Electricity generated from fossil fuels is also expected to decline over the next two years. Credit: Charlotte Venema on Unsplash.

Algonquin Power & Utilities’ (AQN) indirect subsidiary Liberty Utilities has reached a mutual agreement with American Electric Power (AEP) to scrap the $2.8bn deal for purchase of AEP’s Kentucky operations.

Algonquin Power had planned to acquire the Kentucky Power Company and the AEP Kentucky Transmission Company (Kentucky TransCo).

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AQN president and CEO Arun Banskota said: “After careful consideration, and in light of the evolving macro environment, our board of directors and management team have determined that continuing with the transaction is not in the best interests of the company. We therefore engaged with AEP and mutually agreed to terminate the transaction.

“I would like to thank the teams who have worked tirelessly throughout this entire process.

“Looking forward, AQN remains supported by a high-quality asset base and a strong balance sheet, and is well-positioned to deliver sustainable, long-term growth, capitalise on the energy transition and create value for shareholders.”

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The two companies had reached an agreement in October 2021, when AQN agreed to buy the Kentucky Power Company and Kentucky TransCo for a total consideration of $2.8bn.

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Kentucky Power is a state rate-regulated electricity generation and distribution utility operating within the commonwealth of Kentucky, with almost 228,000 active customer connections.

Kentucky TransCo is an electricity transmission business operating in the Kentucky portion of the transmission infrastructure, which is part of the Pennsylvania, New Jersey and Maryland regional transmission organisation.

AEP president and CEO Julie Sloat said: “As a partner in Eastern Kentucky for more than 100 years, we’re renewing our focus on bringing opportunities to the region and supporting the communities we serve.

“We are working diligently to reimagine our strategy with the goal of not just supporting Kentucky but being an essential part of its economic and energy future.

“We believe there are opportunities ahead for our Kentucky operations, and we will focus our efforts on economic development, reliability and controlling cost impacts to customers.”