HOUSTON, Aug. 22 /PRNewswire-FirstCall/ -- STERLING CHEMICALS, INC. (BULLETIN BOARD: SCHI) has announced they and BP Amoco Chemical Company ("BP") have entered into an amended, long-term Acetic Acid Production Agreement that will be effective retroactively as of January 1, 2008.
The amended agreement contains the following key provisions: -- the term is extended from July 31, 2016 until December 31, 2031 -- the payment terms were modified in such a way that Sterling's working capital will be improved by an average of $16 million per year -- cost sharing provisions were simplified and modified resulting in an annual Sterling EBITDA improvement of $1.7 million
Concurrently with the execution of the amended, long-term Acetic Acid Production Agreement, Sterling and BP also entered into a Mutual Release and Settlement Agreement which resolves the previous dispute over credits for blend gas. BP is required to pay Sterling $3.3 million on or before August 27, 2008 and Sterling is entitled to retain all previous amounts it received from BP related to blend gas credits. As a result, Sterling is expected to recognize $5.9 million of additional EBITDA during the third quarter of 2008.
"We are excited about extending our partnership with BP for an additional 15 years," said John V. Genova, President and CEO of Sterling. "We have had a very positive and valuable partnership with BP for more than 22 years. The current and future fundamentals of the acetic acid market remain strong. Our plant is particularly poised to take advantage as it ranks in the top quartile for overall efficiency and can be expanded by another 50% at a fraction of grassroots cost. The first capacity expansion step will be taken in the spring of 2009 when we increase our acetic acid capacity by 100 million pounds to approximately 1.2 billion pounds annually."
About Sterling Chemicals, Inc.
Sterling Chemicals, Inc. is a leading North American producer of selected petrochemicals used to manufacture a wide array of consumer goods and industrial products throughout the world. Its primary products are acetic acid and plasticizers. More information on Sterling Chemicals, Inc. can be found at http://www.sterlingchemicals.com/.
The information in this news release relating to matters that are not historical facts constitutes forward-looking information covered by the safe harbor created by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-looking information is based upon current information and expectations regarding Sterling Chemicals, Inc. The estimates, forecasts and statements contained in or implied by the forward-looking information speak only as of the date on which they are made, are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to evaluate and predict. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecasted by or in the forward-looking information. Important factors that could cause actual results to differ materially from what is expressed, implied or forecasted by or in the forward-looking information include the timing and extent of changes in commodity prices and global economic conditions, industry production capacity and operating rates, the supply-demand balance for Sterling's products, competitive products and pricing pressures, increases in raw material costs, federal and state regulatory developments, as well as the other risk factors discussed in Sterling's filings with the Securities and Exchange Commission, including Sterling's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Sterling assumes no obligation to update the information contained in this press release.
