JAKARTA (Reuters) - The Indonesian unit of Canada's Inco Ltd said on Monday its 2007 nickel in matte output is likely to be lower than last year's record highs due to limited power supply.

Inco's nickel in matte output is forecast to fall to around 158 million pounds this year from 168 million last year, and next year's production is likely to be at the same level, said Arif Siregar, chief of PT International Nickel Indonesia Tbk.

Inco plans to build a dam to generate more electricity for its operations, as part of an effort to boost nickel in matte production to 200 million pounds, Siregar told reporters.

"This year we are looking at 158 million (pounds)," Siregar said. "We haven't completed our 2007 numbers. The main problem currently is power (supply), Looking at the available power currently, the number would be around that."

Nickel matte is an intermediary product from a smelter that must be further refined to make pure metal.

Siregar said he expected the power plant project to be completed by 2009 or 2010.

"We expect to complete all those negotiations by the end of this year. And if everything is okay we will start the project, hopefully early next year."

Inco Indonesia's 9-month output fell 9.45 percent in the first nine months of the year, mainly due to a fire at one of its furnaces.