Indonesia, which desperately needs new sources of electricity to meet rising demand, wants to develop the plant on Java island despite concerns by environmental groups that country's frequent earthquakes makes nuclear power unsafe.

Waryono Karno, secretary general at the Ministry of Energy and Mineral Resources, said Korea Hydro & Nuclear Power Corp. inked the deal with Indonesia's PT Medco Energi International at meeting in Korea.

Fazil Al Fitri, president director of Medco's unit PT Medco Power said the two companies could start construction of a 2,000-megawatt nuclear power plant as soon as 2008 in the Muria Peninsula in Central Java province.

Al Fitri added that $3 billion in investment willbe needed to finance the project, which is expected to be completed by 2016 and start operations in 2017.

The project will be funded by a combination of bank loans, project financing arrangements and internal cash from the two companies, he said.

Medco will likely take a majority stake in the venture, he said, giving no more details about the deal. Indonesia hopes nuclear power will contribute a total of 4,000 megawatts to the national electricity grid by 2025, officials have said.