The Bankability Problem in Cross-Border Transmission — And How to Solve It
Getting a cross-border transmission project to financial close is one of the hardest tasks in energy infrastructure. HVDC cables spanning hundreds of kilometres, multiple seabed jurisdictions, and long construction windows make it technically formidable. But technical complexity rarely kills a deal.
What stops lenders happens before a single cable is laid: unclear revenue streams, misaligned regulatory treatment, poorly structured risk, and political uncertainty. Bankability is one question — will lenders finance this project on workable terms? Answering yes requires deliberate structuring across several layers.
Start with the Revenue Model
Lenders need predictable returns. For cross-border interconnectors, three revenue models are in use.
The regulated model is the most common globally. Revenue flows from tariffs set by the national regulator, offering transparency and attracting lower-cost debt. Both TSOs must agree on cost allocation though, which can be slow and politically difficult.
The merchant model lets a third-party developer earn from electricity price differentials across markets. The problem is that spreads move, and lenders pricing a 20-year instrument need projections that pure merchant models cannot reliably deliver.
The cap-and-floor model sits between the two. Ofgem first applied it for the NEMO interconnector in 2013. It works by:
- Setting a floor revenue to protect lenders from downside scenarios
- Capping upside to safeguard consumers
- Retaining market-based efficiency incentives for developers
NeuConnect between the UK and Germany demonstrates this at scale: financial close in 2022, £2.4 billion capital cost, and more than 20 bank lenders. The revenue model shapes corporate structure, debt sizing, and risk allocation — resolve it early.
Align the Regulatory Environment Across Borders
Revenue architecture means little if regulatory conditions across borders cannot support it. Each regulator holds a mandate for its own consumers and market—neither is set up to optimize for a cross-border project.
Regulatory engagement is a sustained alignment process, not a permitting box to tick. It covers:
- Coherent project treatment in each national framework
- Matching cost recovery mechanisms
- Protection of the revenue case if one jurisdiction changes its rules
For EU market projects, the TEN-E framework and Projects of Common Interest designation bring real advantages: expedited permitting, cross-border cost allocation tools, and CEF funding access. Securing PCI status materially improves the risk picture for lenders.
For non-EU projects, treaty-level frameworks carry more weight. The Black Sea Green Energy Corridor illustrates this: a 2022 quadrilateral treaty between Azerbaijan, Georgia, Romania, and Hungary provided sovereign commitments that commercial contracts alone cannot deliver. Without that foundation, lenders will not commit capital across multiple territorial waters.
Allocate Risk to the Right Party
Risk allocation is the structural backbone of a bankable project. The goal is not to eliminate risk but to place it with the party best positioned to manage it. For cross-border energy infrastructure, the key categories are
Construction risk — Developers transfer this through fixed-price, date-certain EPC contracts. Multi-jurisdiction projects use separate special purpose vehicles per segment, and a delivery failure in one threatens the viability of the whole.
Political and regulatory risk — This covers permit withdrawal, grid code changes, and coastal state interference with repair operations. Tools to manage it:
- Political risk insurance
- Investment treaty protections
- Multilateral development finance institution (DFI) involvement
DFI participation signals risk mitigation. In transition markets, a DFI mandate can be a prerequisite for any commercial bank participation.
Revenue risk — For PPA-dependent projects, counterparty creditworthiness is a key concern. A long-term PPA with a creditworthy TSO is a very different instrument from one with a state-owned utility of uncertain standing.
Currency risk — Where revenues and costs fall in different currencies, sovereign guarantees and multilateral partial risk guarantees can address specific components. Cross-jurisdictional legal experience is essential here.
Build the Right Financing Stack
Most cross-border transmission projects draw from a layered financing stack:
- Senior debt from commercial banks
- Development finance from multilateral institutions
- Equity from infrastructure funds or strategic sponsors
Sequencing matters. DFI mandates take six to twelve months of due diligence, and commercial banks typically wait for an anchor DFI commitment—start that engagement early. Institutional investors suit regulated transmission assets well but enter only after structuring is resolved. They do not take development-stage regulatory risk.
Do Not Underestimate Environmental and Social Requirements
DFIs and many commercial lenders will not proceed without Environmental and Social Impact Assessment frameworks aligned with IFC Performance Standards. For subsea routes, this includes benthic ecology surveys, habitat regulation assessments, and marine conservation zone engagement. These carry real consenting risk and take time. Under-resourcing this work is one of the most common reasons projects reach financial close later than planned.
Where Industry Leaders Are Resolving These Questions
The answers to revenue structuring, regulatory alignment, and project financing come from the people who have built and financed these projects — and they will be in London this November.
Leadvent Group brings this conversation together every year. Taking place on 18–19 November 2026 in London, this submarine cable event gathers 150+ senior professionals for two days of focused sessions, technical deep-dives, and structured networking.
The professionals who gain most include:
- Project directors and development managers on interconnector pipelines
- Heads of infrastructure at investment funds evaluating transmission assets
- Policy and regulation leads at TSOs and developers
- Legal, financial, and engineering advisers structuring the next generation of deals
Speakers confirmed for 2026 include senior figures from National Grid Interconnectors, EirGrid, TenneT, Baltic Cable, Equinor, Elia, and the UK Department for Energy Security and Net Zero. If your work touches how cross-border interconnections get financed and built, this is where those conversations happen.
Seats are limited. Register now for the 6th Annual Submarine Power Cable and Interconnection Forum and make sure you are in the room where the industry's most critical decisions are being shaped.
Frequently Asked Questions (FAQs)
- What does "bankable" mean for a cross-border transmission project?
A project is bankable when lenders agree to finance it on workable terms — predictable revenue, clear risk allocation, regulatory certainty in each jurisdiction, and a financing structure that services debt from project cash flows.
- Why is the cap-and-floor model preferred over the pure merchant model?
Pure merchant interconnectors depend on price spreads, which fluctuate and are hard to forecast over a 20-year debt horizon. The cap-and-floor model protects lenders with a floor while capping upside for consumers — cutting revenue uncertainty enough to make project finance viable, as NeuConnect demonstrated when it closed with more than 20 banks.
- What role do DFIs play in making cross-border projects bankable?
DFIs such as the EIB, ADB, and AfDB provide debt or guarantee capacity that commercial lenders cannot match. Their involvement signals political risk mitigation, lowering the premium commercial banks apply. On some projects, a DFI mandate is a precondition for any commercial bank participation.
- How does multi-jurisdiction permitting affect bankability?
Each coastal state controls its own waters, and a delayed or withdrawn permit in one jurisdiction can stop the entire project. Lenders set consent milestones as drawdown conditions. Projects with major national consents already secured are considerably more attractive to debt markets.
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