Title: Morris Gelb Chief Operating Officer Morgan Stanley February 13, 2002
1Morris GelbChief Operating OfficerMorgan
StanleyFebruary 13, 2002
2Safe Harbor Language
Statements in this presentation relating to
matters that are not historical facts are
forward-looking statements. These forward-looking
statements are just predictions or expectations
and are subject to risks and uncertainties.
Actual results could differ materially, based on
factors including but not limited to future
global economic conditions, availability of
capital markets, industry production capacity and
operating rates, technological developments, the
supply demand balance for the products produced
by the Company and its joint ventures,
competitive products and pricing pressures,
increases in raw material and/or energy costs,
changes in governmental regulations and other
risk factors. For more detailed information
about the factors that could cause our actual
results to differ materially, please refer to
Lyondell Chemical Company's Annual Report on Form
10-K for the year ended December 31, 2000,
Lyondells Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001, as well as
Lyondells Annual Report on Form 10-K for the
year ended December 31, 2001 and Lyondells 2002
proxy statement, which will be filed with the
SEC.
Page 2
3Lyondell Operates in 3 Major Businesses
- Lyondell Chemical Company - Intermediate
Chemicals and Derivatives - Worlds leading producer of PO and derivatives
- 100 Ownership
- Equistar - Petrochemicals and Polymers
- A leading North American producer of ethylene,
propylene and polyethylene - Low cost position based on feedstock flexibility
and scale - 41 Ownership
- LCR - Refining
- Unique capability to refine heavy crude oils
- Contractually stable business strong cash flow
generator - 58.75 Ownership
4Roadmap to Success
- Executing our Strategic Plan
- Prudently Managing Quality Assets
- Delivering Results in Difficult Environment
- Positioned for Significant Returns in Up-Turn
5Our Beliefs in the Drivers of Success Remain
Constant
- Sustainable Competitive Advantages
- Technology
- Market Position
- Low Cost Production
- Scale
- Breadth and Depth of Product Offering
- Global Reach
- Capital Market Liquidity
6Strategy for Value Creation
7Leading Positions in All Key Products
ICD
Equistar
Source CMAI, LYO capacities as of 1/1/01
8Products Serve Key Durable Non-Durable Markets
Grocery Sacks
Automotive Components
Toys
Polyethylene Polypropylene
Consumer Products
Butandiol Propylene Glycol
Food Packaging
Ethylene Propylene
Apparel
Antifreeze / deicers
Automotive Seating
Home Construction
Home Furnishings
Pharmaceuticals
9Sustainable Advantages in Key Businesses
- Petrochemicals Low Cost Advantage
- Feedstock flexibility historically provides 4 cpp
variable cost advantage - Refining Strong Cash Generation
- Heavy Crude Processing Capability
- Unique Deemed Margin Contract
- Improved Operational Reliability
- ICD PO Cost and Technology Leadership
- Proprietary Process Technology Leader
- Global Production Base
- Important Derivative Positions
10Large Asset Base Provides Opportunities to
Optimize the Portfolio
- Petrochemicals
- Idled Lake Charles
- Polymers
- Shut-Down Port Arthur
- Expanded Matagorda Victoria
- ICD
- Exited ADI
- Sold Polyols
11Organizational Focus Delivers Results Throughout
the Cycle
Reduced Fixed Costs
12Reduced Working Capital
Days of Working Capital
2001 Cash from Working Capital LYO 128MM
Equistar 282MM
Includes elimination 130 million AR
securitization
13Prudently Managing Assets
Disciplined Capital Expenditures
PO11 Spending
(,MM)
(MM)
14Minimal Near Term Debt Maturities
Debt Maturity Schedule
1
1 LYO Revolver Expires
15Significant Liquidity
1
2
1 excludes approximately 4.5 million committed
against letters of credit 2 excludes
approximately 0.7 million committed against
letters of credit
16Debt Reduction Still a Priority
Total Lyondell Debt
3.1 B reduction
17Equistar Transactions
- Lyondell Sells Package of Securities to
Occidental - 30 34 million shares of Series B stock
- 5 million, 5 year 25 warrants
- Payments equivalent to 7.38 of 02 03
Equistar distributions up to 35 million - Lyondell buys Occidentals 29.5 share of Equistar
18Impact of Occidental Transaction on Cash
Generation and Earnings Potential
Impact of 0.01/lb margin increase on EPS
Before After Ethylene 0.24 0.32 Polymers 0.1
4 0.19
Impact of accelerated debt reduction . . .
Normalized Equistar EBITDA1 1.0
billion Increase in proportional Equistar
EBITDA 300 million Impact of 300 million of
Lyondell debt reduction 0.12/share
1 - Pro forma assuming 1993 (trough) and 1995
(cyclical upturn) CMAI cash margins, Equistar
product capacities as of 2000 and up to 280
million of cost savings resulting from Equistar
formation.
19Past Demand Contractions Were Followed by Periods
of Strong Growth
Source DRI ChemData
20Investment Highlights
- Executing our strategy
- Accumulated leading positions in all key products
- Established low cost producer positions
- Delivering results in difficult environment
- Preserving our liquidity
- Committed to debt reduction and our dividend
21Morgan StanleyFebruary 13, 2002