PT Sarana Multi Infrastruktur (PT SMI), a dedicated infrastructure entity under the jurisdiction of Indonesia’s Ministry of Finance, announced recent success in obtaining a $700 million sustainability-linked syndicated term loan facility. The firm serves as a financing vehicle for the development of nationally significant infrastructure projects, through public-private partnerships (PPPs).
“This syndicated loan is intended to refinance existing projects as well as to fulfil new financing needs primarily for sustainable infrastructure projects in Indonesia,” the press release noted.
The new funds will be used to refinance a maturing $700 million offshore syndicated term loan that was first arranged in 2020. The sustainability-linked offering closed on September 13 with aggregate commitments of $1.8 billion and was 2.6 times oversubscribed.
Key performance indicators (KPIs) linked to the facility include growing the company’s sustainability financing portfolio, and increasing the number of employees undertaking environment, social, and governance (ESG) training.
Green opportunity
Speaking to FinanceAsia about the transaction, Colin Chen, head of ESG finance for Asia Pacific at MUFG Bank, which served as one of the transaction’s mandated lead arrangers and bookrunners (MLABs), highlighted the opportunities brought by sustainability-linked financing for companies active in “hard-to-abate sectors,” given no requirements around the use of proceeds.
Kunardy Lie, director of institutional banking at DBS Indonesia – also a MLAB – said his team sees “abundant opportunities” to push the sustainability agenda through green and transition financing solutions in the local market.
Although emerging economies like Indonesia are tasked with driving economic growth alongside a low carbon budget, environmental and socially-conscious funding initiatives can help advance sustainability agendas, Lie noted. He cited the market’s PPP scheme as a policy catalyst which convenes industry players, financial institutions and regulators to establish common practices to approach ESG issues.
First introduced in 2005, the state-backed PPP Project Book lists out a range of infrastructure projects that are open to private sector participation, with a view to bridging the existing infrastructure funding gap and driving Indonesia’s national economy. PT SMI is actively involved in the scheme and acts as a crucial financier in some of the key national infrastructure projects.
“We are excited to support PT SMI in their venture to finance ongoing projects including sustainable infrastructure projects,” Lie said, noting that DBS’s relationship with PT SMI started in February 2020 around the arrangement of the original working capital facility.
Renewables projects, as well as other forms of energy transition segments constitute growing sub-sectors within the domestic infrastructure market, Chen added.
He cited supportive policy initiatives, including the Just Energy Transition Partnership (JETP) which was signed off during last November’s G20 summit, and the country’s rich solar and wind resources as helping to drive Indonesia’s developing green economy.
“We will want work closely with policymakers and the private sector to leverage this important initiative in support of Indonesia’s net zero transition,” Chen said.
“This sustainability-linked syndicated term loan facility is a real example of innovative fundraising, by also implementing our commitment towards sustainability target,” Edwin Syahruzad, president director of PT SMI, commented in the press release.
In addition to DBS and MUFG, the MLABs for the transaction included Bank of China (Hong Kong), CTBC Bank Co., Ltd., Mizuho Bank, and United Overseas Bank (UOB). UOB also acted as the MLABs' transaction and overall sustainability coordinator for the transaction.
PT SMI and the remaining MLABs did not respond to FA’s requests for comment.
