Winning investors for Asean Power Grid is mission critical

IN TODAY’S high interest rate environment, the true hurdle for massive infrastructure projects such as the Asean Power Grid (APG) is no longer just political will – it’s securing capital. As a seasoned practitioner in project finance, I’ve seen how large-scale energy initiatives succeed or stall based on their ability to attract and sustain investment. The APG, while visionary, must be underpinned by robust financial structures and risk mitigation strategies to become a reality.

Global climate leadership has faltered in recent years, with major economies retreating from multilateral commitments and rolling back environmental regulations. This shift has created a vacuum – one that Asia is uniquely positioned to fill. A key component of this vision is the APG, which aims to integrate electricity infrastructure and markets across South-east Asia by 2045.

Home to some of the fastest-growing economies in the world and most climate-vulnerable populations, South-east Asia has the scale, innovation capacity and political momentum to drive the next phase of the energy transition.

The APG promises to unlock efficiencies, enable deployment of renewable energy at scale and foster regional energy resilience. Envisioned as an interconnected power system, the APG shall optimise the use of renewable resources. Countries with abundant renewable energy resources will be able to export clean electricity to countries that have challenges meeting their energy needs. With demand signals, the development of these renewable energy projects can take place.

The challenges that hinder bankability

To realise its full potential, the APG must overcome a complex set of challenges. Technical and geopolitical hurdles ultimately feed into the core issue of financial viability.

The first and most obvious challenge is technical. Integrating diverse national grids with different standards, technologies and energy policies is a formidable task that requires harmonising infrastructure readiness, energy mix and regulatory frameworks. Additionally, cross-border energy exchanges require countries to align on issues such as grid stability, power quality and transmission standards.

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Secondly, geopolitical concerns remain significant, as electricity is often viewed not just as a commodity but also a strategic asset. In an era of rising de-globalisation, some countries may prioritise energy independence over regional integration. Concerns over control must be addressed through diplomacy, transparent agreements, and equitable benefit and risk-sharing.

These challenges compound the financial risk. Without clear solutions to technical and geopolitical issues, financiers face uncertainty – making it harder to assess and de-risk investments.

Ensuring bankability for long-term success

To attract capital, the APG must present a compelling investment case to all stakeholders, including governments, policymakers, investors and banks. This means addressing three critical aspects:

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• Risk mitigation: Political and regulatory risks are among the most significant barriers to investment. Governments and multilateral organisations can play a pivotal role in de-risking the projects through government guarantees, extended political risk insurance, concessional financing and blended finance structures. This could involve setting up public-private partnerships that mitigate demand and counterparty risks, allowing private capital to flow in. Given the high upfront cost and the need to make the project economics work, the APG is likely to require long-term equity and loan commitments which will be supported by the long useful lives of the assets. It is hence imperative that the project contractual structures afford investors the confidence that they will survive the changes of governments which will almost certainly occur over these time periods.
• Transparent regulatory frameworks: Financiers and investors need confidence in long-term returns. Harmonised and supportive regulations for cross-border energy trade – including energy dispatch, pricing and revenue streams – will be essential to reducing uncertainty and building trust, thus making projects more bankable.
• Alignment of interest and revenue models: Too often, projects fail when the benefits and risks are not shared equitably among all parties. Governments need to be able to see the benefits associated with an integrated APG, hence a fair allocation of economic benefits and risks is imperative. Power purchase agreements and phased project structures could create predictable cash flows and provide the financial stability needed to attract investors. Importantly, the APG must create a functioning market for renewable energy where suppliers and consumers can transact with confidence.

Momentum is building

Singapore is a prime example of a “ready buyer”. With limited domestic renewable energy potential, it plans to import up to 6 gigawatts (GW) of low-carbon electricity by 2035, a significant increase from its original 4 GW target in 2021. This demand stimulates supply, incentivising renewable energy projects to be developed in the region. The Lao PDR-Thailand-Malaysia-Singapore Power Integration Project which creates opportunities for multilateral and multi-directional electricity trading in the region is a case in point.

Other recent developments reinforce this momentum. Singapore has granted conditional approval to import hydropower from Sarawak, and companies are studying a second 2 GW interconnection with Malaysia. These moves signal growing confidence in regional energy trade.

The APG is not just a physical network – it is a platform for international cooperation, market creation and climate leadership. By focusing on bankability, Asean can unlock the financing needed to realise this transformative initiative.

Asean member states need to recognise that there is much at stake here. While economic benefits that will arise from an integrated APG are paramount, the alternative scenario of Asean’s continued reliance on fossil fuels for power generation is a dire one. After all, carbon emissions recognise no borders.

The writer is group chief sustainability officer of OCBC