Yesterday Atlantic Power Corp (TSX: ATP-U, OTC: ATPWF) became the latest Canadian high-yielder to announce a major structural move. The result: a major win for its investors, particularly those residing in the US.

Atlantic was never organized as an income trust and so wasn’t subject to the new tax slated to kick in Jan. 1, 2011. Nonetheless, it did face its own decision day of sorts in 2016, when the bond portion of its income participating securities (IPS) is slated to mature.

As I’ve pointed out numerous times in the past, were those bonds paid off at par value–either by refinancing or paying off in cash–the equity portion of the IPS would still offer a superior yield. But uncertainty over what management would do has undeniably hung over the price of Atlantic shares since Halloween 2006, just as it has unit prices of Canadian income trusts. And some remained concerned that the Canadian government would eventually come after the IPS structure as it had trusts.

Atlantic’s move this week should set the worries to rest, both about 2011 taxes and 2016 bond maturity. First, pending a shareholder vote on November 24 and subsequent approval by the Supreme Court of British Columbia, the company will convert its IPS shares into common stock on a one-for-one basis. As a corporation, Atlantic already pays income tax in the US–where essentially all of its operations are–and so not face additional levies.

Second, the IPS distribution will become entirely a common equity dividend. The amount will remain the same: A monthly rate of 9.12 cents Canadian per share. However, all of it will now be taxed as an equity dividend and so will not all be treated as a qualified dividend for tax purposes in the US.

Third, the company will maintain its current business strategy of investing in cash-generating energy projects. It’s also internalizing management for the first time, paying former manager ArcLight an aggregate total of CAD15 million over the next three-plus years to terminate the existing contract. That will cost money up front but ultimately save a lot more, particularly now that Atlantic has exercised the last of its right of first refusal asset purchases from ArcLight.

Fourth, Atlantic has now been pre-approved to apply for a New York Stock Exchange listing and expects to premier on the Big Board in the first half of 2010. This should greatly improve the stock’s visibility when it converts to a full-blown corporation and therefore its ability to make additional accretive acquisitions.

Like all income investments, Atlantic’s fate ultimately depends on how well its assets perform. And given the fact that it’s more a collection of investments than an operating company, how well management anticipates and shields its cash flows against volatile commodity prices, exchange rates and interest rates is also critical.

This deal, however, conveys one additional advantage that should help it immeasurably: a dramatic reduction in the leverage on Atlantic’s books, achieved with no impact on shareholders’ cash flow. In contrast, paying off the maturing bond portion of the IPS would have required a huge cash outlay and/or refinancing that could have been extremely expensive depending on where interest rates are in 2016.

This deal already has the approval of the company’s largest shareholder, Caisse de Depot et Placement de Quebec, the provincial pension plan manager that owns roughly 19 percent of the IPSes. It deserves a “yes” vote from all other Atlantic shareholders as well. And for those who don’t already own Atlantic Power Corp, it’s a buy up to USD10.