American Electric Power (AEP) is set to sell nearly 20% of its interests in two transmission companies to a partnership involving KKR and the Canada Public Sector Pension Investment Board. The total value of the deal is $2.82 billion, as announced recently by the company.
This move is seen as a way for AEP to efficiently finance its expanding operations in the Midwest, while also addressing the rising demand from customers and ensuring reliable service. AEP plans to use proceeds from this sale to bolster its ambitious five-year capital growth plan, which is worth $54 billion. This plan includes significant investments in transmission, distribution, and generation projects. The transaction will also help AEP manage its funding needs—around $5.35 billion in equity financing is required by 2029—and strengthen its overall financial position.
The deal will require approval from the Federal Energy Regulatory Commission and the Committee on Foreign Investment in the United States, with a closing expected in the latter half of this year.
The equity stake being sold represents close to 5% of AEP’s total transmission rate base. AEP’s transmission subsidiaries include OHTCo, which has net assets valued at approximately $6.3 billion, and IMTCo, valued at around $4.1 billion. AEP is projecting significant capital investments for both entities, with OHTCo expecting around $3.6 billion in spending from 2025 to 2029 and IMTCo around $2.2 billion within the same timeframe.
Michael Rosenfeld, a managing director at PSP Investments, expressed enthusiasm for the new partnership, highlighting its potential to support essential transmission infrastructure development in an area experiencing growth due to digitalization and the reshoring of manufacturing.
This transaction values AEP stock at roughly $170 per share, even though it was trading around $92 per share recently. This sale is part of a larger strategy by AEP to divest some assets, having previously agreed to sell AEP OnSite Partners to focus more on its regulated utility services.
In a similar vein, FirstEnergy has also been active in selling stakes in its transmission sector to generate capital.