UPDATE 2-TransAlta says Mexican asset sale still on track

(Adds share close; in U.S. dollars unless noted.)

CALGARY, Alberta, Oct 6 (Reuters) - TransAlta Corp (TA.TO) said on Monday it still expects to sell its Mexican power operations for $303.5 million and direct most of the cash to repurchasing its shares.

Steve Snyder, chief executive of Canada's biggest investor-owned power producer, said in a presentation that he remains confident the sale of the two plants will be completed on the terms first disclosed in February.

"Once completed, our intent remains to use a significant portion of the cash proceeds to buy backs shares," Snyder said.

Assets include a 252 megawatt combined cycle gas plant in Campeche and a 259 MW combined cycle plant in Chihuahua. The deal had initially been expected to close around June but Snyder did not say why it was delayed.

He said TransAlta expects to weather the credit crisis because much of its Western Canadian power output is sold on long-term contracts and the electricity sector is considered to be a haven by investors in times of market uncertainty.

"We are actually sitting in a very strong position," Snyder said.

The company said it expects to spend between C$300 million to C$350 million on its capital programs next year and between C$270 million and C$315 million in 2010.

TransAlta expects to add 1,800 MW of power from new projects over the next five years. It also plans a carbon-capture project at a coal-fired power plant in Alberta.

It expects the project to capture 1 million tonnes of carbon dioxide by 2012, which will be stored underground.

TransAlta shares fell C$2.27, or 8.3 percent, to C$25.23 on Monday on the Toronto Stock Exchange, amid a broad selloff in world equity markets.

($1=$1.10 Canadian) (Reporting by Scott Haggett; editing by Rob Wilson)