endesa chile business platform and solid prospects · 2 endesa chile’s macroeconomic environment...

1

Endesa Chile

Business platform and solid prospects

Friday, December 11th 2009

2

Endesa Chile’s macroeconomic environment

Endesa Chile has consolidated a unique business platform

in Latin America

Our business offers solid prospects, with stable and visible

cash flows

Going forward, we will capture the best profitable and

sustainable growth opportunities


Contents

3



in Latin America


cash flows




Contents

44

Sources: EIU September 2009* MUSD = million USD

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Argentina Brazil Chile Colombia Peru

2004 2009e

+52%

+99%

+55%

+204%

+156%

The increase in FDI flows into the region reflect confidence among

international investors

Gross FDI stock (in million USD)

Economic and business growth

Reduction in public debt

Development of internal credit market

Positive current account balance

Contained inflation

Lower country risk

Higher expectations for recovery from the

crisis


5

Sound fundamentals mean that Latin American economies are able to recover more rapidly

Latin America has sustained GDP growth of around 4.5% over the past few years.

Latam economies are expected to contract in 2009, but the impact of the crisis will be less severe

than in other regions and recovery will be faster.

Sources: Bloomberg, IMF WEO October 2009, Latin American Consensus Forecast October 2009

GDP growth in Latin

America is expected to

outstrip the US and the EU

GDP growth estimates

Countries where Endesa

operates are showing higher

growth rates than the rest of

Latam

GDP growth rates

-2,5%

-2,7%

-5,2%

-5,3%

1,5%

-0,3%

-4,1%

-4,2%

-0,7%

-1,7%

Peru

Colombia

Brazil

Chile

Argentina

USA

Spain

UE

Italy

Germany

GDP

%09e

Latin-American economies have

responded well to the crisis…


66

982

940

13,616

8,475

7,573

7,185

6,296

6,142

5,718

3,326

2,658

2,154

USA

Japan

France

Germany

Spain

UK

Italy

Chile

Argentina

Brazil

Perú

Colombia

Sources: EIU September 2009

Electricity demand growth (1990-2009)

0

50

100

150

200

Argentina Brazil Chile Colombia Peru

1990 2009E

+169% +107% +208% +90% +150%TWh

Consumption: kWh 2007

Per capita power consumption

Electricity demand has a great growth potential

Despite the growth in electricity demand in the region over the last 20 years, per capita

power consumption in the countries where Endesa operates remains very low


77

Latin America will provide scope for organic growth of our business

In generation, we will participate in the market's

growth when project returns will be attractive again

In distribution, the expected growth in demand will

enable us to continue undertaking profitable

investments

Sources: Mining and Energy Ministries (Brazil, Colombia and Peru), CNE (Chile) and Endesa estimates (Argentina)

PeruColombiaChileBrazilArgentina

CAGR 2008-17: + 4.6% CAGR 2008-17: + 4.7%

System Capacity (GW) System Demand (TWh)

242

161

26 35

155

13

22

14

19

103

5

11

2008 2017

106 149

5995354

393

961

635 8176

29

56

2008 2017

Endesa Chile is well positioned to benefit from the future growth in the region

PeruColombiaChileBrazilArgentina


8

Moody’s S&P

Chile A1 A+

Brazil Baa3 BBB-

Peru Ba1 BBB-

Colombia Ba1 BB+

Argentina B3 B-

Investment grade Non-investment grade

Sources: J.P.Morgan ChaseEMBI and Reuters

Lower country risk as a consequence of political and economic stability

Rating agencies recognise the improvement in

credit quality, with upgrades for the ratings of

Peru, Colombia and Brazil

Credit risk

Government debtCountry risk (EMBI bp)

BB-

B-

A

BBB-

A

BB+

BB

BB+

BB

BBB-

B-

B+

Rating evolution2006

2007

2009

2008

2005

B+

B-

BBB-

BB

A+

A+

A+

BB

BB+

BB+

BBB-

BB+

BB+

Structural positive evolution of Latin American countries

http://www2.standardandpoors.com/portal/site/sp/en/us/page.siteselection/home.jsp

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in Latin America


cash flows




Contents

1010

Endesa is leader in four of the five Latin American countries

where it has operations

Colombia

2,895 MW

21% market share

Output 9M09: 9,922 GWh

#1

5,540 MW

38% market share


Peru

1,661 MW

28% market share


Chile#1

Brazil:

987 MW

1% market share in generation


5.4 million customers

5% market share in distribution

Argentina

3,652 MW

14% market share


#1

Data as of September 2009

Market shares calculated based on installed capacity

Installed consolidated capacity: 13,748 MW

(including Brazil): 14,734 MW

Consolidated Energy sales: 44,688 GWh

Total Generation

#1

Endesa Chile has consolidated a unique business platform in Latin America

1111

Together with AES, Endesa Chile has the most widely diversified generation portfolio in LatAm

None of the countries in which Endesa Chile operates accounts for more than 38% of its total

installed capacity in LatAm

Weight of

largest

country

operation on

portfolio

Source: 2008 Annual Reports. Total installed capacity of Endesa Chile includes 50% of GasAtacama and generation capacity in Brazil.

Our geographical diversification allows to reduce the risk of exposure to an individual market

% of installed capacity in LatAm by country


12

San Isidro (100.0%)

Pangue (94.99%)

Pehuenche (92.6%)

Celta (100.0%)

Endesa Eco (100.0%)

Canela (75.%)

Ampla

Coelce

Cachoeira

Fortaleza

Cien

Emgesa ( 31,4%) Edegel (22.7%) Chocón ( 23.8%)

Costanera (25.4%)

Operating

Companies

(% Endesa

Chile stake)

ENDESA

60,62%

Chilectra Chilectra Endesa Chile Endesa Chile

100,00%

Chilectra CHILECTRAEndesa Chile ENDESA CHILE

ENDESA LATINOAMÉRICA

Endesa

Brasil

59,98% 99,08%

28,48% 22,06%

36,27% 9%

OPERATING COMPANIES

Corporate structure: Enersis, holding vehicle for Latin America

% stake as of 30 October 2009


ENERSIS

Endesa Brasil (37.65%)

1313

Generation installed capacity 9M09

14,734 MW

Hydro

8.650

Coal 538

CCGT

3.050

Fuel-Gas

2.478Wind 18

Endesa has developed a unique asset portfolio in the region

59% of Endesa Chile's capacity in Latin America is hydroelectric

The bulk of our capacity has lower costs than those of a new entrant


Generation sales 9M09

49,786 GWh

Argentina19%

Brazil10%

Chile32%

Colombia26%

Peru12%

Total installed capacity includes 50% of GasAtacama and the generation capacity in Brazil.

1414

Recurrent growth of Endesa Chile’s financials

(*) Data as of September 2009

CAGR 05’-08’: + 18% CAGR 05’-08’: + 48%

EBITDA (US$ m) Net income (US$ m)

Endesa has consolidated a unique business platform in Latin America

15

3,719 3,6123,833

3,239 3,168

-

1,000

2,000

3,000

4,000

5,000

2005 2006 2007 2008 Sep-09

US

$ m

15

Strong financial position

As of Sept 2009, total liquidity position in Chile reached nearly US$ 1

billion, including cash and cash equivalents and committed credit lines.

Liquidity position enhanced with successful 20-year US$ 340 million local

bond issuance in Dec-08, reflecting the confidence in the company by the

local market.

At this moment, Endesa Chile has ring-fenced its Yankee Bonds’ cross

default clauses only related to Endesa Chile and its Chilean subsidiaries.

Consolidated figures in US$ million as of Sept 2009 and in historical dollars.

Debt by Type

Debt by Currency

Banks

29%

Yankee

Bonds

21%

Others

6%

Local

Bonds

44%

UF-Ch$

17%

Local

currency

29%

US$

54%

Net Debt Evolution


1616

3

354

215

35

415

215

1,246

0

200

400

600

800

1,000

1,200

1,400

2009

2010

2011

2012

2013

2014

Bal

ance

Comfortable debt maturity profile

Peru

10%

Colombia

24%

Chile

59%

Argentina

7%

Financial Debt by Country19 62 58

12747 44

107

0

200

400

600

800

1000

1200

1400

2009

2010

2011

2012

2013

2014

Bal

ance

61 92 8324 25 14

0

200

400

600

800

1000

1200

1400

2009

2010

2011

2012

2013

2014

Bal

ance

Colombia: US$ 1,078 m

Peru: US$ 463 m

Argentina US$ 298 m

Chile: US$ 2,483 m

US$ m

US$ m

US$ m

US$ m

All figures as of September 2009

164 123 156

082 72

482

0

200

400

600

800

1000

1200

1400

2009

2010

2011

2012

2013

2014

Bal

ance


17

2.8x2.5x

1.8x

1.4x

0

0.5

1

1.5

2

2.5

3

2006 2007 2008 30/09/2009

Net debt/EBITDA

EBITDA/Net financial expenses

4.3x

5.0x

6.9x

8.3x

0

1

2

3

4

5

6

7

8

9

2006 2007 2008 30/09/2009

Endesa Chile‘s

investment grade

status restored

Endesa Chile’s

investment grade

status restored

Solid financial ratios…


18

Attractive shareholder remuneration, cash flow received by Endesa Chile

Endesa Chile has received ~US$ 416m since 2006 mostly from foreign subsidiaries.

Endesa Chile: cash flows via dividends and capital reductions

2006 2007 2008 30-Sep-09 Total

US$ m

45

167

130

74416

45

162

130

74

411

5

5

Dividends Equity reductions


19

0

50

100

150

200

250

30/12/05 30/06/06 30/12/06 30/06/07 30/12/07 30/06/08 30/12/08 30/06/09

19

Good share price performance by listed subsidiaries

Endesa Chile share price performance

S&P500 -11%

NYSE ADR Endesa Chile: +68%

ADR Endesa Chile: +68% (2006 – 4 dec 2009)

S&P Utilities -3%


2020

Summary of consolidated results

61%

-

35%

44%

5%

% Var.

Revenues

Operating income

Operating margin

Ebitda

Net income (c)

Ch$ Millions

44%

975

5%

829

Physical sales (GWh) 44,688

509

44%

1,772

-

3,414

1,506

925

1,879

Jan-Sept

US$ m

32%

721

576

42,442

316

1,818

Jan-Sept

2008 (b)

36%

1,146

893

55,735

443

2,492

FY

2008 (a)

Jan-Sept

2009 (b)

a) 2008 figures under Chilean accounting rules

b) Jan – Sept 2009/2008 under IFRS (International Financial Reporting Standards)

c) Attributable to stockholders of the parent company (Endesa Chile)

Main effects: better production mix, lower generation costs, and

higher sales in the spot market


21

Figures at 9M09. Installed capacity includes 50% of Gas Atacaman and generation capacity in Brazil.

Installed capacity (GW)

Assets (US$ m)

Generation output (TWh)

Net income (US$ m)

EBITDA (US$ m)

37%

14%

39%

21%

21%

14.7

11,839

41.4

1,772

925

A key role in Endesa


22



in Latin America


cash flows




Contents

23

Generation business

Right long-term

signals for

investment

Long-term tenders that

promote expansion

• Prices indexed to inflation and fuel prices

• Substitute prices calculated in Chile and

Peru

Regulated market1

Based on marginal pricing

systems

• Audited costs, except Colombia (price

bidding)

• Marginal cost established for thermal

power plants (gas or diesel)

Spot market3

Annual income for availability

• Remuneration based on investment in

peak turbine and recognised firm capacity,

except Brazil

• In Colombia, firm power auctions with

long-term contracts (Reliability Charge)

Capacity payment4

Supply of specific needs of

industrial customers

• Prices indexed to marginal cost, inflation

and fuel prices

Free market2

Stable regulatory frameworks in generation

with long-term signals for investment

Our business offers solid prospects, with stable and visible cash flows

2424

In short, important regulatory changes have been undertaken

by governments to guarantee security of supply and expansion

Catalysts Main Changes (2003-2008)

(2006) “Reliability charge” based on tenders of

firm energy contracts, up to 20 years.Highly dependent on hydro energy sources

Highly dependent on hydro energy sources

Lack of investment in new capacity Price volatility

(2003) “New Model” for the electricity sector,

tenders up to 15 years (thermal) and 30 years

(hydro).

High demand growth (9%)

Lack of investment in new capacity 2006-2008 “New law”: Tenders up to 20 years

(2004) Resolution 1.427/04 FONINVEMEM

(2006) Resolution 1.281/06, Energía Plus and Gas Plus

Lack of Argentinean gas

Highly dependent on hydro energy sources

Investment needs for Gx and Tx

(2004) “Short law I”: Expert panel

(2005) “Short law II”: Tenders up to 15 years

Lack of gas and electricity infrastructure

Economic crisis

FONINVEMEM: Fondo para Inversiones del Mercado Eléctrico Mayorista


2525

Maintain leadership through organic growth

2005 includes 50% of GasAtacama and generation capacity in Brazil. Annual capex considers Endesa Latinoamerica’s perimeter.

A significant part devoted to

expansion.

Maintenance capex able to extend

the useful life of plants.

122211 182 180

108

127

296431

543

246

2005 2006 2007 2008 Sep-09

Maintenance Expansion

Annual capex in generation (US$ m)New 1,578 MW in the last four years

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 3 T 2 0 0 9 T o t a l

+534

+187

14,734+450

+408

Perú:

Ventanilla +457 MW

Colombia:

Cartagena +142 MW

Chile:

San Isidro II +248 MW

Palmucho +32 MW

Canela +18 MW

Perú:

Ventanilla +36 MW

Colombia:

Guavio + 50 MW

Chile:

San Isidro II +105 MW

Ojos de Agua +9 MW

Argentina:

Arroyito +8 MW

Colombia:

Cartagena: + 66 MW

Chile:

TG Quintero +257 MW

Perú:

Santa Rosa +193 MW

13,156


26

Hydrology

Demand growth

Fuel prices

Exchange rates

Inflation

Careful commercial policy to reduce volatility of margins

Our gross margin will be at least 90% of the

expected margin in normal conditions1, even in

the case of:

Driest hydrology of historical levels

Increases in fuel prices

Lower growth in demand…

20.0

41.3

33.0

Thermal

Target

outputTarget sales

Target output and sales in 2009 (TWh)

Hydro

Regulated

and free

contracts

SpotExtreme

hydro

volatility

53.0

Risk variables affecting margins

Commercial policy

(1) With 95% probability (MaR)

* Target output represents consolidated net production of electricity.


27



in Latin America


cash flows




Contents

Maintain our leadership position in Chile, Colombia and Peru

Implementation of regulatory agreements in Argentina

Achieve efficiencies and set best practice standards

Going forward, we will capture the best profitable and sustainable growth opportunities

Main action lines

2929

Start-up

9M 09

Peru: Santa Rosa open-cycle gas plant (193 MW)

Chile: Quintero open-cycle gas plant (257 MW)

Chile: Quintero regasification plant: 20% stake and 33% access to gas

(from mid-2010 full capacity: 9.5M m3/day)

Projects under

construction

Chile: Bocamina II coal-fired plant (370 MW). Scheduled commissioning

4Q 10

Chile: Canela II wind farm (60 MW). Slated to come on stream in 4Q 09

Project pipeline

Maintain our leadership position in Chile, Colombia and Peru

Colombia: Quimbo hydro plant (400 MW)

Chile: Aysén hydro plants (2,750 MW)

Water rights, MW In addition to the project portfolio, we have water rights in Chile

equivalent to approximately 2,800 MW

Projects under

study

Chile: Los Cóndores hydro plant (150 MW)

Chile: Neltume hydro plant (473 MW)

Chile: Punta Alcalde coal plant (740 MW)

Peru: Curibamba hydro plant (163 MW)


30

• Power plant availability improvement

• LTSA optimization

• O&M resources allocation depending

upon its profitability

• Stock optimization

O&M optimization plan

• LNG purchases optimization

• Coal purchases synergies

• Joint purchases Endesa - Enel

Fuel procurement

• Function centralization

• Remote control reinforcement of

power plants

• Contracts renegotiation

• Operational efficiency

Fixed cost reduction plan

Improvement of synergies and efficiency targets

Generation

Achieve efficiencies and set best practice standards


31

3,652 MW installed capacity

1,328 MW hydro

2,324 MW thermal

Risks are limited:

No cross default risk to the rest of the

group's debt

The book value of Argentina at Endesa Chile

is US$ 172 m

Implementation of regulatory agreements in Argentina

We have high quality assets

Our assets in Argentina have significant value upside if the market recovers

Argentina's contribution to Endesa

Chile business in 9M09

0%1%

5%

25%

% Capacity % EBITDA % Net income % Dividends


3232

Endesa Chile’s business platform and solid prospects

Conclusions

Excellent and unique business platform

Strong presence in the region

Optimal country and business diversification

Solid and rooted presence

Proven ability to manage the business

Sound financial position

Profitable growth potential:

Positive structural evolution

Great growth potential in the region

Favourable position and capabilities to leverage on growth

Synergies and efficiency plan

Argentina upside

Greater value

endesa chile business platform and solid prospects · 2 endesa chile’s macroeconomic environment...

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