|/s/ Jeffrey M. Lipton                                 |  | /s/ Larry A. MacDonald                                            
|----------------------------------------------------- |  | ------------------------------------------------------------------
|Jeffrey M. Lipton
President & Chief Executive Officer |  | Larry A. MacDonald
Senior Vice President & Chief Financial Officer
|February 16, 2005
Calgary, Canada                     |  |                                                                   

2

---



INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

Under Canadian Generally Accepted Auditing Standards and the Standards of the Public Company Accounting Oversight Board (United States)

To the Shareholders of NOVA Chemicals Corporation

We
have audited the Consolidated Balance Sheets of NOVA Chemicals Corporation as at December 31, 2004, 2003, and 2002 and the Consolidated Statements of Income (Loss) and Reinvested Earnings
and Cash Flows for each of the years in the three-year period ended December 31, 2004. These financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with Canadian Generally Accepted Auditing Standards and the Standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions.

In
our opinion, these Consolidated Financial Statements present fairly, in all material respects, the financial position of NOVA Chemicals Corporation as at December 31, 2004, 2003, and 2002
and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004 in accordance with Canadian Generally Accepted Accounting
Principles.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of NOVA Chemicals Corporation's internal control over
financial reporting as of December 31, 2004, based on criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 16, 2005 expressed an unqualified opinion thereon.

/s/
Ernst & Young LLP

Ernst &
Young LLP
Chartered Accountants

February 16,
2005
Calgary, Canada

3

---



INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROLS

Under Standards of the Public Company Accounting Oversight Board (United States)

To the Shareholders of NOVA Chemicals Corporation

We
have audited management's assessment, included on page 67 of this annual report, that NOVA Chemicals Corporation maintained effective internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). NOVA Chemicals' management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Corporation's internal
control over financial reporting based on our audit.

We
conducted our audit in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with Generally Accepted Accounting Principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with Generally Accepted Accounting Principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, management's assessment that NOVA Chemicals Corporation maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material
respects, based on the COSO criteria. Also, in our opinion, NOVA Chemicals Corporation maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2004 based on the COSO criteria.

We
have also audited, in accordance with Canadian Generally Accepted Auditing Standards and the Standards of the Public Company Accounting Oversight Board (United States), the 2004 Consolidated
Financial Statements of NOVA Chemicals Corporation and our report dated February 16, 2005 expressed an unqualified opinion thereon.

/s/
Ernst & Young LLP

Ernst &
Young LLP
Chartered Accountants

February 16,
2005
Calgary, Canada

4

---





CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND REINVESTED EARNINGS

|(MILLIONS OF U.S. DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31 |                                                  | 2004 |       | 2003 |   | 2002  |      
|------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ---- | ----- | ---- | - | ----- | -----
|Revenue                                                                                          |                                                  | $    | 5,270 |      | $ | 3,949 |      
|                                                                                                 |                                                  |      |       |      |   |       |      
|Feedstock and operating costs                                                                    |                                                  |      | 4,380 |      |   | 3,476 |      
|Depreciation and amortization                                                                    |                                                  |      | 297   |      |   | 298   |      
|Selling, general and administrative                                                              |                                                  |      | 273   |      |   | 190   |      
|Research and development                                                                         |                                                  |      | 48    |      |   | 45    |      
|Restructuring charges (Note 16)                                                                  |                                                  |      | 8     |      |   | 15    |      
|                                                                                                 |                                                  |      |       |      |   |       |      
|                                                                                                 |                                                  |      | 5,006 |      |   | 4,024 |      
|                                                                                                 |                                                  |      |       |      |   |       |      
|Operating income (loss)                                                                          |                                                  |      | 264   |      |   | (75   | )    
|                                                                                                 |                                                  |      |       |      |   |       |      
|Interest expense (net) (Note 8)                                                                  |                                                  |      | (96   | )    |   | (89   | )    
|Equity in earnings of affiliate (Note 5)                                                         |                                                  |      |      |      |   | 39    |      
|Other gains and (losses) (Note 17)                                                               |                                                  |      | 177   |      |   | 92    |      
|                                                                                                 |                                                  |      |       |      |   |       |      
|                                                                                                 |                                                  |      | 81    |      |   | 42    |      
|                                                                                                 |                                                  |      |       |      |   |       |      
|Income (loss) before income taxes                                                                |                                                  |      | 345   |      |   | (33   | )    
|Income tax (expense) recovery (Note 18)                                                          |                                                  |      | (83   | )    |   | 61    |      
|                                                                                                 |                                                  |      |       |      |   |       |      
|Net Income (Loss)                                                                                |                                                  | $    | 262   |      | $ | 28    |      
|Reinvested earnings, beginning of year                                                           |                                                  |      | 584   |      |   | 605   |      
|                                                                                                 | Change in accounting policy (Notes 2 and 21)     |      |       | (7   | ) |       | 5    
|                                                                                                 | Common share repurchases (Note 12)               |      |       | (155 | ) |       |     
|                                                                                                 | Stock options retired for cash (Note 14)         |      |       | (13  | ) |       |     
|                                                                                                 | Common share dividends                           |      |       | (28  | ) |       | (25  
|                                                                                                 | Preferred securities dividends and distributions |      |       | (10  | ) |       | (29  
|                                                                                                 |                                                  |      |       |      |   |       |      
|Reinvested earnings, end of year                                                                 |                                                  | $    | 633   |      | $ | 584   |      
|                                                                                                 |                                                  |      |       |      |   |       |      
|Weighted-average number of common shares outstanding (millions)                                  |                                                  |      |       |      |   |       |      
|                                                                                                 |  Basic                                          |      |       | 87   |   |       | 87   
|                                                                                                 |  Diluted                                        |      |       | 95   |   |       | 87   
|Net income (loss) per common share (Note 12)                                                     |                                                  |      |       |      |   |       |      
|                                                                                                 |  Basic                                          |      | $     | 2.91 |   | $     | (0.02
|                                                                                                 |  Diluted                                        |      | $     | 2.71 |   | $     | (0.02
|                                                                                                 |                                                  |      |       |      |   |       |      

See
accompanying Notes to Consolidated Financial Statements.

5

---



CONSOLIDATED BALANCE SHEETS

|(MILLIONS OF U.S. DOLLARS)
DECEMBER 31                 |                                                   | 2004 |       | 2003 |   | 2002  |    
|------------------------------------------------------ | ------------------------------------------------- | ---- | ----- | ---- | - | ----- | ---
|Assets                                                 |                                                   |      |       |      |   |       |    
|Current assets                                         |                                                   |      |       |      |   |       |    
|                                                       | Cash and cash equivalents                         |      | $     | 245  |   | $     | 212
|                                                       | Accounts receivable (Note 3)                      |      |       | 567  |   |       | 316
|                                                       | Inventories (Note 4)                              |      |       | 634  |   |       | 392
|                                                       |                                                   |      |       |      |   |       |    
|                                                       |                                                   |      | 1,446 |      |   | 920   |    
|Investments and other assets (Note 5)                  |                                                   |      | 147   |      |   | 157   |    
|Plant, property and equipment, net (Note 6)            |                                                   |      | 3,454 |      |   | 3,336 |    
|                                                       |                                                   |      |       |      |   |       |    
|                                                       |                                                   | $    | 5,047 |      | $ | 4,413 |    
|                                                       |                                                   |      |       |      |   |       |    
|Liabilities and Shareholders' Equity                   |                                                   |      |       |      |   |       |    
|Current liabilities                                    |                                                   |      |       |      |   |       |    
|                                                       | Bank loans                                        |      | $     |     |   | $     |   
|                                                       | Accounts payable and accrued liabilities (Note 7) |      |       | 808  |   |       | 587
|                                                       | Long-term debt due within one year (Note 8)       |      |       | 100  |   |       |   
|                                                       |                                                   |      |       |      |   |       |    
|                                                       |                                                   |      | 908   |      |   | 587   |    
|Long-term debt (Note 8)                                |                                                   |      | 1,416 |      |   | 1,101 |    
|Deferred credits (Note 9)                              |                                                   |      | 355   |      |   | 249   |    
|Future income taxes (Note 18)                          |                                                   |      | 677   |      |   | 586   |    
|                                                       |                                                   |      |       |      |   |       |    
|                                                       |                                                   |      | 3,356 |      |   | 2,523 |    
|                                                       |                                                   |      |       |      |   |       |    
|Shareholders' Equity                                   |                                                   |      |       |      |   |       |    
|Preferred securities (Note 10)                         |                                                   |      |      |      |   | 383   |    
|Retractable preferred shares (Note 11)                 |                                                   |      | 198   |      |   | 198   |    
|Common shares (Note 12)                                |                                                   |      | 499   |      |   | 493   |    
|Contributed surplus (Note 13)                          |                                                   |      | 8     |      |   |      |    
|Cumulative translation adjustment                      |                                                   |      | 353   |      |   | 232   |    
|Reinvested earnings                                    |                                                   |      | 633   |      |   | 584   |    
|                                                       |                                                   |      |       |      |   |       |    
|                                                       |                                                   |      | 1,691 |      |   | 1,890 |    
|                                                       |                                                   |      |       |      |   |       |    
|                                                       |                                                   | $    | 5,047 |      | $ | 4,413 |    
|                                                       |                                                   |      |       |      |   |       |    
|Contingencies and commitments (Notes 8, 11, 22 and 24) |                                                   |      |       |      |   |       |    

See
accompanying Notes to Consolidated Financial Statements.

|On behalf of the board:   |                           
|------------------------- | --------------------------
|/s/ Kerry L. Hawkins      | /s/ Jeffrey M. Lipton     
|Kerry L. Hawkins
Director | Jeffrey M. Lipton
Director

6

---



CONSOLIDATED STATEMENTS OF CASH FLOWS

|(MILLIONS OF U.S. DOLLARS)
YEAR ENDED DECEMBER 31                          |  | 2004 |      | 2003 |   | 2002 |  
|-------------------------------------------------------------------------- |  | ---- | ---- | ---- | - | ---- | -
|Operating Activities                                                       |  |      |      |      |   |      |  
|Net income (loss)                                                          |  | $    | 262  |      | $ | 28   |  
|Depreciation and amortization                                              |  |      | 297  |      |   | 298  |  
|Future income tax expense (recovery) (Note 18)                             |  |      | 38   |      |   | (78  | )
|Other gains (Note 17)                                                      |  |      | (177 | )    |   | (92  | )
|Stock option expense                                                       |  |      | 4    |      |   |     |  
|Equity in earnings of affiliate                                            |  |      |     |      |   | (39  | )
|Methanex dividends received                                                |  |      |     |      |   | 14   |  
|Asset writedowns                                                           |  |      |     |      |   | 9    |  
|                                                                           |  |      |      |      |   |      |  
|Funds from operations                                                      |  |      | 424  |      |   | 140  |  
|Changes in non-cash working capital (Note 19)                              |  |      | (78  | )    |   | (125 | )
|                                                                           |  |      |      |      |   |      |  
|Cash from operations                                                       |  |      | 346  |      |   | 15   |  
|                                                                           |  |      |      |      |   |      |  
|Investing Activities                                                       |  |      |      |      |   |      |  
|Proceeds on sales of assets and investments and other capital transactions |  |      | 225  |      |   | 564  |  
|Plant, property and equipment additions                                    |  |      | (242 | )    |   | (130 | )
|Turnaround costs, long-term investments and other assets                   |  |      | (9   | )    |   | (57  | )
|Changes in non-cash working capital (Note 19)                              |  |      | (110 | )    |   | 7    |  
|                                                                           |  |      |      |      |   |      |  
|                                                                           |  |      | (136 | )    |   | 384  |  
|                                                                           |  |      |      |      |   |      |  
|Financing Activities                                                       |  |      |      |      |   |      |  
|Decrease in current bank loans                                             |  |      |     |      |   | (3   | )
|Proceeds on liquidation of swap positions                                  |  |      |     |      |   |     |  
|Long-term debt additions                                                   |  |      | 400  |      |   |     |  
|Long-term debt repayments                                                  |  |      | (2   | )    |   | (152 | )
|Decrease in revolving debt                                                 |  |      |     |      |   | (2   | )
|Preferred securities redeemed (Note 10)                                    |  |      | (383 | )    |   |     |  
|Preferred securities dividends and distributions                           |  |      | (10  | )    |   | (29  | )
|Common shares issued for stock options                                     |  |      | 37   |      |   | 9    |  
|Common share repurchases (Note 12)                                         |  |      | (188 | )    |   |     |  
|Stock options retired for cash (Note 14)                                   |  |      | (18  | )    |   |     |  
|Common share dividends                                                     |  |      | (28  | )    |   | (25  | )
|Project advances from third parties (Note 19)                              |  |      | 15   |      |   | 11   |  
|Changes in non-cash working capital (Note 19)                              |  |      |     |      |   | (10  | )
|                                                                           |  |      |      |      |   |      |  
|                                                                           |  |      | (177 | )    |   | (201 | )
|                                                                           |  |      |      |      |   |      |  
|Increase in cash and cash equivalents                                      |  |      | 33   |      |   | 198  |  
|Cash and cash equivalents, beginning of year                               |  |      | 212  |      |   | 14   |  
|                                                                           |  |      |      |      |   |      |  
|Cash and cash equivalents, end of year                                     |  | $    | 245  |      | $ | 212  |  
|                                                                           |  |      |      |      |   |      |  

See
accompanying Notes to Consolidated Financial Statements.

7

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All amounts in U.S. dollars, unless otherwise noted.

1.     BASIS OF PRESENTATION

NOVA
Chemicals is incorporated under the laws of the Canada Business Corporations Act. Where used in these financial statements, "NOVA Chemicals" or "the Corporation" 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 25, "United States Generally
Accepted Accounting Principles" (U.S. GAAP).

The
Corporation measures and reports its consolidated financial statements in U.S. dollars.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Changes in Accounting Policies

Stock-Based Incentive Plans.On January 1, 2004, NOVA Chemicals adopted a new accounting standard related to stock-based compensation as
prescribed by the Canadian Institute of Chartered Accountants (CICA). The recommendations require that the fair value of stock options be expensed over their vesting period. Previously, NOVA Chemicals
followed the intrinsic-value approach, where the granting and exercising of stock options was accounted for as equity transactions and no amounts were expensed. The Corporation adopted the accounting
policy on a retroactive basis with no restatement of individual prior periods. Accordingly, on January 1, 2004, reinvested earnings was reduced and contributed surplus was increased by
$7 million to account for the stock option expense that would have been charged to earnings (loss) in 2002 and 2003 with respect to all options granted since January 1, 2002. NOVA
Chemicals uses the Black-Scholes option valuation model to calculate the fair value of options at the date of grant.

Derivative Financial Instruments.Effective January 1, 2004, NOVA Chemicals adopted the Canadian accounting standard that requires all derivative
positions, except those that qualify for hedge accounting treatment, to be marked-to-market at each period end with any resulting gains or losses recorded in earnings (loss).
NOVA Chemicals adopted the new accounting standard on a prospective basis. In accordance with the transitional provisions of the new accounting standard, $10 million of unrealized gains and
$18 million of crystallized losses that existed on January 1, 2004 have been deferred on the consolidated balance sheet. These amounts will be recognized in income over the remaining
term to maturity of the previously hedged transaction.

Cost of Service

Under
the terms of certain sales agreements, the Corporation sold ethylene on a take-or-pay basis, for a price determined by a cost-of-service formula
that included 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 included a 20% after-tax return on equity based on a deemed debt to equity ratio. NOVA Chemicals' cost-of-service agreements expired on June 30,
2004.

Cash and Cash Equivalents

Short-term
investments with initial maturities not greater than 90 days are considered to be cash equivalents, and are recorded at cost, which approximates current market value.

8

---



Foreign Currency Translation

The
Corporation's foreign operations are considered self-sustaining and are translated into U.S. dollars using the current rate method. Resulting translation gains or losses are
deferred in the cumulative translation adjustment account (CTA) until there is a realized reduction of the investment in the foreign operations.

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. NOVA Chemicals may choose to
modify these exposures by entering into contractual arrangements (derivatives), which reduce (hedge) the exposure by creating offsetting positions. Derivative instruments are used only for economic
hedges of foreign exchange rate, commodity prices and interest rate risk. These derivative instruments are not utilized for trading or speculative purposes.

NOVA
Chemicals has U.S., Canadian and European-based petrochemical operations. The Corporation periodically manages its exposure to fluctuations in these exchange rates by using forward exchange
contracts.

NOVA
Chemicals may choose to use commodity-based derivatives to manage its exposure to price fluctuations on crude oil, refined products and natural gas transactions. The instruments are used to
moderate against adverse short-term price movements. Occasionally, longer-term positions will be taken to manage price risk for anticipated supply requirements.

When
considered appropriate, NOVA Chemicals enters into interest rate swaps in order to manage the fixed and floating interest rate mix on its long-term debt portfolio. The interest rate
swap agreements generally involve the periodic exchange of payments without the exchange of the notional principal amounts upon which the payments are based.

Unrealized
gains or losses on derivative instruments that do not qualify for hedge accounting are reflected in earnings (loss) each period as a result of the derivatives being
marked-to-market. Gains or losses realized on settlement of derivative instruments qualifying for hedge accounting are recognized in income in the same period and the same
income statement line item as the revenues or expenditures arising from the hedged transaction.

Gains
or losses on termination or liquidation of derivative instruments qualifying for hedge accounting 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. Gains or losses on termination or liquidation of derivative instruments that do not
qualify for hedge accounting are recognized in earnings (loss) on termination or liquidation.

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

NOVA
Chemicals applies the proportionate consolidation method of accounting for its investments in joint venture operations. Under this method, NOVA Chemicals records, on a
line-by-line basis within its financial statements and notes, its pro rata share of the joint venture's assets, liabilities, revenues, expenses and cash flows.

9

---



Plant, Property and Equipment (PP&E)

NOVA
Chemicals' 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 of PP&E for impairment when circumstances indicate an asset's value may not be recoverable. If it is determined that an asset's undiscounted
cash flows are less than its carrying value, the asset is written down to its net realizable value.

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-off the assets to their salvage values
over their estimated useful lives. The Alberta cost-of-service ethylene plants and the hydrogen plant were 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 operated under billing structures that allowed NOVA Chemicals to recover related income tax costs from customers based on the taxes-payable method.
NOVA Chemicals recorded income tax expense on these operations equal to recoverable amounts. All cost-of-service agreements expired on June 30, 2004.

For
non-cost-of-service operations, 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 (losses) for accounting purposes. Accordingly, income tax expense (recovery) is provided on equity earnings (losses).

Asset Retirement Obligations

In
2003, NOVA Chemicals adopted the new accounting standard related to asset retirement obligations as prescribed by the CICA. The new recommendations change the method for recognition of liabilities
associated with the retirement of plant, property and equipment. The liabilities are initially recorded at their estimated fair value, based on a discounted value of the expected costs to be paid when
the assets are retired. The amount is added to the carrying values of the assets and depreciated over the estimated remaining lives of the assets. The liability increases each period as the amount of
the discount decreases over time. The resulting expense is referred to as accretion expense and is included in operating expenses. The liability is also adjusted for any changes in the estimated
amount or timing of the underlying future cash flows. The Corporation's asset retirement obligations are comprised of expected costs to be incurred upon termination of operations and the closure of
active manufacturing plant facilities. Costs will be incurred for activities such as dismantling, demolition and disposal of facilities and equipment, and remediation and restoration of sites.

10

---



A
change in accounting policy generally requires retroactive restatement of financial statements presented for prior periods, however, as the effect of these new recommendations was less than
$1 million for each prior period, reinvested earnings at January 1, 2003 was increased for the $5 million cumulative effect on adoption.

Employee Future Benefits

Pension Plans.NOVA Chemicals sponsors both defined benefit and defined contribution pension arrangements covering substantially all employees.

The
cost of defined benefit pensions is determined using the projected benefit method prorated on employment services and is expensed as the employees provide services. Adjustments arising from plan
amendments are amortized on a straight-line basis over the estimated average remaining service lifetime (EARSL). Adjustments arising from changes in assumptions and experience gains and
losses are amortized over EARSL when the cumulative unamortized balance exceeds 10% of the greater of accrued obligations or plan assets. Gains or losses arising from plan curtailments and settlements
are recognized in the year in which they occur. For purposes of calculating the expected return on plan assets, pension assets are revalued at fair value. Liabilities are measured at market discount
rates.

The
cost of defined contribution benefits is expensed as earned by employees. NOVA Chemicals makes contributions in accordance with all plan agreements.

Post-Retirement Benefits Other Than Pensions.In North America, NOVA Chemicals provides medical care and life insurance benefits to eligible
retirees and their dependents. Post-retirement benefit costs are expensed as the employees provide service.

Stock-Based Compensation

The
Corporation uses the fair-value method of accounting for equity-settled stock-based compensation awards granted to employees, such as options, where compensation expense is measured
and recognized based on the fair value of the stock-based award. Amounts related to compensation costs are initially credited to contributed surplus and then transferred to common shares upon exercise
of options, or reinvested earnings upon cancellation or retirement of options.

The
Corporation uses the liability method of accounting for cash-settled stock-based compensation awards granted to employees, such as equity appreciation units and restricted stock units.
Units granted and vested are marked-to-market each period based on the value of NOVA Chemicals' common stock as reported on the Toronto or New York Stock Exchanges, as
applicable. Changes in value are recorded through earnings over the vesting period, or for vested units as such changes arise.

Deferred Share Unit Plans

Units
issued under these Plans are calculated based on annual management incentive awards or director fees. The cost of the units earned is expensed as employees and directors provide service. Any
adjustments to the value of the units as a result of expected changes in NOVA 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 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.

11

---



Securitizations

Accounts
receivable 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. Interest paid, net of servicing fees, on the portfolio of sold receivables is recorded as interest expense.

Revenue Recognition

The
Corporation recognizes revenue when the earnings process is complete. This generally occurs when products are shipped to the customer in accordance with the terms of the sales agreement, title or
risk of loss has been transferred, and pricing is fixed or determinable. The Corporation accounts for sales incentives as a reduction in revenue at the time revenue is recorded.

Research and Development

Expenditures
associated with research and development activities are expensed as incurred.

Investment Tax Credits

The
Corporation accounts for investment tax credits using the cost reduction approach. Investment tax credits related to the acquisition of assets are deducted from the related assets with
depreciation calculated on the net amount. Investment tax credits related to current expenses are included in the determination of net income for the period.

Measurement Uncertainty

The
preparation of these consolidated financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect amounts reported and disclosed in the
financial statements and related notes. Actual results could differ materially from those estimates due to factors such as fluctuations in commodity prices, foreign 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.

3.     ACCOUNTS RECEIVABLE

|DECEMBER 31 (MILLIONS OF DOLLARS)  |  | 2004 |     | 2003 |   | 2002 |  
|---------------------------------- |  | ---- | --- | ---- | - | ---- | -
|Trade                              |  | $    | 382 |      | $ | 239  |  
|Proceeds receivable(1)             |  |      | 110 |      |   |     |  
|Other                              |  |      | 79  |      |   | 73   |  
|Allowance for doubtful accounts(2) |  |      | (10 | )    |   | (7   | )
|                                   |  |      |     |      |   |      |  
|                                   |  |      | 561 |      |   | 305  |  
|Income taxes receivable            |  |      | 6   |      |   | 11   |  
|                                   |  |      |     |      |   |      |  
|                                   |  | $    | 567 |      | $ | 316  |  
|                                   |  |      |     |      |   |      |  

---

Accounts Receivable Securitizations

The
Corporation sells undivided interests in certain trade accounts receivable pursuant to revolving securitization transactions in which the Corporation retains servicing responsibilities. The
receivables are sold at a discount approximating the purchaser's financing cost of issuing commercial paper backed by the accounts receivable. The Corporation pays a fee on this same basis plus a
margin that varies with the Corporation's credit rating. The sale of receivables is reflected as a reduction of accounts receivable and in 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 $250 million (2003 and
2002  $195 million). Recourse on sold receivables is limited to the receivables and certain reserves provided to cover credit losses and dilution (such as
discounts, rebates, and other non-cash reductions). During 2004, the Corporation amended its securitization program to extend the maturity to April 2007 and to increase the size of
the facility from $195 million to $250 million.

12

---



Information
regarding the Corporation's securitization programs is as follows:

|DECEMBER 31 (MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)                  |  | 2004 |     | 2003 |   | 2002 |  
|-------------------------------------------------------------------------- |  | ---- | --- | ---- | - | ---- | -
|Amount sold at end of year(1)                                              |  | $    | 250 |      | $ | 177  |  
|Loss, dilution and other reserves (as a % of eligible accounts receivable) |  |      | 16  | %    |   | 18   | %
|Interest expense, net of servicing fees                                    |  | $    | 4   |      | $ | 3    |  
|                                                                           |  |      |     |      |   |      |  

---

One of the Corporation's securitization agreements 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)                                           |  | 2004 |       | 2003 |   | 2002  | 
|--------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | ----- | 
|Proceeds from (repayment of) new securitizations                            |  | $    | 73    |      | $ | 14    | 
|Proceeds from collections reinvested in revolving period securitizations(1) |  | $    | 1,646 |      | $ | 1,406 | 
|Servicing fees received                                                     |  | $    | 2     |      | $ | 2     | 
|Other cash flows received                                                   |  | $    | 452   |      | $ | 306   | 

---

4.     INVENTORIES

|DECEMBER 31 (MILLIONS OF DOLLARS) |  | 2004 |     | 2003 |   | 2002
|--------------------------------- |  | ---- | --- | ---- | - | ----
|Materials and supplies            |  | $    | 47  |      | $ | 46  
|Raw materials                     |  |      | 255 |      |   | 170 
|Finished goods                    |  |      | 332 |      |   | 176 
|                                  |  |      |     |      |   |     
|                                  |  | $    | 634 |      | $ | 392 
|                                  |  |      |     |      |   |     

5.     INVESTMENTS AND OTHER ASSETS

|                        |  | 2004 |     | 2003 |   | 2002
|----------------------- |  | ---- | --- | ---- | - | ----
|
|Methanex Corporation(1) |  | $    |    |      | $ |    
|Other investments(2)    |  |      | 28  |      |   |    
|Other assets(3)         |  |      | 119 |      |   |    
|                        |  |      |     |      |   |     
|                        |  | $    | 147 |      | $ |    
|                        |  |      |     |      |   |     

---

13

---



Methanex Corporation

In
June 2003, the Corporation sold its equity investment in Methanex Corporation for net proceeds of $441 million. This resulted in a before-tax gain of $29 million
and an after-tax gain of $61 million. The sale was completed with no cash taxes payable and accordingly, a previously recorded income tax provision of $32 million was taken
into income at the time of the sale. The Corporation has no remaining equity interest in Methanex.

Other Assets

Other
assets are comprised of the following:

|DECEMBER 31 (MILLIONS OF DOLLARS)                         |  | 2004 |     | 2003 |   | 2002
|--------------------------------------------------------- |  | ---- | --- | ---- | - | ----
|Restricted cash on retractable preferred shares (Note 11) |  | $    | 65  |      | $ | 65  
|Deferred debt issue costs(1)                              |  |      | 20  |      |   | 18  
|Deferred start-up costs(2)                                |  |      | 5   |      |   | 12  
|Prepaid pension                                           |  |      | 5   |      |   |    
|Other                                                     |  |      | 24  |      |   | 34  
|                                                          |  |      |     |      |   |     
|                                                          |  | $    | 119 |      | $ | 129 
|                                                          |  |      |     |      |   |     

---

Petrochemical Joint Ventures

NOVA
Chemicals owns a 50% interest in an ethylene plant and a 20% interest in a cogeneration facility located at Joffre, Alberta. Prior to December 2004, the Corporation also held a 33.3%
interest in an ethane gathering system in Alberta.

The
following is summarized financial information for NOVA Chemicals' interests in these joint ventures:

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)      |  | 2004 |      | 2003 |   | 2002 |  
|------------------------------------------------- |  | ---- | ---- | ---- | - | ---- | -
|Revenue                                           |  | $    | 260  |      | $ | 216  |  
|Operating expenses, depreciation and income taxes |  |      | (236 | )    |   | (204 | )
|                                                  |  |      |      |      |   |      |  
|Net income                                        |  | $    | 24   |      | $ | 12   |  
|                                                  |  |      |      |      |   |      |  

|DECEMBER 31 (MILLIONS OF DOLLARS)              |  | 2004 |     | 2003 |   | 2002 |  
|---------------------------------------------- |  | ---- | --- | ---- | - | ---- | -
|Current assets                                 |  | $    | 37  |      | $ | 21   |  
|Plant, property and equipment and other assets |  |      | 522 |      |   | 556  |  
|Current liabilities                            |  |      | (26 | )    |   | (29  | )
|Long-term liabilities                          |  |      | (33 | )    |   | (33  | )
|                                               |  |      |     |      |   |      |  
|Venturers' equity                              |  | $    | 500 |      | $ | 515  |  
|                                               |  |      |     |      |   |      |  

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS) |  | 2004 |    | 2003 |   | 2002 |  
|-------------------------------------------- |  | ---- | -- | ---- | - | ---- | -
|Cash inflows (outflows) from:                |  |      |    |      |   |      |  
|Operating activities                         |  | $    | 43 |      | $ | 51   |  
|Financing activities                         |  | $    | (2 | )    | $ | (5   | )
|Investing activities                         |  | $    | 36 |      | $ | (9   | )
|                                             |  |      |    |      |   |      |  

In
December 2004, the Corporation sold its 33.3% interest in an ethane gathering system in Alberta for cash proceeds of $78 million, resulting in a before-tax gain of
$53 million ($40 million after-tax).

14

---



NOVA
Chemicals also owned a 50% interest in the Fort Saskatchewan Ethylene Storage Limited Partnership, which was sold in June 2003 for net cash proceeds of $123 million, resulting in an
after-tax gain of $64 million. The total before-tax gain on this transaction was $114 million, of which $38 million was deferred and is being recognized in
earnings over the 20-year storage contract with the new owners.

The
Corporation's 20% interest in the Cochin Pipeline was sold in January 2002 for cash proceeds of $64 million, resulting in a before-tax gain of $59 million
(after-tax gain of $36 million).

6.     PLANT, PROPERTY AND EQUIPMENT

|DECEMBER 31 (MILLIONS OF DOLLARS) |  | 2004(1) |        | 2003 |   | 2002   |  
|--------------------------------- |  | ------- | ------ | ---- | - | ------ | -
|Plant and equipment               |  | $       | 5,962  |      | $ | 5,638  |  
|Land                              |  |         | 35     |      |   | 35     |  
|Under construction                |  |         | 351    |      |   | 169    |  
|                                  |  |         |        |      |   |        |  
|                                  |  |         | 6,348  |      |   | 5,842  |  
|Accumulated depreciation          |  |         | (2,894 | )    |   | (2,506 | )
|                                  |  |         |        |      |   |        |  
|Net book value                    |  | $       | 3,454  |      | $ | 3,336  |  
|                                  |  |         |        |      |   |        |  

---

During the year, the Corporation sold its 100% interest in an ethylene delivery system in Alberta and entered into a pipeline transportation agreement to lease
back the pipeline. Net cash proceeds of $19 million were received from the sale, resulting in a gain of $19 million. The gain realized on the sale has been deferred and is being
amortized to income over the term of the pipeline transportation agreement, which expires in 2016.

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 remaining term of the lease, which expires in 2020.

7.     ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

|DECEMBER 31 (MILLIONS OF DOLLARS) |                                                        | 2004 |     | 2003 |   | 2002
|--------------------------------- | ------------------------------------------------------ | ---- | --- | ---- | - | ----
|Accounts payable                  |                                                        |      |     |      |   |     
|                                  | Trade                                                  |      | $   | 581  |   | $   
|                                  | Other                                                  |      |     | 38   |   |     
|                                  |                                                        |      |     |      |   |     
|                                  |                                                        |      | 619 |      |   | 431 
|                                  |                                                        |      |     |      |   |     
|Accrued liabilitites              |                                                        |      |     |      |   |     
|                                  | Pension and post-retirement benefit obligations        |      |     | 40   |   |     
|                                  | Interest                                               |      |     | 30   |   |     
|                                  | Dividends                                              |      |     | 7    |   |     
|                                  | Deferred gains on interest rate swaps(1)               |      |     | 7    |   |     
|                                  | Site clean-up and restoration                          |      |     | 4    |   |     
|                                  | Deferred commodity hedging gains(2)                    |      |     | 2    |   |     
|                                  | Accounts receivable securitization programs(3)         |      |     |     |   |     
|                                  | Deferred credit on hedges of former economic exposures |      |     |     |   |     
|                                  | Trade accruals and other                               |      |     | 99   |   |     
|                                  |                                                        |      |     |      |   |     
|                                  |                                                        |      | 189 |      |   | 156 
|                                  |                                                        |      |     |      |   |     
|                                  |                                                        | $    | 808 |      | $ | 587 
|                                  |                                                        |      |     |      |   |     

---

15

---



8.     LONG-TERM DEBT

|DECEMBER 31 (MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED) |                                | 2004 |             | 2003 |       | 2002
|--------------------------------------------------------- | ------------------------------ | ---- | ----------- | ---- | ----- | ----
|
|                                                          | Unsecured debentures and notes |      | 2005 - 2028 |      | $     | 933 
|                                                          | Medium-term notes              |      | 2006 - 2009 |      |       | 550 
|                                                          | Other(2)                       |      | 2004 - 2020 |      |       | 33  
|                                                          |                                |      |             |      |       |     
|                                                          |                                |      |             |      | 1,516 |     
|Less installments due within one year                     |                                |      |             |      | (100  | )   
|                                                          |                                |      |             |      |       |     
|                                                          |                                |      |             | $    | 1,416 |     
|                                                          |                                |      |             |      |       |     

---

Unsecured Debentures and Notes

On
January 13, 2004, the Corporation issued $400 million of 6.50% Senior Notes due 2012. The net proceeds were used to redeem the Corporation's preferred securities
(see Note 10). On August 15, 2003, NOVA Chemicals redeemed at par its $150 million of 7% debentures maturing August 15, 2026 from available cash, in accordance with
the terms of the debenture.

The
remaining debentures and notes are unsecured borrowings, which rankpari passuin all respects with other unsecured and unsubordinated debt
of the Corporation. Terms of the outstanding unsecured debentures and notes are as follows:

|DECEMBER 31 (MILLIONS OF DOLLARS,
UNLESS OTHERWISE NOTED) |  | 2004  |  | 2003 |     | 2002
|--------------------------------------------------------- |  | ----- |  | ---- | --- | ----
|
|2005(1)                                                   |  | 7.0   |  | $    | 100 |     
|2010(2)                                                   |  | 7.85  |  |      | 208 |     
|2012(3)                                                   |  | 6.5   |  |      | 400 |     
|2025(4)                                                   |  | 7.875 |  |      | 100 |     
|2026                                                      |  | 7.0   |  |      |    |     
|2028(5)                                                   |  | 7.25  |  |      | 125 |     
|                                                          |  |       |  |      |     |     
|                                                          |  |       |  | $    | 933 |     
|                                                          |  |       |  |      |     |     

---

Secured Loan

The
Corporation has a committed credit facility from a syndicate of Canadian and U.S. banks. The facility provides for a floating-rate revolving line of credit and the issuance of
letters of credit, to a maximum of $300 million. At December 31, 2004, the Corporation had utilized $57 million of this facility in the form of letters of credit. The facility
expires in April 2007 and is secured by $1.2 billion (2003  $1.2 billion) in net book value of assets in Canada, including real estate.

At
December 31, 2004, NOVA Chemicals was in compliance with all required financial covenants under the credit facility.

16

---



Medium Term Notes

The
notes are unsecured borrowings rankingpari passuwith all other unsecured and unsubordinated debt of the Corporation. The
$300 million of 7% notes are due in May 2006 and are not redeemable by the Corporation or the holders prior to maturity. The $250 million of 7.4% notes are due in
April 2009 and are redeemable by the Corporation at any time. As described in Note 24, the Corporation has a floating-for-fixed interest rate swap on the
$300 million of 7% notes due in May 2006.

Repayment Requirements

Repayment
requirements in respect of long-term debt are as follows:

|(MILLIONS OF DOLLARS) |  |  
|--------------------- |  | -
|2005                  |  | $
|2006                  |  |  
|2007                  |  |  
|2008                  |  |  
|2009                  |  |  
|Thereafter            |  |  
|                      |  |  
|                      |  | $
|                      |  |  

Interest Expense

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)      |  | 2004 |     | 2003 |   | 2002 |  
|------------------------------------------------- |  | ---- | --- | ---- | - | ---- | -
|Interest on long-term debt                        |  | $    | 97  |      | $ | 84   |  
|Interest on bank loans, securitizations and other |  |      | 8   |      |   | 8    |  
|                                                  |  |      |     |      |   |      |  
|Gross interest expense                            |  |      | 105 |      |   | 92   |  
|Interest capitalized during plant construction    |  |      | (3  | )    |   |     |  
|Interest income                                   |  |      | (6  | )    |   | (3   | )
|                                                  |  |      |     |      |   |      |  
|Interest expense (net)                            |  | $    | 96  |      | $ | 89   |  
|                                                  |  |      |     |      |   |      |  

9.     DEFERRED CREDITS

|DECEMBER 31 (MILLIONS OF DOLLARS)                |  | 2004 |     | 2003 |   | 2002
|------------------------------------------------ |  | ---- | --- | ---- | - | ----
|Pension and post-retirement benefit obligations  |  | $    | 88  |      | $ | 92  
|Equity appreciation plan obligations (Note 14)   |  |      | 87  |      |   | 12  
|Deferred income                                  |  |      | 31  |      |   | 12  
|Deferred gain on sale of investment(1)           |  |      | 38  |      |   | 37  
|Site clean-up and restoration                    |  |      | 23  |      |   | 27  
|Deferred share unit plan obligations             |  |      | 23  |      |   | 20  
|Deferred gain on sale of asset(2)                |  |      | 20  |      |   |    
|Deferred gains on interest rate swaps(3)         |  |      | 9   |      |   | 16  
|Deferred gain on sale of railcars                |  |      | 9   |      |   | 9   
|Restricted stock unit plan obligations (Note 14) |  |      | 3   |      |   |    
|Deferred commodity hedging gains(4)              |  |      | 2   |      |   | 3   
|Other                                            |  |      | 22  |      |   | 21  
|                                                 |  |      |     |      |   |     
|                                                 |  | $    | 355 |      | $ | 249 
|                                                 |  |      |     |      |   |     

---

17

---



10.   PREFERRED SECURITIES

On
March 1, 2004 the Corporation redeemed its $172.5 million 9.04% and $210 million 9.50% preferred securities, which were due March 31, 2048 and December 31, 2047,
respectively. Net proceeds from the issuance of Senior Notes were used to redeem the securities (see Note 8).

11.   RETRACTABLE PREFERRED SHARES

In
connection with the acquisition of styrenics assets from Huntsman Corporation in 1998, a subsidiary of the Corporation issued retractable preferred shares with a liquidation preference of
$198 million as partial consideration. The preferred shares have a dividend rate of 2%. 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).

Pursuant
to the terms of the retractable preferred shares and related stockholder agreements, the Corporation has the right to call the retractable preferred shares on or after December 15,
2001 and repurchase the retractable preferred shares prior to any retraction into NOVA Chemicals' common shares. If the Corporation does not exercise its repurchase rights prior to March 15,
2007 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 balance of the
obligation, if any, met through the issuance of NOVA Chemicals' preferred shares.

NOVA
Chemicals also entered into a total return swap, which terminates on March 15, 2007, with respect to the retractable preferred shares. Under the terms of the total return swap:
(i) the counterparty pays NOVA Chemicals an amount equal to the fixed dividend on the retractable preferred shares; (ii) NOVA Chemicals pays the counterparty LIBOR plus a spread;
(iii) NOVA Chemicals is obligated under the swap to provide initial 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 issued by a third party for which we pay a fee; (iv) NOVA Chemicals is also required to provide maintenance margin in the
form of restricted cash for any negative changes in the equity value of the retractable preferred shares; and (v) the counterparty pays NOVA Chemicals for any positive changes in the equity
value of the retractable preferred shares.

NOVA
Chemicals has provided $65 million of restricted cash (see Note 5) to reduce the notional amount of the swap from $191 million to $126 million. As a
result, prior to March 15, 2007, NOVA Chemicals can redeem the potentially dilutive security for an additional $126 million.

Beginning
in 2004, changes in the 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 7% Senior
Notes due 2005 and 7% Medium-Term Notes due 2006 issued by NOVA Chemicals (see Note 8).

If
NOVA 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 $12.00 U.S. or less, and 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).

Changes
in Canadian accounting standards will require these preferred shares to be presented on the balance sheet as a liability beginning in 2005.

18

---



12.   COMMON SHARES

Authorized

Unlimited
number of voting common shares without par value, non-voting first preferred shares, and non-voting second preferred shares. Currently only common shares are issued
and outstanding.

Issued and Outstanding

|                                                                    |  | 2004       |   | 2003 |     | 2002
|------------------------------------------------------------------- |  | ---------- | - | ---- | --- | ----
|
|
|Beginning of year                                                   |  | 87,099,781 |   | $    | 493 |     
|Issued for cash on exercise of stock options                        |  | 1,917,735  |   |      | 37  |     
|Issued on exercise of stock options as share appreciation rights(1) |  | 185,377    |   |      |    |     
|Compensation cost of stock options exercised(2)                     |  |           |   |      | 2   |     
|Repurchased(3)                                                      |  | (4,934,600 | ) |      | (33 | )   
|                                                                    |  |            |   |      |     |     
|End of year(4)                                                      |  | 84,268,293 |   | $    | 499 |     
|                                                                    |  |            |   |      |     |     

---

Shares Reserved for Future Issue

|DECEMBER 31 (NUMBER OF SHARES)                                         |  | 2004       |  | 2003       |  | 2002      
|---------------------------------------------------------------------- |  | ---------- |  | ---------- |  | ----------
|Under the employee incentive stock option plan(1),(2)                  |  | 8,569,882  |  | 10,672,994 |  | 11,244,963
|Under the director compensation plan                                   |  | 47,800     |  | 47,800     |  | 47,800    
|Under the terms of the retractable preferred share agreement (Note 11) |  | 8,500,000  |  | 8,500,000  |  | 8,500,000 
|                                                                       |  |            |  |            |  |           
|                                                                       |  | 17,117,682 |  | 19,220,794 |  | 19,792,763
|                                                                       |  |            |  |            |  |           

---

19

---



Earnings Per Share

The
following table outlines the calculation of basic and diluted net income (loss) per common share:

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) |                              | 2004
BASIC |      | 2004
DILUTED |   | 2003
BASIC |     | 2003
DILUTED |       | 2002
BASIC |   | 2002
DILUTED |  
|---------------------------------------------------------------------- | ---------------------------- | ---------- | ---- | ------------ | - | ---------- | --- | ------------ | ----- | ---------- | - | ------------ | -
|Net income (loss)                                                      |                              | $          | 262  |              | $ | 262        |     | $            | 28    |            | $ | 28           |  
|Preferred securities dividends and distributions                       |                              |            | (10  | )            |   | (10        | )   |              | (29   | )          |   | (29          | )
|                                                                       |                              |            |      |              |   |            |     |              |       |            |   |              |  
|Net income (loss) available to common shareholders  basic             |                              | $          | 252  |              | $ | 252        |     | $            | (1    | )          | $ | (1           | )
|Add back preferred dividends                                           |                              |            |      |              |   | 6          |     |              |       |            |   |             |  
|                                                                       |                              |            |      |              |   |            |     |              |       |            |   |              |  
|Net income (loss) to common shareholders  dilutive                    |                              |            |      |              | $ | 258        |     |              |       |            | $ | (1           | )
|                                                                       |                              |            |      |              |   |            |     |              |       |            |   |              |  
|Weighted-average common shares outstanding  basic                     |                              |            | 86.7 |              |   | 86.7       |     |              | 86.8  |            |   | 86.8         |  
|Add effect of dilutive securities:                                     |                              |            |      |              |   |            |     |              |       |            |   |              |  
|                                                                       | Stock options                |            |      |              |   |            | 2.6 |              |       |            |   |              | 
|                                                                       | Retractable preferred shares |            |      |              |   |            | 6.1 |              |       |            |   |              | 
|                                                                       |                              |            |      |              |   |            |     |              |       |            |   |              |  
|Weighted-average common shares outstanding  diluted(1)                |                              |            |      |              |   | 95.4       |     |              |       |            |   | 86.8         |  
|                                                                       |                              |            |      |              |   |            |     |              |       |            |   |              |  
|Net income (loss) per common share                                     |                              | $          | 2.91 |              | $ | 2.71       |     | $            | (0.02 | )          | $ | (0.02        | )
|                                                                       |                              |            |      |              |   |            |     |              |       |            |   |              |  

---

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.

13.   CONTRIBUTED SURPLUS

On
January 1, 2004, the Corporation adopted new accounting recommendations related to stock options (see Notes 2 and 14). The recommendations require that the fair value of
stock options be expensed over their vesting period, with a corresponding amount recorded to contributed surplus. On exercise of options for common shares, amounts previously recorded to contributed
surplus for compensation costs are transferred to the common share account. On retirement or cancellation of options, amounts previously recorded to contributed surplus for compensation costs are
transferred to reinvested earnings.

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)                 |  | 2004 |    | 2003 |   | 2002
|------------------------------------------------------------ |  | ---- | -- | ---- | - | ----
|Beginning of year                                            |  | $    |   |      | $ |    
|Accounting policy change (Note 2)                            |  |      | 7  |      |   |    
|Stock option compensation cost                               |  |      | 4  |      |   |    
|Transfers on exercise, retirement or cancellation of options |  |      | (3 | )    |   |    
|                                                             |  |      |    |      |   |     
|End of year                                                  |  | $    | 8  |      | $ |    
|                                                             |  |      |    |      |   |     

20

---



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.

On
January 1, 2004, the Corporation adopted new accounting recommendations related to stock options (see Note 2). The Corporation adopted the accounting policy on a retroactive
basis with no restatement of individual prior periods. Accordingly, all options granted since January 1, 2002 are accounted for using the fair-value method. The recommendations
require that the fair value of stock options be expensed over their vesting period and reflected in earnings as the related services are provided. The Corporation uses the Black-Scholes option-pricing
model to calculate the fair value of options at the date of grant.

Generally,
options are settled by issuance of common shares. Occasionally, options may be retired, whereby the option premium (the differential between the market price and the exercise price)
is paid in cash. Amounts paid are recorded as a charge to reinvested earnings, net of related tax benefits. Options may also be settled periodically as share appreciation rights (SARs), whereby the
option premium is settled by issuance of common shares. Options settled by issuance of shares are cancelled whereas options settled by other means are returned to the unallocated pool of options
available for issue.

A
summary of the status of the Corporation's employee incentive stock option plan as of December 31, 2004, 2003 and 2002, and changes during the years then ended is presented below:

|                                 |  | 2004       |   | 2003 |        | 2002
|-------------------------------- |  | ---------- | - | ---- | ------ | ----
|
|Outstanding at beginning of year |  | 8,822,440  |   | $    | 26.791 |     
|Granted                          |  | 271,300    |   | $    | 36.526 |     
|Exercised  settled in shares    |  | (1,917,735 | ) | $    | 22.938 |     
|Exercised  retired for cash     |  | (860,750   | ) | $    | 26.161 |     
|Exercised  settled in SARs(1)   |  | (426,246   | ) | $    | 25.682 |     
|Cancelled                        |  | (39,878    | ) | $    | 30.284 |     
|                                 |  |            |   |      |        |     
|Outstanding at end of year       |  | 5,849,131  |   | $    | 27.952 |     
|                                 |  |            |   |      |        |     
|Exercisable at end of year       |  | 5,054,171  |   | $    | 27.613 |     
|                                 |  |            |   |      |        |     

---

The following table summarizes information about employee incentive stock options outstanding at December 31, 2004:

|RANGE OF EXERCISE PRICES (CANADIAN $) |  | OPTIONS OUTSTANDING |  | OPTIONS EXERCISABLE
|------------------------------------- |  | ------------------- |  | -------------------
|
|$18.376 - $21.225                     |  | 421,101             |  | 1.5                
|$24.950 - $28.050                     |  | 3,529,178           |  | 5.7                
|$30.750 - $37.510                     |  | 1,898,852           |  | 5.7                
|                                      |  |                     |  |                    
|                                      |  | 5,849,131           |  |                    
|                                      |  |                     |  |                    

21

---



In 2004, the Corporation recognized total compensation cost in income of $4 million for stock-based employee compensation awards. Had compensation cost
for stock options been determined and expensed based on the fair-value method in prior years, the following pro forma amounts would have resulted:

|DECEMBER 31 (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) |             | 2003 |   | 2002  |  
|----------------------------------------------------------- | ----------- | ---- | - | ----- | -
|Compensation cost, net of tax                               |             | $    | 2 |       | $
|                                                            |             |      |   |       |  
|Net income (loss)                                           |             |      |   |       |  
|                                                            | As reported |      | $ | 28    |  
|                                                            | Pro forma   |      | $ | 26    |  
|                                                            |             |      |   |       |  
|Loss per share  basic and diluted                          |             |      |   |       |  
|                                                            | As reported |      | $ | (0.02 | )
|                                                            | Pro forma   |      | $ | (0.04 | )
|                                                            |             |      |   |       |  

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 2004, 2003, and 2002:

|WEIGHTED-AVERAGE ASSUMPTIONS                  |  |       |  | 2004 |      | 2003 |   | 2002
|--------------------------------------------- |  | ----- |  | ---- | ---- | ---- | - | ----
|Expected dividend yield                       |  | %     |  |      | 1.1  |      |   | 1.4 
|Expected volatility                           |  | %     |  |      | 34.0 |      |   | 36.7
|Risk-free interest rate                       |  | %     |  |      | 2.70 |      |   | 4.20
|Expected life                                 |  | years |  |      | 4.0  |      |   | 4.0 
|Fair value of options granted during the year |  | U.S.  |  | $    | 8.43 |      | $ | 5.34
|                                              |  |       |  |      |      |      |   |     

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, 2004, the mark-to-market value of the vested units was approximately $87 million (2003  $12 million
and 2002  $1 million).

|YEAR ENDED DECEMBER 31           |  | 2004      |   | 2003 |       | 2002
|-------------------------------- |  | --------- | - | ---- | ----- | ----
|
|Outstanding at beginning of year |  | 3,292,987 |   | $    | 18.92 |     
|Granted                          |  | 942,600   |   | $    | 27.90 |     
|Redeemed                         |  | (410,694  | ) | $    | 19.37 |     
|Cancelled                        |  | (23,750   | ) | $    | 21.65 |     
|                                 |  |           |   |      |       |     
|Outstanding at end of year       |  | 3,801,143 |   | $    | 21.08 |     
|                                 |  |           |   |      |       |     
|Exercisable at end of year       |  | 2,149,390 |   | $    | 20.06 |     
|                                 |  |           |   |      |       |     

---

22

---



The following table summarizes information about equity appreciation units outstanding at December 31, 2004:

|EQUITY APPRECIATION UNITS |  | UNITS OUTSTANDING |  | UNITS EXERCISABLE
|------------------------- |  | ----------------- |  | -----------------
|
|$17.42 - $21.72           |  | 2,857,751         |  | 7.3              
|$23.49 - $27.90           |  | 943,392           |  | 9.1              
|                          |  |                   |  |                  
|                          |  | 3,801,143         |  |                  
|                          |  |                   |  |                  

Restricted Stock Unit Plan

The
Restricted Stock Unit Plan is a phantom stock plan wherein the value of a restricted stock unit (RSU) is determined by the value of the Corporation's common shares on the vesting date and is paid
to employees in cash. The value of the RSU is determined using the NYSE price for U.S. residents and the TSX price for residents of all other countries. The units vest and proceeds are
distributed three years from the grant date. The value of any common share dividends declared during the vesting period is credited to each RSU account. The value of the RSU's is expensed over the
vesting period and is marked-to-market.

At
December 31, 2004, a total of 196,178 RSU's were outstanding (December 31, 2003 and 2002  nil). The
mark-to-market liability for the RSU plan was $3 million at December 31, 2004 ($nil million at December 31, 2003 and 2002).

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 the DSUP will be converted to an equivalent number of DSUs based on the average closing price, on the TSX
for Canadian employees and on the NYSE for U.S. employees, of NOVA Chemicals' common shares for the last five consecutive trading days of the month of December prior to the performance period.

The
amount of fees that a non-employee director elects to have participate in the DSUP will be converted to an equivalent number of DSUs based on the average closing price, on the TSX, 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, 2004, 2003 and 2002, and
changes during the years ended on those dates is presented below:

|YEAR ENDED DECEMBER 31           |  | 2004    |   | 2003 |       | 2002
|-------------------------------- |  | ------- | - | ---- | ----- | ----
|
|Outstanding at beginning of year |  | 434,243 |   | $    | 17.29 |     
|Earned                           |  | 116,116 |   | $    | 27.27 |     
|Exercised                        |  | (41,766 | ) | $    | 27.21 |     
|                                 |  |         |   |      |       |     
|Outstanding at end of year       |  | 508,593 |   | $    | 18.75 |     
|                                 |  |         |   |      |       |     

|YEAR ENDED DECEMBER 31           |  | 2004    |   | 2003 |       | 2002
|-------------------------------- |  | ------- | - | ---- | ----- | ----
|
|Outstanding at beginning of year |  | 79,676  |   | $    | 29.24 |     
|Earned                           |  | 14,636  |   | $    | 37.50 |     
|Exercised                        |  | (14,374 | ) | $    | 34.57 |     
|                                 |  |         |   |      |       |     
|Outstanding at end of year       |  | 79,938  |   | $    | 29.80 |     
|                                 |  |         |   |      |       |     

The
amount expensed in aggregate related to the award of units was approximately $4 million (2003  $3 million, and
2002  $4 million).

16.   RESTRUCTURING CHARGES

During
2004, the Corporation provided for an additional $8 million before-tax ($5 million after-tax) in restructuring charges for additional dismantling costs
related to the closure of its oldest and highest-cost polyethylene production line at the St. Clair River site, announced in 2003. During 2003, NOVA Chemicals recognized $15 million
before-tax ($10 million after-tax) in restructuring costs related to asset writedown, severance, and other costs associated with this closure. The Corporation expects
the restructuring actions related to the St. Clair River site to be substantially complete by the end of 2005.

Restructuring
charges in 2002 related to organizational changes involving plant closures and idling, capital project cancellations, writedowns of certain non-productive assets and
severance activities. All actions related to these restructuring activities have been substantially completed.

24

---



17.   OTHER GAINS AND LOSSES

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)                                                    |  | 2004 |     | 2003 |   | 2002
|----------------------------------------------------------------------------------------------- |  | ---- | --- | ---- | - | ----
|
|Gain on sale of 33.3% interest in Alberta                                                       |  |      |     |      |   |     
|Ethane Gathering System (Note 5)                                                                |  | $    | 53  |      | $ | 40  
|Tax related settlement(1)                                                                       |  |      | 122 |      |   | 101 
|Gain on sale of investment in Methanex Corporation (Note 5)                                     |  |      |    |      |   |    
|Gain on sale of 50% interest in Fort Saskatchewan Ethylene Storage Limited Partnership (Note 5) |  |      |    |      |   |    
|Bayport charge(2)                                                                               |  |      |    |      |   |    
|Gain on sale of 20% interest in Cochin Pipeline (Note 5)                                        |  |      |    |      |   |    
|Other                                                                                           |  |      | 2   |      |   | 2   
|                                                                                                |  |      |     |      |   |     
|                                                                                                |  | $    | 177 |      | $ | 143 
|                                                                                                |  |      |     |      |   |     

---

18.   INCOME TAXES

Income
tax expense (recovery) varies from amounts computed by applying the Canadian federal and provincial statutory income tax rates to income (loss) before income taxes as shown in the following
table:

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS) |                                                                       | 2004 |       | 2003 |   | 2002  |    
|-------------------------------------------- | --------------------------------------------------------------------- | ---- | ----- | ---- | - | ----- | ---
|Income (loss) before income taxes            |                                                                       | $    | 345   |      | $ | (33   | )  
|Statutory income tax rate                    |                                                                       |      | 33.87 | %    |   | 36.74 | %  
|                                             |                                                                       |      |       |      |   |       |    
|Computed income tax expense (recovery)       |                                                                       | $    | 117   |      | $ | (12   | )  
|Increase (decrease) in taxes resulting from: |                                                                       |      |       |      |   |       |    
|                                             | Manufacturing and processing deduction                                |      |       |     |   |       | (2 
|                                             | Lower effective foreign tax rates                                     |      |       | 2    |   |       | 19 
|                                             | Lower effective tax rate on equity in earnings of affiliate           |      |       |     |   |       | (12
|                                             | Lower tax rates and higher recoveries on asset sales                  |      |       | (5   | ) |       | (56
|                                             | Non-provision of future income taxes on cost-of-service operations(1) |      |       | 4    |   |       | 9  
|                                             | Reduction in tax reserve(2)                                           |      |       | (11  | ) |       | (20
|                                             | Income tax rate adjustments(3)                                        |      |       | (7   | ) |       | 15 
|                                             | Lower tax rate on gain related to tax settlement(4)                   |      |       | (21  | ) |       |   
|                                             | Other                                                                 |      |       | 4    |   |       | (2 
|                                             |                                                                       |      |       |      |   |       |    
|Income tax expense (recovery)                |                                                                       | $    | 83    |      | $ | (61   | )  
|                                             |                                                                       |      |       |      |   |       |    
|Current income tax expense (recovery)        |                                                                       | $    | 45    |      | $ | 17    |    
|Future income tax expense (recovery)         |                                                                       |      | 38    |      |   | (78   | )  
|                                             |                                                                       |      |       |      |   |       |    
|Income tax expense (recovery)                |                                                                       | $    | 83    |      | $ | (61   | )  
|                                             |                                                                       |      |       |      |   |       |    

---

25

---



The principal temporary difference in calculating future income taxes 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 expense (recovery) arising from Canadian and Foreign operations:

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS) |          | 2004 |     | 2003 |   | 2002 |     
|-------------------------------------------- | -------- | ---- | --- | ---- | - | ---- | ----
|Income (loss) before income taxes            |          |      |     |      |   |      |     
|                                             | Canadian |      | $   | 480  |   | $    | 98  
|                                             | Foreign  |      |     | (135 | ) |      | (131
|                                             |          |      |     |      |   |      |     
|                                             |          | $    | 345 |      | $ | (33  | )   
|                                             |          |      |     |      |   |      |     
|Current income tax expense (recovery)        |          |      |     |      |   |      |     
|                                             | Canadian |      | $   | 44   |   | $    | 14  
|                                             | Foreign  |      |     | 1    |   |      | 3   
|                                             |          |      |     |      |   |      |     
|                                             |          | $    | 45  |      | $ | 17   |     
|                                             |          |      |     |      |   |      |     
|Future income tax expense (recovery)         |          |      |     |      |   |      |     
|                                             | Canadian |      | $   | 86   |   | $    | (41 
|                                             | Foreign  |      |     | (48  | ) |      | (37 
|                                             |          |      |     |      |   |      |     
|                                             |          | $    | 38  |      | $ | (78  | )   
|                                             |          |      |     |      |   |      |     
|Total income tax expense (recovery)          |          | $    | 83  |      | $ | (61  | )   
|                                             |          |      |     |      |   |      |     

19.   CHANGES IN NON-CASH WORKING CAPITAL

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)              |              | 2004 |      | 2003 |   | 2002 |     
|--------------------------------------------------------- | ------------ | ---- | ---- | ---- | - | ---- | ----
|Accounts receivable                                       |              | $    | (251 | )    | $ | (67  | )   
|Inventories                                               |              |      | (242 | )    |   | (71  | )   
|Accounts payable and accrued liabilities                  |              |      | 221  |      |   | 25   |     
|                                                          |              |      |      |      |   |      |     
|Changes in non-cash working capital                       |              |      | (272 | )    |   | (113 | )   
|Reclassification and other items not having a cash effect |              |      | 99   |      |   | (4   | )   
|                                                          |              |      |      |      |   |      |     
|Changes in non-cash working capital having a cash effect  |              | $    | (173 | )    | $ | (117 | )   
|                                                          |              |      |      |      |   |      |     
|These changes relate to the following activities:         |              |      |      |      |   |      |     
|                                                          | Operating    |      | $    | (78  | ) | $    | (125
|                                                          | Investing    |      |      | (110 | ) |      | 7   
|                                                          | Financing(1) |      |      | 15   |   |      | 1   
|                                                          |              |      |      |      |   |      |     
|(Increase) decrease in working capital                    |              | $    | (173 | )    | $ | (117 | )   
|                                                          |              |      |      |      |   |      |     

---

Interest and Income Tax Payments

Third-party
interest payments were $95 million in 2004 (2003  $100 million and 2002  $86 million).
Income tax payments (receipts) were $11 million in 2004 (2003  $(28) million and
2002  $(176) million).

26

---



20.   EMPLOYEE FUTURE BENEFITS

Pension Plans

NOVA
Chemicals sponsors both defined benefit and defined contribution pension arrangements.

Defined
benefit pensions at retirement are mainly related to years of service and remuneration during the last years of employment with some plans having limited or conditional indexing provisions.
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. The Corporation uses a measurement date of December 31 for its pension and post-retirement plans.

Pension
and post-retirement expense (included in operating and selling, general and administrative costs) for all significant defined benefit plans consisted of the following:

|                                                                                                                                                        |                                         | PENSION PLANS |     | POST-RETIREMENT PLANS
|------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------------- | --- | ---------------------
|
|
|Current service cost                                                                                                                                    |                                         | $             | 24  |                      
|Interest cost on projected benefit obligations                                                                                                          |                                         |               | 34  |                      
|Actual (return) loss on plan assets                                                                                                                     |                                         |               | (45 | )                    
|Prior service cost                                                                                                                                      |                                         |               |    |                      
|Actuarial (gain) loss on accrued benefit obligations                                                                                                    |                                         |               | 25  |                      
|                                                                                                                                                        |                                         |               |     |                      
|Costs arising in the period                                                                                                                             |                                         |               | 38  |                      
|Differences between costs arising in the period and costs recognized in the period in respect of the long-term nature of employee future benefit costs: |                                         |               |     |                      
|                                                                                                                                                        | Return on plan assets                   |               |     | 14                   
|                                                                                                                                                        | Transitional (asset) obligation         |               |     | (5                   
|                                                                                                                                                        | Actuarial (gain) loss                   |               |     | (21                  
|                                                                                                                                                        | Past service and actual plan amendments |               |     | 2                    
|                                                                                                                                                        |                                         |               |     |                      
|Net defined benefit cost recognized                                                                                                                     |                                         | $             | 28  |                      
|                                                                                                                                                        |                                         |               |     |                      

---

27

---



The status of all significant defined benefit pension and post-retirement plans is as follows:

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)    |                                                    | PENSION PLANS  |     | POST-RETIREMENT PLANS |    
|----------------------------------------------- | -------------------------------------------------- | -------------- | --- | --------------------- | ---
|
|Change in benefit obligations                   |                                                    |                |     |                       |    
|                                                | Benefit obligation at beginning of year            |                | $   | 569                   |    
|                                                | Current service cost                               |                |     | 24                    |    
|                                                | Interest cost                                      |                |     | 34                    |    
|                                                | Experience (gain) loss                             |                |     | 25                    |    
|                                                | Settlement/curtailment                             |                |     |                      |    
|                                                | Plan amendments                                    |                |     |                      |    
|                                                | Business combination                               |                |     |                      |    
|                                                | Commuted value payments                            |                |     | (7                    | )  
|                                                | Employee contributions                             |                |     | 5                     |    
|                                                | Medicare Act subsidy effect                        |                |     |                      |    
|                                                | Benefits paid                                      |                |     | (21                   | )  
|                                                | Foreign currency exchange rate loss                |                |     | 39                    |    
|                                                |                                                    |                |     |                       |    
|Net benefit obligation at end of year           |                                                    | $              | 668 |                       | $  
|                                                |                                                    |                |     |                       |    
|Change in plan assets                           |                                                    |                |     |                       |    
|                                                | Fair value of plan assets at beginning of year     |                | $   | 425                   |    
|                                                | Actual return (loss) on plan assets                |                |     | 45                    |    
|                                                | Employer and employee contributions                |                |     | 32                    |    
|                                                | Settlement/curtailment                             |                |     |                      |    
|                                                | Benefits paid                                      |                |     | (28                   | )  
|                                                | Foreign currency exchange rate gain                |                |     | 32                    |    
|                                                |                                                    |                |     |                       |    
|                                                | Fair value of plan assets at end of year           |                | $   | 506                   |    
|                                                |                                                    |                |     |                       |    
|Funded status                                   |                                                    |                |     |                       |    
|                                                | Plan assets in deficiency of benefit obligation    |                | $   | (162                  | )  
|                                                | Unrecognized net transitional (asset) obligation   |                |     | (47                   | )  
|                                                | Unrecognized prior service cost                    |                |     | 6                     |    
|                                                | Unrecognized net actuarial loss                    |                |     | 132                   |    
|                                                |                                                    |                |     |                       |    
|Net amounts recognized in consolidated          |                                                    |                |     |                       |    
|                                                |                                                    | balance sheets |     | $                     | (71
|                                                |                                                    |                |     |                       |    
|Weighted-average assumptions as at December 31: |                                                    |                |     |                       |    
|                                                | Discount rate                                      |                |     | 5.6%                  |    
|                                                | Assumed long-term rate of return on plan assets(1) |                |     | 7.3%                  |    
|                                                | Rate of increase in future compensation            |                |     | 3.2%                  |    
|                                                | Long-term health care inflation(2)                 |                |     |                      |    
|                                                |                                                    |                |     |                       |    

---

Some of NOVA Chemicals' pension plans have accumulated benefit obligations that exceed the fair value of assets. The accumulated benefit obligation and the fair
value of assets for these plans were $306 million and $255 million, respectively, at December 31, 2004 ($549 million and $425 million, respectively, at
December 31, 2003 and $426 million and $308 million, respectively, at December 31, 2002).

28

---



Defined Benefit Plan Assets

The
Corporation's investment strategy for defined benefit plans is determined for each plan after taking into consideration the plan structure, nature of the liabilities, the funded status and cash
flow requirements of the plan, the size of the assets, and the financial situation of the Corporation and its ability to withstand fluctuations in pension contributions. The assets of each plan are
invested in a variety of traditional financial instruments such as equities and fixed income securities using a combination of active and passive strategies. Non-traditional assets such as
real estate and venture capital may also be considered in certain situations. Although the Corporation does not consider derivatives a separate asset class, they are permitted in order to manage the
allocation of investments across asset classes, markets and currencies. However, under no circumstances can they be used for speculative purposes or have the effect of leveraging the assets.

While
most of the benefits of diversification are achieved by allocating across different asset classes, the Corporation also believes it may be appropriate to further diversify by using multiple
investment managers employing different management styles within an asset class.

In
Europe, the Corporation has pension plans in several countries that vary considerably in membership, liability structure, pension arrangement, and asset size. Given these differences, the asset
allocation can vary significantly not only from the North American plans, but also by country. In addition, some European plans are re-insured with investment strategy and asset allocation
determined or heavily influenced by the re-insurer.

The
Corporation's Canadian and U.S. plans are the most significant to the Corporation with 79% of total pension assets and 89% of total plan members in these plans. The asset allocation for
these pension plans at the end of 2004, 2003, 2002 and the target allocation for 2005, by asset category follows. This information has been aggregated within a geographic segment as asset allocations
are similar for the Canadian and U.S. plans.

In
2005, NOVA Chemicals expects to fund its defined benefit plans by $52 million.

North American Plans

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS) |  | 2005 |  | 2004 |  | 2003 |  | 2002
|-------------------------------------------- |  | ---- |  | ---- |  | ---- |  | ----
|
|Equities                                     |  | 60%  |  | 60%  |  | 61%  |  | 57% 
|Fixed income                                 |  | 40%  |  | 40%  |  | 39%  |  | 43% 
|Real estate                                  |  |     |  |     |  |     |  |    
|Other                                        |  |     |  |     |  |     |  |    
|                                             |  |      |  |      |  |      |  |     
|Total                                        |  | 100% |  | 100% |  | 100% |  | 100%
|                                             |  |      |  |      |  |      |  |     

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 service. 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 $4 million at December 31, 2004 for
Canadian plans and $7 million for U.S. plans. A 1% decrease in the same health care inflation rate would have decreased the post-retirement benefit obligation by
$3 million and $6 million for Canadian and U.S. plans, respectively.

29

---



Defined Contribution Arrangements

NOVA
Chemicals has a number of defined contribution arrangements providing pension benefits to certain groups of employees. The total expense for the Corporation's contribution to these plans in 2004
was $7 million (2003  $6 million and 2002  $6 million). In 2005, NOVA Chemicals expects to fund its
defined contribution plans by approximately $7 million.

21.   ASSET RETIREMENT OBLIGATIONS

The
Corporation's asset retirement obligations are comprised of expected costs to be incurred upon termination of operations and the closure of active manufacturing plant facilities. The total
undiscounted amount of estimated cash flows expected to be incurred on closure of active plants in 25 to 40 years is between $225 million and $250 million. This amount is
based on third-party cost estimates obtained from reputable sources after an in-depth review of active plant sites and required clean-up and restoration activities. In arriving
at the estimated asset retirement obligation, a credit-adjusted risk-free rate of 10.5% was used to discount the estimated future cash flows. The estimated asset retirement obligation
liability of $23 million at December 31, 2004 will increase, or accrete, each year over the lives of active plants until it equals the $225 million to $250 million expected
to be incurred on closure of the plants. In addition to the liability for active sites, the Corporation also has an asset retirement obligation liability for decommissioning and restoration costs
associated with plant sites that have been divested or are no longer in use. The accrued liability associated with these sites is $4 million and is considered to be adequate at this time.

22.   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 and transportation equipment under various operating leases. The minimum lease payments are approximately $516 million in total with annual amounts of
$40 million in 2005, $40 million in 2006, $34 million in 2007, $33 million in 2008, $36 million in 2009, and $333 million thereafter. Rental expense under
operating leases was $59 million in 2004 (2003  $53 million and 2002  $55 million).

The
Corporation has entered into agreements for the purchase of minimum amounts of feedstock and other raw materials for short- and long-term supply. The resulting obligations, based on
year-end market prices, are approximately $9,793 million in total with annual amounts of $3,223 million in 2005, $1,721 million in 2006, $1,275 million in 2007,
$886 million in 2008, $657 million in 2009, and $2,031 million thereafter.

30

---



23.   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 stryenic polymers, respectively.

Financial Information by Business Segment

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS)   |                           | 2004 |       | 2003  |   | 2002  |      
|---------------------------------------------- | ------------------------- | ---- | ----- | ----- | - | ----- | -----
|Revenue                                        |                           |      |       |       |   |       |      
|                                               | Olefins and polyolefins   |      | $     | 3,230 |   | $     | 2,559
|                                               | Styrenics                 |      |       | 2,324 |   |       | 1,579
|                                               | Intersegment eliminations |      |       | (284  | ) |       | (189 
|                                               |                           |      |       |       |   |       |      
|                                               |                           | $    | 5,270 |       | $ | 3,949 |      
|                                               |                           |      |       |       |   |       |      
|Depreciation                                   |                           |      |       |       |   |       |      
|                                               | Olefins and polyolefins   |      | $     | 181   |   | $     | 187  
|                                               | Styrenics                 |      |       | 116   |   |       | 111  
|                                               |                           |      |       |       |   |       |      
|                                               |                           | $    | 297   |       | $ | 298   |      
|                                               |                           |      |       |       |   |       |      
|Operating income (loss)                        |                           |      |       |       |   |       |      
|                                               | Olefins and polyolefins   |      | $     | 445   |   | $     | 98   
|                                               | Styrenics                 |      |       | (71   | ) |       | (147 
|                                               | Corporate and other(1)    |      |       | (110  | ) |       | (26  
|                                               |                           |      |       |       |   |       |      
|                                               |                           | $    | 264   |       | $ | (75   | )    
|                                               |                           |      |       |       |   |       |      
|Net income (loss)                              |                           |      |       |       |   |       |      
|                                               | Olefins and polyolefins   |      | $     | 255   |   | $     | 18   
|                                               | Styrenics                 |      |       | (69   | ) |       | (127 
|                                               | Equity investments        |      |       |      |   |       | 37   
|                                               | Corporate and other(1)    |      |       | 76    |   |       | 100  
|                                               |                           |      |       |       |   |       |      
|                                               |                           | $    | 262   |       | $ | 28    |      
|                                               |                           |      |       |       |   |       |      
|Plant, property, and equipment additions (net) |                           |      |       |       |   |       |      
|                                               | Olefins and polyolefins   |      | $     | 127   |   | $     | 74   
|                                               | Styrenics                 |      |       | 115   |   |       | 56   
|                                               |                           |      |       |       |   |       |      
|                                               |                           | $    | 242   |       | $ | 130   |      
|                                               |                           |      |       |       |   |       |      

|
|

|DECEMBER 31 (MILLIONS OF DOLLARS) |                         | 2004 |       | 2003  |   | 2002 
|--------------------------------- | ----------------------- | ---- | ----- | ----- | - | -----
|Assets                            |                         |      |       |       |   |      
|                                  | Olefins and polyolefins |      | $     | 2,510 |   | $    
|                                  | Styrenics               |      |       | 2,018 |   |      
|                                  | Investment in Methanex  |      |       |      |   |      
|                                  | Corporate and other(2)  |      |       | 519   |   |      
|                                  |                         |      |       |       |   |      
|                                  |                         | $    | 5,047 |       | $ | 4,413
|                                  |                         |      |       |       |   |      

---

31

---



Financial Information by Geographic Area

|YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS) |                  | 2004 |       | 2003  |   | 2002  |      
|-------------------------------------------- | ---------------- | ---- | ----- | ----- | - | ----- | -----
|Revenue(1)                                   |                  |      |       |       |   |       |      
|                                             | Canada           |      | $     | 1,706 |   | $     | 1,414
|                                             | United States    |      |       | 2,390 |   |       | 1,789
|                                             | Europe and other |      |       | 1,174 |   |       | 746  
|                                             |                  |      |       |       |   |       |      
|                                             |                  | $    | 5,270 |       | $ | 3,949 |      
|                                             |                  |      |       |       |   |       |      
|Export sales from Canadian operations        |                  |      |       |       |   |       |      
|                                             | United States    |      | $     | 1,393 |   | $     | 1,054
|                                             | Europe and other |      |       | 248   |   |       | 148  
|                                             |                  |      |       |       |   |       |      
|                                             |                  | $    | 1,641 |       | $ | 1,202 |      
|                                             |                  |      |       |       |   |       |      
|Operating income (loss)                      |                  |      |       |       |   |       |      
|                                             | Canada           |      | $     | 386   |   | $     | 4    
|                                             | United States    |      |       | (94   | ) |       | (66  
|                                             | Europe and other |      |       | (28   | ) |       | (13  
|                                             |                  |      |       |       |   |       |      
|                                             |                  | $    | 264   |       | $ | (75   | )    
|                                             |                  |      |       |       |   |       |      
|Equity in earnings of affiliates             |                  |      |       |       |   |       |      
|                                             | Canada           |      | $     |      |   | $     | 39   
|                                             |                  |      |       |       |   |       |      

|
|

|DECEMBER 31 (MILLIONS OF DOLLARS) |                  | 2004 |       | 2003  |   | 2002 
|--------------------------------- | ---------------- | ---- | ----- | ----- | - | -----
|Assets(2)                         |                  |      |       |       |   |      
|                                  | Canada           |      | $     | 2,943 |   | $    
|                                  | United States    |      |       | 1,303 |   |      
|                                  | Europe and other |      |       | 773   |   |      
|                                  | Investments      |      |       | 28    |   |      
|                                  |                  |      |       |       |   |      
|                                  |                  | $    | 5,047 |       | $ | 4,413
|                                  |                  |      |       |       |   |      

---

24.   FINANCIAL INSTRUMENTS

Financial Instrument Fair Values

Financial
instrument fair values represent a reasonable approximation of amounts NOVA Chemicals would have received or paid to counterparties to unwind positions prior to their maturity. NOVA
Chemicals has no plans to unwind these positions prior to maturity and has no significant exposure to any individual customer or counterparty.

The
carrying amounts reported on the balance sheets for cash and cash equivalents, accounts receivable, bank loans, and accounts payable approximate their fair value. Fair values and carrying amounts
for long-term debt are as follows:

|DECEMBER 31 (MILLIONS OF DOLLARS) |  | CARRYING AMOUNT |       | ESTIMATED FAIR VALUE(1)
|--------------------------------- |  | --------------- | ----- | -----------------------
|
|Long-term debt(2)                 |  | $               | 1,516 |                        
|                                  |  |                 |       |                        

---

32

---



Foreign Exchange Risk Management

NOVA
Chemicals has U.S., Canadian and European-based petrochemical operations. As a result, a portion of the Corporation's expenditures are incurred in Canadian dollars and euros. Prior to
April 2003, NOVA Chemicals managed its exposure to fluctuations in the Canadian/U.S. dollar exchange rate by using forward exchange contracts. At December 31, 2004, NOVA Chemicals
had no foreign currency forward exchange contracts nor any plans to enter into any such contracts.

Commodity Price Risk Management

NOVA
Chemicals 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.

At
December 31, 2004, 2003 and 2002, the notional volume and estimated fair value of outstanding derivative contracts for natural gas are as follows:

|DECEMBER 31                           |                                             |      |               | 2004 |      | 2003 |     | 2002 |     
|------------------------------------- | ------------------------------------------- | ---- | ------------- | ---- | ---- | ---- | --- | ---- | ----
|Pricing swaps                         |                                             |      |               |      |      |      |     |      |     
|                                      | Notional volume                             |      | GJ millions   |      |      |     |     |      |    
|                                      | Weighted-average price per GJ               |      | Cdn.          |      | $    |     |     | $    |    
|                                      | Estimated fair value(1)                     |      | U.S. millions |      | $    |     |     | $    |    
|                                      | Mark-to-market                              |      | U.S. millions |      | $    |     |     | $    |    
|                                      | Term to maturity                            |      | Months        |      |      |     |     |      |    
|                                      |                                             |      |               |      |      |      |     |      |     
|Basis swaps                           |                                             |      |               |      |      |      |     |      |     
|                                      | Notional volume                             |      | mcf millions  |      |      | 12.6 |     |      | 76.0
|                                      | Weighted-average basis differential per mcf |      | U.S.          |      | $    | 0.61 | (3) | $    | 0.52
|                                      | Estimated fair value(4)                     |      | U.S. millions |      | $    | (3)  | (4) | $    | (18)
|                                      | Mark-to-market                              |      | U.S. millions |      | $    |     |     | $    |    
|                                      | Term to maturity                            |      | Months        |      |      | 1-3  |     |      | 1-15
|                                      |                                             |      |               |      |      |      |     |      |     
|Options                               |                                             |      |               |      |      |      |     |      |     
|                                      | Notional volume  calls                     |      | mcf millions  |      |      | 1.1  |     |      | 3.6 
|                                      | Notional volume  puts                      |      | mcf millions  |      |      | 8.6  |     |      | 33.5
|                                      | Weighted-average price per mcf  calls      |      | U.S.          |      | $    | 5.05 |     | $    | 6.27
|Weighted-average price per mcf  puts |                                             | U.S. |               | $    | 2.50 | (5)  | $   | 2.42 | (5) 
|                                      | Estimated fair value(1)                     |      | U.S. millions |      | $    | 1    |     | $    | 1   
|                                      | Mark-to-market(6)                           |      | U.S. millions |      | $    |     |     | $    |    
|                                      | Term to maturity                            |      | Months        |      |      | 1-3  |     |      | 1-15
|                                      |                                             |      |               |      |      |      |     |      |     

---

33

---



At December 31, 2004, 2003 and 2002, the notional volume and estimated fair value of outstanding derivative contracts for crude oil, refined products,
and alternative feedstock are as follows:

|DECEMBER 31                       |  |               |  | 2004 |       | 2003 |   | 2002 
|--------------------------------- |  | ------------- |  | ---- | ----- | ---- | - | -----
|Notional volume                   |  | bbls millions |  |      | 4.0   |      |   | 6.4  
|Weighted-average price per bbl(1) |  | U.S.          |  | $    | 42.67 |      | $ | 29.96
|Estimated fair value(2)           |  | U.S. millions |  | $    | 12    |      | $ | 9    
|Mark-to-market(3)                 |  | U.S. millions |  | $    | 9     |      | $ |     
|Term to maturity                  |  | Months        |  |      | 1-24  |      |   | 1-36 
|                                  |  |               |  |      |       |      |   |      

---

At December 31, 2004, 2003 and 2002, the notional volume and estimated fair value of outstanding derivative contracts for benzene are as follows:

|DECEMBER 31                      |  |               |  | 2004 |      | 2003 |   | 2002
|-------------------------------- |  | ------------- |  | ---- | ---- | ---- | - | ----
|Notional volume                  |  | gls millions  |  |      | 0.2  |      |   |    
|Weighted-average price per gl(1) |  | U.S.          |  | $    | 3.05 |      | $ |    
|Estimated fair value(2)          |  | U.S. millions |  | $    | (2   | )    | $ |    
|Mark-to-market(2)                |  | U.S. millions |  | $    | (2   | )    | $ |    
|Term to maturity                 |  | Months        |  |      | 1-3  |      |   |    
|                                 |  |               |  |      |      |      |   |     

---

In addition to the crystallized and outstanding positions described in the tables above, the Corporation has liquidated certain natural gas and crude oil
positions. Gains on these liquidated positions attributable to changes in value prior to January 1, 2004 were deferred and are being recognized in income at the original maturity dates. The
unamortized portion of liquidated gains was $3 million at December 31, 2004.

The
Corporation has recognized a net gain of $24 million from commodity risk management in earnings for the year ended December 31, 2004. This gain is the result of $16 million of
realized net gains from settled, crystallized, and liquidated positions and $8 million of net mark-to-market gains on unrealized positions.

Interest Rate Risk Management

When
deemed appropriate, NOVA Chemicals enters into interest rate swap agreements to manage its interest rate price risk exposure on certain fixed-rate debt. The agreements generally
involve the receipt of fixed-rate amounts in exchange for floating-rate LIBOR based payments over the terms of the related debt. In 2004, the Corporation had
floating-for-fixed interest rate swaps outstanding on $300 million (2003  $550 million and
2002  $nil million) of medium-term notes. These positions had an estimated fair-market value of $(2) million at
December 31, 2004 ($4 million at December 31, 2003 and $nil million for 2002).

In
prior years, a series of interest rate swaps on $550 million of fixed-rate debt were liquidated, resulting in a before-tax gain of $40 million in total. The
gains have been deferred and are being recognized in income as a reduction of interest expense over the terms of the related debt instruments, which mature in 2005, 2006 and 2009.

Credit Risk Management

Credit
exposure on financial instruments arises from the possibility that a counterparty to an instrument in which NOVA Chemicals is entitled to receive payment of an unrealized gain fails to perform.
NOVA Chemicals has established a limit on contingent exposure for each counterparty based on the counterparty's credit rating. Credit exposure is managed through credit approval and monitoring
procedures. NOVA Chemicals does not anticipate any counterparties that it currently transacts with will fail to meet their obligations. At December 31, 2004, 2003 and 2002, NOVA Chemicals'
credit exposure was $nil million for foreign currency instruments, $nil million (2003  $4 million and 2002  $nil
million) for interest rate instruments, and $11 million (2003  $3 million and 2002  $4 million) for
commodity-based instruments.

34

---



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.

25.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

Reconciliation to Accounting Principles Generally Accepted in the United States

The
Corporation prepares its consolidated financial statements in accordance with Canadian GAAP, which, in some respects, are different from GAAP 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, EXCEPT PER SHARE AMOUNTS) |                                                                                                | 2004                                                            |     | 2003 |   | 2002 |     
|---------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | --- | ---- | - | ---- | ----
|Net income (loss) in accordance with Canadian GAAP                     |                                                                                                | $                                                               | 262 |      | $ | 28   |     
|Add (deduct) adjustments for:                                          |                                                                                                |                                                                 |     |      |   |      |     
|                                                                       | Start-up costs(1)                                                                              |                                                                 |     | 5    |   |      | 4   
|                                                                       | Foreign exchange derivative instruments and hedging activity(2)                                |                                                                 |     |     |   |      | 3   
|                                                                       | Other derivative instruments and hedging activity(2)                                           |                                                                 |     |     |   |      | (7  
|                                                                       | Inventory costing(3)                                                                           |                                                                 |     | 4    |   |      | (1  
|                                                                       | Preferred securities distributions(4)                                                          |                                                                 |     | (4   | ) |      | (23 
|                                                                       | Equity in earnings of affiliate(5)                                                             |                                                                 |     |     |   |      | (1  
|                                                                       | Change in accounting policy(6)                                                                 |                                                                 |     | (7   | ) |      | 5   
|                                                                       | Other gains(7)                                                                                 |                                                                 |     |     |   |      | 42  
|                                                                       | Other                                                                                          |                                                                 |     |     |   |      | 1   
|                                                                       |                                                                                                |                                                                 |     |      |   |      |     
|Net income (loss) in accordance with U.S. GAAP                         |                                                                                                | $                                                               | 260 |      | $ | 51   |     
|                                                                       |                                                                                                |                                                                 |     |      |   |      |     
|Earnings (loss) per share using U.S. GAAP                              |                                                                                                |                                                                 |     |      |   |      |     
|                                                                       |  Basic                                                                                        |                                                                 | $   | 3.00 |   | $    | 0.52
|                                                                       |  Diluted                                                                                      |                                                                 | $   | 2.73 |   | $    | 0.51
|                                                                       |                                                                                                |                                                                 |     |      |   |      |     
|Comprehensive income (loss) (net of tax)(8)                            |                                                                                                |                                                                 |     |      |   |      |     
|                                                                       | Net income (loss) in accordance with U.S. GAAP                                                 |                                                                 | $   | 260  |   | $    | 51  
|                                                                       | Cumulative translation adjustment(9)                                                           |                                                                 |     | 121  |   |      | 395 
|                                                                       |                                                                                                | Less: reclassification of amounts included in net income (loss) |     |      |  |      |     
|                                                                       | Unrealized gain (loss) on cash flow hedging instruments
(less tax of $nil, $(2), and $(15))(2) |                                                                 |     |     |   |      | 4   
|                                                                       | Equity in comprehensive income (loss) of affiliate
(less tax of $nil, $nil and $(1))(5)        |                                                                 |     |     |   |      | (3  
|                                                                       | Minimum pension liability adjustments
(less tax of $nil and $2, and $(1))(10)                  |                                                                 |     | 1    |   |      | (3  
|                                                                       |                                                                                                |                                                                 |     |      |   |      |     
|Comprehensive income in accordance with U.S. GAAP                      |                                                                                                | $                                                               | 382 |      | $ | 390  |     
|                                                                       |                                                                                                |                                                                 |     |      |   |      |     
|Accumulated other comprehensive income (loss)(8)                       |                                                                                                |                                                                 |     |      |   |      |     
|                                                                       | Cumulative translation adjustment(9)                                                           |                                                                 | $   | 332  |   | $    | 211 
|                                                                       | Unrealized loss on cash flow hedging instruments(2)                                            |                                                                 |     |     |   |      |    
|                                                                       | Equity in comprehensive income (loss) of affiliate(5)                                          |                                                                 |     |     |   |      |    
|                                                                       | Minimum pension liability(10)                                                                  |                                                                 |     | (3   | ) |      | (4  
|                                                                       |                                                                                                |                                                                 |     |      |   |      |     
|Accumulated other comprehensive income (loss)                          |                                                                                                | $                                                               | 329 |      | $ | 207  |     
|                                                                       |                                                                                                |                                                                 |     |      |   |      |     

35

---



|DECEMBER 31 (MILLIONS OF DOLLARS)                |                                             | 2004                    |       | 2003   |        | 2002  |      
|------------------------------------------------ | ------------------------------------------- | ----------------------- | ----- | ------ | ------ | ----- | -----
|Balance sheet items in accordance with U.S. GAAP |                                             |                         |       |        |        |       |      
|                                                 | Current assets(2),(3)                       |                         | $     | 1,482  |        | $     | 959  
|                                                 | Investment and other assets(1),(2),(5),(10) |                         |       | 139    |        |       | 157  
|                                                 | Plant, property, and equipment (net)(1),(6) |                         |       | 3,429  |        |       | 3,311
|                                                 | Current liabilities(2)                      |                         |       | (893   | )      |       | (585 
|                                                 | Long-term debt:                             |                         |       |        |        |       |      
|                                                 |                                             | Preferred securities(4) |       |        |       |       |      
|                                                 |                                             | Other long-term debt(2) |       |        | (1,427 | )     |      
|                                                 | Deferred credits(2),(3),(10)                |                         |       | (1,030 | )      |       | (829 
|                                                 | Retractable preferred shares                |                         |       | (198   | )      |       | (198 
|                                                 |                                             |                         |       |        |        |       |      
|Common shareholders' equity                      |                                             | $                       | 1,502 |        | $      | 1,310 |      
|                                                 |                                             |                         |       |        |        |       |      

---





36

---



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. NOVA Chemicals adopted the fair-value method of accounting for
stock-based compensation on January 1, 2004.

The
following table outlines the impact on the Corporation's U.S. GAAP results of prior years, 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) |             | 2003 |   | 2002 | 
|-------------------------------------------------------------------- | ----------- | ---- | - | ---- | 
|Net income (loss) in accordance with U.S. GAAP                       |             |      |   |      | 
|                                                                     | As reported |      | $ | 51   | 
|                                                                     | Pro forma   |      | $ | 44   | 
|Earnings (loss) per share  basic                                    |             |      |   |      | 
|                                                                     | As reported |      | $ | 0.52 | 
|                                                                     | Pro forma   |      | $ | 0.44 | 
|Earnings (loss) per share  diluted                                  |             |      |   |      | 
|                                                                     | As reported |      | $ | 0.51 | 
|                                                                     | Pro forma   |      | $ | 0.44 | 
|                                                                     |             |      |   |      | 

U.S. Accounting Developments

FASB
Statement No. 150, Accounting for Certain Financial Instruments with the Characteristics of both Liabilities and Equity, issued in May 2003, requires the classification of certain
financial instruments, previously classified as equity, as liabilities. While Statement No. 150 has not had an impact on the current classification of the Corporation's financial instruments,
the FASB intends to continue deliberations on this topic. Future recommendations by the FASB may have an impact on the Corporation's financial position and are not determinable at this time.

37

---



QuickLinks