Calgary, Alberta-based TransAlta (NYSE: TAC), one of Canada's largest independent power producers, including hydro, wind and geothermal operations, received an offer from its largest shareholder to take the company private in a deal worth $7.8 billion.

New York's LS Power Equity Partners teamed up with Global Infrastructure Partners, also based in New York, for the Cdn$39 per share offer. The deal represents a 21 percent premium over TransAlta's Friday close.

TransAlta shares were up 15.31 percent at $37.05 on the New York Stock Exchange in afternoon trading. The company also trades on the Toronto Stock Exchange (TSE: TA), and was up 13.61 percent on the TSE at Cdn$36.64.

LS Power Equity and its affiliates hold 9 percent of TransAlta's stock. Global Infrastructure is a joint venture of Credit Suisse and General Electric (NYSE: GE).

"While we are enthusiastic about TransAlta, we continue to believe that TransAlta is undervalued and will not be fairly valued as a public company," said James Bartlett, president of LS Power Equity, in a letter to TransAlta.

This is the second time LS Power Equity has tried to shake things up at TransAlta. Earlier this year, LS Power Equity, through its Luminus Management group, tried to push through an alternate slate of directors at TransAlta. LS Power Equity withdrew the shareholder proposal after TransAlta agreed to sell its Mexican operations, raising $303.5 million in cash, which the power company said it would use to buy back shares.

LS Power Equity said it hopes to complete a consensual, negotiated transaction that is supported by the TransAlta board and management.

The bulk of TransAlta's operations are in coal and natural gas, but the company says it is Canada's leading provider of wind, with 154 megawatts in operation, and 162 MW under development. The company also owns 164 MW of geothermal power in Imperial Valley in Southern California. In addition, TransAlta has 807 MW of hydro power.

In May, TransAlta announced a $124 million project to expand its Summerview wind farm in southern Alberta, boosting the site's installed capacity to 136 MW, up from 70 MW (see TransAlta to add 66MW to Alberta wind farm).

TransAlta is also looking into clean coal technologies, and signed an agreement in May with French power group Alstom to develop a large scale carbon capture and storage facility in Alberta (see TransAlta, Alstom to develop CCS project in Alberta). Under that deal, a pilot version of Alstom's chilled ammonia process will be installed at a TransAlta coal fired generating station west of Edmonton.

LS Power Equity has its own power holdings through its LS Power affiliate, which already has some wind and solar under development. LS Power also recently announced the creation of a dedicated business unit for the development, acquisition, and ownership of renewable energy projects.

LS Power is looking into 200 MW of wind in the Great Basin in Nevada, and 250 MW of concentrating solar trough technology in Arlington Valley, Ariz.

But LS Power Equity does not appear to be looking to roll up its power operations with TransAlta, saying that TransAlta's headquarters and corporate infrastructure would remain in Alberta under the offer.

"We would hope the current management team would agree to continue to lead the company," said Bartlett. "We believe that in a private company structure, the company and its leadership would have significant flexibility in making long-term investments and plans that benefit stakeholders."

LS Power Equity already has financing for the deal in place, saying it will fund the offer with $6 billion of equity and a $2 billion debt facility provided by Credit Suisse.

TransAlta's board said it will "carefully consider" the letter from LS Power Equity and Global Infrastructure and will respond in due course.