Investment funds managed by KKR and the Public Sector Pension Investment Board (PSP Investments), which is one of Canada’s largest pension investors, announced an agreement to acquire a 19.9% interest in American Electric Power’s (AEP) Ohio and Indiana & Michigan transmission companies for $2.82 billion.
Originally founded in 1906 and one of the largest electric utilities in the U.S., AEP has pioneered the country’s energy system by delivering safe, reliable, and affordable energy for millions of homes. This investment will support AEP’s ability to meet increasing customer demand and enhance grid reliability. KKR and PSP Investments have formed a 50/50 strategic partnership to pursue the acquisition.
AEP is a fully regulated electric utility that serves 5.6 million retail and wholesale customers across 11 states. And 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. This investment by KKR and PSP Investments in these two transmission companies will support AEP’s previously announced five-year capital plan to benefit customers.
Upon closing the deal, AEP will remain the majority owner and operator of the transmission assets. KKR is funding this investment from its core infrastructure strategy. And Moelis and Morgan Stanley served as financial advisors and Simpson Thacher served as legal advisor to KKR and PSP Investments.
KEY QUOTES:
“We are thrilled to strategically partner with the best-in-class leader in transmission in the U.S., 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.”
– Kathleen Lawler, Managing Director, KKR
“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 (“HICI”) strategy, which is predicated on investing in North American core infrastructure assets that exhibit a defensive and predictable inflation-linked cashflow profile.”
– Michael Rosenfeld, Managing Director, Infrastructure Investments, PSP Investments
“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.”
– Bill Fehrman, AEP president and chief executive officer
