Sterling Chemicals Announces Signing of Acetic Acid Contract Extension With BP

STERLING CHEMICALS, INC. has announced they and BP Amoco Chemical Company 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.”