UPDATE 2-TransAlta raises bought-deal offer size by 25 pct

Thu Dec 2, 2010 1:06pm EST

* To issue 10 mln preferred shares at C$25 each

* To fund capital projects, reduce debts

Dec 2 (Reuters) - TransAlta Corp (TA.TO), Canada's biggest publicly owned electricity producer, raised the size of the bought deal offer by 25 percent, hours after making the initial announcement.

The company, which runs coal, gas and renewable power facilities in Canada, said it will raise C$250 million. Earlier in the morning the company said it would raise C$200 million.

The company would issue 10 million preferred series A shares for C$25 each.

The net proceeds of the offering will be used to partially fund capital projects, other general corporate purposes and to reduce short-term debts of the company and its affiliates, it said in statement.

The company may invest the funds that it does not immediately require in short-term marketable debt securities, it added.

The shareholders will be entitled for a cumulative quarterly dividend yielding 4.60 percent yearly until March 31, 2016.

The dividend rate will be reset every five years on a par with the five-year government of Canada bond yield plus 2.03 percent.

TransAlta also gave preferred shareholders the option to convert to series B shares, which pay out quarterly floating dividends at a rate equal to the three-month Treasury Bill yield plus 2.03 percent.

CIBC, RBC Capital Markets and Scotia Capital will underwrite the issue, expected to close by Dec. 10.

The company's shares, which have gained over a percent since it reported weak third-quarter results in October, were little changed at C$20.95 on Thursday on the Toronto Stock Exchange. ($1=1.017 Canadian Dollar) (Reporting by Aftab Ahmed in Bangalore; Editing by Don Sebastian) (aftab.ahmed@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: aftab.ahmed.reuters.com@reuters.net))

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