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First Gen’s ₱50B Gas Asset Sale Signals Strategic Pivot Amid Earnings Decline and Execution Risk

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First Gen Corporation (FGEN) is moving forward with a landmark transaction to sell 60% of its gas-fired power generation and LNG infrastructure business to Prime Infrastructure Capital Inc. for ₱50 billion, following regulatory clearance from the Philippine Competition Commission (PCC). The deal includes the Santa Rita, San Lorenzo, San Gabriel, and Avion gas plants, as well as the Batangas LNG terminal, which began commercial operations in January 2025.

The transaction marks a strategic pivot for the Lopez-led energy firm, which is increasingly focused on expanding its renewable energy portfolio and infrastructure assets. First Gen will retain a 40% stake in the gas platform, ensuring continuity and future upside participation.

Revenue and Earnings Decline Underscore Strategic Urgency

For the nine months ended September 30, 2025, consolidated revenues fell 3.3% year-on-year to US$1.786 billion, while net income declined 2.0% to US$265.8 million. The downturn was driven primarily by the gas generation segment, where San Gabriel’s transition to merchant trading following the expiry of its power supply agreement in February 2024 led to a 61% drop in revenue and a swing to net loss.

Despite stronger performance from Santa Rita and San Lorenzo, the overall natural gas platform’s net income attributable to the parent fell 5.5%. The geothermal and wind segment (EDC) also faced pressure due to lower selling prices, higher depreciation, and increased interest expenses from recent borrowings. However, the Batangas LNG terminal emerged as a bright spot, contributing ₱1.92 billion in net income in its first nine months of operations.

Execution Risk: Will the Deal Materialize?

While the transaction has cleared regulatory hurdles, its ₱50 billion valuation—nearly equivalent to FGEN’s entire market capitalization—raises questions about execution risk.

“This is a high-stakes transaction,” said an energy sector analyst. “Prime Infra is essentially valuing the gas platform at more than the whole company. If market conditions shift or LNG economics deteriorate, there’s a real possibility they could reassess.”

The deal’s success hinges on final documentation, closing conditions, and Prime Infra’s continued appetite for gas infrastructure amid global energy transition pressures.

Outlook: What Happens to FGEN Shares if the Deal Falls Through?

Analysts warn that failure to close the transaction could weigh heavily on investor sentiment. The market has partially priced in expectations of a ₱50 billion cash infusion, which would strengthen FGEN’s balance sheet and accelerate its renewable energy expansion.

If the deal collapses:

  • Share price downside risk: FGEN could trade back toward its pre-announcement levels, as the anticipated deleveraging and growth funding would evaporate.
  • Valuation pressure: Investors may re-focus on the merchant risk at San Gabriel, earnings volatility in the gas segment, and slower capital recycling.
  • Strategic overhang: Questions on FGEN’s ability to execute its pivot to clean energy without the transaction proceeds could dampen multiples.

Conversely, if the deal closes as planned, analysts expect a potential re-rating driven by improved earnings quality, lower leverage, and clearer renewable growth visibility.

Strategic Reset in Motion

First Gen has already prepaid ₱20 billion in peso-denominated loans, signaling its intent to use the proceeds for deleveraging, renewable energy expansion, and potential shareholder returns. The company is advancing projects such as the Aya pumped-storage facility, Tanawon geothermal plant, and multiple battery energy storage systems (BESS).

“This is a strategic reset,” said a source familiar with the transaction. “First Gen is positioning itself for the next decade of clean energy growth, while monetizing assets that are becoming more volatile.”

The transaction is expected to close in the coming months, subject to final documentation and remaining closing conditions.



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