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OPINION July 9, 2018

PT SMI Supports Sustainable Development by Issuing the First Corporate Green Bond in Indonesia

Jakarta, 9 July 2018 – PT Sarana Multi Infrastruktur (Persero) ("PT SMI"), an Indonesian state-owned enterprise under coordination of Ministry of Finance with a main role as catalyst to support the acceleration of infrastructure development in Indonesia, has issued the first green bond in Indonesia. The issuance of the green bond is an important step taken by PT SMI to support the achievement of the Sustainable Development Goals ("SDGs").

PT SMI’s green bond will be an IDR 3 trillion green program bond with a maximum emission value of IDR 1 trillion in the first phase of 2018.

As a catalyst, PT SMI has a robust commitment to sustainable development through the provision of financing facilities to various green projects in Indonesia. PT SMI's commitment is in line with the commitment of the Government of Indonesia in realizing the Paris Agreement's commitment to protect and sustain ecosystems and environmental eminence.

PT SMI’s President Director, Emma Sri Martini stated: “PT SMI is strongly committed to supports the achievement of SDGs and addressing the climate change mitigation as well as adaptation programs and has taken innovative action through the issuance of this first green bond. In this regard, the Center for International Climate Research-Oslo ("CICERO"), the world's leading environmental research center has given PT SMI a "Medium Green" opinion.

PT SMI’s Green Bond synergize the investors and other stakeholders to support the earth's sustainability development. PT SMI will allocate the proceeds of green bond to finance sectors such as renewable energy, clean transportation, as well as sustainable water and waste management.

In carrying out our mandate as a catalyst to supports Indonesia's infrastructure development, PT SMI has established a Sustainable Financing Division that will actively increase its capacity to contribute more to sustainable development while implementing the Environment & Social Management Framework that governs project’s social and environmental impacts compliance.

PT SMI has also recently accredited by the Green Climate Fund which portrays our readiness to enter the global market and enables us to access global funds to finance various eligible green projects.”

The book building period was short and there was a long national holiday, the demand of PT SMI Green Bond was excellent, and it will meet the Rp.1 Trillion expected target. The investors’ interest was first-rate during the book building period since they expect the higher yields due to higher interest rates.

As the Fed and BI interest rates raised, some investors indicated to withstand the action after the bond coupon and choose to wait for certainty. However, during the best effort period, there was more demand of PT SMI Green Bond amounting to Rp145 billion, bringing the total of phase I emissions to Rp500 billion.

PT SMI’s President Director, Emma Sri Martini stated: "In this first emission, we do not prioritize its size amid the interest rate hikes. We are committed to delivering competitive financing rates to the green projects – however, our Green Bond still provides the risk premium over the government bonds so we deliver lower risk premium compared to conventional bonds. The first emission is more to activate the offer, while for future emissions we will launch it at a more conducive condition through the offer facility of Rp 3 trillion. The Green Bond is different from the Sharia that has formed its ecosystem and target market, where Green Bond takes time for future development. This can be seen from the Sukuk investors who remain to their interests at the same time, even though the yield is the same as the Green Bond. We hope PT SMI Green Bond will be the predominant milestone for the Green Financing development that requires commitment and support from stakeholders as well as regulators and investors. We expect the Green Bond will be more competitive than conventional bonds, as Green Bond has more value-added than conventional bonds”.

The World Bank as one of the pioneers of the green bond market with a total value of close to USD 11 billion issuance, has provided technical assistance with CICERO to PT SMI in preparing a green bond framework that is aligned with the internationally-developed Green Bond Principles and ASEAN Green Bond Standards. This has established Indonesia as one of the first Southeast Asian countries to adopt both standards. This collaboration took place under a broader capital market and infrastructure finance technical assistance programs supported by the Swiss State Secretariat for Economic Affairs (SECO) and Global Affairs Canada (GAC).

Yongmei Zhou, World Bank Program Leader for Indonesia and Timor-Leste stated: "With this bond, PT SMI has demonstrated its commitment and innovative financing capability in supporting sustainable infrastructure development in Indonesia. It is uniquely positioned to inspire other corporations to contribute to the country’s resilience against climate change."

The Center for International Climate Research-Oslo ("CICERO"), the world's leading environmental research center, has given SMI "Medium Green" opinion, based on the assessment of framework which consists of project selection and evaluation criteria, governance policies and proceeds reporting procedures of the green bond issued. The same predicate has been given by CICERO to the world's first sovereign green sukuk issuance done by the Government of Indonesia through the Ministry of Finance of the Republic of Indonesia. As a transparency and accountability, PT SMI will also publish a yearly environmental impact report on the use of green bond proceeds that will be audited by an independent environmental expert.

In addition to the green bond, PT SMI also issued an IDR 1 trillion sukuk as a part of the first phase of the IDR 3 trillion program sukuk. PT SMI has been providing shariah-based financing since 2017. It also became one of PT SMI's commitment to encourage the entry of sharia market players in infrastructure development in Indonesia.


About PT Sarana Multi Infrastruktur (Persero) (“PT SMI”)

PT Sarana Multi Infrastruktur (Persero) ("PT SMI") was founded on February 26, 2009 is a State-Owned Enterprise and Non-Bank Financial Institution under the coordination of the Ministry of Finance which has a mandate as a catalyst in supporting the acceleration of infrastructure development in Indonesia. PT SMI has various unique functions and products/ features to support the acceleration of infrastructure development that not only serves as infrastructure financing but also as an enabler through the implementation of the Public-Private Partnership (PPP) involving various financial institutions both private and multilateral. PT SMI plays an active role in supporting the implementation of PPP and encourages the acceleration of infrastructure development in the region through regional financing product. PT SMI has three business pillars: (1) Financing and Investment for financing of infrastructure projects, (2) Advisory – solution for the needs of professionals and experts in the field of infrastructure, and (3) Project Preparation – assisting the Contracting Agency to prepare infrastructure projects.