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TransAlta Corp.’s Sundance power plant in Alberta. The transactions come a day after TransAlta, Canada’s largest coal-fired power generator, learned the Alberta government will phase out that form of energy by 2030.Ian Jackson

TransAlta Renewables Inc. is buying Ontario and Quebec wind and hydro power assets from its parent company, TransAlta Corp., for $540-million and taking on a new big investor: Alberta's public-sector pension manager.

It's selling an 8-per-cent stake in the company to Alberta Investment Management Corp., or AIMCo, for $200-million.

TransAlta Renewables, which is currently 76-per-cent owned by TransAlta Corp., is also offering $150-million of shares in a bought deal.

The series of transactions comes a day after TransAlta Corp., Canada's largest coal-fired power generator, learned that the Alberta government will phase out that form of energy by 2030 under its sweeping plan to fight climate change. The company and a government-appointed negotiator will try to reach an agreement on how to deal with stranded asset value.

It is selling its majority-owned affiliate the Sarnia Cogeneration Plant, Le Nordais wind farm and Ragged Chute hydro facility, adding a total of 611 megawatts of generating capacity. As part of the deal, TransAlta Renewables will issue $175-million in shares to the parent as well as $215-million in unsecured debentures.

The acquisition of long-term contracted generation capacity will support a 5-per-cent increase in dividends, TransAlta Renewables president Brett Gellner said in a statement.

In its budget last month, the Alberta NDP government gave AIMCo, along with other public agencies, a mandate to search out investments in companies that will help the province diversify the economy away from oil and gas.

Kevin Uebelein, AIMCo's chief executive officer, said the investment is not related to the timing of Alberta's economic diversification strategy or its climate plan. Still, AimCo is actively scouting for more deals in renewable energy as policies around carbon emissions firm up.

"The short answer is yes," Mr. Uebelein said in an interview. "As governments move to change the shape of the playing field with regard to carbon taxing and other measures, then these other forms of power generation, the payback calculation will adjust in response to those government actions."

The AIMCo investment is expected to close on Thursday. As part of the deal, the fund manager gets the right to acquire shares in future financings.

Under the bought-deal financing, TransAlta Renewables will issue 15.4 million subscription receipts at $9.75 each to underwriters led by Canadian Imperial Bank of Commerce and Toronto-Dominion Bank. They will be converted into common shares when the acquisition closes in January, the company said.

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