TRANSALTA CORP. $20 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 197.8 million; Market cap: $4 billion; Price-to-sales ratio: 1.3; SI Rating: Average) operates over 50 electrical-power plants in Canada, the United States and Australia.

TransAlta uses coal to generate 60% of its electricity, and owns three coal mines (two in Alberta and one in Washington State). This helps keep its costs down. Natural gas fuels 30% of the company’s electricity production, and hydroelectric and other sources account for 10%.

This heavy dependence on coal has made TransAlta a target for environmentalists. To comply with tougher carbon-emission regulations, the company has teamed up with TransCanada Corp. to capture and store carbon emitted from TransAlta’s coal-fired power plants. The project could cost $400 million. The federal government plans to contribute $20 million to $30 million, and the two companies will probably split the rest.

TransAlta is also expanding its wind-power operations, which currently account for 3% of its capacity. It will build a $135-million wind farm in Ardenville, Alberta, which should begin operating in early 2011. TransAlta has signed long-term contracts for 40% of the power from Ardenville. This should help lower the project’s risk.

To put these investments in context, TransAlta earned $36 million, or $0.18 a share, in the three months ended March 31, 2009. That’s a 63.6% drop from the $99 million, or $0.50 a share, it earned a year earlier. Revenue fell 5.9%, to $756 million from $803 million. TransAlta had to shut down some of its electrical-power plants for maintenance during the quarter, and this was the main reason for the lower revenue and earnings.

These plant shutdowns will continue into this year, and will probably slow TransAlta’s earnings. Still, the stock trades at a reasonable 13.6 times the company’s projected 2009 earnings of $1.47 a share. The $1.16 dividend yields 5.8%.

TransAlta is a buy.