LONDON (Reuters) -Portugal's main power utility EDP initiated merger discussions with London-listed peer SSE earlier this year, but talks did not progress, three people familiar with the matter told Reuters. The proposed deal would have created one of Europe's largest utilities, with the companies' combined market value exceeding $44 billion, though still smaller than leaders Iberdrola and Enel.

EDP made the approach before the summer, seeking to create a regionally broader asset portfolio, two of the people said. SSE's management declined the proposal, preferring to focus on growing the company independently, the people added.

They did not give details of the proposal.

Talks ended around June, one of them said, speaking on condition of anonymity because they were not authorized to speak publicly.

EDP declined to comment. SSE said it does not comment on market speculation.

In May, EDP's CEO Miguel Stilwell d'Andrade initiated discussions with SSE's leadership, including holding talks with SSE's CEO Alistair Phillips-Davies and Chair John Manzoni, a second person said.

It is not clear whether EDP might revisit the proposal.

The talks come amid an upswing in power sector dealmaking, reaching almost $110 billion worldwide as of Sept. 24 from 853 transactions, according to LSEG data, up 43.5% from the previous year.

These have largely been smaller deals, however. In one of the larger deals attempted earlier this year, talks fell apart between Abu Dhabi's TAQA and Criteria over the acquisition of Naturgy, the second largest Spanish utility by market value.

EDP, which has invested in renewable energy in recent years, owns a 71% stake in EDP Renovaveis. EDP Renovaveis is the world's fourth-largest renewable energy producer, operating in 28 countries across Europe, Asia and the Americas.

EDP's market capitalisation of $17.5 billion is significantly lower than SSE's, which was $27.05 billion as of Tuesday.

By enterprise value EDP is the larger of the two companies at $46 billion, according to LSEG data.

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