In a strategic move that underscores the growing demand for reliable power and infrastructure investment, KKR and PSP Investments have agreed to acquire a 19.9% equity interest in American Electric Power's (AEP) Ohio and Indiana & Michigan Transmission Companies (Transcos) for $2.82 billion. This 50/50 partnership between the two global investment firms aims to support AEP's five-year, $54 billion capital investment plan, enhance reliability for customers, and strengthen AEP's balance sheet.

AEP, a leading electric utility serving 5.6 million retail and wholesale customers across 11 states, will maintain majority ownership and operational control of the transmission assets. The transaction, which is expected to close in the second half of 2025, is subject to approval from the Federal Energy Regulatory Commission (FERC) and clearance from the Committee on Foreign Investment in the United States (CFIUS).

The strategic partnership between KKR, PSP Investments, and AEP is a testament to the growing importance of transmission infrastructure in meeting increasing customer demand and bolstering grid reliability. The Midwest region, particularly Ohio, Indiana, and Michigan, is experiencing significant growth driven by strong manufacturing industries 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.



KKR, a leading global investment firm, and PSP Investments, one of Canada's largest pension investors, have formed a 50/50 strategic partnership to pursue the acquisition. Kathleen Lawler, Managing Director at KKR, expressed enthusiasm about the partnership, stating, "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." Michael Rosenfeld, Managing Director of Infrastructure Investments at PSP Investments, echoed Lawler's sentiments, highlighting the investment's alignment with PSP's High Inflation Correlated Infrastructure strategy.

Bill Fehrman, AEP's president and chief executive officer, welcomed the partnership, noting that it allows AEP to efficiently finance a growing segment of its business and enhances its ability to serve growing customer demand and provide reliable service. Fehrman also emphasized AEP's commitment to maintaining operational control of the transmission assets, stating that the company will continue to support growth and modernization initiatives.

The transaction represents a significant move in the utilities infrastructure space, with the 19.9% stake acquisition in AEP's transmission companies offering KKR exposure to regulated utility assets that offer stable, inflation-protected returns while maintaining AEP's operational control. The investment aligns perfectly with the growing electrification trend and manufacturing reshoring movement in the Midwest, with Ohio, Indiana, and Michigan's manufacturing renaissance and increasing digitalization creating a compelling growth narrative for transmission infrastructure.



For KKR shareholders, this investment represents a strategic portfolio diversification into defensive infrastructure assets with strong recession-resistant characteristics. The 50/50 partnership with PSP Investments also helps mitigate risk while maintaining meaningful exposure to the upside potential. The transaction's attractive valuation, with a multiple of 30.3 times LTM P/E, indicates that the partnership is a valuable opportunity for KKR and PSP Investments to secure funding at a favorable rate.

In conclusion, the strategic partnership between KKR, PSP Investments, and AEP is a win-win situation for all parties involved. AEP gains efficient financing for its capital investment plan, while KKR and PSP Investments acquire a stake in a stable, inflation-protected asset with significant growth potential. As the demand for reliable power and infrastructure investment continues to grow, this strategic partnership serves as a testament to the value of collaboration and long-term thinking in the utilities sector.