Kinder Morgan, Nucor Sign 10-Year Agreement Worth $900M

Kinder Morgan Inc. (NYSE:KMI) has inked a new 10-year agreement with Nucor Corporation (NYSE:NUE) to supply in-plant services for five of the latter’s facilities. The agreement is valued at about $900 million.

The five facilities of Nucor include one at Decatur, AL; one at Hertford, NC; one at Berkeley, SC; and two at Blytheville, AR. The annual production from these five facilities is about 13.4 million tons of steel products.

Kinder Morgan will be in charge of handling about 14.8 million tons of scrap steel, direct-reduced iron, pig iron and other feedstocks annually. The company will also provide other ancillary services.

Nucor, the largest recycler and steel producer in North America, is one of the major customers of Kinder Morgan’s Terminals division. The latest agreement further strengthens Kinder Morgan’s relationship with Nucor and ensures the continued provision of handling, processing, warehousing and marine services by the former.

Kinder Morgan is one of the largest midstream companies in North America. The company’s size is believed to be advantageous due to its opportunities to build smaller adjacent pipelines at a lower cost than peers. Further, an increased demand for power generation and exports are expected to drive continued infrastructure build-out for the company in the coming quarters. Such positives are likely to boost future earnings as well.

Kinder Morgan’s significant efforts to reduce costs and restrict capital expenditures to only high return projects are expected to improve margins and partly offset the impact of low commodity prices.

Kinder Morgan holds a Zacks Rank #2 (Buy). Other well-ranked players from the energy sector are Braskem S.A. (NYSE:BAK) , FutureFuel Corp. (NYSE:FF) and ReneSola Ltd. (NYSE:SOL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).