Global investment firm KKR and the Public Sector Pension Investment Board (PSP), one of Canada’s largest pension funds, have agreed to acquire a 19.9 percent stake in American Electric Power Ohio's (AEP) Indiana and Michigan transmission companies for $2.82 billion.
KKR and PSP Investments have formed a 50/50 strategic partnership to pursue the acquisition.
“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,” said Kathleen Lawler, managing director, KKR.
Ohio-based AEP operates the nation's largest electric transmission system, with more than 40,000 miles of transmission lines and more than 225,000 miles of distribution lines across 11 states, including Texas, Ohio, Oklahoma, Virginia, Tennessee, and Kentucky. The company plans to invest $43 billion over the next five years in grid upgrades.
According to the company, the investment will support AEP’s ability to meet increasing customer demand and enhance overall grid reliability, which is driven primarily by data center growth across its coverage area.
“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,” said Bill Fehrman, AEP president and CEO.
Following the transaction's close, AEP will remain the majority owner and operator of the transmission assets. KKR is funding this investment through its core infrastructure strategy.
In July, AEP reported that it is expecting a huge increase in its energy load over the next five years, driven almost entirely by data center demand. AEP said that it has seen customer commitments for more than 15GW of incremental load by the end of the decade.
To address this new demand, AEP filed a settlement in October requiring new data center customers to pay for a minimum of 85 percent of the energy they need each month to cover the cost of the infrastructure required to bring electricity to those facilities. If approved, the filing will be in place for up to 12 years, including a four-year ramp-up period.
KKR has invested heavily in the US power market over recent years. Most recently, in October, the firm partnered with Energy Capital Partners on a $50 billion partnership to accelerate data center, power generation, and transmission infrastructure development to support the expansion of artificial intelligence and cloud computing worldwide.
