Indonesia's Inco revises dam costs up by 50 pct

JAKARTA, July 31 (Reuters) - Shareholders of PT International Nickel Indonesia (INCO.JK), one of the world's top nickel producers, have approved a sharply higher cost estimate for a planned hyroelectric power plant, the company said on Thursday.

Inco has revised the cost estimate to build the Karebbe dam to $410 million, from initial estimate of $275-$280 million, the company said in a statement.

Construction on the project resumed in the fourth quarter of 2007 after it was suspended in January, 2006, pending the issuance of a forestry permit.

"The higher capital estimate is primarily due to increased prices for equipment, commodities and project labour," the company said.

Despite the anticipated higher cost, the company will use internal funds to fund the project, Indra Ginting, director of investor relations and corporate secretary at Inco, said.

"We haven't had any plan to issue bonds to finance the project," he said.

The Karebbe dam is expected to provide an additional 90 megawatts of power per year, from the current 275 megawatts and is expected to start operating in the first half of 2011.

The dam will also help boost production to about 200 million pounds of nickel in matte annually.

The company, which is 61 percent owned by Brazil's Companhia Vale do Rio Doce VALE5.SA.RIO.N through Canada's Inco Ltd, expect to produce 169.8-174.2 million pounds of nickel in matte in 2008. (Reporting by Fitri Wulandari; Editing by Ed Davies and Louise Heavens)