UPDATE 2-Charge masks big jump in TransAlta profit

(New throughout with CEO comments, details. Changes dateline, previous TORONTO)

By Jeffrey Jones

CALGARY, Alberta, April 21 (Reuters) - A charge from TransAlta Corp's TA.TO sale of its Mexican power plants led to a 41 percent drop in first-quarter profit, masking a bigger-than-expected jump in operating earnings, the Canadian-based electricity generator said on Monday.

TransAlta, which last month won a battle over strategy with a large shareholder, said results were buoyed by a combination of strong plant operations and wide gross margins amid strong power prices in Alberta and the U.S. Pacific Northwest.

Chief Executive Steve Snyder said he expects higher electricity prices in those two regions due to rising demand and stronger natural gas prices.

The Calgary-based company also said it will start a C$75 million ($75 million) efficiency upgrade at its 2,073 megawatt Sundance plant in central Alberta. The project, due to be completed by the end of 2009, will increase capacity by 53 MW.

"Upgrades continue to be among our best-returning projects," Snyder told analysts.

In the quarter, TransAlta earned C$33 million, or 17 Canadian cents a share, down from C$56 million, or 28 Canadian cents, a year earlier.

The result included a C$65 million charge from the $304 million sale of the company's two Mexican power plants, announced earlier this year.