FLOWING CLEAN ENERGY THROUGH GREEN BOND AT PT ARKORA HYDRO TBK (AN EVALUATION AND PROPOSED STRATEGIES FOR PT ARKORA HYDRO TBK’S GREEN BOND)

• Main Author: Djaja, David
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/79781
• Institution: Institut Teknologi Bandung

Human-induced activities affected the changing of world’s climate. To enable transition into environmentally friendly business activities, companies need funding. One of them is green bond which is the focus of this research. The most recent company that issued green bond is PT Arkora Hydro Tbk. The company has target to own 200 MW of hydro power plant capacity in 2025. Meanwhile, currently they only have 87.8 MW capacity of mini hydro power plant. It shows that they still have 112.2 MW gap to their target. Usually, from financial aspects, green bond is issued to lower companies cost of fund. However, the green bonds issued has higher coupon than other green bonds issued in Indonesia. This research aims to find the cause of the issue, the effect of green bonds issuance to company value, and recommendations for the next green bonds issuance. Based on the research, there are several factors that affect investors trust and lead to green bond oversubscription. The factors are use of proceed, external review, issuer’s credit rating, issuer’s ESG score. After analyzing benchmarks across the nations and some issuer abroad, PT Arkora Hydro Tbk’s has not been rated for its ESG score and the green bond has lower credit rating compared to other issuers. The value of PT Arkora Hydro Tbk increases by 2.38% by issuing green bond, calculated using Discounted Cash Flow valuation technique. To get lower coupon rate for next issuance, it is recommended that PT Arkora Hydro should increase its credit rating by improving its financial performance, mitigate risk related to hydro power plant condition, get their ESG score rated, opportunity to get additional funding from selling carbon credit, and try to explore new market opportunities to issue the next green bonds.