1Preheat oven to 325°F. Place sugar and water in small saucepan on medium heat. Stir until sugar begins to dissolve. Cook, without stirring, about 10 minutes, until sugar turns golden brown. Pour caramel into 9x2-inch round cake pan. Using oven mitts, tilt pan to coat bottom and sides with caramel. Place pan on wire rack to cool and harden caramel slightly.
2Meanwhile, place remaining ingredients except shredded coconut in blender container; cover. Blend until smooth. Stir in coconut. Pour mixture over cooled caramel in pan. Cover with foil. Place cake pan in large baking pan or roasting pan. Pour enough hot water into baking pan to reach halfway up sides of cake pan.
3Bake 1 hour 30 minutes or until knife inserted in center comes out clean. Remove cake pan from water bath. Cool on wire rack. Carefully loosen sides of custard from pan with a knife. Cover with plastic wrap.
4Refrigerate at least 3 hours or overnight. To unmold, invert pan onto a large shallow plate or 10-inch pie dish. Sprinkle flan with additional toasted coconut, if desired.