(Reuters) - New York-based activist investor Clinton Group Inc called on Atlantic Power Corp (>> Atlantic Power Corporation) on Thursday to restart a sale process it abandoned last month, challenging its decision to remain an independent company.

Atlantic Power shares ended up 21 percent at C$2.73 ($2.43) in Toronto after Reuters reported on an open letter that Clinton Group was preparing to send to the company's board of directors. Clinton Group subsequently published the letter.

Clinton Group is confident that bids for Atlantic Power came in at least at $4 per share, the fund manager's senior managing director Joseph De Perio wrote in the letter.

"With an unaffected price of $3 per share, such bids after a competitive process should have been attractive," De Perio writes.

Clinton is open to working with Atlantic Power in a constructive manner and believes many other shareholders are of like mind, De Perio wrote. He added that Clinton Group has a "meaningful" stake in Atlantic Power. He declined to disclose the size of the stake.

A representative for Boston-based Atlantic Power did not immediately respond to a request for comment. The company owns and operates a diverse fleet of power generation assets in the United States and Canada and has a market value of more than $300 million.

Atlantic Power shares lost about a third of their value on Sept. 16 when the struggling utility announced it had removed its chief executive and would not proceed with a sale process it started earlier this year.

As a part of that effort, Atlantic Power hired Goldman Sachs Group Inc (>> Goldman Sachs Group Inc) and Greenhill & Co Inc (>> Greenhill & Co., Inc.) to assist the company in an evaluation of strategic alternatives. Representatives for Greenhill and Goldman declined to comment.

Faced with mounting debts in a volatile power market, the company slashed its annual dividend by 70 percent, the second time since February 2013. It currently has a market value of around C$300 million.

The company has been caught between falling demand in a volatile wholesale power market and a recovery in the price of the natural gas that feeds its plants in several U.S. states and Canadian provinces.

Several utilities have been selling assets to lower their exposure to this market. Duke Energy Corp (>> Duke Energy Corp) agreed in August to sell its non-regulated Midwest commercial generation business to Dynegy Inc (>> Dynegy Inc) for $2.8 billion.

At the time of the September announcement, Atlantic Power also said it would consider selling assets or entering joint ventures to raise capital and reduce its debt.

The company's long-term debt almost quadrupled between 2010 and the end of June, according to Thomson Reuters data. At about $1.8 billion, the debt is equivalent to about three times its annual revenue for 2013.

The stock shed more than two-thirds of its value in the same period.

(Reporting by Mike Stone in New York; Editing by Diane Craft)

By Mike Stone