The last Monday, that is 23 September 2019 recorded a penalty fine for Nova Chemicals due to the breach of a few contractual agreements in relation to Dow. The Court of the Queen’s Bench in Alberta, Canada, has signed a judgment ordering Nova Chemicals to pay Dow (NYSE: DOW) CAD$1.43 billion (equivalent to approximately USD$1.08 billion). The payment is supposed to be made on October 11, 2019 for the damages Dow sustained through 2012 which was related to both the companies’ jointly owned ethylene asset in Joffre, Alberta, Canada.
The court that initially ruled in June 2018 uncovered the fact that Nova Chemicals has failed to operate the ethylene asset to its full capacity for more than 10 years. It was furthermore found that Nova has breached a number of contractual agreements related to Dow taking its share of the asset’s ethylene production. Dow has a broad portfolio of industrial intermediates, performance materials, and plastics businesses that offers a wide range of various science-based products and solutions. In this case, all these activities caused a reduction in productivity of Dow and the company’s sales.
Dow suffered a series of damages through 2012 which the signed judgment clearly relates to. As far as the post 2012 period damages are concerned, Dow anticipated to receiving an additional judgment that were owed by Nova. The judgment is still a subject matter to appeal, which is to be take place in the forthcoming October. Dow further anticipates to track an accounting benefit related to a fragment of this judgment in the 3rd quarter of 2019. The Company estimates to treat this as a significant non-recurring item while the calculation of non-GAAP financial measures, including operating EPS (earnings per share).
Adding to this, the ethylene asset is currently running at a higher utilization rate and providing Dow more ethylene from benefitted feedstock position. Dow operates in 31 countries with 113 manufacturing sites and has approximately 37,000 people.
