* At least 12 dead in explosion at military base
* Base was storing munitions from confiscated Iran vessel
* Blast knocks out largest power station
* Power outtages force shutdown of desalination plants (Repeats to additional subscribers, no change to text)
By George Psyllides
MARI, Cyprus, July 11 (Reuters) - A massive blast at a military base in Cyprus of confiscated Iranian munitions killed at least 12 people on Monday and knocked out the island's largest power station, officials said.
Witnesses said metal rained down on a nearby motorway and the explosion was felt for miles around in the olive groves and small farming villages that surround the Evangelos Florakis navy base on the south coast.
Cyprus's defence minister and army chief both resigned hours after the explosion, a government spokesman said.
The Iranian armaments were the cargo from the Monchegorsk, a ship Cyprus intercepted in 2009 sailing from Iran to Syria in violation of U.N. sanctions on Iran.
In Nicosia, the capital some 65 kms to the north east, residents were woken by power cuts. Communications in the popular holiday island was patchy, as mobile networks were jammed.
Military sources said they believed all 98 containers of the Iranian armaments -- kept exposed in scorching temperatures -- went up in the early morning blast which badly damaged the Vassilikos power plant. The facility, one of three in Cyprus and the newest, provides the Mediterranean island with half its electricity.
"We can't assess the extent of the damage, but it's a biblical disaster," electricity authority spokesman Costas Gavrielides told Reuters.
Photographs of the power station showed the outer walls of two large multi-storey buildings had been shredded by the explosion. Lines of search and rescue workers walked through nearby olive groves.
"It was huge. I fell out of bed and ran to check on the kids," said Eleni Toubi, a resident of Mari, a village which is separated from the navy base by a small hill. Windows and doors of her small home were blown out and the roof damaged.
"Where can I go? I don't have anywhere else to stay," she said.
There were no indications of the economic cost of the disaster, but it will add pressure on a government already facing a need to slash deficits to stave further cuts by credit ratings agencies.
The island was hit by rolling power cuts as authorities attempted to juggle demand in a peak season. The agriculture ministry said all water desalination plants would shut.
Farmer Nicos Aspros was out tilling his field when the blast occurred. "My tractor jumped about half a metre high," he said.
"There isn't a house in the community which hasn't been damaged."
Police and army officials gave little detail about the incident which happened just before 0300 GMT. The island's cabinet met in an emergency session.
A government spokesman said 12 people had been killed in the blast.
Britain, which has troops stationed on Cyprus, said its personnel were on stand-by to assist the local authorities.
As news of the explosion emerged, the public rushed to hospitals to donate blood. Authorities issued emergency appeals for people to switch off non-essential electrical equipment and the commerce ministry urged residents to use their own generators where possible. (Writing by Michele Kambas; Editing by Matthew Jones)