American Electric Power will sell private-equity firm KKR and Canada’s Public Sector Pension Investment Board a 19.9% equity interest in AEP Ohio Transmission, or OHTCo, and AEP Indiana Michigan Transmission, or IMTCo, for $2.82 billion, AEP said Thursday.
“This transaction allows AEP to efficiently finance a growing segment of its business in the Midwest and enhance its ability to serve growing customer demand and provide reliable service,” the Columbus, Ohio-based utility company said.
AEP said it plans to use the proceeds from the sale to the KKR-PSP consortium to support its five-year, $54 billion capital growth plan, which includes investments in transmission, distribution and generation projects. The sale will offset some of AEP’s $5.35 billion equity financing needs through 2029, the company said. It will also strengthen the company’s balance sheet, according to a presentation on the deal.
The transaction requires Federal Energy Regulatory Commission approval and clearance from the Committee on Foreign Investment in the United States. AEP expects the deal will close in the second half of this year.
The 19.9% equity stake KKR and PSP is buying represents about 5% of AEP’s total transmission rate base. OHTCo has about $6.3 billion in net plant and IMTCo has about $4.1 billion in net plant, according to a Nov. 10 presentation by AEP. The utility company expects OHTCo will spend about $3.6 billion on capital investments from 2025 to 2029 and IMTCo will spend about $2.2 billion in the same period.
“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,” Michael Rosenfeld, managing director of infrastructure investments at PSP Investments, said in a press release.
The deal’s value is equivalent to issuing AEP common shares at about $170/share, according to the utility company. AEP stock sold for about $92/share on Wednesday.
The planned sale to the KKR-PSP consortium marks a string of asset sales by AEP. The company, for example, in May agreed to sell AEP OnSite Partners, a distributed resources business, to funds advised by London-based private equity firm Basalt Infrastructure Partners in a deal it expects will net $315 million.
The AEP OnSite Partners sale in September is part of AEP’s recent move to sell unregulated assets to concentrate on its regulated utilities.
FirstEnergy has also been selling stakes in its transmission businesses to raise capital.
