When KKR offered to buy more of First Gen Corporation at ₱35 per share, the proposal looked generous by one obvious measure.
First Gen had spent much of the previous year trading in the high teens and low ₱20s. A ₱35 offer therefore represented a substantial premium to the market price and an unusually attractive exit for shareholders who had watched the stock trade below its apparent asset value for years.
First Philippine Holdings, however, was not persuaded.
The Lopez-controlled holding company rejected the proposal after concluding that the price did not reflect First Gen’s true value. That response invites a more difficult question than whether ₱35 represented a premium to the stock market price.
The question is what First Gen itself is worth.
This requires looking beyond the share price. First Gen has changed significantly over the past year. It sold 60 percent of its gas business to Prime Infrastructure, retained substantial exposure to those assets, accumulated considerable financial resources and committed capital to one of the country’s largest pumped-storage hydro developments.
At the same time, Energy Development Corporation, its geothermal platform, has returned to stronger earnings, while its existing hydro assets continue to generate significant profits despite the volatility that comes with water conditions.
As a whole, the numbers suggest that ₱35 was not an irrational offer. It was simply a price that favored the buyer.
A company that looks cheap on book value
At June 30, 2026, First Gen had about ₱194.8 billion of equity attributable to shareholders. After adjusting for redeemable preferred shares, common equity was roughly ₱190.6 billion.
Spread across around 3.6 billion common shares, that works out to a book value of approximately ₱53 per share.
KKR’s ₱35 proposal therefore valued First Gen at only about 0.66 times book value.
This does not automatically make the offer unfair. Companies deserve to trade below book when they earn weak returns on equity or when investors believe assets are overstated.
First Gen does not fit comfortably into either category. The company generated recurring net income attributable to shareholders of ₱8.67 billion in the first six months of 2026, almost unchanged from the previous year even after the sale of 60 percent of its gas business. The more revealing exercise, however, is to look at the parts.
The geothermal business remains the core of the story
Energy Development Corporation is still First Gen’s most important operating asset.
EDC controls roughly 1,465 megawatts of geothermal, wind and solar capacity, including the Unified Leyte, Palinpinon, Bac-Man, Tongonan, Mindanao and Nasulo geothermal plants, along with Burgos Wind and solar projects.
The first half of 2026 showed how valuable that platform can be. EDC produced ₱32.3 billion in electricity revenue and ₱9.16 billion in net income. Recurring net income reached ₱9.39 billion, while recurring earnings attributable to EDC shareholders reached ₱8.66 billion.
At the First Gen level, EDC excluding FG Hydro contributed ₱3.69 billion of attributable earnings during the first six months, up 73.5 percent from a year earlier. The improvement came from higher selling prices, stronger geothermal generation and contributions from battery energy storage systems that began operating late last year.
It would be aggressive to simply double those numbers. Geothermal earnings were much weaker in 2025, when lower wholesale electricity prices and higher maintenance costs hurt profitability.
A normalized annual contribution of around ₱5.5 billion therefore looks more reasonable.
Applying an 11 times earnings multiple gives an estimated value of around ₱60.5 billion for First Gen’s economic interest in EDC, equivalent to about ₱16.80 per First Gen share.
For a renewable platform built around geothermal assets that are difficult and expensive to replicate, that valuation does not appear excessive.
Hydro adds value, but weather makes it harder to price
First Gen’s hydro assets are less predictable. FG Hydro, which operates the Pantabangan-Masiway complex, performed strongly in the first half. Revenue reached ₱2.35 billion, operating income ₱1.62 billion and net income ₱1.80 billion.
First Gen’s attributable contribution was around ₱733 million.
Because hydro earnings depend heavily on water availability, a normalized contribution of roughly ₱1.2 billion is more prudent than simply annualizing the first half. At 10 times earnings, the asset would be worth around ₱12 billion, or about ₱3.30 per First Gen share.
Casecnan requires even more caution. The plant lost money in the first half of 2026 because of weaker water inflows, real property tax settlements, higher expenses and costs linked to the repayment of debt. But the poor half-year does not necessarily capture its underlying value.
In 2025, Casecnan generated ₱2.87 billion in revenue, ₱1.38 billion in operating income and ₱932 million in net income.
A normalized profit of around ₱900 million and a nine times multiple produces a valuation of roughly ₱8.1 billion, or about ₱2.25 per share. This is conservative when compared with the $526 million price First Gen paid to acquire the plant.
The retained gas stake may be the most misunderstood asset
The sale of 60 percent of First Gen’s gas business to Prime Infrastructure changed the structure of the company but did not eliminate its exposure to gas.
Prime Infra paid an adjusted ₱48.8 billion for the 60 percent stake, excluding possible earn-outs.
This transaction implies a value of roughly ₱81 billion for the entire gas business and about ₱32.5 billion for First Gen’s retained 40 percent interest. This is a useful floor because it comes from an actual transaction.
The earnings tell a more interesting story. In the first six months of 2026, First Gen recognized ₱3.97 billion of equity earnings from its retained gas interests.
A normalized annual contribution of around ₱6 billion appears reasonable. At a relatively modest 7.5 times multiple, that gives the retained gas stake a value of approximately ₱45 billion, or around ₱12.50 per First Gen share. This estimate already discounts the fact that First Gen no longer controls the business.
The cash from the gas sale did not disappear
One reason First Gen can look less valuable after the Prime Infra transaction is accounting presentation.
The gas business was deconsolidated, which means a large amount of revenue and assets no longer appears in the same way on First Gen’s financial statements.
But the economic value did not vanish. At the end of 2025, the First Gen parent company held more than $1 billion in financial assets, including cash, investments and receivables.
Part of that capital has since been redeployed into pumped-storage hydro. First Gen committed around ₱61.9 billion for a 33 percent stake in Prime Hydropower Energy Inc., which will own the 1,400-megawatt Pakil pumped-storage project and an indirect interest in the 600-megawatt Wawa project.
Only part of the investment had been funded initially, while the remaining subscription obligations extend through 2029.
Those projects could eventually become highly valuable as the Philippine grid absorbs more intermittent renewable energy.
But their future value should not be counted prematurely. A conservative approach is simply to recognize the capital invested and avoid assigning a large development premium. If the projects perform well, the upside comes later.
After adjusting for future funding needs and applying a haircut to the financial assets, a reasonable estimate of net financial and development value is about ₱46.5 billion, or nearly ₱13 per share.
What the pieces suggest
Add the major businesses together and the picture becomes clearer. EDC contributes roughly ₱60.5 billion of value. FG Hydro adds around ₱12 billion. Casecnan contributes another ₱8.1 billion. The retained gas business is worth around ₱45 billion. Smaller businesses contribute roughly ₱3 billion, while net financial and development assets add around ₱46.5 billion.
This produces an estimated equity value of about:
₱175 billion.
Divided by approximately 3.6 billion shares, First Gen would be worth around:
₱49 per share.
This estimate does not require a heroic assumption about pumped storage. It does not assume that EDC maintains the extraordinary pace of earnings seen in the first half. Nor does it value Casecnan at anything close to what First Gen originally paid for it.
It is, in other words, a fairly restrained estimate.
Why KKR’s ₱35 still makes sense
There is an important thing between saying an offer is low and saying it is irrational.
KKR’s ₱35 proposal makes considerable sense from the buyer’s perspective.
Under a bearish scenario, EDC earnings could weaken again, gas profits could normalize lower, hydro could remain volatile and First Gen’s development assets could deserve a larger discount.
Under those assumptions, the value of the company can fall toward roughly ₱35 per share.
This means KKR was effectively offering something close to a downside valuation.
This is precisely the sort of price a sophisticated financial buyer would prefer: one that leaves significant upside if the operating businesses perform well. The same price is less compelling for the seller.
FPH controls First Gen and has no obvious reason to sell valuable strategic assets at a price that already assumes a pessimistic outcome.
Earnings also point toward ₱50
Another way to test the valuation is through recurring earnings.
First Gen’s first-half recurring attributable income of ₱8.67 billion suggests normalized full-year earnings of around ₱16.5 billion to ₱17.5 billion.
At nine times earnings, the stock would be worth roughly ₱41 to ₱44.
At 10 times, it would be worth about ₱46 to ₱49.
At 11 times, it would be worth roughly ₱50 to ₱54.
For a business with major geothermal assets, strong hydro profitability, a continuing stake in gas generation and a substantial development pipeline, a 10 to 11 times earnings multiple does not appear demanding.
Again, the result clusters around the same range.
Book value provides the final check
One of the simplest ways to test whether KKR’s ₱35 offer was reasonable is to compare it with First Gen’s book value.
As of June 30, 2026, First Gen’s common book value was approximately ₱53 per share. KKR’s proposal therefore valued the company at only about 0.66 times book value.
A low price-to-book ratio is not automatically a sign of undervaluation. Companies deserve to trade below book when they consistently earn weak returns on equity or when the quality of the underlying assets is poor.
First Gen, however, has been generating a respectable return on its equity.
In 2025, net income attributable to shareholders reached US$370.9 million. Against average parent equity of roughly US$3.0 billion, that translates to an ROE of about 12.3 percent.
Even on a recurring basis, after adjusting for the one-off gain from the sale of 60 percent of the gas business, ROE was roughly 8.8 percent.
This recurring figure should also be viewed in context. First Gen entered 2026 with a substantial amount of capital still parked in financial assets or committed to projects that had not yet reached full earning capacity. The company has since begun redeploying that capital into the Pakil and Wawa pumped-storage hydro projects, which are expected to become meaningful contributors over time.
More importantly, some of First Gen’s core operating assets are already generating stronger returns than the consolidated figure suggests. EDC’s geothermal platform posted a sharp earnings recovery in the first half of 2026, while FG Hydro continued to produce strong profits from Pantabangan-Masiway.
This matters because a company capable of generating around 10 percent to 12 percent ROE should not normally command the same price-to-book multiple as a business earning only 5 percent or 6 percent.
At 0.90 times book, First Gen would be worth about ₱47.70 per share.
At 0.95 times book, the value rises to around ₱50.35.
At 1.0 times book, it would be worth approximately ₱53.
Given First Gen’s double-digit reported ROE, the quality of its geothermal, hydro and gas assets, and the fact that part of its equity has yet to reach full productive use, I think 0.95 times book is a reasonable justified multiple.
It still applies a modest discount for corporate complexity, execution risk and the fact that the gas business is no longer fully controlled. But it does not assume that First Gen deserves a deep discount to book despite its ability to earn healthy returns on equity.
Using 0.95 times book, the implied value is approximately:
₱50.35 per share
This is strikingly close to the other valuation methods, including the sum-of-the-parts estimate of around ₱49 and the normalized earnings valuation of roughly ₱50 to ₱53.
This also strengthens the case that First Gen’s fair value is closer to ₱50 per share than to KKR’s ₱35 offer.
A good offer for the buyer, not necessarily for the seller
No valuation can produce a perfectly precise number, particularly for a power company with volatile electricity prices, hydro exposure and large projects still under development.
A bearish case can justify something close to ₱35.
A more balanced assessment produces roughly ₱49.
Normalized earnings point toward ₱47 to ₱53.
Book value supports roughly ₱48 to ₱53 if First Gen deserves to trade anywhere near the value of its equity.
If we take the total, a reasonable fair-value range appears to be:
₱49 to ₱53 per share
with a central estimate of around:
₱51 per share.
This does not mean KKR made a bad offer.
At ₱35, KKR was attempting to acquire exposure to some of the country’s most strategic energy assets at roughly two-thirds of book value and at a price close to a bearish valuation scenario.
For KKR, that would have been an attractive entry point.
For First Philippine Holdings, it was a different calculation.
The financial statements suggest that FPH was not simply defending the family silver when it said ₱35 failed to reflect First Gen’s true value.
At around ₱50, the company would still trade at less than book value.
