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Utility deal value jumps in Q1 despite drop in transactions, PwC says

Dominion Energy Inc.'s offer to acquire troubled South Carolina utility SCANA Corp. accounted for 50% of the first quarter's total deal value for North American power and utilities, which rose 60% from the fourth quarter of 2017.

"Fading uncertainties regarding tax reform, the unique window of opportunity for solar and wind energy assets, and a continuing drive to rationalize portfolios all served to keep results strong in the first quarter of 2018," PricewaterhouseCoopers LLP wrote in its most recent analysis.

Richmond, Va.-headquartered Dominion announced Jan. 3 that it agreed to acquire Cayce, S.C.-headquartered SCANA in a stock-for-stock deal valued at about $7.9 billion. Including the assumption of debt, the transaction is valued at about $14.6 billion.

"This deal accounted for 50[%] of the quarter's total deal value and is expected to position Dominion Energy as one of the largest and fastest-growing energy utility companies," PwC wrote. The deal, however, faces significant legislative and regulatory hurdles.

The second-largest mega deal, or deal greater than $5 billion, in the first quarter was Global Infrastructure Partners' agreement to acquire Zephyr Renewables LLC in a multitiered transaction with NRG Energy Inc. The move, which PwC values at $7.9 billion, also provides a new sponsor for NRG Yield Inc.

"Partly due to the Zephyr deal, renewable deals represented 36[%] of total deal value, or $10.3 billion for the quarter," PwC wrote. "Investors took advantage of the window of opportunity in the segment as growing efficiency continues to reduce cost while an assortment of phasing down government incentives encourage investment."

NRG also announced the sale of its 3,555-MW NRG South Central Generating LLC coal-fired and natural gas portfolio to Cleco Corporate Holdings LLC for $1 billion. NRG expects to close these transactions in the second half of this year.

As deal value rose to $28.9 billion in the first quarter of 2018 from $18 billion in the fourth quarter of 2017, deal volume declined by about 21%, according to PwC.

PwC noted that 33% of the deal volume was driven by transactions of more than $1 billion, representing 90% of total deal value.