JAKARTA- A unit of Indonesian power utility Perusahaan Listrik Negara (PLN) on Tuesday agreed with United Arab Emirates company Abu Dhabi Future Energy Co (Masdar) to develop what they said could become the world's largest floating photovoltaic plant.

Masdar and PLN unit PT Pembangkitan Jawa Bali (PJB) will build a 200-megawatt floating photovoltaic (PV) power plant in Cirata dam, owned by PJB, in West Java, at a cost of $300 million.

"It's another step forward for basically developing and constructing not only the largest floating solar PV in Indonesia, but also in the world," Masdar CEO Mohamed Jameel Al Ramahi said at the signing of the agreement.

PJB Chief Executive Iwan Agung Firstantara said the project, which would occupy about 225 hectares of the Cirata hydroelectric plant reservoir, "will accelerate renewable energy development in Indonesia."

The two companies aim to complete the first 50MW of the project in the second quarter of 2019, with the remaining 150MW targeted for early 2020. The pair completed a feasibility and grid interconnectivity study in September and aim to finalise a power purchase agreement with PLN before yearend.

Deputy Energy and Mineral Resources Minister Arcandra Tahar said additional incentives were needed to make the project viable, referring to tax allowances and tax treaties between UAE and Indonesia and other incentives. Tahar also urged the developers to keep the project below the average power generation cost in the region.

"If you push for a tariff, for example, that's higher than the local average power generation cost, it is going to be difficult," said Tahar.

Al Ramahi said the price per kilowatt-hour could be below 10 U.S. cents, but declined to provide details. "It will be a very attractive solution," he said.

(Reporting by Wilda Asmarini; Writing by Fergus Jensen; Editing by Manolo Serapio Jr.) ((fergus.jensen@thomsonreuters.com; +62 21 2992 7604; Reuters Messaging: fergus.jensen.thomsonreuters.com@reuters.net))