Prime Infra and First Gen: A Strategic Alliance to Power the Philippines' Renewable Future

The Philippines' energy landscape is undergoing a seismic shift. With renewable energy (RE) targets demanding a 35% share of the power mix by 2030, and natural gas serving as the critical “bridge fuel” to achieve decarbonization, the May 2025 acquisition of First Gen Corporation's gas assets by Prime Infrastructure Capital (Prime Infra) emerges as a landmark strategic play. This deal positions Prime Infra to dominate LNG infrastructure while enabling First Gen to accelerate its renewable expansion—a dual-pronged strategy that could redefine energy security in Southeast Asia.

The Deal: A Masterclass in Synergy

Prime Infra's purchase of a 60% stake in First Gen's gas subsidiaries for PHP50 billion (USD$896 million) delivers immediate control over five operational gas-fired power plants (totaling 2,047 MW) and the interim offshore LNG terminal in Batangas. The terminal, powered by the BW Batangas FSRU, has already secured long-term LNG supplies from global giants like Shell, Qatar, and PetroChina—a critical advantage in an era where gas imports are set to surge.

The strategic brilliance lies in the synergy between gas and renewables:
- LNG as a Bridge Fuel: The terminal ensures stable gas supply for existing plants while reducing reliance on the declining Malampaya gas field, whose production Prime Infra is already bolstering with an $800 million investment.
- Capital Recycling for Renewables: First Gen will redirect PHP50 billion into its renewable arm, Energy Development Corp. (EDC), which aims to quadruple its capacity to 13 GW by 2030—representing 18% of the nation's power supply.

Why This Deal Wins in a Transitioning Market

The Philippines' energy transition hinges on two pillars: reliability and affordability. Prime Infra's acquisition directly addresses both:
1. Energy Security: The LNG terminal diversifies supply chains, mitigating risks from Malampaya's decline. With Tokyo Gas as a 20% partner, the terminal also benefits from Japan's deep LNG expertise.
2. Cost Efficiency: Fixed-price LNG contracts (vs. volatile spot markets) stabilize power generation costs, a boon for consumers and industrial users.
3. Scalability: The partnership's 60%-40% ownership structure ensures operational continuity while enabling Prime Infra to leverage its infrastructure expertise—already evident in its Manila Water and Malampaya holdings—to expand further.

Risks: Navigating the Storm Clouds

No deal is without risks. Two stand out:
1. Malampaya's Decline: Even with the $800 million investment, the field's output is projected to drop from 15 million cubic feet per day in 2020 to just 5 million by 2030. Prime Infra must accelerate LNG imports to fill the gap—a challenge if global LNG prices spike.
2. Competitive Threats: Meralco, AboitizPower, and San Miguel's $3.3 billion LNG terminal in Batangas looms large. However, Prime Infra's early mover advantage—secured through the FSRU's operational track record—gives it a head start in securing supply contracts.

The Investment Thesis: A Play on ESG-Driven Growth

This deal is not just about gas—it's about building an ESG-aligned energy powerhouse. Here's why investors should act now:
- Scalable Platform: Prime Infra gains a foothold in LNG infrastructure, a sector expected to grow at 6% CAGR in Southeast Asia through 2030.
- Renewables Upside: First Gen's RE expansion (targeting 13 GW by 2030) aligns perfectly with government mandates, offering stable revenue streams through power purchase agreements.
- Valuation Attraction: First Gen's 16% stock surge post-announcement signals market confidence—but the upside remains untapped. Prime Infra's valuation, meanwhile, is poised to rise as its infrastructure footprint expands.

Final Call: Buy the Dip, Build the Future

The Prime Infra-First Gen partnership is a rare opportunity to invest in a strategically indispensable asset at a pivotal moment for Philippine energy. With LNG demand set to surge and renewables accounting for 70% of new power capacity additions by 2030, this deal's dual focus on infrastructure and decarbonization makes it a cornerstone of the nation's energy security.

For investors, the risks are manageable—mitigated by long-term LNG contracts, Prime Infra's financial firepower, and First Gen's operational expertise. The reward? A front-row seat to a transition that will define the region's energy landscape for decades.

Act now. The bridge to renewables is being built—and this is the bridge to own.