February 27 (Renewables Now) - With the issuance of USD 1.25 billion (EUR 1.01bn) in green bonds, Indonesia has become the first Asian country to sell a green sukuk bond on the international market.
The sale on Friday involved the sale of five-year green sukuk bonds, which adhere to Islamic financing rules. An unnamed banker has told the Financial Times that the placement attracted “remarkable demand,” which lowered initial pricing guidance for investors by 30 basis points and reduced the yield to 3.75%.
Funds from the transaction will be allocated to finance renewable energy projects, green tourism and waste management, Luky Alfirman, head of the budget financing and risk management office at Indonesia's Finance Ministry told reporters on Friday. However, documents for the new bonds, seen by Reuters, show that some projects will include “an element of deforestation,” while none of the schemes to be supported will be for fossil-fuel based infrastructure or projects that involve the burning of peat.
CIMB Group Holdings Bhd (KLSE:CIMB), Citigroup Inc (NYSE:C), Dubai Islamic Bank PJSC, HSBC (LON:HSBA) and Abu Dhabi Islamic Bank acted as bookrunners for the offering.
Alongside the green bond deal, Indonesia has also raised USD 1.75 billion from issuing a 10-year sukuk bond with a coupon of 4.4%.
Indonesia, the world’s largest exporter of coal, has pledged to reduce its carbon dioxide (CO2) emissions by at least 29% by 2030 from a business-as-usual baseline levels. The Asian country has also set a target to cut the use of coal power generation and lift the share of renewables in its power mix to 23% by 2025.
(USD 1.0 = EUR 0.811)