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TransAlta Corp. says it will move ahead with a new hydro power project in central Alberta after the provincial government agreed to financial compensation for shutting down coal-fired plants far ahead of schedule.

Analysts said the government’s $1.36-billion deal with three coal power generators will improve investor confidence in the electricity market following a period of considerable uncertainty.

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The markets reacted quickly as TransAlta, ATCO Ltd. and Capital Power Corp. each saw their stock prices jump in trading Friday.

Calling the coal deal “mutually beneficial,” TransAlta CEO Dawn Farrell said the Calgary company has agreed to work with government officials on other electricity files “in a manner that supports TransAlta’s future investment in Alberta.”

The company said it’s now developing a pumped hydro project at its existing Brazeau dam in Drayton Valley. Should it secure a long-term contract, the power producer expects to begin construction in 2021.