- A 50/50 strategic partnership between KKR and PSP Investments
agrees to acquire 19.9% non-controlling equity interest in two AEP
Transcos for $2.82 billion
- Transaction provides highly efficient financing to support
AEP's five-year, $54 billion capital
investment plan, enhance reliability for customers and strengthen
balance sheet
COLUMBUS, Ohio, Jan. 9, 2025
/PRNewswire/ -- American Electric Power (Nasdaq: AEP) today
announced a definitive agreement for a strategic partnership
between KKR and PSP Investments to acquire a 19.9% equity interest
in the company's Ohio and
Indiana & Michigan
Transmission Companies (Transcos) for $2.82
billion. The Transcos are transmission-only, Federal Energy
Regulatory Commission (FERC) regulated utilities that build, own
and operate transmission infrastructure.
The transaction multiple of 30.3 times LTM P/E is highly
attractive and is a significant premium to AEP's current stock
price. The 19.9% minority equity interest represents approximately
5% of AEP's total transmission rate base.
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
proceeds will support AEP's five-year, $54
billion capital growth plan, which includes investments in
transmission, distribution and generation projects and will offset
a significant amount of AEP's $5.35
billion equity financing needs through 2029. Upon closing,
the transaction will immediately be accretive to AEP's earnings and
credit profile.
"Executing on our five-year capital plan is critical to meeting
growing energy demand and bolstering reliability for our customers.
Electricity demand is anticipated to grow significantly in AEP's
footprint by the end of the decade," said Bill Fehrman, AEP president and chief executive
officer. "Areas such as Ohio and
Indiana are experiencing growth
that has not been seen for decades. This transaction allows us to
address a portion of our capital needs efficiently and at a very
attractive valuation, benefiting our customers and supporting
economic development in our states."
Fehrman continued, "We are pleased to launch this strategic
partnership with two of the world's premier global infrastructure
investors. KKR and PSP Investments are experienced investors in the
utilities and energy space with a proven track record of successful
infrastructure investments. This transaction allows AEP to maintain
a controlling interest in our valuable transmission assets, which
we will support through growth and modernization initiatives."
Customers and employees will not experience any changes as a
result of this transaction. Long term, states and customers should
benefit from the increased economic development opportunities
enabled by investment in the transmission system. AEP's employees
will continue to operate and maintain the Transcos' assets.
The transaction requires approval from FERC and clearance from
the Committee on Foreign Investment in the United States. The transaction is expected
to close in the second half of 2025.
J.P. Morgan Securities LLC is serving as exclusive financial
advisor to AEP. Morgan Lewis & Bockius LLP is serving as
legal counsel to AEP.
About AEP
Our team at American Electric Power (Nasdaq: AEP) is committed
to improving our customers' lives with reliable, affordable power.
We are investing $54 billion from
2025 through 2029 to enhance service for customers and support the
growing energy needs of our communities. Our nearly 16,000
employees operate and maintain the nation's largest electric
transmission system with 40,000 line miles, along with more than
225,000 miles of distribution lines to deliver energy to 5.6
million customers in 11 states. AEP also is one of the nation's
largest electricity producers with approximately 29,000 megawatts
of diverse generating capacity. We are focused on safety and
operational excellence, creating value for our stakeholders and
bringing opportunity to our service territory through economic
development and community engagement. Our family of companies
includes AEP Ohio, AEP Texas, Appalachian Power (in Virginia, West
Virginia and Tennessee),
Indiana Michigan Power, Kentucky Power, Public Service Company of
Oklahoma, and Southwestern
Electric Power Company (in Arkansas, Louisiana, east Texas and the Texas
Panhandle). AEP also owns AEP Energy, which provides
innovative competitive energy solutions nationwide. AEP is
headquartered in Columbus, Ohio.
For more information, visit aep.com.
This report made by American Electric Power and its Registrant
Subsidiaries contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934. Although AEP
and each of its Registrant Subsidiaries believe that their
expectations are based on reasonable assumptions, any such
statements may be influenced by factors that could cause actual
outcomes and results to be materially different from those
projected. Among the factors that could cause actual results to
differ materially from those in the forward-looking statements are:
changes in economic conditions, electric market demand and
demographic patterns in AEP service territories; the economic
impact of increased global conflicts and trade tensions and the
adoption or expansion of economic sanctions, tariffs or trade
restrictions; inflationary or deflationary interest rate trends;
volatility and disruptions in the financial markets precipitated by
any cause, including turmoil related to federal budget or debt
ceiling matters or instability in the banking industry,
particularly developments affecting the availability or cost of
capital to finance new capital projects and refinance existing
debt; the availability and cost of funds to finance working capital
and capital needs, particularly if expected sources of capital such
as proceeds from the sale of assets, subsidiaries and tax credits,
and anticipated securitizations, do not materialize or do not
materialize at the level anticipated, and during periods when the
time lag between incurring costs and recovery is long and the costs
are material; shifting demand for electricity; the impact of
extreme weather conditions, natural disasters and catastrophic
events such as storms, drought conditions and wildfires that pose
significant risks including potential litigation and the inability
to recover significant damages and restoration costs incurred;
limitations or restrictions on the amounts and types of insurance
available to cover losses that might arise in connection with
natural disasters or operations; the cost of fuel and its
transportation, the creditworthiness and performance of parties who
supply and transport fuel and the cost of storing and disposing of
used fuel, including coal ash and spent nuclear fuel; the
availability of fuel and necessary generation capacity and the
performance of generation plants; AEP's ability to recover fuel and
other energy costs through regulated or competitive electric rates;
the ability to build or acquire generation (including from
renewable sources), transmission lines and facilities (including
the ability to obtain any necessary regulatory approvals and
permits) to meet the demand for electricity at acceptable prices
and terms, including favorable tax treatment, cost caps imposed by
regulators and other operational commitments to regulatory
commissions and customers for generation projects, and to recover
all related costs; the disruption of AEP's business operations due
to impacts on economic or market conditions, costs of compliance
with potential government regulations, electricity usage, supply
chain issues, customers, service providers, vendors and suppliers
caused by pandemics, natural disasters or other events; new
legislation, litigation and government regulation, including
changes to tax laws and regulations, oversight of nuclear
generation, energy commodity trading and new or heightened
requirements for reduced emissions of sulfur, nitrogen, mercury,
carbon, soot or particulate matter and other substances that could
impact the continued operation, cost recovery, and/or profitability
of generation plants and related assets; the impact of federal tax
legislation on results of operations, financial condition, cash
flows or credit ratings; the risks associated with fuels used
before, during and after the generation of electricity and the
byproducts and wastes of such fuels, including coal ash and spent
nuclear fuel; timing and resolution of pending and future rate
cases, negotiations and other regulatory decisions, including rate
or other recovery of new investments in generation, distribution
and transmission service and environmental compliance; resolution
of litigation or regulatory proceedings or investigations; the
ability to efficiently manage operation and maintenance costs;
prices and demand for power generated and sold at wholesale;
changes in technology, particularly with respect to energy storage
and new, developing, alternative or distributed sources of
generation; AEP's ability to recover through rates any remaining
unrecovered investment in generation units that may be retired
before the end of their previously projected useful lives;
volatility and changes in markets for coal and other energy-related
commodities, particularly changes in the price of natural gas; the
impact of changing expectations and demands of customers,
regulators, investors and stakeholders, including evolving
expectations related to environmental, social and governance
concerns; changes in utility regulation and the allocation of costs
within regional transmission organizations, including ERCOT, PJM
and SPP; changes in the creditworthiness of the counterparties with
contractual arrangements, including participants in the energy
trading market; actions of rating agencies, including changes in
the ratings of debt; the impact of volatility in the capital
markets on the value of the investments held by AEP's pension,
other postretirement benefit plans, captive insurance entity and
nuclear decommissioning trust and the impact of such volatility on
future funding requirements; accounting standards periodically
issued by accounting standard-setting bodies; other risks and
unforeseen events, including wars and military conflicts, the
effects of terrorism (including increased security costs),
embargoes, cyber security threats, labor strikes impacting material
supply chains, global information technology disruptions and other
catastrophic events; and the ability to attract and retain the
requisite work force and key personnel.
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SOURCE American Electric Power
