PT Pertamina Geothermal Energy's (PGEO) issuance marks the first green issuance from a sovereign-linked corporate in Indonesia.

In April 2023, the geothermal operator priced its inaugural $400 million five-year green bonds at 5.15%, after a tightening of 45 basis points and an oversubscription of 8.25x.

The net proceeds raised will be used to finance investments and expenditures related to the construction, operation, transmission and procurement of geothermal sources in the country and other geothermal-related activities such as steam generation.

PGEO said that the issuance further advances the nation's decarbonisation and net-zero targets by 2060, as well as Pertamina's (PGEO's parent company, which is wholly owned by the Indonesian government) energy transition commitments as Indonesia gradually weans itself off coal-generated power.

"Supporting our customers by facilitating funding towards green activities – such as renewable energy generation – is an important role banks like ANZ can play in the transition to net zero. We are honoured to partner with PGEO in this green bond issuance. As one of the largest pure-play geothermal operators in Indonesia, PGEO's power generation capacity will be increasingly critical to achieve Indonesia's carbon neutrality goal" commented Stella Saris Chow, head of sustainable finance, international, ANZ.

ANZ reports that the final pricing of 5.15% was the tightest five-year spread for a BBB- corporate in Asia within a two-year period, which it accredited to its strong credit positioning and the scarcity value of an Indonesian sovereign-linked issuance.

This is particularly impressive given that the unfamiliarity of a debut issuer's credit usually poses a large hurdle for pricing and investor demand in the global bond markets. PGEO overcame this by engaging with over 150 investors globally through a book-building process which resulted in overwhelming investor demand, the bank said.

One Sustainable Debt Awards judge noted the significance of this link with Pertamina as a sovereign-owned entity "in one of the largest and fastest-growing emerging market economies" calling it a "strong signal and success worthy of the best green bond for corporates in APAC".

Another said the "use of proceeds for the development of new geothermal energy shows genuine innovation, whilst pricing appears competitive, and the speed of execution appears to have been impressive."

Jodi West, president director, ANZ Indonesia, added: "We're pleased to support PT Pertamina Geothermal Energy Tbk given its important role in the transition of the Indonesian economy. With the sustainability agenda continuing to accelerate in Indonesia, we look forward to supporting more clients with their sustainable financing requirements."