PEFINDO has affirmed its idA(pg) rating for PT Arkora Hydro Tbk (ARKO)’s Green Bond I Year 2023

(March 4, 2024)--The debt instrument is partially guaranteed by PT Indonesia Infrastructure Finance (IIF, idAAA/Stable) that covers minimum 75% of the principal amount on a pro rata basis, the quarterly coupon payments at minimum 200%, and any late payment fee for coupon payments and/or any other penalty fees due of a minimum of IDR7.0 billion.

The instrument rating mainly reflects unconditional and irrevocable partial guarantee from IIF, in addition to ARKO’s key credit profile which includes its good operating management, strong financial flexibility, benefits from the government’s commitment to expand the renewable energy supply, although constrained by ARKO’s moderate position as a mini-hydro independent power producer (IPP), its aggressive financial profile, and exposure to the hydrological conditions.

Any significant change in ARKO’s credit profile or credit enhancement structure in its guaranteed bond may trigger similar rating action to its debt instrument.

ARKO develops and operates mini hydro power plant projects. Currently, it has two power generations with a total capacity of 17.4 megawatts (MW) and two sites under construction with total capacity of 15.4 MW. It also has an affiliated company providing construction services for its projects and operation and maintenance (O&M) services. As of December 31, 2023, its shareholders consisted of PT Arkora Bakti Indonesia (47.52%), PT Energia Prima Nusantara (26.55%), part of PT United Tractors Tbk (UNTR), ACEI Singapore Holdings Private Ltd (10.07%), Aldo Henry Artoko (0.10%), and the public of 15.75%.

As a guarantor, IIF is a private non-bank financial institution focusing on investing in commercially feasible infrastructure projects. It provides long-term, fund-based products, such as senior loans, mezzanine finance, and equity participations, in addition to non-fund based products, such as guarantees and fee-based services. Its shareholders consisted of PT Sarana Multi Infrastruktur (Persero) (SMI, 30.00%), International Finance Corporation (IFC, 19.99%), Asian Development Bank (ADB, 19.99%), Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG, 15.12%), and Sumitomo Mitsui Banking Corporation (SMBC, 14.90%) as of December 31, 2023. (ends)