Under the agreement, the company will acquire securities that will track the cash flow of the portfolio, including six operating assets and the South Hedland project, as well as 270 kilometres of gas pipeline.
TransAlta Renewables said Monday that it expects the deal will increase cash for available distribution by approximately $127 million once the South Hedland project is operating.
The company said it plans to increase its dividend by nine per cent when the deal closes, and by an additional six to seven per cent once the South Hedland project is fully commissioned.
The deal will see TransAlta receive about $220 million in cash and $1.1 billion in common and class B shares of TransAlta Renewables, which will also spend about $490 million to fund the construction and commissioning of South Hedland.
To help pay for the deal, TransAlta Renewables said it has signed a deal with a syndicate of underwriters to raise $200 million by issuing 15.8 million subscription receipts at a price of $12.65 each.
The underwriters have also been granted an over-allotment option for an additional 2.4 million subscription receipts, which could increase the total raised to $230 million.
TransAlta, which has power plants Canada, the United States and Australia, created TransAlta Renewables in 2013.
The company will own approximately a 77 per cent stake in TransAlta Renewables once the deal closes, up from just over 70 per cent at present.
TransAlta shares closed up 11 cents at $11.88 on the Toronto Stock Exchange, while TransAlta Renewables shares closed down a penny at $13.02.