There is a temptation, when a company posts handsome headline earnings, to stop reading just as the numbers become interesting. First Gen’s 2025 results invite exactly that mistake. The group reported a stronger consolidated profit, helped in no small part by the sale of 60% of its gas business to Prime Infra and the resulting gain on sale, deconsolidation effects, and associate income. Yet the more revealing story lies elsewhere: in Energy Development Corporation, or EDC, the renewable-energy platform that now carries a larger share of First Gen’s strategic identity—and, increasingly, its valuation burden.
EDC is not merely one asset among many. It is the center of gravity of First Gen’s continuing business. In 2025, EDC contributed about US$785.7m of First Gen’s consolidated electricity-sale revenues, or roughly 87% of the total, and it accounted for around 1,464.76 MW of installed renewable capacity. After the gas-business sell-down reduced First Gen’s consolidated portfolio to 1,764.2 MW, EDC represented roughly four-fifths of what remained. First Gen’s economic stake in EDC is only 45.8%, but its 65% voting interest allows it to continue consolidating the company. In accounting terms, that is enough for control; in economic terms, it makes EDC the principal engine of the group’s renewable earnings story.
That is why EDC’s 2025 performance deserves more attention than the group’s flattering top line. Revenues rose 5.2% to ₱48.6bn, yet net income fell 20% to ₱7.4bn. For a business marketed as the dependable core of a clean-energy portfolio, that is an awkward combination. Growth in sales is welcome; growth in sales accompanied by a steep decline in profit is something else entirely. It suggests that the marginal peso of revenue is being earned at a lower quality than before—more costly, more volatile, or both.
The annual report points to a set of reasons that are individually understandable and collectively troubling. EDC’s cost base rose faster than its revenues: operations and maintenance expenses increased, geothermal drilling and workovers required heavier spending, and depreciation climbed as new assets came onstream. Interest expense also rose as the company drew more debt to fund expansion. At the same time, merchant exposure became less benign. Lower average WESM selling prices diluted margins, while outages and lower output in some assets reduced the quality of sales. None of these pressures is catastrophic on its own. Together, they amount to a clear warning that the renewable platform is becoming more expensive to run, and perhaps harder to scale profitably than the label “renewable” might imply.
One should be precise about the weakness. The problem is not that EDC stopped growing. It did not. The problem is that profitability deteriorated despite growth. That is a more serious message for investors than a simple cyclical slowdown. A revenue miss can be blamed on weather, timing, or dispatch. Margin compression is harder to excuse. It raises questions about the durability of competitive advantage, the age and maintenance intensity of the asset base, and the amount of capital required merely to keep the machine humming. In old utility language, it hints at a business that may be moving from a “cash cow” to a “capital sponge”.
Some of the deterioration reflects success of a sort. New projects—such as Palayan Binary, Tanawon, Mahanagdong Binary, and the various battery-energy storage systems—added revenue but also brought start-up inefficiencies, fresh depreciation, and a heavier financing bill. This is the classic curse of infrastructure growth: the market applauds the ribbon-cutting before it notices the drag from asset additions on returns. Investors would be wrong to treat every peso of new depreciation as a sign of decay; some of it is the accounting shadow cast by a larger future platform. But they would be equally wrong to ignore the fact that expansion has, at least for now, diluted the earnings quality of the incumbent business.
The implications for First Gen’s valuation are substantial. Before the gas sale, the company could point to a more diversified earnings base: gas, renewables, hydro, and a measure of contractual stability. After the sale, gas becomes less visible in the consolidated income statement, appearing instead through equity-accounted associate earnings. That may be a sensible strategy. It is not the same thing as a stable reported operating base. The market will therefore look more closely at what remains under full consolidation. And what remains is, above all, EDC. If EDC is growing but earning less on that growth, then First Gen’s post-restructuring core may deserve a lower multiple than the headline 2025 profit would imply.
This matters especially in a sum-of-the-parts frame. EDC is First Gen’s largest continuing contributor to revenue, capacity, and strategic narrative. A softer view on EDC’s normalized profitability, therefore, transmits directly into a softer view on First Gen’s net asset value. The same is true in a DCF framework: lower margins mean lower near-term free cash flow, while higher maintenance intensity and a rising debt burden tend to lower terminal value and raise the discount rate investors demand. Put bluntly, a renewables business that grows while requiring more maintenance, more borrowing, and more merchant-price tolerance is worth less than one that grows with discipline and throws off cash.
Still, the annual report does not justify panic. There is a difference between a structurally impaired franchise and a platform suffering the strains of investment and transition. EDC remains a formidable business: it is First Gen’s premier renewable platform, with geothermal, wind, solar, and reserve-market capabilities, long-lived contracts, and a scale that is hard to replicate. First Gen continues to control and consolidate it for a reason. The question for investors is not whether EDC matters; it is whether 2025 marks a temporary dip in profitability as new assets are absorbed, or a more persistent shift toward lower-margin growth.
That distinction is the heart of the investment case. If 2025 proves to be a transitional year—higher maintenance, higher depreciation, a spate of outages, weaker merchant prices, but better economics later—then the market may eventually forgive the margin squeeze. If not, First Gen’s “clean-energy champion” story becomes harder to value generously. For now, the sensible conclusion is this: EDC remains the jewel in First Gen’s crown, but in 2025, the jewel showed a crack. It still shines. Investors simply have more reason than before to examine it under a harsher light.
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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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