First Gen’s Cash Squeeze Clouds Dividend Outlook After Pumped-Storage Bet

 

Stronger geothermal earnings lifted first-half profit, but weaker operating cash flow and an initial ₱16.5 billion investment in hydro projects sharply reduced the power producer’s cash cushion

**MANILA—**First Gen Corp. entered 2026 with a large cash pile from the sale of a controlling stake in its natural-gas business. Six months later, much of that financial cushion had disappeared.

The Philippine power producer ended June with ₱23.74 billion in cash and cash equivalents, down ₱33.77 billion—or nearly 59%—from ₱57.51 billion at the end of 2025. The decline reflected weaker cash generation, debt repayments and the opening payment on an ambitious push into pumped-storage hydropower. 

Those demands are casting a cloud over First Gen’s second-half dividend distribution, even as its operating businesses—particularly geothermal subsidiary Energy Development Corp.—reported stronger results.

First Gen paid ₱16.5 billion during the first half for a 33% interest in Prime Hydropower Energy Inc., the company that will hold interests in the planned 1,400-megawatt Pakil and 600-megawatt Wawa pumped-storage projects. A further ₱45.38 billion remains payable through 2029, giving the company a substantial funding commitment that doesn’t appear in its headline interest-bearing debt figures. 

The result is a company with improving power-generation earnings but less immediately available cash—and a growing list of projects competing with shareholders for capital.

Strong earnings, weaker cash conversion

First Gen’s revenue climbed 73% to ₱41.15 billion in the six months ended June, while operating income rose 63% to ₱11.35 billion. Consolidated net income increased 7.1% to ₱12.82 billion.

But earnings attributable to First Gen shareholders fell 8.7% to ₱8.42 billion, largely because the company now owns only 40% of its former gas subsidiaries following the sale of a 60% stake to Prime Infrastructure Capital Inc. in November 2025. First Gen’s recurring net income attributable to shareholders was nearly unchanged at ₱8.67 billion, compared with ₱8.62 billion a year earlier.

The cash-flow statement told a less buoyant story.

Net cash generated from operating activities dropped 38% to ₱13.30 billion from ₱21.58 billion. Receivables increased by ₱6.40 billion during the period, reversing the ₱6.94 billion release of cash from receivables recorded a year earlier. First Gen Singapore’s LNG sales to the group’s former gas subsidiaries, as well as higher receivables at EDC and First Gen Hydro, contributed to the increase.

The company then used ₱25.34 billion in investing activities and another ₱22.20 billion in financing activities. It spent ₱16.64 billion on investments in associates, ₱5.69 billion on property and equipment, and ₱28.10 billion on repaying long-term debt. 

First Gen’s own measure of free cash flow swung to a negative ₱11.58 billion from a positive ₱3.02 billion a year earlier.

The negative figure doesn’t suggest its power plants have stopped producing cash. Rather, it reflects a company that is simultaneously investing, reducing debt, and absorbing a working-capital buildup. Still, dividends are paid with cash, not accounting earnings.

A bet on storing power

Pumped-storage facilities act like giant batteries, using surplus electricity to move water to an elevated reservoir and releasing it later to generate power when demand rises. Such assets could become increasingly valuable as the Philippine grid adds solar and wind capacity, whose output varies with weather and time of day.

First Gen’s investment provides exposure to two of the country’s largest planned pumped-storage developments. The projects could eventually give the company a central role in balancing a more renewable-heavy power system.

The returns, however, are likely to take years to materialize.

First Gen agreed to acquire its PHEI interest for a total consideration of about ₱61.9 billion. It paid ₱12.5 billion for existing shares and ₱4 billion toward new subscriptions in March, leaving the remaining subscription balance payable through 2029. The company also arranged standby letters of credit totaling ₱24.75 billion to support the acquisition and assigned rights to ₱9.9 billion in investment management accounts as collateral. 

That commitment changes the way investors may need to view First Gen’s leverage.

Reported long-term debt, including current maturities, declined 15% to ₱99.64 billion after the parent company and Fresh River Lakes Corp., the owner of the Casecnan hydro plant, prepaid their loans. Interest-bearing debt-to-equity ratio improved to 0.42 times from 0.52 times. 

But other noncurrent liabilities rose to ₱53.79 billion from ₱8.84 billion, almost entirely because of the pumped-storage subscription payable. The obligation isn’t classified as bank debt, but it represents a claim on future liquidity nonetheless. 

First Gen’s current ratio weakened to 1.78 times from 2.52 times, while its quick ratio fell below one—to 0.94 times from 1.65 times. The company remains adequately capitalized and compliant with its debt covenants, but its room for discretionary cash distributions has narrowed. 

Geothermal strength, Casecnan weakness

The cash concerns contrasted with EDC's strong operating results.

EDC’s electricity revenue rose 42% to ₱32.25 billion, while net income jumped 79% to ₱9.16 billion. Higher electricity prices, improved output from several geothermal fields, new capacity from the Tanawon plant, and contributions from battery-storage facilities supported the increase. 

Pantabangan-Masiway also performed well. First Gen Hydro’s revenue rose 19% to ₱2.35 billion, while net income increased 44% to ₱1.80 billion as higher reservoir levels supported greater generation and allowed the company to sell more electricity and reserve capacity. 

Casecnan was the weak spot. Revenue fell 15% to ₱730 million after generation dropped to 70.6 gigawatt-hours from 152.4 gigawatt-hours because of lower water inflows. The operation posted a net loss of ₱879 million, compared with a ₱140 million profit a year earlier, as replacement-power costs, property-tax settlements and debt-prepayment charges compounded the decline in output. 

Dividend decision gets harder

First Gen declared a regular common dividend of ₱0.40 a share during the first half, or about ₱1.44 billion. That distribution represented a modest portion of recurring earnings, suggesting that the company can afford a second-half dividend from an accounting-profit standpoint.

The question is whether management will choose to preserve cash instead.

First Gen typically has several possible sources of liquidity beyond cash generated by its consolidated operations. It held ₱16.28 billion in financial assets measured at fair value through profit or loss as of the end of June, and its retained gas investment continues to generate substantial earnings. First Gen recognized ₱3.97 billion as its share of the gas companies’ first-half profits. 

There is also incoming cash from that business. First Gas Holdings declared a $37.5 million dividend on July 30, payable on or before Aug. 12. First Gen’s 40% interest would correspond to roughly $15 million before any applicable deductions or structural adjustments. 

That dividend offers some relief but doesn’t erase the broader capital-allocation tension.

A second-half common dividend remains possible, particularly given First Gen’s earnings and access to financial assets. Yet repeating or increasing the first-half payout would come as the company faces weaker operating cash conversion, a diminished cash balance and tens of billions of pesos in remaining pumped-storage commitments.

First Gen has traded control of a mature gas business for cash, retained earnings from a minority stake in a gas business, and exposure to large future hydro projects. The first-half results show the promise of that strategy. They also show its immediate cost: profits are holding up, but cash has become more precious.

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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.