How investors are backing energy connectivity across ASEAN
Key takeaways
- ASEAN’s power grid buildout is moving from concept to execution, unlocking large-scale private markets investment in regional energy connectivity.
- Why it matters now: Rising electricity demand and renewable integration require investment of more than USD700 billion, with PPPs critical to mobilizing capital.
- What investors need: Stable regulation, long-term contracts, and risk-sharing frameworks to deliver bankable cross-border energy projects.
Investors are backing a major push to integrate electricity networks across Southeast Asia.
Growing demand for power and a regulatory push to connect electricity networks are transforming the outlook for infrastructure investments in Southeast Asia, unlocking the potential for hundreds of billions of dollars of private investment in the years ahead.
Progress towards an interconnected regional power market in Southeast Asia – the ASEAN Power Grid (APG) – is accelerating at a time when global investors are pouring record amounts of investment into the infrastructure sector. Fundraising for closed-end infrastructure funds reached almost USD300 billion globally in 2025, smashing previous records.
“The ASEAN Power Grid is no longer just a long-term vision – it is moving into real execution,” said Badrulhisyam Fauzi, CFA, Chief Financial Officer of Tenaga Nasional, Malaysia’s national energy company.
“In terms of cross-border electricity trade, the APG will be the enabler for energy security, renewable integration and cost optimization across ASEAN,” he added.
The APG comes with massive investment requirements. One ASEAN study estimated a need for USD764 billion in investment in generation and transmission infrastructure for the APG to be fully operational by 2045 with high levels of renewable energy.
Private investment is seen as the key to reaching these targets, and governments in the region are working hard to boost the appeal of cross-border projects.
In October 2025, the ASEAN countries, Asian Development Bank (ADB) and the World Bank launched a new initiative to promote public-private partnerships (PPPs) and de-risk financing in order to transform concepts into bankable projects that can involve private capital. The ADB is committing USD10 billion over 10 years, while the World Bank is committing a further USD2.5 billion, to help develop a pipeline of projects that can attract the private sector.
Overcoming challenges to private finance
Investors in Southeast Asia stress that reliable, long-term energy contracts and policy consistency are an essential starting point for cross-border projects, echoing the findings of a 2023 study by researchers at the Singapore-based ISEAS–Yusof Ishak Institute.
“The important requirement for all these large projects is that you need a deal in place that includes long-term contracts with customers of good standing that make the project bankable,” said Khan Yow, Managing Director at Seraya Partners, a Singapore-based fund focused on digital and energy transition infrastructure and managing about USD2.5 billion of capital. “A lot of what we do as a fund is working with developers to help turn projects into bankable assets so that banks and other lenders can come in to finance them.”
Sharing out the risk appropriately is also critical.
“When it comes to PPPs and mobilizing private capital at scale, the most important principle is that the risk must sit with the party best able to manage it,” said Fauzi. “Government is expected to play a critical role in ensuring that the system is investable – setting clear rules and taking risk where it is best placed to manage it. Investors need confidence that the regulatory framework will remain stable over time.”
First-of-a-kind projects will likely need a certain level of public funding or incentives to create the conditions for private investment to enter, supported by concessional funding and guarantees from multilateral institutions.
“This will be essential to bridge the gap between public ambition and private capital,” added Fauzi.
There has already been a clutch of bilateral interconnection projects through the region (see Figure 2). A transmission line connects Sarawak in Malaysia to West Kalimantan in Indonesia, while another connects Gurun in Malaysia to Khlong Ngae in Thailand, for which an upgrade is now being explored. An interconnector has existed between Malaysia and Singapore since the 1980s, but a second link is now being planned.
At the multilateral level, the Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS) began in 2022, with Keppel importing renewable energy from Laos to Singapore. The project’s trading capacity was doubled to 200MW in early 2026. A second project, the Brunei-Indonesia-Malaysia-Philippines Power Integration Project is being planned.
Replicating the success of the LTMS will not be simple. Experts say much of the work required to make the APG a reality is around creating the kind of standardization that investors find appealing. Grid connection rules and market design vary widely across the region.
Malaysia, for instance, is largely a market backed by long-term power purchase agreements (PPAs) between independent power producers and TNB. Singapore, by contrast, is traditionally a merchant market, with power producers selling power into the market without long-term fixed-price PPAs.
Making patience pay
On paper, the demand dynamics for greater regional integration are compelling, especially for Singapore, which has the most expensive power in Southeast Asia today. Demand is also rising. According to Wood Mackenzie, demand from data centers will quadruple in Southeast Asia between 2025 and 2035, reaching 10.7GW and accounting for up to 4% of peak demand.
Growing adoption of electric vehicles (EVs) are also expected to result in a substantial increase in their share of final electricity consumption in the region in the near future, albeit from a low base. The IEA estimates that demand from EVs will rise to 1.0% in 2030 from just 0.2% in 2024.
Land constraints in power-hungry markets like Singapore are also driving demand for cross-border collaboration.
“To build a fossil fuel-based power plant of 100-200MW you don’t need much space, but to replace it with solar you might need 200-300 hectares of land,” said Ricardo Silaen, CFA, now Director at Indonesian mining contractor Darma Henwa, and until November 2025 at private energy company Indika Energy.
Even smaller, domestic projects can be cumbersome, according to Nicole Chung, CFA, Managing Director at Malaysia-based Borneo Capital Partners, a financial advisory firm that offers capital structuring and deal origination services for cross-border and complex deals in Southeast Asia for clients in infrastructure, telecoms and renewables.
“The problem is that energy authorities might operate on a 5-10 year planning cycle, but the markets move on a 1-2 year cycle,” she said. “Even when there is a single energy regulator, there may be different departments that you must satisfy, and so the process takes a long time.”
This can even be the case for self-generation projects, where the power needed is generated on-site.
“To build your own power project to supply your data center, for example, you would need to get a power production license, which can take time,” said Chung. “But if you also want the reliability and redundancy of a connection to the national grid, which most people do want, then that also takes a long time.”
For Chung, the secret to investment success will often lie in ensuring sufficient knowledge and local experience at the developer level.
“My advice to investors looking to buy into power infrastructure in the region is to know that the developer or project they are backing has a strong connection with the local regulatory authority, with people of experience and influence,” she said.
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