The U.S. power & utilities (P&U) sector experienced a significant downturn in deal value in the second quarter, with a decline of 77% to $4.4 billion, according to the latest EY report Power transactions and trends Q2 2017.

That’s the lowest value of M&A activity in at least four years in the America’s region, a drop that analysts attribute to changing monetary policy and new regulatory positions adopted by the Trump administration.

As in other regions, the U.S. P&U sector sees an abundance of capital chasing a shrinking number of high-value, low-risk deals. Sixty-percent of U.S. deals were domestic as outbound investment slowed to a trickle.

Outside the U.S., however, the report indicates that renewable energy asset valuations are increasing with demand. Renewable assets traded at high forward premiums to long-term price-to-earnings multiples across regions, with the trend most acute in Europe where the premium reached 79% in Q2 2017.

But U.S. federal policy changes around renewables have increased the risk associated with greenfield development of these assets, despite ongoing state-based support.

Separately, an increasing interest rate environment will reduce available capital as investors seek higher returns, the report warns.

“The decline in Americas deal value suggests that concerns over rising interest rates in the U.S. and U.S. federal policy changes may be taking their toll on investor confidence — but time will tell," said Matt Rennie, EY Global Power & Utilities Transactions Leader. "Regardless, we expect the relentless march of renewables and energy reform initiatives to continue to spur an increase in deal volume globally.”

Read the report in its entirety here