An interconnector is a treaty with a cable attached
Southeast Asia's cross-border power projects are usually presented as engineering ventures. They succeed or fail on agreements between governments, and private developers should structure, price and govern them on that basis.
For as long as I have worked in this industry, the region has talked about a connected power system. Linking each country's grid to its neighbours was proposed by ASEAN governments decades ago. Progress has been real but slow. The first multilateral trade through existing interconnections began in 2022, carrying up to 100 megawatts from Laos to Singapore through Thailand and Malaysia. Since then, Singapore's stated aim of importing around 6 gigawatts of low-carbon electricity by 2035 has drawn proposals from Indonesia, Malaysia, Vietnam, Cambodia and further afield.
Most of these proposals are presented as engineering ventures: so many gigawatts of solar, so many gigawatt-hours of storage, a cable of a certain length and voltage. The engineering is demanding but well understood. High-voltage direct-current cables have been laid under other seas for decades. What is less well understood, or less often admitted, is that a cross-border link is first an agreement between states and only second a piece of infrastructure. A developer who forgets that will spend money on the wrong risks.
Two governments sign before any lender does
Consider what a project exporting power from Indonesia to Singapore needs. The exporting government must permit the export of electricity, and it may attach conditions about domestic benefit. The importing country's regulator must license the import and accept arrangements for dispatch, security of supply and what happens when the link trips. Both sides must settle, formally or in practice, how disputes will be handled. The cable crosses waters where shipping lanes, anchorages and fishing grounds are managed by more than one authority. Lenders will lend only once all of this is agreed, and they will want comfort that it will stay agreed for twenty-five years.
Each of these is a political decision, and political decisions change with governments. Indonesia, for instance, has at different times restricted and then permitted exports of renewable electricity, and it now expects export projects to support the manufacture of solar panels and batteries at home. That expectation is legitimate. A country with large renewable resources and fast-growing demand of its own will not wish to become a quarry for a wealthier neighbour's clean power. A developer who treats the expectation as an obstacle rather than a design requirement has misread the project.
For directors, this changes how a cross-border project should be valued. Megawatts of export capacity are not the asset. The asset is a set of approvals and relationships that may or may not mature into a financeable project. It behaves like an option, and options lose value quickly when their holder spends too much keeping them alive.
It also changes what a board should ask management to report. A development update that lists solar yield studies, battery quotations and cable specifications tells directors how hard the team is working. It does not tell them whether the project is closer to being financed. The questions that matter are narrower and more awkward. Which approvals are held, and on what conditions? Which remain, and which official or ministry decides each one? What has changed in either government's position since the last update, and what would each change cost the project? I now write our own Selat Hijau updates in that order, with the engineering at the end, and the board's discussion has become shorter and better.
The case for being the minority
When Lintasari formed the Selat Hijau consortium in 2022 to export 1,000 megawatts from Indonesia's Riau Islands to Singapore, our chief executive wanted control. Control would have let us consolidate the project, choose the contractors and run the operation. I argued for 40 per cent, with an Indonesian partner holding 35 per cent and a Singapore infrastructure fund the rest.
My argument was about who should answer for the project in each capital. Over thirty years, the questions an export project will face in Jakarta concern local manufacturing, land, tax, domestic supply and the politics of sending power abroad from a country where many islands still run on diesel. An Indonesian owner with substantial equity has both the standing and the incentive to answer them. A foreign majority owner answers them as a guest. In Singapore the questions concern reliability and price, which our experience of contracted generation equips us to answer. Spreading ownership this way lets each party carry the risks it can actually manage.
The cost was real. We gave up the operator's role and about a third of the equity value we would otherwise have held, and our share of any eventual profit is smaller. But our development spending is capped at US$18 million until financial close, a sum we can afford to lose, which matters because the project may not proceed. The conditional approval the consortium received from Singapore's energy regulator in 2024 was a step, not an outcome. Financial close, planned for 2028, still depends on a cable route, export permits and financing that are all open.
What the exporting country must keep
There is a final question that I think the region's import plans have not fully faced. If a country exports large volumes of renewable electricity while its own grid still leans heavily on coal, the atmosphere gains little in the short run. The exporter may burn more coal to meet its own demand while its best renewable sites serve a neighbour.
I do not think this should stop exports. Trade can finance manufacturing, transmission and skills that would not otherwise exist, and over time it can strengthen the exporting country's own grid. But I think export projects should carry some obligation to the domestic system: a share of capacity available to local users, investment in transmission that serves local demand, or manufacturing that also supplies domestic projects. Selat Hijau's arrangements include the second and the third. Whether they are enough will be judged in Jakarta, not in Singapore and not in our boardroom.
For investors and boards my conclusion is modest. A cross-border power project should be governed as a long negotiation among states, with a developer's capital committed in proportion to the approvals it actually holds. Treat it as a treaty with a cable attached and the engineering will usually follow. Treat it as a cable in search of a treaty and the money will usually run out first.