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The share prices of Nova Chemicals and TransCanada PipeLines could be within spitting distance of each other by the end of the year.

Considered unthinkable just nine months ago, it's now within the realm of possibility that Nova's share price could stall and eventually trade $10 above TCPL's rising value. Okay, so that's a long way to spit.

But in May last year, shares of Nova surged over $36, while TCPL languished near $10. Since then, the petrochemical company's costs have gone up while its stock has fallen to $28.80 on the Toronto Stock Exchange. In the meantime, TCPL's fortunes have turned around, with its stock hitting $16 on the TSE.

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Granted, that's still a big gap between the two companies, which emerged as separate entities after TCPL's messy $7.65-billion takeover in mid-1998 of what was then the Nova conglomerate. But the trend isn't Nova's friend at the moment.

After Calgary-based TCPL swallowed the Nova conglomerate, it spun off Nova's chemicals division. Conservative investors who owned TCPL suddenly found themselves holding some shares in the shrunken and riskier Nova.

Both TCPL and Nova got hammered in the last half of 1998. After accounting for the merger's stock swaps, TCPL slumped 17 per cent to $22.45 and Nova plunged 37 per cent to $20. That was understandable for Nova, which never advertised itself as a haven. But TCPL's drop came as a surprise because it was supposed to be the stock that you put under your pillow and forgot about.

TCPL carried an annual dividend of $1.12 a share -- considered sacred in the minds of investors.

But in late 1999, TCPL announced it would slash that dividend to 80 cents a share, sparking another selloff as its stock dropped to $12.

Nova shares, on the other hand, shot up to $34 in 1999 amid improved petrochemical prices. Who could have predicted that, in 1999 at least, the defensive play of TCPL would get creamed while investors holding risky Nova shares would be the ones sleeping peacefully at night?

TCPL, amid much skepticism about whether it could stage a comeback, has regained some of its lustre by selling off $3.4-billion in assets.

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The pipeline giant kept key assets such as its main natural gas line from Western Canada to Central Canada, as well as an extensive network of pipelines within Alberta formerly owned by Nova. TCPL, which misjudged the strength of rival Alliance Pipeline, now stands to benefit from any new pipelines built in the North.

Nova, however, must contend with the slowdown in the manufacturing sector. Some observers in Calgary are privately smirking because Nova moved its top executives to Pittsburgh from Calgary last year.

Calgarians who felt snubbed after the exodus to the United States can at least secretly revel in Nova's misfortune of having to buy expensive Alberta natural gas this winter.

Nova had thrived for years on buying cheap gas in Alberta as the feedstock for its petrochemical operations. Now that gas prices have gone through the roof, Nova is getting a nasty dose of Alberta justice -- you use Alberta's valuable resources, you pay through the nose.

Gone are the days when Nova got coddled by the Alberta government, which in 1954 founded its predecessor, Alberta Gas Trunk Line. After being privatized in 1961 and renamed Nova in 1980, it grew into a big-league energy player under Bob Blair and Ted Newall.

It wouldn't be fair to knock Nova simply because it turned its back on its Alberta heritage. Nova's chemicals operations go well beyond Alberta's borders and into the United States and Europe. The company represents a "pure play" for investors, including many U.S. portfolio managers, willing to go on a roller-coaster ride.

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But Nova is finding out that no matter where its executives are located, investors get nervous when they hear about plant shutdowns, financial writedowns and slowing demand. The inclination among investors this winter has been to crush Nova's stock as if it were a disposable foam cup (which contains plastics produced by Nova).

For Nova, nothing would make it happier than skyrocketing petrochemical prices. Assuming all the bad news is in the rear-view mirror, Nova shares could rally this year if natural gas prices dip and petrochemical prices soar. That's a big if, though.

Gulf Canada's share price has surged since its executives moved back to Cowtown after a fling with Denver. On the whole, Nova's top brass would rather stay in Pittsburgh, but if they're the least bit superstitious, they should consider returning to the company's Alberta roots. bjang@globeandmail.ca

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NOVA CHEMICALS CORPORATION TRANSCANADA PIPELINES LIMITED
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