TransAlta will have a 43 per cent stake in the Fortescue River Gas Pipeline Joint Venture, with a subsidiary of DUET Group holding the rest.
The 270-kilometre line would connect another pipeline that runs parallel to Australia's western coast to TransAlta's 125-megawatt power station at Fortescue Metals Group's Solomon Hub further inland.
The pipeline is contracted to Fortescue under a 20-year agreement.
Construction is set to begin in July, with the pipeline coming into service in early 2015.
TransAlta has been involved in the Western Australia market — home to many remote mining operations — for 15 years, with six facilities able to generate a total of 425 megawatts.
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