US private firm KKR and Canadian pension fund PSP Investments have agreed to acquire a 19.9% interest in American Electric Power’s (AEP) Ohio and Indiana & Michigan transmission companies for $2.82bn (€2.7bn).
The investment will support AEP’s ability to meet increasing customer demand and enhance grid reliability. KKR and PSP Investments have formed a 50-50 partnership to pursue the acquisition.
AEP is a fully regulated electric utility that serves 5.6m retail and wholesale customers across 11 states. Ohio, Indiana and Michigan are among AEP’s fastest-growing service territories driven primarily by the strong American manufacturing industry and newer sources of load growth.
Kathleen Lawler, managing director at KKR, said: “We are thrilled to strategically partner with the best-in-class leader in transmission in the US, and are impressed with AEP’s deep operational capabilities, highly experienced leadership team and its history of innovation.
“KKR’s infrastructure business has a long track record of investing behind the energy transition and electrification opportunities, and this investment in AEP sits squarely at the intersection of these two trends. The simplicity and stability of the assets, coupled with the robust demand for electricity, make AEP’s transmission assets an ideal investment for KKR.”
Michael Rosenfeld, managing director, infrastructure investments at PSP Investments, said: “We are delighted to form this partnership with AEP to support its ambitious growth plan to build much needed transmission infrastructure in a region that is undergoing significant tailwinds from digitalization and reshoring of critical manufacturing.
“This investment marks an important milestone in PSP Infrastructure’s roll out of its High Inflation Correlated Infrastructure strategy, which is predicated on investing in North American core infrastructure assets that exhibit a defensive and predictable inflation-linked cashflow profile.”
AEP president and chief executive officer Bill Fehrman said: “We are pleased to launch this strategic partnership with two of the world’s premier global infrastructure investors. KKR and PSP are experienced investors in the utilities and energy space with a proven track record of successful infrastructure investments.
“This transaction allows AEP to efficiently finance a growing segment of our business and enhances our ability to serve growing customer demand and provide reliable service to our customers.”
Upon the closing of the transaction, AEP will remain the majority owner and operator of the transmission assets. KKR is funding this investment from its core infrastructure strategy.
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