Cdn Hydro says in talks with multiple parties

* Advances process to “generate superior value”

* Board continues to reject TransAlta bid

* Cdn Hydro shares close at C$5.01 on TSX

OTTAWA, Oct 2 (Reuters) - Takeover target Canadian Hydro Developers Inc KHD.TO said on Friday it is in negotiations with multiple parties as it seeks alternatives to TransAlta Corp's TA.TO C$654 million ($605.5 million) bid.

The renewable energy producer has argued it can do better than TransAlta’s hostile offer of C$4.55 a share, which is set to expire at 8 p.m. EDT (2400 GMT) on Oct. 2. Canadian Hydro said on Friday it is “advancing the process to generate superior value”.

TransAlta, which produces most of its electricity from coal-fired plants and is keen to acquire Canadian Hydro’s green energy assets, has already extended its bid three times.

On Friday, Canadian Hydro repeated its recommendation that shareholders reject TransAlta’s bid, which it describes as inadequate.

Canadian Hydro shares, which have consistently traded above TransAlta’s offer, closed at C$5.01 on the Toronto Stock Exchange on Friday. TransAlta ended at C$21.06.

Last week Canadian Hydro said it had received a number of proposals from other suitors after opening its books to try to attract a sweeter deal.

Analysts have said that companies ranging from power utilities to infrastructure firms to financial institutions could find Canadian Hydro’s wind and hydroelectric power assets attractive.

In August, Canadian Hydro said it had doubled its size in the previous eight months as two large wind farms began power production. Executives forecast positive quarter-over-quarter gains through 2009 and 2010, with adequate free cash flow generation to fund the equity portion of developing one 100 megawatt project annually.

$1=$1.08 Canadian Reporting by Susan Taylor; editing by Rob Wilson