Enel Americas Annual Report 2002

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FY2002 Annual Report · Enel Americas

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Table of Contents

Letter From the Chairman of the Board

Identification of the Company

Ownership and Control

Board of Directors

Organizational Structure

Management

Activities

Business Activities

Corporate Structure

Generation

Endesa Chile

Distribution

Chilectra

Río Maipo

Edesur

Edelnor

Cerj

Coelce

Codensa

Others Businesses

Synapsis

CAM

Manso de Velasco

Liability Statement

Identification of other Subsidiaries and Related Companies

Financial Statement

Consolidated Financial Statements

Unconsolidated Financial Statements

Financial Statements of Subsidiaries

227

283

Letter from the Chairman
of the Board

their portfolios. For that purpose, they chose to

sell shares of those companies that presented

the best liquidity. In that context, a strong sales

trend came upon the Enersis shares, which

explained, in great measure, the deep fall in the

stock-exchange valuation of our titles.

The steady slow down of the United States of

America, the low expectations for the recovery

of the stock-exchange markets of some relevant

Asian actors, and, moreover, the threats of war in

the Middle East, which have strongly impacted

the stability of the energy prices and the exchange

rate stability of the region, were all added to the

previous problems.

Dear Shareholder:

I am pleased to submit the 2002 Annual Report

However, our company has calmly responded to

on the management and operations of the Enersis

this environment of difficult prediction, keeping

Group for your consideration.

its long and short term objectives unaltered. In

fact, and despite the adverse circumstances, our

Before starting the summary of the activity of the

best effort has been focused on reinforcing the

Group that I am honored to preside, I deem it

management of our main businesses.

essential to refer to the global context in which

our activity was developed.

In the first place, and as an essential element to

compensate the previously mentioned effects,

As each one of us could appreciate, the

Enersis has designed and launched during the

decrease in the economic activity in the region

year 2002, an ambitious financial strengthening

became worse during the year 2002. This could

plan, intended to solve the liquidity problems in

be confirmed by a decrease in the levels of

the short term, to renegotiate the bank debt and

investment, deterioration of the exchange terms

to increase the equity of the Group, which was

of our countries, fall of the employment rate and

reduced in US$ 290 million due to the recognition

exchange rate instability, with the addition of

of the negative goodwill associated with the

political instability in some important countries

investments in Argentina and Brazil because of

where we operate.

the regional crisis.

Due to these circumstances, during the first and

In the operational area, the efforts to improve

second quarters of the year 2002, the foreign

efficiency, which had begun several years before,

investors, mainly institutional ones based on

continued, thus increasing the productivity from

the United States of America, tried to reduce

1,379 customers per employee to 1,409 customers

their shareholding positions in Latin American

per employee between the years 2001 and 2002.

companies, in an effort for reducing the risk on

Furthermore, as a part of the efforts destined

ENERSIS 20 02 ANNUAL REPORT

Pablo Yrarrázaval
Chairman

to serve the natural growth of our market, we

increased our customer base by 275,000, which

is equivalent to having incorporated a company

of the size of our subsidiary Río Maipo, without

having incurred in expansion investments.

However, this has been carried out in an

unfavorable environment that operated during

the whole year 2002, and that has resulted in

a reduction in the average consumption per

customer of 5.5% compared to the year 2001.

Regarding the generation business, it has been a

good hydroelectric year which, together with the

conclusion of the important interconnection of

2,000 MW between Argentina and Brazil carried

out by our Group, has permitted to compensate

A consequence of all the aforesaid has been the

the lower levels of activity with an aggressive

debt reduction achieved during the year, starting

reduction of the energy costs.

from a consolidated figure of US$ 9,326 million

by the end of 2001 and ending with US$ 8,980

Another element of particular interest for

millions, a decrease of 3.7%.

our shareholders is that, due to the efforts to

increase the rationalization of the organizational

As you can appreciate, our main effort during the

structure of the Group, selling and administrative

year 2002 was focused on how to best confront a

expenses were reduced by 20.2%. This strong

year that appeared as an extraordinarily difficult

reduction is related with the decrease in the

and complex one, where the uncertainties were

observed expenses due to the lower levels of

generalized during the period.

activity and devaluations, and is also due to the

urgent measures applied by the management

Therefore, and despite all those difficulties, we

to contain the negative effects produced by the

continue to work on the strengthening of the

tariff reduction, especially the tariffs freezing in

company, the only way to overcome the challenge

Argentina.

from the environment, without letting sadness

stop us from perseverantly continuing to improve

Precisely in this context of optimization of the

efficiency.

existing resources, another important measure

was to reduce the recurrent investments in fixed

We closed the year with losses, mainly accounting

assets. This reduction, which reached a 6.9%,

losses, due to the above mentioned goodwill

was made with the purpose of contributing to

adjustments. The net income of US$ 224,000

relieve the cash tensions, without compromising

million losses was due to the accounting

the service quality standards demanded by more

adjustments made in order to better reflect the

than ten million customers that form our business

economic reality of our businesses in Argentina

platform in the five countries where we operate.

and Brazil, and also due to other minor

ENERSIS 2002 ANNUA L REPORT

2
2

investments in Chile. In the first two countries,

million, strengthening the equity base through

and in agreement with the Chilean accounting

a capital increase up to US$ 2,000 million,

rules, the net balance of positive and negative

divestments for about US$ 900 million including

goodwill for investments made both in generation

the debt associated with the divested assets, and

and distribution was accelerated. In Argentina,

finally continuing to improve the operations by

there was a write off equivalent to US$ 49 million,

increasing the generation of free cash flow by

in Brazil, US$ 315 million, and finally in Chile,

US$ 130 million, a goal which is achievable in a

US$ 23 million, corresponding to our investments

three-year term.

in the real estate business. The consolidated

effect of US$ 387 million, net of minorities,

These objectives will allow the Company to

was partially compensated by US$ 97 million

reduce, during the year 2003, its consolidated

in provisions made by Enersis during the year

debt for about US$ 2,600 million, and, even

2002, with which the final effect on results was of

though they generated skepticism at first and

US$ 290 million.

many questions later, they ended up by attracting

the interest and support of the market. This is

As stated above, these adjustments showed our

because those who know our companies realize

interest in reflecting, with total transparency,

that, beyond the short term adverse circumstance,

the real impact that the uncertain environment

the foundations of our business remain unaltered

in Argentina and Brazil was having on the

and, when the region improves its activity levels,

company. It was necessary to establish, with full

Enersis should again be one of the best and most

clarity and once and for all, the real scope of this

trustworthy alternatives of investment.

situation to this day, and thus put an end to many

speculations about the magnitude of the impact

The state of each of these ambitious goals is the

of the crisis on our investments abroad. In this

following:

respect, and based on the opinions of investors

With respect to the refinancing of liabilities, the

and analysts, I can say that this write off was very

company, after hard negotiations with banks,

well received by the market.

reached an unprecedented agreement in the

Chilean private area, which consists in extending

I am going to briefly mention now the scope

the bank debt for US$ 2,330 million due in 2003

of the Financial Strengthening Plan to which I

and 2004 to the year 2008, and removing the

referred previously. We conceived a plan of steps

acceleration clauses associated with the rating

that would allow the Enersis Group to foster its

grids, in function of which the credit cost increase

capabilities, even in the midst of difficulties in

depending on the rating risk classification.

the region, with the object of being in the best

conditions when the Group resumes its usual

Since the new refinancing is not linked to the

growth levels.

rating and permits prepayment in advance at any

time, without extra costs, the short term financing

In this way, last October we launched our

pressures have been solved, thus contributing,

Strengthening Plan, based on four pillars which

as the first pillar of the plan, to provide financial

were totally interrelated: Refinancing liabilities

stability to the Group.

due in the short and middle term for US$ 2,300

ENERSIS 20 02 ANNUAL REPORT

With respect to the capital increase, a main pillar

Finally, let me tell you that while some relevant

in our process of strengthening the equity base of

actors of this sector are leaving the region, the

the company and reducing financial expenses, we

Enersis Group is renewing its commitment to

want to take advantage of the good disposition of

continue being a regional energetic leader. To

our controller shareholder regarding his express

fulfill these expectations, we have the best work

desire to capitalize the debt that Enersis still has

team, to whom I dedicate my special appreciation

with the company, amounting to an approximate

for the great contribution and commitment with

figure of US$ 1,400 million. We believe this

their work during a very difficult 2002.

strong demonstration of trust in the future of

the company should encourage the rest of the

Dear Shareholders, 2002 is already past, we have

shareholders to show their support once more,

learnt from it and we have been able to define

despite the real “voyage through the desert”

the best lessons to confront the future. Here is

during these last two years, a circumstance that

where we stand. This is our challenge and we will

we hope to overcome in the shortest possible time.

assume it with confidence, with determination,

and with a strong commitment toward our

With respect to the process of divestments, it

shareholders.

is important to comment on the real interest

evidenced in the purchase of our companies Río

Kind regards,

Maipo and Central Canutillar. As will be publicly

informed, to January 27th, we had received

thirteen non binding offers for said companies,

and we hope to conclude the process by the end

of March 2003.

Finally, with respect to the operating

improvements planned for a period of three years,

which will result in the generation of free cash

flow, it is worth highlighting the new objectives

in the matters of productivity, efficiency in

collections, theft and investment per customer,

which would allow us to rescue, after a period

of three years, the US$ 130 million target of

Pablo Yrarrázaval

additional free cash flow over the baseline of the

Chairman of the Board

year 2002.

Enersis S.A.

In summary, the four levers of action will

converge to achieve a sustained improvement

of the Group’s free cash flow, and at the same

time increase its solvency in order to be in the

best disposition to confront the future more

optimistically.

ENERSIS 2002 ANNUA L REPORT

4
4

GENERAL IDENTIFICATION

Corporate name
ENERSIS S.A.

Type of company
Limited Liability
StockCompany

Tax register number
94.271.000 – 3

Address
Santa Rosa No. 76, Santiago

Telephone
(56-2) 353 4400
(56-2) 378 4400

Fax
(56-2) 378 4788

P.O. Box
1557, Santiago

Identification
of the company

to August 1, 1988. The latest amendment is

acknowledged in a public deed of July 24, 2002,

executed before Patricio Zaldívar, Notary Public

in Santiago. The abstract was recorded in the

Official Commerce Register of Santiago on page

21,885, No 17.850 and published in the Official

Gazette on August 19, 2002.

ARTICLES OF INCORPORATION AND BY-

HISTORICAL OVERVIEW

LAWS

The company was originally organized as

Compañía Chilena Metropolitana de Distribución

Eléctrica S.A., as recorded in a public deed of

June 19, 1981, executed before Patricio Zaldívar,

Notary Public in the city of Santiago and amended

by notary deed of July 13 the same year.

The existence of the Company was authorized and

its by-laws were approved pursuant to resolution

No 409-S of July 17, 1981, issued by the

Superintendence of Securities and Insurance. The

abstract of such authorization and its approval

were recorded in the Official Commerce Register

of Santiago, on page 13,099 No 7,629 of the year

1981, and published in the Official Gazette on

July 23, 1981.

On June 19, 1981, Compañía Chilena de

Electricidad S.A. was restructured into a parent

company and three subsidiaries, one of which

was Compañía Chilena Metropolitana de

Distribución Eléctrica S.A.

In 1985, as a result of the privatization policy

enacted by the Government of Chile, the transfer

of the capital stock of Compañía Chilena

Metropolitana de Distribución Eléctrica S.A.

to the private sector began. This process was

completed on August 10, 1987. Through this

process, private pension funds (A.F.P.), the

company’s workers, institutional investors and

thousands of small investors became stockholders

of the Company.

To date, the by-laws have been subsequently

amended. The existence of the company under

the current name of Enersis S.A. dates back

The organizational structure was based upon

operating activities or functions in which

attainments were evaluated on a functional

basis and profitability was limited by a tariff

ENERSIS 20 02 ANNUAL REPORT

Web Site
www.enersis.com

E-mail
comunicacion@e.enersis.cl

Securities register number
No. 175

External Auditors
Deloitte & Touche

Subscribed and paid in capital
(ThCh$) 751,208,197

mechanism originating from the exclusive

and sales needs of the rural and semi-urban areas

involvement of the Company in the business of

of Chile’s Metropolitan Region.

electricity distribution. In 1987, the Board of

Directors proposed a division of the different

The Extraordinary Shareholders’ Meeting held on

activities of the parent company. Thus, four

April 27, 1994 approved changing the corporate

subsidiaries were formed, making it possible to

name of subsidiary Distribuidora Chilectra

manage them as business units with objectives

Metropolitana S.A. to that of Chilectra S.A.,

of their own, thereby expanding the activities of

effective as of June 1, 1994.

the company to other non-regulated businesses,

though still related to the core business.

CORPORATE PURPOSE

This proposal was approved by the Extraordinary

The purpose of the company is to undertake

Shareholders’ Meeting held on November 25,

both in Chile and abroad, the exploitation,

1987, which established its new corporate

development, operation, generation, distribution,

purpose.

transmission, transformation and/or sales of

energy of whatever nature and in any form,

As a result, Compañía Chilena Metropolitana de

directly or through other companies, as well

Distribución Eléctrica S.A. became an investment

telecommunication activities and the provision

company. On August 1, 1988, under a resolution

of engineering advisory services, either in Chile

adopted by the Shareholders’ Meeting held

or abroad. Its purpose will further be to invest

on April 12, 1988, the Company changed its

and manage company investments in subsidiaries

corporate name to Enersis S.A.

or related companies that generate, transmit,

distribute or commercialize electric energy, or that

Furthermore, to the effects of providing enhanced

are involved in the following lines of business: (i)

customer service, as of June 1, 1989, it was

energy in any of its forms or nature, (ii) the supply

approved the division of subsidiary Distribuidora

of public services or companies having energy as

Chilectra Metropolitana S.A. into a successor

their main input, (iii) telecommunications and

company that retained the corporate name, and

information systems, (iv) intermediation business

a new company incorporated under the name

through the Internet. In the fulfillment of its main

of Compañía Eléctrica del Río Maipo S.A., that

objective, the company will develop the following

currently serves the electric energy distribution

functions:

ENERSIS 2002 ANNUA L REPORT

6
6

a) Promote, organize, set up, modify, dissolve

services such as may appear necessary for a

or liquidate companies of any nature, whose

more adequate performance.

corporate purpose is similar or related to those

of the Company.

In addition to its core business purpose and acting

b) Propose to its subsidiary companies

and Financing Policy approved at the ordinary

investment, financing and commercial policies

Shareholders’ General Meeting, the company may

always within the bounds of the Investment

as well as the accounting practices and

invest in:

principles which such companies shall abide

by.

1.- The acquisition, exploitation, construction,

rental, management, intermediation, marketing

c) Supervise the management of its subsidiary

and disposal of any kind of movable property and

companies.

real estate, either directly or through subsidiary or

d) Provide its subsidiary or related companies

related companies.

with the needed financial resources to develop

2.- All types of financial assets, including

their business activities, and in addition,

shares, bonds, debentures, commerce paper,

furnish management services as well as

and in general all kinds of securities and equity

financial, commercial, technical, legal and

contributions to companies, either directly or

auditing services and, in general, any other

through subsidiary or related companies.

ENERSIS 20 02 ANNUAL REPORT

Ownership
and Control

OWNERSHIP STRUCTURE

The capital stock of the company is divided into 8,291,020,100 shares of the

same and only one series with no par value.

At December 31, 2002, a total of 8,291,020,100 shares of common stock were

subscribed and paid in, with the following breakdown:

Shareholders

Number of
Shareholders

Endesa S.A.

A.F.P

Citibank N.A.

Stockbrokers, Mutual Funds, Insurance
Companies and Foreign Investment Funds

Other Shareholders

Total

10,076

10,194

Number of
shares

5,389,163,065

1,035,179,340

328,916,750

922,979,777

614,781,168

8,291,020,100

65.00%

12.49%

3.97%

11.13%

7.41%

100.00

CONTROLLERS IDENTIFICATION

Pursuant to Title XV of Law 18,045, the ownership interest of the controller,

Endesa S.A., in Enersis of 65% derives from the controlling stake it has in the

ownership of Compañía de Inversiones Chispa Uno S.A. (21.5%) and Endesa

Internacional S.A. (8.4%) plus the 35.1% direct interest in the ownership

through Elesur S.A.

LIST OF THE TWELVE LARGEST SHAREHOLDERS OF THE COMPANY

At December 31, 2002, Enersis was owned by 10,194 shareholders. The twelve

largest were:

Shareholders

Tax Register Number

Number of Shares

Elesur S.A.

96.800.570-7

2,914,325,536

Compañía de Inversiones Chispa Uno S.A.

96.641.060-4

1,780,246,340

Endesa Internacional S.A.

59.072.610-9

Citibank N.A. (according to Circ. 1,375 SVS)

97.008.000-7

98.000.100-8

98.000.400-7

98.001.000-7

96.571.220-8

98.000.000-1

96.894.180-1

98.000.600-K

80.537.000-9

AFP Habitat S.A.

AFP Provida S.A.

AFP Cuprum S.A.

Banchile Corredores de Bolsa S.A.

AFP Santa María S.A.

Bancard S.A.

AFP Summa Bansander S.A.

Larraín Vial S.A. Corredores de Bolsa

Subtotal: 12 shareholders

Others: 10,182 shareholders

Total: 10,194 shareholders

8
8

694,591,189

328,916,750

323,304,197

255,812,109

178,611,688

178,368,323

150,793,071

91,338,455

91,054,355

72,983,101

7,060,345,114

1,230,674,986

8,291,020,100

35.15%

21.47%

8.38%

3.97%

3.90%

3.09%

2.15%

1.82%

1.10%

0.88%

85.16%

14.84%

100.00%

ENERSIS 2002 ANNUA L REPORT

MOST IMPORTANT CHANGES IN OWNERSHIP

During 2002, the most important changes in the ownership of Enersis were:

Shareholder

Tax Register
Number

Number of Shares
2001

Number of Shares
2002

Variation %

Citibank (according to Circ. 1,375 SVS)

97.008.000-7

744,587,100

328,916,750

AFP Habitat S.A.

AFP Provida S.A.

AFP Cuprum S.A.

98.000.100-8

246,829,975

323,304,197

98.000.400-7

354,857,654

255,812,109

98.001.000-7

213,592,328

178,611,688

Banchile Corredores de Bolsa S.A.

96.571.220-8

43,915,204

178,368,323

AFP Santa María S.A.

Bancard S.A.

98.000.000-1

156,254,454

150,793,071

96.894.180-1

17,819,771

AFP Summa Bansander S.A.

98.000.600-K

129,094,720

Larraín Vial Corredores de Bolsa

Cía de Seguros de Vida Consorcio Nacional

Bolsa de Comercio de Santiago

Consorcio Corredores de Bolsa S.A.

80.537.000-9

99.012.000-5

90.249.000-0

96.772.490-4

26,028,630

48,752,062

13,883,000

5,102,454

91,338,455

91,054,355

72,983,101

61,996,453

47,995,976

42,267,412

(55.83)

30.98

(27.91)

(16.38)

306.17

(3.50)

412.57

(29.47)

180.40

27.17

245.72

728.37

STOCK EXCHANGE TRADING BY DIRECTORS AND MAIN EXECUTIVE OFFICERS

Enersis shares traded by directors and main executive officers of the Company during

2002 are as follows:

Shareholder

Tax Reg.
Number

No. of Shares
Traded

Unit Price

Relationship with the Company

Inversiones y Asesorías
Sydarta Ltda.

78.133.360-3

1,000,000

Ch$ 123.0

Company related to Ernesto Silva, Director of Enersis

SANTIAGO STOCK EXCHANGE, CHILEAN ELECTRONIC STOCK EXCHANGE

AND VALPARAISO STOCK EXCHANGE

The number of shares traded in the stock exchange where Enersis shares are traded, both

in Chile, through the Santiago Stock Exchange, the Chilean Electronic Stock Exchange,

and the Valparaíso Stock Exchange, as well as in the United States and Spain, through

the New York Stock Exchange (NYSE) and Latin American Stock Exchange of Madrid

(Latibex) correspondingly, are detailed below:

ENERSIS 20 02 ANNUAL REPORT

1 1

1 0

QUARTERLY STOCK EXCHANGE INFORMATION OF THE LAST THREE YEARS

During 2002, 2,363 million shares, equivalent to

Ch$ 219,385 million were traded. The share price

Santiago Stock
Exchange

1st Quarter 2000

2nd Quarter 2000

3rd Quarter 2000

4th Quarter 2000

1st Quarter 2001

2nd Quarter 2001

3rd Quarter 2001

4th Quarter 2001

1st Quarter 2002

2nd Quarter 2002

3rd Quarter 2002

4th Quarter 2002

Units

Amount ($)

Average Price

closed at Ch$ 59.

190,988,277

110,101,006

88,658,193

198,483,727

217,618,425

292,388,256

226,195,786

393,051,599

512,037,133

474,079,058

692,521,240

684,639,252

40,078,550,323

23,513,620,910

18,383,256,232

39,102,614,613

44,437,043,299

57,663,194,013

41,936,113,910

73,344,332,507

72,041,084,807

48,911,115,424

54,285,443,986

44,147,517,186

216.22

213.51

209.79

200.73

205.94

197.59

185.74

183.26

140.70

103.17

78.39

64.48

Chile Electronic Stock
Exchange

Units

Amount ($)

Average Price

During 2002, 1,273 million shares were traded,

equivalent to Ch$ 141,605 million. The share

price closed at Ch$ 58.6.

1st Quarter 2000

2nd Quarter 2000

3rd Quarter 2000

4th Quarter 2000

1st Quarter 2001

2nd Quarter 2001

3rd Quarter 2001

4th Quarter 2001

1st Quarter 2002

2nd Quarter 2002

3rd Quarter 2002

4th Quarter 2002

Valparaíso Stock
Exchange

1st Quarter 2000

2nd Quarter 2000

3rd Quarter 2000

4th Quarter 2000

1st Quarter 2001

2nd Quarter 2001

3rd Quarter 2001

4th Quarter 2001

1st Quarter 2002

2nd Quarter 2002

3rd Quarter 2002

4th Quarter 2002

73,157,401

61,091,600

50,955,676

72,312,976

83,608,430

158,055,600

109,886,421

169,896,292

269,920,400

359,523,772

386,541,593

257,464,603

Units

4,651,539

3,320,362

743,378

812,885

1,170,182

2,746,772

2,071,416

4,724,089

18,797,002

7,970,306

22,259,663

9,087,665

ENERSIS 2002 ANNUA L REPORT

15,149,830,280

13,142,859,608

10,684,550,675

14,105,017,267

17,152,644,402

31,321,294,251

20,354,381,577

31,038,862,776

37,714,503,611

48,319,942,414

35,646,626,810

19,923,582,845

207.17

213.97

207.78

195.78

205.77

197.13

186.42

182.94

139.72

134.40

92.22

77.38

Amount ($)

Average Price

During 2002, 58 million shares were traded,

equivalent to Ch$ 5,668 million. The share closed

at Ch$ 59.

966,141,613

694,944,396

155,761,788

164,792,985

241,026,099

532,712,377

389,093,093

856,465,194

2,597,626,847

748,664,861

1,751,836,764

570,105,970

207.70

209.29

209.53

202.72

205.97

193.94

187.83

181.29

138.19

93.93

78.70

62.73

1 1

1 0
1 0

New York Stock Exchange ( NYSE)

amortization of negative goodwill from normal

The shares of Enersis started trading in the New

operations in the quarters ending in March, June,

York Stock Exchange (NYSE) on October 20,

September and December of such fiscal year. For

1993. The ADR for the Company consists of 50

purposes of the above calculation, the interim

shares and its stock exchange ticker symbol is

dividends for the year 2003 already distributed

ENI. Citibank N.A. performs as depositary bank

on such distribution date will be deducted

and Banco de Chile performs as custodian bank in

from the 85% of the cumulative income before

Chile.

amortization of negative goodwill.

During 2002, in the United States of America,

Dividends established in pursuance of this policy

22 million ADR´s (1 ADR = 50 shares), equivalent

will be applied to the income originated from

to US$ 174 million, were traded. The price of the

normal company operations, understanding as

ADR closed at US$ 4.09.

such the income before amortization of negative

goodwill obtained by the Company in the period

Latin American Stock Exchange of Madrid

2003, without considering those resulting from

Stock Exchange (LATIBEX)

the following events:

The shares of Enersis started trading in the Latin

American Stock Exchange (Latibex) on December

1. Accounting effects deriving from the valuation

17, 2001. The contract unit for the company is

of equity contributions made to subsidiary

50 shares and its stock exchange ticker symbol is

companies.

XENI. Santander Central Hispano Investment S.A.

performs as linking entity and Banco Santander

2. Accounting effects deriving from the

performs as custodian bank in Chile.

recognition of the premium in equity

In Latibex, during 2002, 3,775,758 titles were

traded (1 title = 50 shares), equivalent to

3. Profits arising, directly or indirectly, from

25 million Euros. The price of the share

participation in related companies organized

closed at 3.92 Euros.

in Chile or abroad.

placement by subsidiaries of their own stock.

DIVIDEND POLICY FOR THE YEAR 2003

4. Profits generated by subsidiary companies

organized abroad or by subsidiary companies

All present members of the Board of Directors

in which the participation of the Company,

unanimously agreed to submit to the Enersis

either directly or indirectly, is less than 60% of

Ordinary Shareholders’ Meeting, scheduled for

the capital stock of those companies, as well as

March 31, 2003, the following Dividend Policy

profits deriving from the disposal of assets in

they expect to enforce during the period 2003:

such companies.

Distribute in May, August and November of the

5. Accounting recognition of positive and

year 2003, and in February 2004, an interim

negative goodwill associated with such

dividend to be charged to the net income of the

investments.

year 2003, amounting to 85% of the income before

ENERSIS 20 02 ANNUAL REPORT

1 3

1 2

The Board of Directors shall not distribute

Company makes from time to time, or to the

interim dividends based on the income before

existence of given conditions.

amortization of negative goodwill that arise from

the above events and the Ordinary Shareholders’

As for the final dividend policy, it is the purpose

Meeting shall state their view thereon when

of the Board of Directors that such dividends

approving the final dividend.

are as a minimum the interim dividends already

The foregoing is the intention of the Board of

Law on Stock Companies, whichever of the two is

distributed or the minimum stated by the Chilean

Directors of the Company and, consequently, its

higher.

fulfillment will be subject to the income before

amortization of negative goodwill as well as to

The following table shows the dividends per

the results reflected in the projections that the

share paid out over the last five years.

Dividend Number

Dividend Type

Closing Date

Due Date

Ch$ per Share
($ of each year)

Accrued in

Interim

Definitive

Interim

Definitive

20.02.98

07.05.98

20.11.98

11.05.99

19.04.01

26.02.98

13.05.98

26.11.98

17.05.99

25.04.01

0.800000

4.500000

1.600000

4.000000

1.806391

1997

1998

2000

DISTRIBUTABLE PROFITS
(in thousands of Ch$ to December 2002)

SYNTHESIS OF SHAREHOLDERS’

COMMENTS AND PROPOSALS

Profits of the period

Negative goodwill amortization

(223,748,087)

112,247,774

Income before amortization of negative goodwill

(335,995,861)

No comments were submitted to Enersis regarding

businesses carried out from January 1st to

December 31st, 2002, either from senior partners

Percentage on distributable profits distributed as
dividend

or groups of shareholders that total 10% or more

of the shares issued with voting right, pursuant

to the provisions of Article 74 of Law No. 18,046

and the Articles 82 and 83 of the Regulation of the

Law on Stock Companies.

ENERSIS 2002 ANNUA L REPORT

1 3

1 2
1 2

CHAIRMAN
Pablo Yrarrázaval
Tax register number:
5.710.967-K
Chairman of the Santiago de
Chile Stock Exchange

VICECHAIRMAN
Rafael Miranda
Tax register number:
48.070.966-7
Profession:
Industrial Engineer
Instituto Católico de Artes e
Industrias (ICAI) de Madrid

DIRECTOR
José L. Palomo
Tax register number:
51.316.595-F
Profession: B.S. in Economic
and Business Sciences, in Law
and in Sociology
Universidad de Madrid

Board of Directors

Enersis is managed by a Board of Directors made

REMUNERATION OF THE BOARD

up by seven members who serve a three-year term

OF DIRECTORS

and may be reelected.

The Board of Directors was elected in the

Law No. 18,046 on Joint Stock Companies,

Ordinary Shareholders’ Meeting on April 2, 2001.

the Ordinary Shareholders’ Meeting held on

Pursuant to the provisions of Article 33,

On July 26, 2002, due to the resignation of the

that corresponds to the Board of Directors for the

April 11, 2002, agreed upon the remuneration

Directors Mr. Alfredo Llorente and Mr. Luis

accounting period 2002.

Rivera, the Board of Directors agreed to appoint

Mr. Pablo Yrarrázaval as Director and Chairman of

Details on amounts paid to the Directors of

the Board, and Mr. José L. Palomo as Director.

Enersis members of the Committee of Directors,

and to those who were Directors of this Company

and performed as subsidiary directors as well, are

shown below:

ENERSIS 20 02 ANNUAL REPORT

1 5

1 4

SECRETARY OF THE
BOARD OF DIRECTORS:
Domingo Valdés
Tax register number:
6.973.465-0
Profession: Lawyer
Universidad de Chile

DIRECTOR
José M. Fesser
Tax register number:
48.064.839-0
Profession: Lawyer
Universidad de Sevilla

DIRECTOR
Ernesto Silva
Tax register number:
5.126.588-2
Profession: Commercial Engineer
Pontificia Universidad
Católica de Chile

DIRECTOR
Hernán Somerville
Tax register number:
4.132.185-7
Profession: Lawyer
Universidad de Chile

DIRECTOR
Eugenio Tironi
Tax register number:
5.715.860-3
Profession: Sociologist
School of High Studies in Social
Sciences, Paris, France

DIRECTOR

Alfredo Llorente

Pablo Yrarrázaval

Rafael Miranda

Luis Rivera

José L. Palomo

José M. Fesser

Ernesto Silva

Hernán Somerville

Eugenio Tironi

28,406

22,814

37,524

13,019

11,407

24,406

25,015

24,413

At December 31, 2002,
ThCh$

ENERSIS
BOARD

ENERSIS
COMMITTEE

At December 31, 2001,
ThCh$

ENERSIS
BOARD

ENERSIS
COMMITTEE

OTHER
SUBSID.

TOTAL

29,586

25,225

37,524

13,019

11,407

24,406

28,606

24,413

222,792

1,180

2,411

3,591

10,773

49,323

35,183

24,006

24,597

24,601

24,599

206,910

2,340

2,332

7,004

TOTAL

51,663

35,183

24,006

24,597

35,472

26,933

24,599

8,539

TOTAL

212,019

8,539

222,453

BOARD OF DIRECTORS’ EXPENSES

During 2002, the Board of Directors did not

make use of the budget for functioning expenses

approved by the Ordinary Shareholders’ Meeting

held on April 2002.

ENERSIS 2002 ANNUA L REPORT

1 5

1 4
1 4

COMMITTEE OF DIRECTORS

rating private companies and Fitch, Moody’s

and Standard & Poor’s as international risk

Pursuant to the provisions of Article 50 bis of Law

rating private companies, proposals that were

No. 19,705, Enersis has a Committee of Directors

accepted by such Board, with the exception of

made up of three members, with the powers and

the independent External auditors for reasons

duties provided in such article.

well-known to the public, being replaced by

Deloitte & Touche.

On July 27, 2002, the Board of Directors of the

Company appointed Pablo Yrarrázaval, Hernán

The Committee of Directors quarterly analyzed

Somerville and Ernesto Silva as members of the

and approved the Individual and Consolidated

Committee of Directors of Enersis. In turn, in

Statements of the Company; examined the

its Meeting No. 03/2002 on July 31 of that year,

antecedents of the operations referred to by

all present members of the Board of Directors

Articles 44 and 89 of Law 18,046 on Stock

unanimously agreed to appoint Pablo Yrarrázaval

Companies; issued reports on such subject

as Chairman of the Committee and Domingo

matters; and examined the remuneration systems

Valdés as Secretary of the same Committee.

and compensation plans for managers and main

ACTIVITIES OF THE COMMITTEE

DURING 2002

executive officers as well.

As a conclusion, during the fiscal year 2002,

Enersis’s Committee of Directors not only has

In its first session of the period, on February

properly dealt with the issues provided in Article

26, 2002, the Committee of Directors examined

50 bis of Law 18,046 on Stock Companies, buy

the External auditors’ report regarding the

has also conducted a prompt follow-up of the

Balance Sheet and the Financial Statements

economic-financial situation of the Company.

corresponding to the accounting period 2001, and

the examination of the External auditors’ report

EXPENSES OF THE COMMITTEE

on bank draft and money brokerage.

During 2002, the Committee of Directors did not

In the aforementioned session and for the fiscal

make use of the budget for functioning expenses

year 2002, the Committee of Directors proposed

approved by the Ordinary Shareholders’ Meeting

to the Board of Directors as follows: Arthur

held on April 2002. Additionally, the Committee

Andersen-Langton Clarke as External auditors,

has not required to hire professional consultants

Feller Rate and Fitch Chile as domestic risk

to perform its functions.

ENERSIS 20 02 ANNUAL REPORT

1 7

1 6

Organizational
Structure

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ENERSIS 2002 ANNUA L REPORT

16
16

Management

CHIEF HUMAN RESOURCES
OFFICER:
Mateo Pizá
Tax register number:
14.756.238-1
Profession: Senior Industrial
Engineer
Escuela Técnica Superior de
Ingenieros Industriales de
Barcelona

CHIEF STAFF BUSINESS
OFFICER:
Víctor H. Badilla
Tax register number:
7.284.550-1
Profession: Psychologist B.S. in
Psychology
Pontificia Universidad
Católica de Chile

CHIEF HUMAN RESOURCES
DEVELOPMENT OFFICER:
Álvaro Moncada
Tax register number:
8.074.284-3
Profession: Commercial Engineer
Universidad de Concepción

MANAGEMENT OF ENERSIS

CHIEF EXECUTIVE OFFICER:
Enrique García
Tax register number:
14.704.156-K
Profession: Civil Engineer
(Infrastructure)
Escuela Técnica Superior de
ICCP de Madrid

CORPORATE CHIEF
DISTRIBUTION AND SERVICES
OFFICER:
Marcelo Silva
Tax register number:
5.056.359-6
Profession: Commercial Engineer
Universidad de Chile

CORPORATE CHIEF
ECONOMIC & FINANCIAL
OFFICER:
Mario Valcarce
Tax register number:
5.850.972-8
Profession: Commercial Engineer
Universidad
Católica de Valparaíso

CORPORATE CHIEF
PLANNING AND CONTROL
OFFICER:
Rafael López
Tax register number:
14.709.119-2
Profession: B.S. in Economic
and Business Sciences
Universidad de Málaga

CORPORATE
COMMUNICATIONS
OFFICER:
Fernando Nadal
Tax register number:
14.683.859-6
Profession: Journalist and
Lawyer
Universidad Alcalá de Henares
de Madrid

CORPORATE AUDITING
OFFICER:
José M. Raventós
Tax register number:
14.743.221-6
Profession: B.S. in Economic
and Business Sciences
Universidad de Sevilla

GENERAL COUNSEL:
Domingo Valdés
Tax register number:
6.973.465-0
Profession: Lawyer
Universidad de Chile

CHIEF INVESTMENTS
AND RISKS OFFICER:
Ricardo Alvial
Tax register number:
7.330.389-3
Profession: Public Administrator
Universidad de Chile

CHIEF CORPORATE
ACCOUNTING OFFICER:
Fernando Isac
Tax register number:
14.733.649-7
Profession: Economist
Universidad de Zaragoza

INSTITUTIONAL AFFAIRS
DIRECTOR:
José L. Domínguez
Tax register number:
6.372.293-6
Profession: Civil Engineer
Pontificia Universidad
Católica de Chile

CHIEF INFORMATION
SYSTEMS OFFICER:
Cristóbal Sánchez
Tax register number:
48.072.431-3
Profession: B.S. Information
Systems
Universidad Politécnica
de Madrid

CHIEF PROCUREMENT
OFFICER:
Eduardo López
Tax register number:
7.706.387-0
Profession: Commercial Engineer
Universidad Católica
de Valparaíso

CHIEF BUSINESS MARGIN AND
ELECTRIC SUPPLY OFFICER:
Cristián Herrera
Tax register number:
10.545.763-4
Profession: Industrial Civil
Engineer
Pontificia Universidad
Católica de Chile

CHIEF REGIONAL
DISTRIBUTION AND
COMMERCIAL OFFICER:
José E. Martínez
Tax register number:
37.314.692-K
Profession: Telecommunications
Engineer
Universidad Politécnica
de Catalunya

CHIEF PLANNING AND
OPERATIONAL CONTROL
OFFICER:
Juan P. Spöerer
Tax register number:
10.877.023-6
Profession: Commercial Engineer
Pontificia Universidad
Católica de Chile

TAX DIRECTOR:
Máximo de la Peña
Tax register number:
5.897.849-3
Profession: Lawyer
Universidad de Chile

ENERSIS 20 02 ANNUAL REPORT

1 9

1 8

MANAGEMENT
OF SUBSIDIARIES

CHIEF EXECUTIVE OFFICER
ENDESA CHILE:
Héctor López
Tax register number:
48.062.402-5
Profession: B.S. in Law and
Economic Sciences
ICADE de Madrid

CHIEF EXECUTIVE OFFICER
CHILECTRA:
Julio Valenzuela
Tax register number:
4.469.173-6
Profession: Civil Engineer
(Electric)
Pontificia Universidad
Católica de Chile

CHIEF EXECUTIVE OFFICER
RÍO MAIPO:
Alejandro Gómez
Tax register number:
6.975.457-0
Profession: Civil Engineer
Universidad de Chile

CHIEF EXECUTIVE OFFICER
EDESUR:
José M. Hidalgo
Spanish Passport:
10.0120778 G
Profession: B.S. in Economic
and Business Sciences
Universidad de Santiago
de Compostela

CHIEF EXECUTIVE OFFICER
EDELNOR:
Emilio García
Tax register number:
NIF 71.249.480-B
Profession: Industrial Engineer
Escuela Técnica Superior de
Ingenieros Industriales de Bilbao

CHIEF EXECUTIVE OFFICER
CERJ:
Manuel Montero
Tax register number:
NIF 30.785.023-Y
Profession: Industrial Engineer
Escuela Técnica
Superior de Ingenieros
Industriales de Madrid

CHIEF EXECUTIVE OFFICER
COELCE:
Celestino Izquierdo
Tax register number:
NIF 05.872.282-Z
Profession: Industrial Engineer
Universidad Politécnica de
Madrid

CHIEF EXECUTIVE OFFICER
CODENSA:
José M. Martínez
Tax register number:
36.547.347-W
Profession: Senior Industrial
Engineer
Escuela de Barcelona

CHIEF EXECUTIVE OFFICER
SYNAPSIS SOLUCIONES
Y SERVICIOS IT LTDA.:
Victor H. Muñoz
Tax register number:
7.479.024-0
Profession: Civil Engineer
Universidad Federico Santa
María de Valparaíso

CHIEF EXECUTIVE OFFICER
COMPAÑÍA AMERICANA
DE MULTISERVICIOS:
Pantaleón Calvo
Tax register number:
6.611.573-9
Profession: Civil Engineer
Universidad de Chile

CHIEF EXECUTIVE OFFICER
INMOBILIARIA
MANSO DE VELASCO:
Andrés Salas
Tax register number:
6.002.870-2
Profession: Civil Engineer
Universidad de Chile

REMUNERATION OF CHIEF OFFICERS

The total remuneration obtained by the

aforementioned Enersis’ managers, during the

year 2002, amounts to Ch$ 2,453 million. This

amount includes the remuneration of the existing

officers at December 31, 2002, as well as those of

the officers who disassociated along the period.

INCENTIVE PLANS

Enersis has a yearly bonus plan for its executives

for goal achievement and individual contribution

level to the Company’s results. This plan includes

a definition of bonus ranges in accordance with

its executives’ hierarchical level. The bonuses that

are occasionally given to the executives consist of

a given number of monthly gross remuneration.

COMPENSATIONS

Compensations paid during 2002 add up to

Ch$ 321 million. This amount corresponds to

aforementioned managers who disassociated

along the fiscal year 2002.

ENERSIS 2002 ANNUA L REPORT

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1 8
1 8

DISTRIBUTION OF HUMAN RESOURCES

the follow-up regarding the establishment of

The distribution of human resources of Enersis,

Additionally, together with the Regional

in its subsidiaries, to December 31, 2002, was as

Distribution Business Line, we generated bases

the model in said companies began in August.

follows:

for bids for distribution services, in the matters of

human resources and safety at work, according to

COMPANY

TOP
EXECUTIVES

PROFESSIONALS
AND TECHNICIANS

ADMINISTRATIVE
STAFF

TOTAL

this new model.

Enersis

Endesa
Chile (1)

Chilectra (2)

Río Maipo

Edesur

Edelnor

Cerj

Codensa

Coelce

Synapsis (3)

Cam (4)

Inm. Manso
de Velasco

106

1,658

487

1,611

357

874

726

538

659

569

105

242

221

211

608

194

543

838

219

1,937

720

2,251

565

1,451

802

1,401

726

794

In September 2002, the human resources system

named Meta4 E-Mind Nómina (a world-class

technology product) came into operation. This

system encompassed all the companies of the

Group in Chile, and permitted a homologation

of the different systems that were used up to that

date.

Another relevant fact relates to the continuation

of the training of the region’s executive officers

in an integration and development program

TOTAL

261

7,650

3,083

10,994

in Spain, allowing them to share a wider and

(1) Includes: Endesa Chile, Ingendesa, Pangue, Pehuenche,
Celta, San Isidro, Central Costanera, El Chocón, Edegel,
Emgesa, Betania, Cachoeira Dourada, Infraestructura
2000, Autopista Los Libertadores, Autopista del Sol,
Túnel El Melón.

(2) Includes: Empresa Eléctrica de Colina
(3) Includes: Synapsis Chile, Synapsis Argentina, Synapsis

Colombia, Synapsis Brazil, Synapsis Perú

(4) Includes: Cam Chile, Cam Argentina, Cam Brazil, Cam

Colombia, Cam Perú

This year, the rearrangement in the use of the

physical facilities of the Group in Chile continued

with Enersis moving to its new corporate building

located at Santa Rosa No. 76, Santiago.Thus, the

regional heads of the business lines of the Group

are now present and operate in the same building.

The Contractor Management model for Latin

America was defined. Its diffusion to the

companies of the Group in Latin America and

global vision of business, as well as to work on

management skills that are essential to improve

the management potential of this group. The

training program is the only corporate activity

that gathers executive officers from different

countries, cultures, education and business lines

under the same umbrella, which results in a

higher commitment with the present and future

Group’s company project.

Likewise, the training plans carried out for

workers (professional and administrative), which

had been carried out in 2001, continued during

2002. They were aimed at consolidating corporate

values and the achievement of the Group’s

strategic objectives, totaling 11,974 hours/man.

ENERSIS 20 02 ANNUAL REPORT

2 1

2 0

Activities

CULTURAL ACTIVITIES

Enersis has reaffirmed its commitment to the

community, with a strong bet on education

and culture as an integration channel and a

real contribution to society. In August 2002,

the sustained effort on cultural activities made

by Enersis during the last years was rewarded

by Corporación Amigos del Arte, a Chilean

institution, with the Great Prize “Ernesto Pinto

Lagarrigue” in recognition for the Company’s

permanent support to the cultural development

in Chile. In the words of Corporación Amigos

del Arte, this distinction was awarded to Enersis

as a token of appreciation to the Company

which “through time has sustained a policy of

cooperation with the public that has undoubtedly

favored our national artists as well as a massive

audience, always grateful for every possibility

to know and admire the various aspects of each

exhibitor.”

The prestigious award obtained was a

confirmation to Enersis that it is doing a very good

job with the activities which, year after year, it has

been conducting in the cultural area. During 2002,

these activities can be summarized as follows:

II Latin American Painting Contest

For the third consecutive year, Enersis called

for painters to create. This initiative, which

began in the year 2000 as a contest for Chilean

painters, continued in 2001 with a Latin

American exhibition. Due to the great success of

this contest, during the second semester of 2002,

ENERSIS 2002 ANNUA L REPORT

2 1

2 0
2 0

Churches Lighting Agreement

The agreement between Enersis and Endesa-

España Foundation, together with the subsidiaries

Chilectra and Endesa Chile, and the Chilean

Bishops’ Assembly for the lighting of cathedrals,

churches and religious temples in Chile,

involving a total amount of US$ 1.2 million in five

years, materialized in seven projects during the

year. During 2002, modern lighting was installed

in the following churches: Sagrado Corazón de

Jesús Church in Puerto Varas, St. Joseph’s Church

in La Unión, Metropolitan Cathedral of Santiago,

Votive Temple of Maipú, Cathedral of Valparaíso,

Corazón de María Basilica in Antofagasta, and

Cathedral of Copiapó. These projects are added

to those carried out in 2001, totalling eleven

churches with brand new lighting.

International Book Fair

Enersis organized the II Latin American Painting

For the eleventh consecutive year, Enersis

Contest, “Power and the World”, with a select

sponsored the International Book Fair of Santiago,

group of 25 outstanding artists from Argentina,

a meeting of literature and culture, which year

Brazil, Chile, Colombia and Perú.

to year gathers more than 200,000 visitors at

The topmost event was the opening ceremony for

the exhibition of all the works participating in the

contest, which took place at the end of October

in the Museo de Artes Visuales de Santiago.

During that ceremony, prizes were awarded for

the best works by a jury presided by the Director

of the National Museum of Fine Arts. The winner

was the Brazilian artist Abraham Palatnik, who

received a prize of US$ 15,000. The second and

third awards were granted to the Colombian

artists Santiago Cárdenas and María Cristina

Cortés, respectively.

ENERSIS 20 02 ANNUAL REPORT

2 3

2 2

the Centro Cultural de la Estación Mapocho.

significant step in the recovery of the historical

In addition to its role as sponsor, the Company

patrimony of the city of Santiago. During 2002,

organized a daily contest between the attendants,

the photographic pieces continued to be restored

raffling ten libraries including books valued at

and catalogued. There are approximately

half a million Chilean pesos.

20,000 pieces, including glass plates, acetates

and positives. The travelling exhibition with a

Energy Information Center

selection of 60 images has already been presented

The Company has played an important role in

in Antofagasta, Copiapó and Santiago.

communicating information on electric energy

to children and youngsters, according to the

Enersis also took part in the donation of libraries

guidelines defined by the Ministry of Education.

to rural public schools for poor children,

During 2002, the Energy Information Center

the sponsoring for the literary (story) contest

was visited by about 7,000 students aged 5-18,

organized by SOFOFA and the Architecture

who were able to learn about how electricity is

Biennial Exhibition, as well as seminars and

produced and how it is distributed.

meetings of the energy sector. Also in the

Other initiatives

social area, Enersis contributed to the

campaign for providing a roof

In 2001, together with its subsidiary Chilectra,

to the homeless, named “Un

the Company began to recover the Photographic

Techo para Chile”, together

Archive, which became the starting point for the

with its subsidiaries Endesa

book “Lights of Modernity”. This represented a

Chile and Chilectra.

ENERSIS 2002 ANNUA L REPORT

2 3

2 2
2 2

FINANCIAL ACTIVITIES

August: Citibank for US$ 25 million

November: BBVA Bank for US$ 48 million

As of December 31, 2002 the consolidated

leverage ratio is 1.5 times.

With the resources from these funding,

Changes in the indebtedness of the Company

These were taken within the framework defined

occurred during 2002 were essentially oriented

by the so called Genesis Project in 1999.

prepayments of the bilateral credits were made.

to reschedule the existing debt to improve its

conditions.

As for amendments to credit agreements, the

credits with Elesur for approximately UF 60

In this sense, during 2002, Enersis subscribed the

million and the bilateral credits with ABN Bank

following credits, directly and through its Agency

for US$ 100 million and with the Bank of Tokyo

in Cayman Islands:

for US$ 50 million were extended along the year.

ENERSIS 20 02 ANNUAL REPORT

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Business Activities

HISTORICAL EXPANSION

Enersis is the largest private electrical Group in

Latin America. This has been achieved through

a stable and balanced growth in its business

activities in electric energy, generation and

distribution, as well as in businesses related to

these activities.

Synapsis Soluciones y Servicios IT Ltda.

Aimed at providing services and equipment

related to computing and data processing.

Inmobiliaria Manso de Velasco Ltda.

In the real estate business, committed to the

integral development of real estate projects, and to

the management, leasing, purchasing and sales of

real estate owned by Enersis and its subsidiaries

in Chile.

Compañía Americana de Multiservicios Ltda.

Whose areas of action are related to commercial

and other operations in networks for public

service companies, preferably in measuring

systems for utilities, and as a purchase agent, an

importer and exporter, and also as a merchandiser

and materials supplier for the subsidiary

companies of Enersis and third parties.

The electric energy distribution business has

been performed jointly with its subsidiary

Chilectra S.A., a company whose main aim is the

distribution of electric energy in the Metropolitan

Region and abroad. It also participates in the

distribution and sale of electric energy together

with its subsidiary, Compañía Eléctrica del Río

INTERNATIONAL DEVELOPMENT

Enersis started its process of expansion to other

countries during 1992, by participating in various

privatization processes in the neighboring

countries of Latin America, thus developing a

significant presence in the electric sectors of

Maipo S.A., in the areas surrounding those served

Argentina, Perú, Colombia, and Brazil.

by Chilectra.

Through its subsidiary Empresa Nacional de

Electricidad S.A. (Endesa Chile), it has been

materializing its investments in the generation of

electric energy in the country and abroad.

Additionally, Enersis is present in business areas

complementary to its main activities, through the

ownership of a majority stake in the following

companies:

In July of 1992, Edesur, a company that

distributes electric energy to the city of Buenos

Aires, Argentina, was adjudicated to Distrilec

Inversora S.A., a company in which Enersis

participates. Afterwards, in December, 1995,

Enersis purchased an additional 39% of that

company, becoming its controller since then.

ENERSIS 2002 ANNUA L REPORT

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2 4

Between July 1994 and December 1995, Enersis,

During 1999, Endesa España became the

through the company Inversiones Distrilima S.A.

controlling stockholder of Enersis. Through a

purchased 60% of the stock capital of the

Tender Offer (OAA), in which it offered Ch$ 320

Empresa de Distribución Eléctrica de Lima

per share, the Spanish multinational company

Norte S.A. (Edelnor) in Perú. In that same year, it

bought another 32% of Enersis which, added

purchased Edechancay.

to the 32% it had acquired in August 1997,

increased Endesa España’s final stake in the

In 1996, Enersis entered into the Brazilian market

ownership of Enersis to 64%. The transaction,

for the first time, jointly purchasing with other

ended on April 7, 1999, involved an investment of

partners an important part of the stock of the

US$ 1,450 million.

Companhia de Eletricidade do Rio de Janeiro

(Cerj) which distributes electric energy in the city

On May 11, 1999, Enersis acquired an additional

of Rio de Janeiro, Brazil.

35% interest in the ownership of Endesa Chile,

where it already held a 25% of the capital stock.

In 1997, Enersis successfully participated through

Consequently, Enersis attained an approximately

a consortium in the process of capitalization

60% share in the ownership of the generation

and subsequent control of Codensa S.A. ESP, a

company and became its parent company,

company that distributes electricity in the city

allowing Enersis to consolidate itself as one of

of Bogotá and the district of Cundinamarca,

the largest private electricity Groups in Latin

Colombia.

America.

At the beginning of 1998, Enersis participated

Important operations were carried out during

in the Brazilian market once again. This time,

2000, which may be summarized as follows: the

through a consortium which acquired control of

Company’s equity increased by US$ 520 million.

Companhia Energética de Ceará S.A. (Coelce), a

Furthermore, proceeds of US$ 1,400 million were

company that distributes electricity in Northern

received as a result of the sale of our subsidiaries

Brazil, in the State of Ceará.

Transelec, Esval, Aguas Cordillera and some real

ENERSIS 20 02 ANNUAL REPORT

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2 6

estate divestments, within the strategic scope

The above mentioned factors enable Enersis to

provided for in the Genesis Project.

make investments that contribute to the growth

of profits, with an adequate weighting of risks

Important investments were made during 2001:

deriving from its business activities.

US$ 364 million to increase the company’s stake

in the capital stock of Chilectra; US$ 150 million

INVESTMENTS AND DIVESTMENTS

in the purchasing of Edesur’s capital stock by

10%, in Argentina, which was owned by the

Chile

company workers; US$ 132 million to increase

Chile’s most important investment during 2002

the participation in the Brazilian company Cerj;

was the continuation of the building of Ralco

and US$ 23 million to increase the participation

hydroelectric power station, which is being

of Enersis in Río Maipo by 15%.

developed by the Endesa Chile subsidiary.

During 2002, US$ 119 million were invested in

GROWTH AND DEVELOPMENT

the building of the power station and a physical

progress of 74% was achieved by the end of

Enersis’ main objective is to maximize the

the year.

economic value of its equity, through stable

growth founded on electric businesses rigorously

Within the Genesis Project, Enersis obtained

evaluated and managed. The attainment of this

US$ 13 million for the disposal of real estate

objective is sustained by an investment strategy,

property, industrial lots and macrolots of various

focused on increasing the value of the subsidiaries

real estate projects of Inmobiliaria Manso de

and related companies, and the purchasing of new

Velasco.

companies.

Brazil

A key factor of this strategy involves making

During 2002, Enersis strengthened the financial

investments that significantly call for the

situation of Companhia de Eletricidade do Rio

experience, management skills and operating

de Janeiro (Cerj) by converting into capital

capabilities of Enersis and its subsidiaries. Such

US$ 100 million in convertible bonds, and by a

requirement makes it necessary to invest in

capital increase of additional US$ 100 million,

companies in which Enersis has a final decision

in progress.

on their management and operation, and the

power to approve or reject its investment projects.

Pursuant to the strategic objective of increasing

the presence in Brazil, particularly in the

Another development factor consists in having

generation sector, Enersis jointly with

an exceptional team of professionals that actively

Endesa S.A. proceeded with the construction of

interact with the subsidiaries, providing them

the Fortaleza Thermoelectric Power Station in

with assistance in evaluating their investment

the state of Ceará. During 2002, Enersis made

projects and are permanently alert to new

an equity contribution of US$ 21 million for

business opportunities in their respective

the development of this power station, having

business areas in the Latin American market.

an installed capacity of 310 MW and a foreseen

ENERSIS 2002 ANNUA L REPORT

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investment of US$ 203 million, which will supply

PROSPECTS FOR THE YEAR 2003

the Coelce distributor as of 2004. In this manner,

Coelce’s electric supply is assured, in a market

Chile

with one of the highest growth indexes in Brazil.

During 2003, the financial strengthening plan

for Enersis will be carried out, by increase

Also, the commercial operation of the second

of its own funds, disposal of assets and debt

stage of the electric interconnection between

reduction. Besides, the consolidation process and

Argentina and Brazil was launched. The first

the efficiency improvement, as set forth in the

module of 550 MW began its operation in May,

Genesis Project, will continue.

and the second module of additional 550 MW

began in August, thus totaling a transmission

This plan involves increasing funds of its own

capacity of 2,200 MW between both countries.

by approximately US$ 2,000 million. This

Perú

capital increase will be open to all of Enersis’

shareholders and can be materialized through

During 2002, Enersis invested US$ 1.6 million to

money contributions and/or capitalization of

increase its stake in the capital stock of Distrilima

shareholders’ debts.

by 1.73%. Through this consortium, Enersis

controls Edelnor.

A part of the financing which Enersis has

provided to its subsidiaries and related companies

ENERSIS 20 02 ANNUAL REPORT

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2 8

will be substituted by credits subscribed by these

companies with third parties.

There are plans for the divestment of assets, by

offering for sale Río Maipo distributing company,

Manso de Velasco real estate company and several

real estate properties owned by the Group.

Endesa Chile subsidiary will continue with the

construction of Ralco hydroelectric power station,

which is being developed at the Biobío river and

which is expected to go into operation during

2004.

Brazil

The development of Fortaleza’s thermoelectric

project and the management improvement in

distributors Companhia de Eletricidade do Rio de

Janeiro (Cerj) and Companhia Energética do Ceará

will continue.

Colombia

It is expected that Codensa will maintain its

performance in the areas of loss decrease and

quality service improvement, keeping customers’

orientation and profitability as the objectives of

future management.

INVESTMENT AND FINANCING POLICY

OF THE YEAR 2002

The Ordinary Shareholders’ Meeting, held on

April 11, 2002, approved the Investment and

Financing Policy as follows:

1. INVESTMENTS

(a) Investment areas

• Equity contributions for investment or

creation of subsidiary or related companies,

whose scope of business is similar, related

or connected to energy in any of its forms or

nature, or the provision of public services or

that has energy as their main input.

•

Investments consisting in the acquisition,

exploitation, construction, rental,

management, marketing and disposal of any

kind of real estate, either directly or through

subsidiary companies.

• Other investments in any kind of financial

assets, titles and movable property.

ENERSIS 2002 ANNUA L REPORT

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Enersis will make investments, pursuant to

(b) Maximum investment limits

the provisions in its by-laws, in the following

The maximum investment limits for each

areas:

investment area will be as follows:

Enersis’s participation in the ownership of

such companies, with appointees originating

preferably from the Board of Directors or the

senior management of both the Company and

its subsidiaries.

• Propose to the subsidiary companies the

investment, financial and commercial policies,

as well as the accounting systems and criteria,

which they are to abide by.

Investments in its subsidiaries of the electric

sector, as needed to enable such subsidiaries

• Supervise the management of the subsidiary

to attain their respective corporate purpose.

and related companies.

ii) Investment in other subsidiary companies,

• Maintain a permanent control of the

such that the total of the proportions of the

borrowing limits and the clean assets factor

fixed assets corresponding to the participation

for accounting purposes, in a manner such

in each one of these other subsidiary

that the investments or equity contributions

companies does not exceed the proportion of

made or to be made do not involve a variation

fixed assets corresponding to the participation

that departs from the parameters defining the

in the subsidiaries of the electric sector and of

maximum investment limits. Said control,

Enersis S.A.

in respect of the clean assets factor for

accounting purposes, will be maintained as

iii) Other investments, such that the clean assets

long as it remains in force.

factor for accounting purposes of Enersis,

calculated on the basis of the individual

2. FINANCING

balance sheet represents, as a proportion of

Enersis’s assets, a same or higher percentage

(a) Maximum leverage level

than that stipulated in the first paragraph of

The maximum leverage level for Enersis will

article 45 bis of Decree Law N 3,500, as long

be based on a ratio of total debt to equity

as this provision is in force.

plus minority interest equal to 1.75 of the

consolidated balance sheet.

In order to control areas of investment and

(b) Authority of management to agree with

pursuant to what is defined in the corporate

creditors on restrictions to dividend

purpose of the Enersis, actions as far as

distributions

possible will be taken as follows:

Restrictions to dividend distributions may be

agreed upon with creditors solely provided

• Propose to the Shareholders’ Meetings of

that they are previously approved at a

the subsidiary and related companies, the

Shareholders’ Meeting (either Ordinary or

appointment of directors that correspond to

Extraordinary).

ENERSIS 20 02 ANNUAL REPORT

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The international and national risk ratings

creditors on the granting of collateral

assigned to Enersis to December 31, 2002 are

The management of the Company has the

as follows:

authority to agree with creditors on granting

real and personal collateral, in compliance

with the law and the Company’s by-laws.

(d) Essential assets for the operation of the

Company

The shares of common stock that represent

equity contributions made by Enersis S.A.

to its subsidiaries Chilectra and Compañía

Eléctrica del Río Maipo are essential assets

for the operation of Enersis.

RISK FACTORS

Enersis is an investment company whose assets

are properly diversified in five countries in

the region, which provides it with a balanced

corporate risk profile.

In the same manner, the financial flows of

Enersis follow the same diversification, with

the additional advantage that they correspond

to generation, distribution and other related

business, which grants a higher stability to the

company’s financial situation.

The above has been duly considered by domestic

and international risk rating companies. Indeed,

such companies acknowledge that, among other

factors, one of the strengths of the Group lies

in its balanced investment portfolio, which has

allowed Enersis to keep a company classification

of “Investment Grade”, beyond the contingencies

experienced by the region during the last years.

Debt in local currency

Debt in foreign currency

Fitch

BBB+

Standard &
Poor’s

Moody’s

BBB

Baa3

Bonds

Fitch

Feller Rate

First Class
Level 1

AA-

The corporate strategy applied by the Group

to contain the inherent risks to an investment

company in the electric industry, has been to

manage the company’s assets with both prudence

and responsibility. This policy can be observed

during last year by the strengthening of cash,

decrease of debts, improvement in the quality

service index, concentration on primary activities

and continuous monitoring of the economic and

regulatory situation in each operating country.

A concrete measure within the global context

of the Group’s risk proactive handling was the

creation, during 2001, of the Enersis Group Risk

Committee, aimed at identifying the most diverse

risks that could affect the company and propose,

in due time, the contention measures needed.

This Committee has elaborated a Group’s risk

map and it is operating under state-of-the-art

techniques of Company Risk Management.

ENERSIS 2002 ANNUA L REPORT

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3 0

Corporate
Structure

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ENERSIS 2002 ANNUA L REPORT

32
32

Generation

COLOMBIA
2,732 MW

PERU
1,003 MW

BRAZIL
658 MW

ARGENTINA
3,622 MW

CHILE
3,935 MW

IDENTIFICATION OF THE COMPANY

Corporate nameEmpresa
Nacional de Electricidad S.A

Type of company Limited
Liability Stock Company

Tax register number
91.081.000-6

Address
Santa Rosa N°76
Santiago, Chile

Telephone
(56-2) 630 9000

Fax
(56-2) 635 4720
(56-2) 635 3938

Endesa Chile

Web site
www.endesa.cl

E-mail
comunicacion@endesa.cl

Securities register number
N°114

External Auditors
Ernst & Young, Serv. Prof.
de Auditoría Ltda.

Subscribed and paid in capital
(ThCh$) 1,009,510,570

Corporate purpose
Generation and provision
of electric energy, sale of
consulting and engineering
services within the country and
abroad, and construction and
exploitation of infrastructure
works.

COMPANY OWNERSHIP

Its annual generation added up to 16,286 GWh,

and its energy sales amounted to 18,334 GWh,

Enersis, the main stockholder in Endesa Chile

during 2002.

with 60% of the property, has channeled

investment in the area of electric generation

Endesa Chile participates in the Central

through this company. Its shareholders are:

Interconnected System (SIC), the main

Enersis

ADR’s

AFP’s

Retail Investors

Others

60,0 %

4,5 %

18,7 %

7,5 %

9,3 %

interconnected system in the country, covering

an area that serves approximately 93% of the

national population. Endesa Chile and its

subsidiaries in the country have an installed

capacity of 3,753 MW in this system, which

represents approximately 53.6% of the SIC.

OPERATIONAL ACTIVITY

The company also participates in the Northern

Interconnected System (SING), through its

The main activities carried out by Endesa Chile

subsidiary Celta, and indirectly through the

and its subsidiaries are related to the generation

companies Gasoducto Atacama Chile Limitada

and commercialization of electric energy and,

and GasAtacama Generación Limitada, serving

additionally, to the sales of consulting and

various mining companies and selling energy in

engineering services in all specialties.

the spot market. The installed capacity in this

Endesa Chile is the main electric generation

SING. When including GasAtacama Generación,

company in Chile and one of the country’s

where Endesa participates with a 50% ownership,

largest companies. In Chile, it operates a total of

the installed capacity in the SING totals 25.7%.

system is 182 MW, which represents 5.1% of the

3,935 MW, representing 37.1% of the country’s

installed capacity. 73.7% of the installed capacity

Endesa Chile has presence in Argentina, through

of Endesa Chile and its subsidiaries in Chile is

Central Costanera S.A. and Hidroeléctrica El

hydraulic energy, and the rest is thermal energy.

Chocón S.A., operating a total of 3,622 MW,

ENERSIS 20 02 ANNUAL REPORT

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3 6

Property Structure
60%

BOARD OF DIRECTORS
Chairman
Luis Rivera

Vice-Chairman
Antonio Pareja

Directors
Rodolfo Martín
Jaime Bauzá
José M. Hidalgo
Emilio García
Andrés Regué
Antonio Tuset
Leonidas Vial

Officers
Chief Executive Officer
Héctor López

Chief Human Resources Officer
Juan C. Mundaca

Chief Energy Planning Officer
Rafael Errázuriz

Chief Communications Officer
Rodolfo Nieto

Chief Planning and Control
Officer
Julio Valbuena

Chief Production and Transport
Officer
Rafael Mateo

Legal Counsel
Carlos Martín

Chief Financial Officer
Alfredo Ergas

Chief Trading and
Commercialization Officer
José Venegas

Chief Generation Chile Officer
Claudio Iglesias

which represents 16% of the Argentinean

Interconnected System’s total, with an annual

generation of 7,168 GWh and annual sales of

7,897 GWh.

In Brazil, it participates through Centrais Elétricas

Cachoeira Dourada S.A., operating a total of

658 MW, representing approximately 1% of the

installed capacity in that country, with an annual

generation of 2,467 GWh and annual sales of

3,591 GWh. Likewise, through the interconnection

line with Argentina operated by CIEN, 2,000 MW

are added to said market, the energy and power

being supported by the Argentinean subsidiary

Central Costanera S.A.

In Perú, the company participates through Edegel,

operating a total of 1,003 MW, representing 23%

of the Peruvian system, with an annual generation

of 4,279 GWh and annual sales amounting to

4,158 GWh.

Finally the company participates in Colombia,

through Central Hidroeléctrica de Betania S.A.

E.S.P. and the power generation company Emgesa,

ENERSIS 2002 ANNUA L REPORT

3 7

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operating a total of 2,732 MW, representing 20%

ELECTRIC PROJECTS

of the installed capacity in Colombia, with an

annual generation of 10,616 GWh and annual

The most important activities and projects along

sales adding up to 14,639 GWh.

2002 were:

CIEN, Energy Interconnection Argentina-Brazil

effort, the Group provides more than half the

On August 1, 2002, the fourth and last module

annual requirements of capacity in Brazil, an

of the converter station Garabí in Brazil began

extraordinary figure compared to the participation

its commercial operation. This was the endpoint

of its companies in that market.

of an ambitious project, which has had to

overcome a number of geographic and technical

Finally, the CIEN project is totally in service,

difficulties. Thus becoming not only a model

practically all its capacity being engaged in

from the technological point of view, but also the

contracts. The contracts are for: 300 MW with

most important electric interconnection in Latin

Tractebel, 700 MW with Furnas, 800 MW with

America and one of the most modern throughout

Copel and 200 MW with Cerj, totalling 2,000 MW.

the world.

Additionally, in the short term, the company

should supply to Coelce, energy purchased from

The total investment for this project has amounted

Petrobrás (106 MW in 2003 and 54 MW in 2004).

to over US$ 700 million. With this investment

ENERSIS 20 02 ANNUAL REPORT

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3 8

Ralco Project

The Ralco project is located at the Alto Biobío

area, about 120 km southeast of Los Angeles

and 30 km upstream from the Pangue power

station. The project involves the construction of

various works which will constitute a dam power

station. Its nominal power will be 570 MW and

it will annually contribute an average generation

of 3,100 GWh to the Interconnected Central

System (ICS).

At December 2002, the physical progress of the

works construction was 73.9%.

become its property. During 2002, the contractor

Regarding the environmental issues of the project,

company made progress in the excavation,

during 2002, Endesa Chile has successfully

construction of foundations, mounting of

developed all the plans and programs engaged,

structures and laying of the conductor. The

and have achieved significant progress, both

starting on service is foreseen for the second

in what was offered in the environmental

semester of 2003.

impact study and in what was imposed by the

environmental evaluation decisions on the

OTHER BUSINESSES

project.

Among other businesses, the Ingendesa company

Ralco Power Station-SIC Joint

may be pointed out, which participated in

This project includes the construction of

important investment projects in Chile and

a transmission line of 220 kV and 140 km

Latin America, particularly in the areas of

two-circuit line, which will join the Ralco

energy, infrastructure, mining, public works and

Hydroelectric Power Station and the Charrúa

telecommunications, through services rendered

Substation, from which electricity will be

to the companies of the Group as well as to other

delivered to the Central Interconnected System.

non-related customers.

During 2002, the company continued to engage

Additionally, Endesa Chile manages the

in agreements for rights of way with the property

companies Sociedad Concesionaria Túnel

owners affected by the line. On the other hand,

El Melón S.A. which operates on Ruta 5 Norte;

the proceedings for the electric concession have

Sociedad Concesionaria Autopista del Sol S.A.

reached the final stage.

engaged in the design, construction and operation

of the Santiago-San Antonio highway, and a new

This project is being materialized by the Abengoa

24-km section in the urban area Santiago-Malloco;

Chile S.A. company, under the modality that

and Sociedad Concesionaria Autopista Los

Endesa Chile pays an annual toll for 20 years,

Libertadores, comprising the expansion and

a term after which the transmission line will

improvement of the General San Martín highway.

ENERSIS 2002 ANNUA L REPORT

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Distribution

COLOMBIA
1,910,737 Clientes

PERU
871,430 Clientes

BRAZIL
3,787,819 Clientes

ARGENTINA
2,089,997 Clientes

CHILE
1,620,981 Clientes

IDENTIFICATION OF THE COMPANY

Corporate name:
Chilectra S.A.

Type of company:
Limited Liability Stock
Company

Tax register number:
96.524.320-8

Address:
Santa Rosa N°76, Piso 8
Santiago, Chile

Telephone:
(56-2) 675 2000

Fax:
(56-2) 675 2999

P.O. Box:
1557, Santiago

Web site:
www.chilectra.cl

E-mail:
rrpp@chilectra.cl

Securities register number:
N°321

External auditors:
Deloitte & Touche Sociedad de
Auditores y Consultores Ltda.

Total number of shares:
366,045,401

Subscribed and paid in capital
(ThCh$):
282,119,751

Chilean stock exchange ticker
symbol
Chilectra

Participation of Enersis (direct
and indirect):
98.2%

Chilectra

COMPANY OWNERSHIP

Puyehue S.A. (1.1%), ESSA (1.1%), and

Enersis, its main shareholder having 98.2%

of ownership, has destined Chilectra as its

Tariff Setting Process

others (2.9%).

operator in the investments in the area of energy

The electricity rates are set every four years, in

distribution.

compliance with the current regulations (DFL

No. 1 of 1982 issued by the Ministry of Mining).

OPERATING ACTIVITY

The next tariff review will take place in the

Chilectra is the largest electric energy distribution

company in the country. It serves 33 boroughs of

Energy Losses

year 2004.

the Metropolitan Region including 2,118 sq km

During 2002, Chilectra continued with its efforts

within its concession area, and has 555 km of

to control energy losses. There were inspections

different high tension circuit lines. It also owns

to closed customers and to those with dubious

52 substations and 122 power transformers with a

demands. The company maintained its levels of

capacity of 4,927 MVA.

investment in new projects related to technical

measures and in the control and maintenance of

Sales and Purchases of Energy

those already existing, together with preventive

The physical energy sales reached 9,952 GWh

and corrective activities carried out on site. All

during 2002, representing a 3.8% increase as

of the large customers’ electric connections were

compared to the same period of 2001. Out of

inspected and a special plan of removal of service

the total energy invoiced, 29.1% corresponds to

connections and closing of distribution boxes was

residential sales, 26.9% to industrial sales, 21.5%

implemented.

to commercial sales and 22.5% to other areas.

During 2002, Chilectra purchased energy from

possible to keep the energy loss index under

several generation companies in the country, such

relatively constant values, amounting to 5.6% at

This set of measures and activities made it

as Endesa Chile (30.0%), AES Gener S.A. (34.6%),

the end of the period.

Pangue S.A. (11.7%), Colbún S.A. (18.6%),

ENERSIS 20 02 ANNUAL REPORT

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4 2

Corporate purpose:
Operate, either in Chile or
abroad, in the distribution and
sales of hydraulic, thermal
or any other form of electric
energy.

BOARD OF DIRECTORS
Chairman
Jorge Rosenblut

Vice-Chairman
José M. Fernández

Directors
Pedro Buttazzoni
Alberto Martín
Marcelo Llévenes
Álvaro Quiralte
Hernán F. Errázuriz

Officers
Chief Executive Officer
Julio Valenzuela

Chief Communications Officer
Marcelo Castillo

Chief Distribution Officer
Rolando Hechenleitner

Chief Commercial Officer
Juan C. Olavarría

Chief Regulation Officer
Guillermo Pérez

Legal Counsel
Gonzalo Vial

Commercial Activity

Likewise, during 2002, important projects of

The number of customers amounted to 1,319,428

electric supply for large customers materialized

at December 31, 2002, which represents a 2.4%

which implied increasing the installed capacity

increase as compared to the same period of 2001.

by over 63.000 kW. Also, important long-term

supply contracts were renewed, which means

Chilectra made progress in the strengthening

4,400 GWh of projected energy sales.

and positioning of the company in the energy

distribution market, providing services and

During 2002, Chilectra developed activities

electric products for homes, companies and

that will directly or indirectly favor millions of

industries. In this respect, Chilectra intensified

people, including those outside its concession

the sales plan for products that use electric energy

area. In all these initiatives, Chilectra contributed

as input, as well as services such as protected

more than US$ 350 million for different items.

energy insurance, electronic payment via the

Internet and others, thus achieving almost 8,000

sales for these items.

Special mention should be made of the historical

agreement reached with Metro S.A. to provide

the electricity transportation service through

Chilectra’s network for the present and future

lines of public transportation, making available

to Metro S.A. up to 150,000 kW starting from mid

2004 and during a 30-year term. This is the most

important business of the year, because it creates

a long-term relationship with one of the greatest

consumers of Chilectra’s concession area.

ENERSIS 2002 ANNUA L REPORT

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4 2
4 2

IDENTIFICATION OF THE COMPANY

Corporate name
Compañía Eléctrica del Río
Maipo S.A.

Address
Covadonga N°139,
San Bernardo, Chile

Type of company
Limited Liability Stock
Company

Tax register number
96.557.330-5

Telephone
(56-2) 600 858 5858

Fax
(56-2) 540 7007

Río Maipo

P.O. Box
30, San Bernardo

E-mail
riomaipo@rmaipo.enersis.cl

Securities register number
N°345

External Auditors
Deloitte & Touche Sociedad de
Auditores y Consultores Ltda.

Chilean stock exchange ticker
symbol
Rio Maipo

Total number of shares
360,613,552

Subscribed and paid in capital
(Th Ch$) 15,463,145

Participation of Enersis (direct
and indirect)
98.7%

COMPANY OWNERSHIP

Additionally in 2002, Río Maipo purchased

energy from Chilectra (98%) and from

At December 31, 2002, Enersis, its main

AES Gener (2%).

shareholder, controls 98.7% of the shares of the

company.

Tariff Setting Process

OPERATING ACTIVITY

current regulations (DFL No.1 of 1982, issued by

the Ministry of Mining) are set every four years.

Río Maipo is the fourth largest electric energy

The next Tariff Setting Process will take place

The electricity rates, in compliance with the

distribution company in Chile. Its concession area

in 2004.

comprises the boroughs of San José de Maipo,

Puente Alto, La Pintana, El Bosque, San Bernardo,

Energy Losses

Calera de Tango, Isla de Maipo, Talagante,

During 2002, Río Maipo continued with efforts

Peñaflor, Padre Hurtado and Curacaví, serving

in the control of energy losses, undertaking a

a population of about 1,500,000 people, over an

series of actions and investments in new projects

area of 1,596 sq. km. It currently owns 27 km of

of technical measures, and in the control and

high-tension lines, a power substation and 10

maintenance of the already existing ones.

transformers with a total capacity of 81 MVA.

All of this, together with the preventive and

Energy Sales And Purchases

corrective activities carried out on site, allowed

In 2002, the physical energy sales reached

us to maintain the energy loss rate at relatively

1,274 GWh, representing a 2.8% increase as

constant values, which improved by the end of

compared to the same period the year before. Out

the year. Despite the macroeconomic condition

of this total, 40.0% corresponds to residential

that the country is still going through, the loss

sales, 7.7% to the commercial sector, 42.2% to the

rate reached a level of 6.2% for the period from

industrial sector and 10.1% to other sectors.

January to December 2002.

ENERSIS 20 02 ANNUAL REPORT

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4 4

Corporate purpose
To exploit the distribution
and sales of electric energy,
hydraulic, thermal or of any
other nature.

BOARD OF DIRECTORS
Chairman
Julio Valenzuela

Directors
Jorge Claro
Pantaleón Calvo
Rolando Hechenleitner
Fernando Urbina
Guillermo Pérez

Chief Executive Officer
Alejandro Gómez

Commercial Activity

commercial offices, which were assessed by our

At December 31, 2002, the company’s customers

customers with a 77.6% rating, which represents

totaled 301,553, which represented an increase

an improvement of 6.9% as compared to 2001.

of 2.7% as compared to the same period last

year. Out of that figure, 96.4% are residential

As a part of the global project for changing their

customers, 2.3% are commercial customers and

public image and enlarging the relation with

the remaining 1.3% corresponds to industrial and

customers, we developed a new consumption bill

other customers.

that was introduced in November. This change

of format aims at the consolidation of the bill as

Río Maipo aims its commercial work at achieving

an efficient communication instrument to the

excellence in service quality and service to

customer, which delivers more information about

residential, commercial and industrial customers.

energy consumption, new products, and social

campaigns in which the company is involved.

To this effect and with the purpose of having

a tool to improve customers’ service, in 2002

Likewise, in 2002, Río Maipo carried out 3,074

Río Maipo carried out three service quality

hours/man training, aimed at improving service

measurements, in order to set customers’

quality mainly in the following: customers’

satisfaction indexes in all contact areas: Maipo

service, regulation in force, electricity supply,

phone, Emergency Service, Commercial and

and the company’s services and products.

Sales Offices, and Municipalities. As a result

of these measurements, the global satisfaction

index of residential customers and the Small and

Medium Size Companies (PYME) for the period

was 81.5%, which represents an increase by

1.2% compared to the year 2001. It is important

to point out the improvement obtained by our

ENERSIS 2002 ANNUA L REPORT

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4 4
4 4

IDENTIFICATION OF THE COMPANY

Corporate name
Empresa Distribuidora Sur S.A.
(EDESUR S.A.)

Address
San José N°140 (1076),
Buenos Aires, Argentina

Type of company
Stock Company

Telephone
(54-11) 4370 3700

Edesur

Fax
(54-11) 4381 0708

Web site
www.edesur.com.ar

External auditors
Pistrelli Díaz y Asociados S.R.L.

Total number of shares
898,585,028

E-mail
servicio@edesur.com.ar

Subscribed and paid in capital
(Argentinean $) 898,585,028

Corporate purpose
Distribution and
commercialization of electric
energy and associated
operations.

BOARD OF DIRECTORS
Chairman
Enrique García
(Enersis Chief Executive Officer)

Vice-Chairman
Rafael Fernández

OPERATING ACTIVITY

the Executive Power to renegotiate the contracts

for works and public services.

Edesur S.A.’s main purpose is the distribution

and commercialization of electric energy in the

The approval of this law affected Edesur’s

southern area of Buenos Aires, comprising two

situation during 2002. Due to the measures

thirds of the Federal Capital and twelve districts

adopted against the crisis, a great alteration in the

in the Province of Buenos Aires. It has a total

company’s economic-financial equation occurred,

concession area of 3,309 sq km, serving a total of

which drove it to a particularly critical situation

2,089,997 customers with a level of physical sales

regarding the provision of services and the

of 12,138 GWh, which represents a decrease of

fulfillment of its contractual obligations according

6% with respect to the same period in the

to the original terms.

year 2001.

With the purpose of trying to repair this

On January 7, 2002, Law No. 25,561 was dictated,

situation, in February the Executive dictated

declaring a public emergency in social, economic,

Decree No. 293/02, which ordered the Ministry

administrative, financial and exchange matters.

of Economy to renegotiate, through an ad hoc

This law modified the convertibility law and

committee, the contracts for works and public

deleted the indexing clauses based on other

services, within a maximum term of 120 days.

countries’ price indexes and every other indexing

mechanism in the contracts agreed upon by the

Since the original deadline was not met, in

public administration, among them contracts for

September the Executive dictated Decree

works and public services. In this way, the prices

No. 1839/02, extending the term for the

and tariffs resulting from those clauses were

renegotiation process by 120 additional

left established in pesos with the exchange rate

working days.

1 peso = US$ 1. Furthermore, the law authorized

ENERSIS 20 02 ANNUAL REPORT

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4 6

Directors
Marcelo Silva
(Enersis Chief Distribution and
Services Officer)
Domingo Valdés
(Enersis Legal Counsel)
Pablo Alejandro
Juan C. Cassagne
Rafael Arias
Jorge Volpe
Alfredo Mac Laughlin

Deputy Directors
Santiago Daireaux
Manuel M. Benites
Pablo Casado
Horacio Babino
Jorge G. Casagrande
Pablo M. Lepiane
Alan Arntsen
Pedro E. Aramburu
Mariano F. Grondona

Main Officers
Chief Executive Officer
José M. Hidalgo

Legal Affairs Director
Alvaro Estivariz

Human Resources Director
Héctor Ruiz

Commercial Director
Sandro Rollan

Distribution Director
Daniel H. Colombo

Service Director
Daniel R. Alasia

Planning and Control Director
Juan Garade

Management and Finance
Director
Juan Verbitsky

With respect to granting urgency tariff raises,

Despite this situation, Edesur made the greatest

and in anticipation of the final result of the

possible effort to accomplish the investments

renegotiation process, in December the Executive

necessary to maintain the provision and quality

dictated Decree No. 2437/02 granting a raise to

of service. The amount invested by the company

the distribution companies. The effects were

during 2002 totaled US$ 26 million.

suspended by two judicial resolutions which have

been appealed by the government and by Edesur.

As a result of these investments, Edesur was able

The management of Edesur, regarding technical,

2002, as compared to 9.9% during 2001.

to keep the level of energy losses to 11.6% in

commercial, administrative, fiscal and financial

matters during 2002, was totally designed to try to

minimize the serious effects of the emergency and

of the measures adopted by the authorities.

Company Ownership

Other Shareholders 12%

Chilectra S.A. 16%

Enersis S.A. 16%

Distrilec Inversora S.A. 56%

ENERSIS 2002 ANNUA L REPORT

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4 6
4 6

IDENTIFICATION OF THE COMPANY

Corporate name
Empresa de Distribución
Eléctrica de Lima
Norte S.A.A.

Address
Jr. Teniente César López Rojas
Nº201, Urb. Maranga,
San Miguel, Lima, Perú

Type of company
Limited Liability Stock Company

Telephone
(51-1) 561 2001

Fax
(51-1) 452 3007

Web site
www.edelnor.com.pe

Total number of shares
1,174,902,874

E-mail
enlinea@edelnor.com.pe

Subscribed and paid in capital
(Peruvian Soles) 1,174,902,874

External auditors
Gris, Hernández y Asociados,
S.C. – Deloitte & Touche

Corporate purpose
Engage in activities pertaining
to the delivery of distribution,
transmission and generation of
electric energy services.

BOARD OF DIRECTORS
Chairman
Reynaldo Llosa

Directors
Emilio García
Julio Valenzuela
Fernando Fort
Fernando Urbina
Guillermo Morales
José Griso

Edelnor

OPERATING ACTIVITY

Eepsa (7.8%) Egenor (15.3%), Cahua (3.2%),

Pacasmayo (0.2%). The remaining 0.1%

Edelnor is the concession holding company of

corresponds to self-generation of the isolated

the public electricity service for the northern

systems which supply the rural areas of the Norte

part of Metropolitan Lima and the Constitutional

Chico zone.

Province of Callao, as well as for the provinces of

Huaura, Huaral, Barranca and Oyón. It serves 52

The distribution tariffs remain in force for four-

districts on an exclusive basis and shares another

year periods and are determined considering an

5 districts with the distribution company for the

efficient model distribution company and taking

southern part. The concession area awarded to

into account the different components established

Edelnor extends over 2,440 sq km, 1,838 sq km of

by law. The last distribution tariff fixation came

which corresponds to the northern part of Lima

into force on November 1, 2001 and will end up

and Callao.

on October 31, 2005.

The physical energy sales in 2002 reached

On December 10, 2002, experts from the

3,872 GWh, which represents an increase by 5.1%

International Certification Services (SGS of

as compared to 2001. Out of the total energy sold,

Perú, S.A.C.) finished auditing the Certification

38.1% corresponds to residential sales, 27.6% to

of the Quality Management System of Edelnor,

industrial sales, 17.3% to commercial sales and

and concluded that the company satisfactorily

17% to sales to other sectors.

complies with Rule ISO 9001:2000.

During 2002, the number of customers reached

The energy losses at the end of the year 2002

871,430, that is a 0.48% increase compared to

reached an annual 8.5%. This result was achieved

2001.

by following the strategic plan based on the

follow-up of critical electric feeders, inspections

During the year 2002, Edelnor purchased

and normalizations in distribution networks, as

energy from six generation companies;

well as a stricter control on customers who steal

Electroperú (50%), Edegel (23.4%),

from the company.

ENERSIS 20 02 ANNUAL REPORT

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4 8

Main Officers
Chief Executive Officer (*)
Emilio García

Chief Management
and Control Officer
Juan Yamamoto

Chief Commercial Officer
Enrique Demarini

Legal Counsel
Luis Salem

Chief Human Resources Officer
Carlos Ureta

Chief Communication Officer
María Dávila

Chief Technical Officer
Walter Sciutto

(*) In a Board of Directors
Meeting which took place
on December 16, 2002, Mr.
Ignacio Blanco was appointed
Chief Executive Officer, and
it was established that this
appointment would be effective
as of January 16, 2003.

Finally, the planned strategy to control the

In September, the second short-term Obligation

collectable accounts during 2002 was based

Program was registered for an amount of up to

mainly on a strong electricity cutoff and

US$ 50 million, with the purpose of maintaining

cutoff verification policy, which was oriented

the access of local money to the market and

to customers having two unpaid bills, thus

complying with the refinancing obligations.

permitting to control the growth of new unpaid

debts.

Thanks to the advantages offered by these debt

issuance, and despite the volatility of the interest

Within the frame of the Edelnor Corporate Bonds

rates, Edelnor was able to reduce the cost of its

Issue Program, three successful bond issues were

financial debt, which is totally denominated in

made in the local market. On January 2002, the

local currency, from 9.5% in December 2001, to

Third Issue of Edelnor Bonds was placed by an

7.7% in December 2002.

amount of S/.30 million (about US$ 8.5 million)

for a 2-year term, achieving a cutoff rate of 6.5%.

In April 2002, the Fourth and Fifth Bond Issues

were placed, by amounts of S/.20 million (about

US$ 5.7 million) and S/.19 million (about US$ 5.3

million) for 2- and 5-year terms, obtaining rates of

Company Ownership

6.34% and VAC + 6.1875%, respectively.

Other Shareholders 3%

Likewise, within the frame of Edelnor’s first

Short-Term Obligation Program, in August, the

fifth Securities Issue was placed for S/.25 million

AFP`s 37%

(about US$ 7.1 million), in two series. Series C

was placed for a term of 270 days, obtaining a

5% rate and Series D was placed for a term of 360

Inversiones Distrilima 60%

days, obtaining a 5.25% rate.

ENERSIS 2002 ANNUA L REPORT

4 9

4 8
4 8

IDENTIFICATION OF THE COMPANY

Corporate name
Cerj-Companhia de
Eletricidade do Rio de Janeiro

Address
Praça Leoni Ramos Nº1, Säo
Domingos, Niterói, Rio de
Janeiro, Brazil

Type of company
Stock Company

Telephone
(55-21) 2613 7000

Fax
(55-21) 2613 7153

Web site
www.cerj.com.br

E-mail
cerj@cerj.com.br

External auditors
Deloitte & Touche Tohmatsu

Total number of shares
2,124,730,536,352

Subscribed and paid in capital
(Th Brazilian reales)
545,424,306

Corporate purpose
Generation, transmission,
distribution and
commercialization of electric
energy.

Cerj

OPERATING ACTIVITY

certain period. The last adjustment took place

in December 2002, and tariffs were raised by

The concession area of Companhia de Eletricidade

28.56%.

do Rio de Janeiro (Cerj) covers 31,741 sq km,

corresponding to 73.3% of the Rio de Janeiro

Cerj has dedicated a special effort to the control

State. The company serves a population of 4.1

of energy losses, for which purpose the following

million people, through 1,778,407 customers in

measures were taken:

66 municipal districts. The main areas in which

the company serves are Niterói, Sao Gonçalo,

• 435,000 inspections were accomplished,

Petrópolis, Campos and the Los Lagos area.

generating, in this way, 96,000 normalizations.

Energy sales in the period amounted to

collection bills were issued for non registered

Within these normalizations, 73,000

7,146 GWh, which is higher by 6% compared to

consumption.

the same period in 2001. Out of the total energy

sold in the year 2002, 38.4% corresponds to

• Two projects were developed, Jardín Catarina

residential sales, 24.2% to industrial customers,

and Morros Comunitarios, serving areas with a

18.9% to commercial customers and 18.5% to

high concentration of low socioeconomic level

other customers.

customers.

To serve this market, Cerj bought electric energy

• Measurements were taken in the distribution

mainly from Furnas (78.3%) and Itaipú (19.0%),

transformers, thus focusing on the site of

with a 2.7% that was self-generated.

electric energy theft.

Cerj’s distribution tariffs are adjusted as set forth

• Collections and cutoffs were carried out more

in the Concession Agreement of November 1996.

effectively and in less time.

In December of each year, ANEEL (National

Electric Energy Agency) reviews the tariffs

The latter led to the fact that, as of October

according to the variations occurred in some

2002, the energy losses started to decrease

variables stipulated in the contracts during a

systematically from 23.3% to 20.7% in

ENERSIS 20 02 ANNUAL REPORT

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5 0

BOARD OF DIRECTORS
Chairman
Eduardo J. Bernini

Vice-Chairman
Emilio López

Deputy Directors
Manuel F. das Neves
Luis F. Goncalves
Francisco J. Arias
Fernando G. Urbina

Directors
Juan A. Madrigal
Antonio M. García
Fernando Nadal
(Enersis Corporate
Communications Director)
Luiz C. Barcelos
Marcelo Llévenes
Marcelo Silva
(Enersis Corp. Chief Distribution
and Services Officer)
Alfonso Arias

Main Officers
Chief Executive Officer
Manuel Montero

Chief Financial Officer
Julio Moratalla

Chief Human Resources Officer
Claudio Mendes

Chief Commercial Officer
Gonzalo Mardones

Chief Technical Officer
Manuel F. das Neves

Legal Counsel
Antonio P. Fagundes

December 2002. The level of accumulated losses

for 12 months reached 22.6%, being slightly lower

than the 22.7% reached in 2001.

Among the most relevant facts in the financial

area of the company, which occurred during

Company Ownership

Other Shareholders 4%

2002, is the conversion of Luz de Río Bonds

Endesa Internacional Energía 4%

(Debentures). This, due to a capital increase in

Cerj by R$ 260.8 million (about US$ 75 million)

Endesa Internacional S.A. 14%

during the month of July, as well as a

Eletricidade de Portugal Intern 15%

second capital increase which will conclude

during the month of January 2003, which

consists in the capitalization of the debt of

Luz de Río Ltda. 16%

Enersis S.A. Ag. Islas Cayman 20%

Enersis S.A. by a total amount of R$ 370 million

Chilectra S.A. Ag. Islas Cayman 27%

(about US$ 105 million).

ENERSIS 2002 ANNUA L REPORT

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5 0
5 0

IDENTIFICATION OF THE COMPANY

Corporate name
Companhia Energética
do Ceará

Type of company
Limited Liability
Stock Company

Address
Av. Barão de Studart, 2917,
Bairro Dionísio Torres,
Fortaleza, Ceará, Brazil
CEP 60.127-900

Fax
(55-85) 216 1410

Web site
www.coelce.com.br

External auditors
Deloitte & Touche Tohmatsu

Total number of shares
155,710,600,088

Corporate purpose
Exploit the distribution and
sales of electric energy,
thermal, hydraulic or any other
form.

Telephone
(55-85) 216 1100

E-mail
investor@coelce.com.br.

Subscribed and paid in capital
(Brazilian reales)
433,057,722.64

Coelce

OPERATING ACTIVITY

and high tension lines, installed 8,088 new

distribution transformers, increased power and

Coelce is the electric energy distribution company

built 9 substations, among others things.

of the State of Ceará, in the northeast of Brazil,

covering a total concession area of 146,817 sq km.

As defined in the concession contract, in April the

The company serves a population of more than

tariffs were adjusted by 14.27%. During that same

seven million people, represented by 2,009,412

month, an extraordinary raise was authorized,

customers. The customers’ growth rate for the

intended to repair the losses caused by the

year 2002 was of 4.8%.

electric rationing, as a consequence of the severe

The energy sales at December, 2002 amounted

February 2002. The tariffs were raised by 2.9% for

to 5,558 GWh, that is, an increase of 3.8%

residential customers and by 7.9% for industrial

compared to the same date in 2001. Out of the

and commercial customers, and these new tariffs

drought suffered by Brazil from the year 2001 to

total energy sold, 30.4% corresponds to industrial

will be valid until 2004.

customers, 29.9% to residential customers,

18.1% to commercial customers, and 21.6% to

Likewise, during the month of April, the tariff

other customers. On the other hand, the peak

revision process for Coelce was initiated. It should

demand occurred during December, amounting

end by April 2003 with the application of new

to 1,020 MW.

tariffs that will remain in force for the company

during the four following years. During September

99% of the energy required by the company was

2002, the National Agency of Electric Energy

purchased from Companhia Hidroelétrica do Sao

(ANEEL) defined the calculation methodology for

Francisco-Chesf.

the remuneration basis of the company’s assets,

through Resolution No. 493 / 2002.

During 2002, Coelce invested US$ 58.2 million

in the development, improvement and expansion

With respect to the commercial activities of

of the electric system, within which the company

the company during 2002, Coelce focused on

built 30 feeders and 5,745 km of medium

lowering the customers’ delay in payment,

ENERSIS 20 02 ANNUAL REPORT

5 3

5 2

BOARD OF DIRECTORS
Chairman
Marcelo Llévenes

Vice-Chairman
Ignacio Blanco

Directors
Manuel Soto
Fernando Urbina
Juan A. Madrigal
Antonio Cleber
Fernando A. de Moura
Emilio López
Jorge Parente
Manuel F. das Neves
Fernando Nadal
(Enersis Corporate
Communications Director)

Main Officers
Chief Executive Officer
Celestino Izquierdo

Chief Commercial Officer
Josep Pujols

Chief Strategic Planning and
Management Control Officer
Juan P. Harrison

Chief Distribution Officer
José Távora

Chief Administrative, Financial
and Investor Relations Officer
Antonio O. Alves

Chief Management
and HR Officer
José R. Ferreira

Chief Institutional
Project Officer
José Nunes

Legal Counsel
Silvia Cunha

reducing energy losses and increasing energy

consumption. For those purposes, the following

activities were carried out:

• 215,954 inspections were accomplished,

thus generating 31,507 normalizations where

3 million reales were recovered. As for large

customers, 1,866 inspections were made,

resulting in an increase of 120 thousand reales

in collection of non registered consumption.

• 11,116 customers with irregular payments were

reconnected, thus generating a consumption of

8,267 MWh.

• Measurements were taken in the distribution

transformers, so as to focus on the site of

electric energy theft.

• Collections and cutoffs were carried out more

effectively and in less time.

Other Shareholders 1%

Company Ownership

As a result of these activities, the energy losses at

Endesa 2%

December 31, 2002 reached 12.95% (accumulated

Electrobrás 7%

for 12 months), slightly lower than the 13.0%

registered in 2001.

Inversionistas Privados 33%

Investluz 57%

ENERSIS 2002 ANNUA L REPORT

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5 2
5 2

IDENTIFICATION OF THE COMPANY

Corporate name
Codensa S.A. E.S.P.

Type of company
Private Stock Company

Address
Carrera 13ª N° 93-66
Bogotá, Colombia

Telephone
(571) 601 6060

Fax
(571) 601 5917

Codensa

Web site
www.codensa.com.co

Total number of shares
132,093,274

E-mail
tservice@codensa.com.co

External auditors
Deloitte Colombia Ltda.

Subscribed and paid in capital
(Th Colombian $)
1,320,855,815,028

Corporate purpose
Distribution and
commercialization of electric
energy, as well as all the
similar, complementary and
related activities.

OPERATING ACTIVITY

During 2002, Codensa supplied 9,015 GWh,

which is 4% higher than the 8,673 GWh

Codensa S.A. E.S.P. renders services in the

registered in the same period of 2001, to 1,910,737

distribution and commercialization of energy in

customers. The company’s customers increased by

the city of Santa Fe de Bogotá and in 96 municipal

60,248 during 2002.

districts in the Departments of Cundinamarca,

Tolima and Boyacá. The total concession area

With respect to the tariff setting process of

comprises 14,087 sq km, of which 1,587 sq km

Codensa, the methodology for the calculation of

correspond to urban areas.

the rate of return was approved in April. This rate

ENERSIS 20 02 ANNUAL REPORT

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5 4

BOARD OF DIRECTORS
Chairman
Andrés Regué

Directors
David F. Acosta
José M. Martínez
Cristián Herrera
(Chief Business Margin and
Electric Supply Officer)
José A. Vargas
Israell Fainboim
Moisés Rubinstein

Deputy Directors
Alvaro Bolaños
Germán Castro
Lucía Piedrahita
Roberto Ospina
Henry Navarro
Silvia Escobar
Carmenza Saldias

Main Officers
Chief Executive Officer
José M. Martínez

Chief Commercial Officer
David F. Acosta

Chief Communication Officer
Emilia Sarracino

Chief Distribution Officer
Germán Castro

Chief Financial Officer
Lucía Piedrahita

Legal Counsel
Álvaro Camacho

Chief Planning and Control
Officer
Roberto Ospina

Chief Human Resources
Officer
Alvaro Bolaños

Chief Regulation Officer
Omar Serrano

will be used to calculate the remuneration of the

• Activities of promotion and development

distribution activity during the next tariff setting

were accomplished, intended to establish a

period. This rate (WACC) was set at 16.06%

relationship with the community in order to

before taxes (it used to be 9%). Moreover, the

guarantee the development of the operations

Regulation Commission approved, in October

and the improvement of Codensa’s image.

2002, a tariff transition with a monthly raise of the

distribution costs by 2.4% through March 2003,

During September 2002, the company’s capital

thus accumulating an increase of 15.29% to that

was reduced by an amount of Co$ 551,000 million

date.

(about US$ 192 million), in order to optimize and

make better use of the financial structure of the

With respect to the commercial activities of the

company.

company, the following were carried out:

• Plans were developed for the collection policy.

As a result, the uncollectable of Codensa was

of Co$ 55,427 million (about US$ 19 million)

by the end of the year, thus achieving a

Company Ownership

net reduction of Co$ 13,445 million (about

US$ 5 million) during the year.

• The accumulated twelve-month energy losses

Empresa Eléctrica
de Bogotá 52%

index was reduced by 1.5 percentage points,

going from 11.8% to 10.3%.

Luz de Bogotá 48%

• 212,000 jobs were accomplished,

corresponding to normalizations in marginal

neighborhoods, 92,000 meters replaced and

28,000 inspections made.

ENERSIS 2002 ANNUA L REPORT

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5 4
5 4

Others Businesses

COLOMBIA
Synapsis
CAM

PERU
Synapsis
CAM

BRAZIL
Synapsis
CAM

ARGENTINA
Synapsis
CAM

CHILE
Synapsis
CAM

Inmobiliaria
Manso de
Velasco

Telephone
(56–2) 632 1240

Fax
(56–2) 699 2695

Web site
www.synapsis-it.com

External auditors
Deloitte & Touche

E-mail
synapsis@synapsis-it.com

Subscribed and paid in capital
(ThCh$) 3,943,580

IDENTIFICATION OF THE COMPANY

Corporate name
Synapsis Soluciones y
Servicios IT Ltda.

Type of company
Limited Liability Stock
Company

Tax register number
96.529.420-1

Address
Catedral N° 1284,
Santiago, Chile

Synapsis

COMPANY OWNERSHIP

Its strengths lie in the technological development

with the generation of advanced solutions in

Synapsis is 100% property of Enersis. This is

sofware; experience and wide knowledge of the

the Group’s professional service company for

problems of the Latin American market, and

information technologies.

commitment to continuous improvement with

OPERATING ACTIVITY

services, that confer added value to its customers’

the object of providing high quality products and

Founded in 1988, with its main offi ce in Santiago,

businesses.

Chile, and offi ces in the most important capital

The services provided by Synapsis are addressed

cities of the region, Synapsis is consolidated as

to large companies and institutions in various

the most experienced and trustworthy specialist

economic sectors, both in the domestic and the

in business consulting services for IT solutions in

international market, covering practically any

the Latin American market.

need from a technological point of view. Starting

from a thorough knowledge of its customers’

The pillars of Synapsis are its work team formed

problems, Synapsis designs and implements

by more than 700 highly qualifi ed professionals,

solutions and tools, taking the best advantage

and its presence in Argentina, Brazil, Colombia,

of the information technologies, as instruments

Perú and Chile, thus ensuring the coverage of all

of innovation, improvement and support for

the Latin American region.

company management.

During 2002, Synapsis continued to follow

the guidelines given by the Genesis Project,

generating a great change in the structure of the

company, with a new approach based on three

pillars: Consulting Services, Software Plant and

Operation. With this new business approach,

centered on offering technology and business

ENERSIS 20 02 ANNUAL REPORT

Corporate purpose
Supply and sell services
and equipment related to
computers, data processing,
telecommunication systems
and control systems for public
utility companies and others,
both domestic and foreign.

Participation of Enersis
100%

Agents
Cristóbal Sánchez
(Enersis Chief Information
Systems Officer)
Víctor H. Muñoz

Main Officers
Chief Executive Officer
Víctor H. Muñoz

Chief Financial Officer
Rodrigo A. Morelli

Chief Consulting Services Officer
Gustavo Pardo

Chief Plant Officer
Guillermo Toro

Chief Operations Officer
María A. Letelier

Chief New Business Officer
Manuel de Andrés

consulting services, Synapsis becomes a strategic

partner for its customers.

Several achievements during 2002, which foretell

important successful events in the future, are: the

ISO 9000 Certification, Synapsis being one of the

first professional services companies to obtain this

quality certification; the opening of the new Santa

Rosa Data Processing Center, with an investment

of US$ 1,400,000 and a total area of 400 m2; and

the expansion of the Call Center with more than

300 operators and the most modern technological

tools, in order to provide better service to the

customers.

In Chile, Synapsis achieved the renewal of the

During the year, Synapsis obtained important

Scada system for the main electric companies,

contracts for outsourcing services, and

the Scada and Telecommunications project in

accomplished large projects with state-of-the-art

Essbio company, the establishment of Synergi@ 4i

technology, among which it is worth pointing

in Chilectra and Río Maipo, the SAP project in

out: Nova Era, presently being established in

Empresa de Ferrocarriles del Estado (EFE), the

Coelce, Brazil; the establishment of Synergi@ 4i

adoption of the Synergi@ 4i product in Abastible

commercial system in Enelbar, Venezuela; the

company, the generation of the Sirhena system for

Medellín City Hall project in Colombia; the

Human Resources management in Chilectra, the

establishment of SDE-SAC in Edelnor, Perú; the

full establishment of SIE 2000A, based on SAP, in

conclusion of the Electra project with Synergi@ 4i

all the companies of the Group, the control system

in Panama; the SDE project in Edesur, Argentina;

project in CDEC-SIC, and the microinformation

and the establishment of Scada system for the San

system and service quality improvement project

Gaban company in Perú.

of the Call Center for Smartcom, among others.

ENERSIS 2002 ANNUA L REPORT

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5 8
5 8

IDENTIFICATION OF THE COMPANY

Address
Bulnes N°1238, Santiago, Chile

Web site
www.camchile.cl

Telephone
(56–2) 389 7300

Fax
(56–2) 389 7342

E-mail
cam@cam.enersis.cl

External auditors:
Deloitte & Touche Sociedad de
Auditores y Consultores Ltda.

Subscribed and paid in capital
(ThCh$) 2,572,038

Corporate purpose
Perform, on its own behalf,
for third parties and/or in
association with third parties,
both in Chile and abroad,
general services, real estate
services and building of real
estate, import, export and
distribution of products of any
nature.

Participation of Enersis
100%

Agents
Pantaleón Calvo
Eduardo López
(Enersis Chief Procurement
Officer)

Corporate name
Compañía Americana de
Multiservicios Ltda.

Type of company
Limited Liability Stock
Company

Tax register number
96.543.670-7

CAM

GENERAL INFORMATION

than 10 million meters. In this area, a modern

Merger

laboratory was set up in CAM Perú, which will

enable to keep an exact registry of the meters

Compañía Americana de Multiservicios (CAM)

in the commercial systems of Edelnor and third

was merged with Distribuidora de Productos

parties. In Chile, the laboratories were once again

Eléctricos (Diprel) with the purpose of rendering

credited (authorized) by the SEC to operate as

massive integral services to electric distribution,

certification institutions.

water, gas and telecommunications companies.

In commercial services for utility companies,

The merger of both companies strengthened

CAM has improved its position as an efficient

the operating, commercial and competitive

service provider among the main companies,

capabilities, by having under the same

both electric and water, diversifying its supply

management, the responsibility for the materials

of services and increasing the number of services

and logistics to be included in the services, thus

effectively rendered. In 2002, agreements were

providing ready-to-use solutions.

signed with Aguas Andinas for providing the

services of meter readings, delivery, cutoff and

Operating activity

reconnection, and payment collection.

The main office in Chile and its subsidiaries

in Argentina, Brazil, Colombia and Perú have

In engineering, construction and assembly

consolidated their presence in the region,

services, CAM has consolidated its presence

and have supported the management of

in the domestic market. Some good examples

the distribution companies of the Group by

are the works achieved during 2002 for

expanding the customers portfolio and rendering

Colbún generation company, accomplishing

services to other companies.

the construction and assembly of Candelaria

and Minero 220 kV substations, having 7 and

The expertise and ability demonstrated in the

19 pieces of land, respectively. Additionally,

integral service for measurement systems has

CAM materialized the construction of the

allowed CAM to fully provide and operate today,

Casablanca-Algarrobo 110 kV line for Chilquinta

electric and water measurement equipment in

distribution company, and is presently engaged

the region, being technically responsible for more

in the construction and assembly of the 110 kV

ENERSIS 20 02 ANNUAL REPORT

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6 0

Deputy Agents
Andreas Gebhardt
Cristóbal Sánchez
(Enersis Chief Information
Systems Officer)

Main Executive Officers
Chief Executive Officer
Pantaleón Calvo

CAM Brazil Chief Executive
Officer
Pablo Calderón

CAM Perú Chief Executive
Officer
Mario Albornoz

CAM Colombia Chief Executive
Officer
Fernando Foix

CAM Argentina Legal
Representative
Mauricio Naser

Transmission Subsystem for Codelco Chile, El

In Perú, sales to third parties amounted to

Teniente division.

US$ 3.7 million, representing a 2.5 fold increase

compared to the previous period. Additionally,

In order to improve the access of CAM’s

CAM consolidated the technical and commercial

customers to information regarding its services, a

services for Edelnor distribution company. Also,

special system with a platform was implemented

CAM Perú was awarded the international bid

in the Internet. In this way, the mandator has a

for supply of materials made by UNOPS, for the

book of virtual works available, which he can

extension of the rural electric boundary of the

access from any place in the country.

country, for an amount of US$ 5.5 million.

Another line of basic business is the integral

In Argentina, it is worth pointing out the

service in the construction of distribution

continuity of the ISO 9,002 quality certification

networks. In this area, CAM has built the feeders

and the ISO 14,001 environmental certification for

for Chilectra and Río Maipo, for a total of 138 km

an additional year, and the renewal of the contract

during 2002; aerial and underground electric

with Edenor for the repair of meters and the

networks with an extension of 170 km; and,

measurement of electric variables.

jointly with Chilectra, has transferred distribution

networks corresponding to 200 km in Medium

CAM Brazil obtained the contract for

Tension.

Presence in the region

“Fiscalización de Empresas Contratistas”, that

is, the supervision of contractor companies

that render commercial services to Cerj, for

CAM Colombia became the first company to

a three-year period. This is the first contract

expand its services to gas utilities, when it was

awarded under the bidding system presently in

awarded two contracts for the company Gas

force in Brazil. On the other hand, Cerj assigned

Natural de Bogotá. In this context, there was

CAM the integral service of measurement systems,

obtained the certification of the laboratory as

both in the laboratory and on site, for its meter

a constituent part of the Colombian metrology

equipment consisting of about 1.7 million units.

network, and a contract signed with Electrocosta

The same supervision service, but for distribution

for the calibration and certification of 100,000

works in Low Tension, Medium Tension and High

electronic meters.

Tension, was rendered during the year to Coelce.

ENERSIS 2002 ANNUA L REPORT

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6 0
6 0

IDENTIFICATION OF THE COMPANY

Corporate name
Inmobiliaria Manso de Velasco
Ltda.

Tax register number
96.909.280-8

Type of company
Limited Liability Stock
Company

Address
Santa Rosa N°76, Piso 9
Santiago, Chile

Telephone
(56–2) 378 4700

Fax
(56–2) 378 4702

E-mail
rch@mvelasco.enersis.cl

Subscribed and paid in capital
(ThCh$) 5,848,651

External auditors
Deloitte & Touche

Participation of Enersis
100%

Manso de Velasco

were implemented according to the master plan,

thus offering better equipment and service areas

REAL ESTATE PROJECTS

to the lots and users.

Manso de Velasco develops important real estate

In the 2002 fiscal year, ENEA obtained important

projects, mainly for the residential (Santuario

progress in commercial terms and in the

del Valle and Puerto Pacífico) and the industrial

development of its urbanization works. Important

sector (ENEA). During 2002, important progress

companies joined our Business Center, among

was achieved in the urbanization and marketing

them: Transportes Nilo, Sociedad Concesionaria

of different projects, despite the depressed status

Vespucio Norte Express (to build the main offices

of the real estate market.

and the operation center for the above mentioned

Enea Project

This project corresponds to a real estate

Costanera Norte highway), and the development

of the Santa Catalina Housing Project.

development in a 1,000 ha area, strategically

Inserted in the project is Aguas Santiago

located in western Santiago, borough of Pudahuel,

Poniente company, which provides the water

next to the International Airport “Arturo Merino

utility services associated with the real estate

Benítez”. The remarkable road relationship

development of the ENEA project. Due to the

and connectivity of the project have been

important sale levels achieved by the project,

complemented by future works in the vial link

the company has had to activate its water

of Av. Américo Vespucio, Av. San Pablo and the

infrastructure works, and is presently serving

highway under concession Costanera Norte,

more than 1,500 residential and industrial

which should be in full operation in 2006. This

customers. In view of this prospect, Aguas

connectivity positions ENEA near the key centers

Santiago Poniente is in the process of a notorious

of the city, and therefore will permit an important

increase of its economic value, due to the

development of this Business Center.

certainty that the customers who join the Enea

project will require the services of this company.

It is currently in its Phase I, corresponding to

the concept of Industrial and Business Center.

Santuario del Valle Project

However, other areas intended for housing and

Santuario del Valle, located in the La Dehesa

commercial purposes are being sold as well. The

neighborhood, is being consolidated as one of the

project has innovative facilities, and green areas

most important real estate projects in the country.

ENERSIS 20 02 ANNUAL REPORT

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6 2

Corporate purpose
Purchase, sell, parcel,
subdivide, market and
commercially operate, in any
way, all types of real property,
either on its own behalf or on
behalf of others.

Agents
Cristóbal Sánchez
(Enersis Chief Information
Systems Officer)
Andrés Salas

Main Officers
Chief Executive Officer
Andrés Salas

Legal Counsel
Alfonso Salgado

Chief Real Estate
Development Officer
Gustavo Cardemil

ENEA Project Manager
Bernardo Küpfer

During 2002, the Santuario del Valle project was

near important commercial areas and only 5

devoted to the sales of single-family residential

minutes away from downtown Viña del Mar.

lots oriented towards the high socio-economic

segment of the population, and of macrolots,

In 2002, the property was subdivided into nine

which are larger lots to be developed by third

sublots, which the company expects to sell during

parties as housing condominiums oriented

the next few months. Two of these sublots have

towards the same socio-economic segment.

already been sold.

The sales of the 486 lots corresponding to Sectors

REAL PROPERTY

1 to 5 was considered finished, with sales of

single-family lots for Ch$ 1,637 million during

Immobiliaria Manso de Velasco Ltda. manages a

the year. Up to date, 94% of the total project

total of 43,241 built m2, corresponding to office

has been sold. Only 50 lots of Sector 6, the last

buildings, parking buildings and stores, most

stage, remain for sale. As for macrolots, a total

of which are rented to related companies and

area of 12 ha was sold during 2002, for a total of

third parties, having generated an income of

Ch$ 7,037 million.

Ch$ 1,774 million in 2002.

Tapihue Project

Tapihue project includes properties

corresponding to lands associated to the farms

Tapihue, Amancay (lot B) and La Petaca. Such

properties, as a whole, involve an area of 7,302 ha

in the borough of Til-Til, province of Chacabuco,

Metropolitan region, and are classified as CUDA

(Conditioned Urban Development Area), as per

the Santiago Metropolitan Urban Development

Plan.

Meseta Puerto Pacífico

The company owns a property of more than

35,000 m2 in Viña del Mar, located in an excellent

site (15 Norte Street and Nueva Libertad Street),

ENERSIS 2002 ANNUA L REPORT

6 3

6 2
6 2

Liability
Statement

The undersigned Directors and Chief

Executive Officer of Enersis are liable

under oath for the truthfulness of

all the information provided in the

present annual report, in compliance

with the General Rule No.30 issued by

the Superintendence of Securities and

Insurance.

CHAIRMAN
Pablo Yrarrázaval
Tax registry number:
5.710.967-K

VICECHAIRMAN
Rafael Miranda
Tax registry number:
48.070.966-7

DIRECTOR
José L. Palomo
Tax registry number:
51.316.595-F

DIRECTOR
José M. Fesser
Tax registry number:
48.064.839-0

DIRECTOR:
Ernesto Silva
Tax registry number:
5.126.588-2

DIRECTOR:
Hernán Somerville
Tax registry number:
4.132.185-7

DIRECTOR:
Eugenio Tironi
Tax registry number:
5.715.860-3

GERENTE GENERAL:
Enrique García
Tax registry number:
14.704.156-K

ENERSIS 20 02 ANNUAL REPORT

6 5

6 4

Identification
of Other
Subsidiaries
and Related
Companies

DISTRILEC

ENERSIS DE ARGENTINA

Corporate name
Distrilec Inversora S.A.

Corporate name
Enersis de Argentina S.A.

Type of company
Foreign Closed Stock Company

Type of company
Foreign Stock Company

Address
San José Nº 140 (C1076AAD)
Buenos Aires - Argentina

Address
Suipacha N°1111 Piso 18,
Buenos Aires, Argentina

Telephone
(54-11) 4114 3000

Fax
(54-11) 4114 3001/3002

External auditors
Pistrelli Díaz y Asociados S.R.L
.
Subscribed and paid in capital
(Arg$) 497,612,021

Participation of Enersis
(direct and indirect)
51.5%

Corporate purpose
The exclusive purpose of capital
investment in companies, already
organized or to be organized, that have
as main activity the distribution of
electric energy.

Telephone
(54-11) 4114 3000

Fax
(54-11) 4114 3001

External auditors
Pistrelli Díaz y Asociados S.R.L.

Subscribed and paid in capital
(Arg$) 12,000

Participation of Enersis
(direct and indirect)
100%

Corporate purpose
Mainly financial, able to carry out
all types of financial and investment
activities.

BOARD OF DIRECTORS
Chairman
Rafael Fernández

Vice-Chairman
Enrique García
(Enersis Chief Executive Officer)

Directors
Marcelo Silva
(Enersis Corp. Chief Distribution
and Services Officer)
Domingo Valdés
(Enersis Legal Counsel)
Mariano F. Grondona
Alan Arntsen
Horacio R. Babino
Luis M. Sas
Jorge G. Casagrande
Daniel J. Maggi

Deputy Directors
Pablo Casado
Manuel M. Benites
Luis D. Barry
Pedro E. Aramburu
Santiago Daireaux
Rigoberto Mejía
Jorge R. Barros
Pablo A. Ferrero
Nicolás Carusoni
Antonello Tramonti

Chief Executive Officer
José M. Hidalgo

ENERSIS 2002 ANNUA L REPORT

6 5

6 4
6 4

ENERSIS ENERGÍA DE COLOMBIA
(en liquidation)

Corporate name
Enersis Energía de Colombia S.A. E.S.P.

Type of company
Foreign Stock Company

Address
Carrera 13A Nº 93-66, Piso 2,
Bogotá, Colombia

Telephone
(57-1) 601 5790

Fax
(57-1) 601 5799

ENERSIS INTERNACIONAL

INVESTLUZ

DISTRILIMA

Corporate name
Enersis Internacional

Type of company
Foreign Stock Company

Corporate name
Investluz S.A.

Type of company
Foreign Stock Company

Corporate name
Inversiones Distrilima S.A.

Type of company
Foreign Stock Company

Address
P.O. BOX 309,
Ugland House, South Church St,
Grand Cayman, Cayman Islands

Address
Av. Barao de Studart N°2917,
Dionisio Torres
Fortaleza, Ceará, Brazil

Address
Tnte. César López Rojas Nº 201,
Urbanización Maranga, San Miguel,
Lima, Perú

Telephone
(345) 949 8066

Fax
(345) 949 8080

Telephone
(55-85) 216 1123

Fax
(55-85) 216 1423

Telephone
(51-1) 561 1604

Fax
(51-1) 452 3007

External auditors
Deloitte Colombia Ltda.

External auditors
Deloitte & Touche

External auditors
Deloitte & Touche Tohmatsu

External auditors
Deloitte & Touche

Subscribed and paid in capital
(Col$) 300,000,040

Subscribed and paid in capital
(Th US$) 360,557,687

Subscribed and paid in capital
(R$) 954,618,954.27

Subscribed and paid in capital
(S/.) 595,422,815.98

Participation of Enersis
(direct and indirect)
100%

Participation of Enersis
(direct and indirect)
48.4%

Participation of Enersis
(direct and indirect)
55.7%

Corporate purpose
Purchase of electric energy and sales
to final users, either regulated or non
regulated.

Corporate purpose
Any legal activity related with energy
or fuel.

Corporate purpose
Participation in the capital of Coelce
and in other companies in Brazil and
abroad, as a shareholder.

LIQUIDATORS
Main Liquidator
Fernando Foix

Deputy Liquidator
Álvaro Pérez

BOARD OF DIRECTORS
Chairman
Mario Valcarce
(Enersis Chief Economic Financial
Officer)

Secretary
Máximo de la Peña
(Enersis Tax Director)

MAIN EXECUTIVE OFFICERS
Chairman Director
Celestino Izquierdo

Finance Vice-Chairman
Antonio O. Alves

Directors
José R. Ferreira
Manuel M. Montero
Silvia Cunha
Eduardo J. Bernini
Juan P. Harrison

Corporate purpose
Making investments in other companies,
especially in those related with
distribution and generation of electric
energy.

BOARD OF DIRECTORS
Chairman
Julio Valenzuela

Vice-Chairman
Reynaldo Llosa

Directors
José Griso
Marciano Izquierdo
Fernando Urbina
Emilio García
José Chueca

Deputy Directors
Mario Albornoz
Fernando Fort
Patricia Mascaró
Marco de Andrea
Enrique Demarini
Walter Sciutto
Pilar Dávila

Chief Executive Officer
Emilio García

ENERSIS 20 02 ANNUAL REPORT

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6 6

ENDESA MARKET PLACE

Corporate name
Endesa Market Place S.A.

Type of company
Stock Company

Address
Paseo de la Castellana N°95,
Madrid, Spain

Telephone
(34-91) 213 4100

Fax
(34-91) 213 4199

External auditors
Deloitte & Touche

Subscribed and paid in capital
(Euros) 6,743,800

Participation of Enersis
(direct and indirect)
15.0%

Corporate purpose
B2B and new technologies.

Associated Managers
Evaristo Villa
Ignacio Antoñanzas

CGTF

Corporate name
CGTF – Central Geradora
Termelétrica Fortaleza S.A.

Type of company
Foreign Stock Company

Address
Av. Barrao de Studart N°2917/83,
Dionisio, Fortaleza, Ceará, Brazil

Telephone
(55-85) 216 1100

Fax
(55-85) 216 1410

External auditors
Deloitte & Touche Tohmatsu

Subscribed and paid in capital
(R$) 41,472,571

Participation of Enersis
(direct and indirect)
48.8%

Corporate purpose
Development of thermoelectric
generation projects in Brazil.

Chairman
Juan A. Madrigal

Directors
Francisco Bugallo
Marcelo Llévenes

Chief Executive Officer
Hernán Salazar

LUZ DE BOGOTÁ

Corporate name
Luz de Bogotá S.A.

Type of company
Foreign Stock Company

Address
Carrera 13A Nº 93-66, Piso 6,
Bogotá, Colombia

Telephone
(571) 601 5402

Fax
(571) 601 5905

External auditors
Deloitte Colombia Ltda.

Subscribed and paid in capital
(Col$) 336,780,602,632

Participation of Enersis
(direct and indirect)
44.7%

Corporate purpose
Any legal activity related with energy
or fuel or with public utility services.

BOARD OF DIRECTORS
Chairman
Andrés Regué

Directors
Felipe Acosta
José M. Martínez
Cristián Herrera
Enersis Chief Business Margin
and Electric Suppy Officer

Deputy Directors
Marcelo Llévenes
Germán Castro
José Inostroza
Lucio Rubio

Chief Executive Officer
José M. Martínez

ENERSIS 2002 ANNUA L REPORT

6 7

6 6
6 6

Consolidated

Enersis Consolidated Financial Statements

ENERSIS 2002 ANNUAL REPORT

INDEX

Accounts Inspector`s Report

Independent Accountant’s Report

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Changes in Shareholders’ Equity

Consolidated Statements of Cash Flow

Notes to the Consolidated Financial Statements

Consolidated Relevant Facts

Consolidated Management Analysis

198

209

ENERSIS 2002 ANNUA L REPORT

6 9

6 8
6 8

ACCOUNTS INSPECTOR’S REPORT

Pursuant to the provisions in law No. 18,046 on Limited Liability Stock Companies and in compliance with the mandate

granted by the Ordinary Shareholders’ Meeting held on April 11, 2002, we have examined the Consolidated Financial

Statements of Enersis S.A. for period between January 1 and December 31, 2002.

Our assignment was focused on verifying, on a selecyive basis, the coincidence of the fi gures presented in the Financial

Statements with the offi cial records of the Company and its subsidiaries and to such and end we compared the fi gures

presented in the ledger with the grouping and classifi caton worksheets. To subsequently ascertain if these amounts which

are the balances of accounts of the same nature match with those included in the Financial Statements, a revision which

entailed no objections.

Marcela Araya

Accounts Inspector

Marco Acevedo

Accounts Inspector

Santiago, January 31, 2003

ENERSIS 20 02 ANNUAL REPORT

ENERSIS 2002 ANNUA L REPORT

70
70

Consolidated Balance Sheets

(Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2002 and thousands of US dollars)

ASSETS

CURRENT ASSETS:

Cash

Time deposits

Marketable securities

Accounts receivable, net

Notes receivable, net

Other accounts receivable, net

Amounts due from related companies

Inventories

Income taxes recoverable

Deferred income taxes

Prepaid expenses

Other current assets

Total current assets

2001
ThCh$

2002
ThCh$

2002
ThUS$

37,648,796

48,184,878

178,113,234

145,626,894

203,072

1,543,290

550,248,992

458,839,724

5,683,330

72,220,719

18,019,578

77,424,074

57,510,102

24,162,101

13,971,567

5,131,349

62,776,096

195,398,835

60,382,653

54,435,976

51,955,793

7,666,018

127,241,229

132,021,608

67,053

202,651

2,148

638,510

7,141

87,358

271,912

84,027

75,752

72,300

10,668

183,718

1,162,446,794

1,223,963,114

1,703,238

PROPERTY, PLANT AND EQUIPMENT, NET

9,625,049,659

9,879,458,183

13,748,011

OTHER ASSETS:

Investments in related companies

Investments in other companies

Long-term receivables

Goodwill, net

Negative goodwill, net

Amounts due from related companies

Intangibles

Accumulated amortization

Other assets

Total other assets

167,448,008

149,560,997

101,903,562

1,318,832,593

194,164,157

159,466,794

125,850,513

847,513,499

(181,194,560)

(95,172,950)

170,667,792

71,697,080

898,167

80,915,893

(25,148,069)

(34,648,290)

198,535,455

238,755,596

270,194

221,910

175,130

1,179,379

(132,440)

1,250

112,601

(48,216)

332,246

1,972,302,858

1,517,743,379

2,112,054

TOTAL ASSETS

12,759,799,311

12,621,164,676

17,563,303

The accompanying notes are an integral part of these consolidated financial statements

ENERSIS 20 02 ANNUAL REPORT

7 3

7 2

LIABILITIES AND SHAREHOLDERS’ EQUITY

2001
ThCh$

2002
ThCh$

2002
ThUS$

CURRENT LIABILITIES:

Short-term debt due to banks and financial institutions

301,010,064

425,049,260

Current portion of long-term debt due to banks and
financial institutions

Promissory notes

Current portion of bonds payable

Current portion of long-term notes payable

Dividends payable

Accounts payable

Short-term notes payable

Miscellaneous payables

Amounts payable to related companies

Accrued expenses

Withholdings

Income taxes payable

Deferred income

Other current liabilities

Total current liabilities

LONG-TERM LIABILITIES:

Due to banks and financial institutions

Bonds payable

Long-term notes payable

Accounts payable

425,536,729

605,261,953

54,630,248

13,189,514

62,848,322

498,501,344

26,580,340

7,008,951

41,628,914

14,554,203

258,955,300

222,075,984

45,429,070

53,324,443

31,120,649

79,920,329

53,957,592

77,283,022

11,314,564

150,383,758

4,833,074

73,417,551

16,285,712

84,930,321

55,485,759

27,532,029

9,085,674

59,541,957

591,488

842,268

18,354

693,702

57,930

20,253

309,036

6,726

102,166

22,663

118,187

77,213

38,313

12,643

82,857

1,639,303,381

2,151,373,249

2,993,799

1,971,249,920

1,691,338,670

2,271,468,659

2,097,845,568

215,513,230

220,886,690

34,746,948

22,606,529

2,353,625

2,919,310

307,381

31,459

Amounts payable to related companies

1,001,707,159

988,291,605

1,375,282

Accrued expenses

Deferred income taxes

Other long-term liabilities

Total long-term liabilities

MINORITY INTEREST

SHAREHOLDERS’ EQUITY:

Paid-in capital, no par value

Additional paid-in capital – share premium

Other reserves

Retained earnings

Net income (loss) for the year

Total shareholders’ equity

234,388,938

226,922,617

36,059,964

61,740,871

67,228,005

103,975,862

315,780

85,917

144,690

5,832,362,823

5,413,608,412

7,533,444

4,073,571,128

4,050,602,721

5,636,719

751,208,197

1,045,363

33,370,057

27,176,075

33,370,057

41,942,477

360,653,617

402,807,650

42,154,033

(223,748,087)

1,214,561,979

1,005,580,294

46,437

58,366

560,537

(311,362)

1,399,341

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

12,759,799,311

12,621,164,676

17,563,303

ENERSIS 2002 ANNUA L REPORT

7 3

7 2
7 2

Consolidated Statements of Income

(Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2002 and thousands of US dollars)

OPERATING INCOME:

Sales

Cost of sales

Gross profit

Administrative and selling expenses

Operating income

NON-OPERATING INCOME AND EXPENSE:

Interest income

Equity in income of related companies

Other non-operating income

Equity in losses of related companies

Amortization of goodwill

Interest expense

Other non-operating expenses

Price-level restatement, net

Exchange difference, net

Non-operating expense, net

2001
ThCh$

2002
ThCh$

2002
ThUS$

3,059,380,761

2,485,873,220

3,459,280

(2,025,312,072)

(1,730,050,356)

(2,407,496)

1,034,068,689

755,822,864

(279,524,922)

(223,178,503)

754,543,767

532,644,361

1,051,784

(310,570)

741,214

56,592,832

3,629,292

85,284,624

14,996,244

194,693,581

308,143,887

(14,328,089)

(6,732,461)

(80,576,348)

(506,344,171)

(452,801,275)

(439,536,318)

(183,929,244)

(241,196,604)

2,175,075

4,964,890

(30,542,651)

(16,110,247)

118,680

20,868

428,805

(9,369)

(704,616)

(611,646)

(335,643)

6,909

(22,419)

(505,086,827)

(796,530,156)

(1,108,431)

INCOME (LOSS) BEFORE INCOME TAXES
EXTRAORDINARY ITEMS, MINORITY INTEREST
AND AMORTIZATION OF NEGATIVE GOODWILL

249,456,940

(263,885,795)

(367,217)

Income taxes

Extraordinary items

(129,850,137)

(66,016,985)

(22,375,640)

(91,868)

(31,137)

INCOME (LOSS) BEFORE MINORITY INTEREST AND
AMORTIZATION OF NEGATIVE GOODWILL

119,606,803

(352,278,420)

(490,222)

Minority interest

(125,152,619)

16,282,559

22,658

INCOME BEFORE AMORTIZATION OF NEGATIVE
GOODWILL

(5,545,816)

(335,995,861)

(467,564)

Amortization of negative goodwill

47,699,849

112,247,774

156,202

NET INCOME (LOSS) FOR THE YEAR

42,154,033

(223,748,087)

(311,362)

The accompanying notes are an integral part of these consolidated financial statements

ENERSIS 20 02 ANNUAL REPORT

7 5

7 4

Consolidated Statements
of Changes in Shareholders’ Equity

(Expressed in thousands of historical Chilean pesos, except as stated)

Number
of shares
(in thousands)

Paid-in
capital
ThCh$

Additional
paid-in
capital
ThCh$

Other
reserves
ThCh$

Retained
earnings
ThCh$

Net income
(loss) for
the year
ThCh$

Total
ThCh$

As of January 1, 2001

8,291,020

707,398,979

31,423,970

7,266,721

264,427,970

90,082,590

1,100,600,230

Transfer of prior year income to

retained earnings

Dividends

Price-level restatement of capital

Cumulative translation adjustment

Net income for the year

(14,976,824)

90,082,590

(90,082,590)

21,929,368

974,144

225,268

10,615,407

18,892,550

(14,976,824)

33,744,187

18,892,550

40,926,246

As of December 31, 2001

8,291,020

729,328,347

32,398,114

26,384,539

350,149,143

40,926,246

1,179,186,389

As of December 31, 2001 (1)

8,291,020

751,208,197

33,370,057

27,176,075

360,653,617

42,154,033

1,214,561,979

As of January 1, 2002

8,291,020

729,328,347

32,398,114

26,384,539

350,149,143

40,926,246

1,179,186,389

Transfer of prior year income to retained earnings

Price-level restatement of capital

Cumulative translation adjustment

Net loss for the year

40,926,246

(40,926,246)

21,879,850

971,943

791,536

11,732,261

14,766,402

35,375,590

14,766,402

(223,748,087)

As of December 31, 2002

8,291,020

751,208,197

33,370,057

41,942,477

402,807,650

(223,748,087)

1,005,580,294

(1) Restated in thousands of constant Chilean pesos as of December 31, 2002.
The accompanying notes are an integral part of these consolidated financial statements

ENERSIS 2002 ANNUA L REPORT

7 5

7 4
7 4

Consolidated Statements of Cash Flows

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002 and thousands of US dollars)

Years ended December 31,

2001
ThCh$

2002
ThCh$

2002
ThUS$

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) for the year

Gain on sales of property, plant and equipment

42,154,033

(223,748,087)

(5,734,441)

(1,095,916)

(311,362)

(1,525)

Charges (credits) to income which do not represent cash flows:

Depreciation

Amortization of intangibles

Write-offs and accrued expenses

Equity in income of related companies

Equity in losses of related companies

Amortization of goodwill

Amortization of negative goodwill

Price-level restatement, net

Foreign currency translation, net

426,020,442

454,471,134

8,031,971

83,298,120

10,389,287

55,938,311

(3,629,292)

(14,996,244)

14,328,089

80,576,348

6,732,461

506,344,171

632,431

14,457

77,842

(20,868)

9,369

704,616

(47,699,849)

(112,247,774)

(156,201)

(2,175,075)

30,542,651

(4,964,890)

16,110,247

(6,909)

22,419

(318,747)

205,474

Other credits to income which do not represent cash flows

(85,418,284)

(229,054,815)

Other charges to income which do not represent cash flows

69,401,896

147,655,390

Changes in assets which affect cash flows:

Decrease in trade receivables

Decrease in inventory

Decrease (increase) in other assets

Changes in liabilities which affect cash flows:

Increase (decrease) in accounts payable associated
with operating results

Increase in interest payable

Decrease in income tax payable

Increase (decrease) in other accounts payable associated
with non-operating results

Net decrease in value added tax and other similar taxes
payable

119,961,261

1,211,389

55,973,106

11,768,733

24,428,653

(23,047,923)

77,891

16,377

(32,073)

(62,185,972)

(49,587,699)

(69,005)

7,825,819

55,125,046

(54,073,346)

(45,838,237)

76,711

(63,787)

(93,868,474)

30,029,884

41,789

(117,627,568)

(1,891,294)

(2,632)

Income (loss) attributable to minority interest

125,152,619

(16,282,559)

(22,658)

Net cash flows provided by operating activities

560,520,990

627,782,332

873,609

The accompanying notes are an integral part of these consolidated financial statements

ENERSIS 20 02 ANNUAL REPORT

7 7

7 6

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of shares

Proceeds from the issuance of debt

Proceeds from bond issuances

Other sources of financing

Capital decrease subsidiary

Dividends paid

Payment of debt

Payment of bonds

Payment of loans obtained from related companies

(100,900,143)

(44,389,633)

Payment of bond issuance costs

Other disbursements for financing

(996,147)

(11,140,779)

(43,615,899)

(24,567,635)

Years ended December 31,

2001
ThCh$

2002
ThCh$

2002
ThUS$

1,905,653

2,652

1,936,899,708

978,914,577

1,362,233

280,374,847

131,515,409

57,920,839

26,348,466

(119,286,568)

(144,467,460)

(100,446,315)

183,014

36,666

(165,996)

(139,779)

(1,870,062,467)

(1,094,545,835)

(1,523,143)

(74,167,788)

(29,347,204)

(40,839)

(61,771)

(15,503)

(34,188)

Net cash provided by (used) in financing activities

40,985,490

(285,039,864)

(396,654)

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sales of property, plant and equipment

Proceeds from loans obtained from related parties

Other receipts from investments

19,716,715

5,525,961

22,605,406

31,457

13,675,849

18,556,146

25,822

Additions to property, plant and equipment

(341,553,736)

(317,915,443)

(442,403)

Long-term investments

Investment in financial instruments

(12,879,738)

(23,465,277)

(724,403)

(32,654)

(1,008)

Other loans granted to related companies

(233,615)

Other investment disbursements

Net cash used in investing activities

(187,891,023)

(35,935,186)

(503,639,587)

(336,878,757)

(50,009)

(468,795)

POSITIVE NET CASH FLOW FOR THE YEAR

97,866,893

5,863,711

8,160

EFFECT OF PRICE-LEVEL RESTATEMENT ON CASH AND
CASH EQUIVALENTS

(74,996)

(2,499,632)

(3,478)

NET INCREASE IN CASH AND CASH EQUIVALENTS

97,791,897

3,364,079

4,682

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

120,035,704

217,827,601

303,123

CASH AND CASH EQUIVALENTS AT END OF YEAR

217,827,601

221,191,680

307,805

The accompanying notes are an integral part of these consolidated financial statements

ENERSIS 2002 ANNUA L REPORT

7 7

7 6
7 6

Notes to the Consolidated Financial Statements

(Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2002, except as stated)

DESCRIPTION OF BUSINESS

a. Enersis S.A. (the “Company”) is registered in the Securities Register under N°0175 and is regulated by the Chilean

Superintendency of Securities and Insurance (the “SVS”). The Company issued publicly registered American Depositary

Receipts in 1993 and 1996. Enersis S.A. is a reporting company under the United States Securities and Exchange Act of

1934.

b. The Company’s subsidiaries, Chilectra S.A., Compañía Eléctrica del Río Maipo S.A. (Río Maipo S.A.), Empresa Nacional de

Electricidad S.A. (Endesa S.A.) are registered in the Securities Register under N°s 0321, 0345, 0114, respectively.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. General

The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting

principles in Chile and the regulations established by the SVS (collectively “Chilean GAAP”), and the specific corporate

regulations of Law N°18,046, related to the formation, registration and liquidation of Chilean corporations, among others. Certain

amounts in the prior years’ financial statements have been reclassified to conform to the current year’s presentation.

The preparation of financial statements in conformity with Chilean GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of

the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual

results could differ from those estimates.

Reclassifications – For purposes of comparision, in the 2001 of financial statements the following reclassifications were made

in the 2001 financial statements:

ENERSIS 20 02 ANNUAL REPORT

7 9

7 8

Balance sheet reclassifications

From

Notes receivable

Goodwill

Land

Technical appraisal

Charge (credit)
ThCh$

(6,334,876)

Other accounts receivable, net

3,391,332

Negative goodwill, net

(34,153,467)

Other assets

17,117,163

Accumulated depreciation

Current portion of long-term notes payable

Miscellaneous payables

5,571,195

(5,718,123)

Current portion of long-term debt
due to banks and financial institutions

Due to banks and financial institutions

(17,545,577)

Other current liabilities

Other long-term liabilities

(21,520,395)

Short-term notes payable

Other reserves

1,210,739

Bonds payable

Deficit during development period of subsidiaries

Statement of income reclassifications

From

Charge (credit)
ThCh$

Other non-operating expenses

1,586,072

Other non-operating income

Income taxes

Deferred income taxes

(4,444,572)

Interest expense

(2,392,830)

Foreign currency transalation, net

Amortization of negative goodwill

(248,147)

Amortization of goodwill

Statement of Cash flow reclassifications

From

Payment of bonds

Other credits to income which do not represent
cash flows

Other sources of financing

Other charges to income which do
not represent cash flows

Charge (credit)
ThCh$

85,102,292

24,250,320

27,586,411

906,583

Other accounts payable associated
with non-operating results

Decrease in income tax payable

Other charges to income which do not
represent cash flows

Other disburments for financing

Amortization of intangibles

ENERSIS 2002 ANNUA L REPORT

7 9

7 8
7 8

6,334,876

(3,391,332)

34,153,467

(17,117,163)

(4,619,536)

4,766,464

18,453,424

20,612,548

(1,210,739)

Charge (credit)
ThCh$

1,940,610

3,629,529

(318,809)

248,147

Charge (credit)
ThCh$

(102,068,728)

(7,283,884)

(17,297,324)

(10,289,087)

(906,583)

The accompanying financial statements reflect the consolidated results of operations of Enersis S.A. and its subsidiaries. All

significant intercompany transactions have been eliminated in consolidation. Investments in companies in the development

stage are accounted for using the equity method, except that income or losses are included directly in equity instead of

being reflected in the Company’s consolidated statement of income. The Company consolidates the financial statements of

companies in which it controls over 50% of the voting shares, which are the following:

Percentage participation as of December 31,

Company name

Chilectra S.A.

Compañía Eléctrica del Río Maipo S.A.

Synapsis Soluciones y Servicios IT Ltda.

Inmobiliaria Manso de Velasco Ltda.

Cía. Americana de Multiservicios Ltda. (4)

Endesa Chile S.A. (1)

Enersis de Argentina S.A.

Enersis International Ltd.

Inversiones Distrilima S.A.

Empresa Distribuidora Sur S.A. (Edesur)

Empresa Eléctrica de Panamá S.A. (3)

Interocean Developments Inc. (3)

Luz de Bogotá S.A. (2)

Cerj

Investluz (2)

Cía. Americana de Multiservicios Uno Ltda. (4)

Enersis Energia de Colombia S.A.

2001
Total

98.24

98.74

100.00

59.98

100.00

54.54

65.09

99.67

100.00

44.66

58.16

47.02

100.00

2002
Direct

98.24

98.74

99.99

99.93

59.98

100.00

15.93

16.02

25.71

20.37

15.61

100.00

Indirect

0.01

0.00

0.07

39.75

49.07

18.95

41.58

32.80

Total

98.24

97.74

100.00

59.98

100.00

55.68

65.09

44.66

61.95

48.41

100.00

Includes certain majority owned companies not presented herein.

(1)
(2) The Company obtained shareholder agreements dated June 25, 1999, from Endesa International, the majority shareholder of these companies, giving the Company

the right to elect a majority of the Board of Directors. The Superintendency of Securities and Insurance was notified on June 28, 1999.

(3) These companies were absorbed by the parent company.
(4) On January 1 2002, Cía. Americana de Multiservicios Ltda. merged with Cía. Americana de Multiservicios Uno.

Situation in Argentina

In Argentina, at the end of 2001, as a result of the serious economic crisis, a change in the economic model and in the law

of convertibility was implemented with the promulgation of new National Government regulations. This situation gave rise to,

among other consequences: devaluation of the Argentinean peso with respect to the US dollar and the pesification of certain

assets and liabilities recorded in foreign currency in said country, pesification of public service tariffs, introduction of deposit

withdrawal limitations in financial institutions, limitations to make certain transfers abroad for capital services and financial

loan interest without prior authorization of the Central Bank of the Republic of Argentina.

Considering the above mentioned unstable environment, the company performed an evaluation of the recoverability of its

investments in Argentinean companies. Management believes that the evolution of the aforementioned measures will not

result in significant adjustments different to those recognized in these financial statements.

b. Periods covered

These financial statements reflect the Company’s financial position as of December 31, 2002 and 2001, and the results of its

operations, the changes in its shareholders’ equity and its cash flows for the years ended December 31, 2002 and 2001.

ENERSIS 20 02 ANNUAL REPORT

8 1

8 0

c. Constant currency restatement

The cumulative inflation rate in Chile as measured by the Chilean Consumer Price Index (“CPI”) for the two-year period ended

December 31, 2002 was approximately 6.19%.

Chilean GAAP requires that the financial statements be restated to reflect the full effects of loss in the purchasing power

of the Chilean peso on the financial position and results of operations of reporting entities. The method described below is

based on a model that enables calculation of net inflation gains or losses caused by monetary assets and liabilities exposed to

changes in the purchasing power of local currency. The model prescribes that the historical cost of all non-monetary accounts

be restated for general price-level changes between the date of origin of each item and the year-end.

The financial statements of the Company have been price-level restated in order to reflect the effects of the changes in the

purchasing power of the Chilean currency during each year. All non-monetary assets and liabilities, all equity accounts and

income statement accounts have been restated to reflect the changes in the CPI from the date they were acquired or incurred

to year-end (see also Note 24).

The purchasing power gain or loss included in net income reflects the effects of Chilean inflation on the monetary assets and

liabilities held by the Company.

The restatements were calculated using the official consumer price index of the National Institute of Statistics and based on

the “prior month rule,” in which the inflation adjustments are based on the CPI at the close of the month preceding the close

of the respective period or transaction. This index is considered by the business community, the accounting profession and

the Chilean government to be the index that most closely complies with the technical requirement to reflect the variation in

the general level of prices in Chile, and consequently it is widely used for financial reporting purposes.

The values of the Chilean consumer price indices used to reflect the effects of the changes in the purchasing power of the

Chilean peso (“price-level restatement”) are as follows:

November 30, 2002

November 30, 2001

Index

113.36

110.10

Change over Previous
November 30,

3.0%

3.1%

By way of comparison, the actual values of the Chilean consumer price indices as of the balance sheet dates are as

follows:

December 31, 2002

December 31, 2001

Index

112.86

109.76

Change over Previous
December 31,

2.8%

2.6%

The above-mentioned price-level restatements do not purport to represent appraisal or replacement values and are only

intended to restate all non-monetary financial statement components in terms of local currency of a single purchasing power

and to include in net income or loss for each year the gain or loss in purchasing power arising from the holding of monetary

assets and liabilities exposed to the effects of inflation.

ENERSIS 2002 ANNUA L REPORT

8 1

8 0
8 0

Index-linked assets and liabilities

Assets and liabilities that are denominated in index-linked units of account are stated at the year-end values of the respective

units of account. The principal index-linked unit used in Chile is the Unidad de Fomento (“UF”), which is adjusted daily to

reflect the changes in Chile’s CPI. Certain of the Company’s investments are linked to the UF. As the Company’s indexed

liabilities exceed its indexed assets, the increase in the index results in a net loss on indexation. Values for the UF are as

follows (historical Chilean pesos per UF):

December 31, 2002

December 31, 2001

Comparative financial statements

Ch$

16,744.12

16,262.66

For comparative purposes, the 2001 consolidated financial statements and the amounts disclosed in the related Notes have

been restated in terms of Chilean pesos of December 31, 2002, purchasing power.

Convenience translation to U.S. dollars

The financial statements are stated in Chilean pesos. The translations of Chilean pesos into US dollars are included solely for

the convenience of the reader, using the observed exchange rate reported by the Chilean Central Bank as of December 31,

2002 of Ch$718.61 to US$1.00. The convenience translations should not be construed as representations that the Chilean

peso amounts have been, could have been, or could in the future be, converted into US dollars at this or any other rate of

exchange.

d. Assets and liabilities in foreign currencies

Assets and liabilities denominated in foreign currencies are detailed in Note 30. These amounts have been stated at the

observed exchange rates reported by the Central Bank of Chile as of each year-end as follows:

Currency

United States dollar (Observed)

British pound sterling

Colombian peso

New Peruvian sol

Brazilian real

Japanese yen

Euro

French Franc (2)

Pool Unit (IBRD)(1)

Unidad de Fomento (UF)

Unit of Account (IDB) (1)

Argentine peso

Symbol
used

US$

$ Col

Soles

FFr

$ Arg

2001
Ch$

654.79

948.01

0.29

190.29

282.97

4.99

578.18

88.36

7,742,160.26

16,262.66

929.26

385.17

2002
Ch$

718.61

1,152.91

0.25

204.73

203.57

6.07

752.55

9,089,158.76

16,744.12

1,093.75

219.09

(1) Units of measurment used by the International Bank for Reconstruction and Development (IBRD) and Interamerican Development Bank (IDB) to express the

weighted-average of multicurrency loan obligations granted using fixed currency rates to the US dollar, at a determined date.

(2) Beginning on January 1, 2002, these currency will be expressed in the Euro.

ENERSIS 20 02 ANNUAL REPORT

8 3

8 2

e. Time deposits and marketable securities

Time deposits are presented at original placement plus accrued interest and UF indexation adjustments, as applicable.

Marketable securities include investments in quoted shares they are valued at the lower of cost or maket value. The investments

are in both short-term highly liquid fixed rate investments shares and mutual fund units valued at cost plus interest and

indexation or redemption vale as appropriate.

f. Allowance for doubtful accounts

Accounts receivable are classified as current or long-term, depending on their collection terms. Current and long-term trade

accounts receivable, notes receivable and other receivables are presented net of allowances for doubtful accounts (see Note

5). Write-offs of uncollectible accounts amounted to ThCh$115,349,531 and ThCh$52,836,900 for the years ended December

31, 2002 and 2001, respectively. In addition, the total sum owed by the companies that have gone into bankruptcy amounting

to ThCh$707,755 (ThCh$585,195 in 2001) is included in the bad debts estimation.

g. Inventories

Inventory of materials in transit, land and operation and maintenance materials, are valued at the lower of price-level restated

cost or net realizable value. The cost of real estate projects under development, included in inventory, include the cost of

land, demolition, urbanizing, payments to contractors and other direct costs.

The costs and revenues of construction in progress are accounted for under the completed contract method in accordance

with Technical Bulletin N°39 of the Chilean Association of Accountants and are included in current assets as their realization

is expected in the short-term.

h. Property, plant and equipment

Property, plant and equipment are valued at net replacement cost as determined by the former Superintendcy of Electric and

Gas Services (SEG) adjusted for price-level restatement in accordance with D.F.L. N°4 of 1959. The latest valuation under

the D.F.L. 4 was in 1980.

Property, plant and equipment acquired after the latest valuation of net replacement cost are shown at cost, plus price-level

restatement. Interest on debt directly obtained to finance construction projects is capitalized during the period of construction

(only in power generators).

In 1986, an increase based upon a technical appraisal of property, plant and equipment was recorded in the manner authorized

by the SVS in Circulars No.’s 550 and 566 dated October 15 and December 16, 1985, respectively, and Communication

N°4790, dated December 11, 1985.

The Company and its subsidiaries have evaluated the recoverability of the book value of their property, plant and equipment

in accordance with Technical Bulletin N°33 of the Chilean Accounting Association.

As a result of this evaluation no adjustments have been arrived at that affect the book values of these assets.

i. Depreciation

Depreciation expense is calculated on the revalued balances using the straight-line method over the estimated useful

lives of the assets. Depreciation expense was ThCh$454,471,134 and ThCh$426,020,442 as of December 31, 2002 and

2001, respectively. Depreciation expense of ThCh$439,903,194 and ThCh$413,824,670 was included in Cost of sales and

ThCh$14,567,940 and ThCh$12,195,772 were included in Administrative and selling expenses, respectively.

ENERSIS 2002 ANNUA L REPORT

8 3

8 2
8 2

j. Leased assets

The leased assets, whose contracts have financial lease characteristics, are accounted for as acquisition of propery plans and

equipment, recognizing the total obligation and the unaccrued interest. Said assets do not legally belong to the Company,

for which reason, as long as the call option is not exercised, it will not be able to freely dispose of them.

k. Power installations financed by third parties

As established by D.F.L. 1 of the Ministry of Mines dated September 13, 1982, power installations financed by third parties are

treated as reimbursable contributions. As such, the installations constructed using this mechanism form part of the Company’s

plant and equipment.

Such installations made prior to D.F.L. 1 are deducted from Plant and equipment and their depreciation is charged to Power

installations financed by third parties.

Investments in related companies

Investments in related companies are included in “Other assets” using the equity method. This valuation method recognizes

in income the Company’s equity in the net income or loss of each investee on the accrual basis (Note 11).

Investments in foreign affiliates are recorded in accordance with Technical Bulletin No.64 of the Chilean Association of

Accountants.

The Company and its subsidiaries have evaluated the recoverability of the book value of their property, plant and equipment

in accordance with Technical Bulletin N°33 of the Chilean Accounting Association.

As a result of this evaluation no adjustments have been arrived at that affect the book values of these assets.

m. Intangibles, other than goodwill

Intangibles, other than goodwill, correspond mainly to easements, parent company contributions, and rights for the use of

telephone lines and are amortized in accordance with Technical Bulletin N°55 of the Chilean Association of Accountants.

n. Severance indemnity

The severance indemnity that the Company is obliged to pay to its employees under collective bargaining agreements is stated

at the present value of the benefit under the vested cost method, discounted at 9.5% and assuming an average employment

span which varies based upon years of service with the Company.

o. Revenue recognition

This is revenue for electric power generation and distribution, among which are included energy supplied and unbilled at each

year-end, valued at the selling price using the current rates and has been included in revenue from operations. The unbilled

amount is presented in current assets as trade receivables and the corresponding cost is included in cost of operations. The

Company also recognizes revenues for amounts received from highway tolls for motorized vehicles, income related to computer

advisory services, engineering services and sale of materials.

ENERSIS 20 02 ANNUAL REPORT

8 5

8 4

p. Income tax and deferred income taxes

At December 31, 2002 and 2001, the Company recorded current tax expense according to the tax laws and regulations in

each country of ThCh$155,527,993 and ThCh$124,813,922, respectively. The Company records income taxes in accordance

with Technical Bulletin N°60 of the Chilean Association of Accountants, and with circular N°1466 issued on January 27, 2000

by the SVS, recognizing, using the liability method, recognizing the deferred tax effects of temporary differences between the

financial and tax values of assets and liabilities using the tax rates to be in effect at the time of reversal.

q. Accrued vacation expense

In accordance with Technical Bulletin No.47 issued by the Chilean Association of Accountants, employee vacation expense

is recorded on the accrual basis.

r. Reverse repurchase agreements

Reverse repurchase agreements are included in “Other current assets” and are stated at cost plus interest and indexation

accrued at year-end, in conformity with the related contracts.

s. Statements of cash flows

The Consolidated Statements of Cash Flows have been prepared in accordance with the indirect method.

Investments considered as cash equivalents, as indicated in point 6.2 of Technical Bulletin N°50 issued by the Chilean

Association of Accountants, include time deposits, investments in fixed income securities classified as marketable securities,

repurchase agreements classified as other current assets, and other, cash balances classified as other accounts receivable

with maturities less than 90 days.

For classification purposes, cash flows from operations include collections from clients and payments to suppliers, payroll

and taxes.

t. Financial derivative contracts

As of December 31, 2001 and 2002 the Company and its subsidiary have forward contracts, currency swaps, and interest

swaps and collars with several financial institutions, defined as cover, which are recorded according to Technical Bulletin N°57

of the Chilean Association of Accountants. In 2001, such contracts were defined as investment.

u. Goodwill and negative goodwill

Goodwill and negative goodwill are determined according to Circular N°368 of the SVS. Amortization is determined using

the straight-line method, considering the nature and characteristic of each investment, foreseeable life of the business and

investment return, and does not exceed 20 years.

The Company has evaluated the recoverability of its goodwill and negative goodwill value arising from investments abroad,

and in virtue of Technical Bulletin N°56 of the Chilean Association of Accountants, it has resorted to IAS 36 “Impairment of

Assets Value”.

v. Pension and post-retirement benefits

Pension and post-retirement benefits are recorded in accordance with the respective Collective Bargaining Contracts of the

employees based on the actuarially determined projected benefit obligation.

ENERSIS 2002 ANNUA L REPORT

8 5

8 4
8 4

w. Bonds

Bonds payable are recorded at the face value of the bonds. The difference between the face value and the placement value,

equal to the premium or discount, is deferred and amortized over the term of the bonds.

x. Investments in other companies

Invesments in other companies are presented at acquisition cost adjusted for pricel-level restatement.

y. Research and development costs

Costs incurred by the Company in research and development are either general in nature (water-level studies, hydroelectric

research, seismic-activity surveys) which are expensed as incurred, or studies related to specific construction projects which

are capitalized.

During 2001 and 2002 there have been no expenses under this caption.

CHANGE IN ACCOUNTING PRINCIPLES

There were no changes in accounting principles during 2002 that would effect the comparison with the prior year financial

statements.

TIME DEPOSITS

Time deposits as of each year-end are as follows:

Financial Institution

Banco Bilbao Vizcaya

Banco CCF Brasil

Banco Colpatria

Banco Continental

Banco Crédito del Perú

Banco de Bogotá

Banco de Chile

Banco de Chile N.Y.

Banco do Brasil

Banco do Estado do Ceará

Banco Frances

Banco Ganadero

Banco Holandes

Banco Interbank

Banco Itau

Banco Liberal

Banco Nationale de Paris

Banco Pactual

Banco Provincia Buenos Aires

Banco Rio

Banco Santander

Annual Rate
%

Scheduled
Maturity

2001
ThCh$

2002
ThCh$

1.28

8.50

2.42

1.13

7.50

1.10

18.55

25.00

3.50

1.46

3.00

2.75

1.46

6.50

7.30

2.90

30.01.03

28,873,651

4,539,102

812,623

02.01.03

01.02.03

03.01.03

02.01.03

15.09.03

8,654,209

14,808,363

3,369,062

1,762,858

444,764

491,759

3,339,638

179,675

606,954

149,484

344,943

1,060,351

4,959,682

07.01.03

01.01.03

14.01.03

01.01.03

02.01.03

21.01.03

02.01.03

603,576

11,119

391,658

482,268

13,048,776

9,832

796,736

431,741

2,862,988

213,069

693,825

2,923,141

650,606

5,125,732

2,339,169

ENERSIS 20 02 ANNUAL REPORT

8 7

8 6

Financial Institution

Banco Santander CDB

Banco Santander Do Brasil

Banco Sudameris

Banco Tequendama

Banco Union Colombiano

Banco Votorantim

Banco Wiese Sudameris

Bank Boston

Bank of America

Banco Credito-Soles

Bonos de Solidaridad

Bradesco

Citibank N.Y.

Cititrust

Colcorp S.A.

Corficolombia

Corfivalle

Corporacion las Villas

Cuenta Corriente Remunerada

Annual Rate
%

7.50

18.55

Scheduled
Maturity

02.01.03

2001
ThCh$

1,058,196

909,937

3,800,198

2,936,874

2,720,943

2002
ThCh$

4,312

1,170,656

19.40

23.09.03

3,228,008

1.44

1.10

0.87

1.13

10.00

19.37

1.10

6.24

9.00

8.12

7.98

02.01.03

03.01.03

01.01.03

02.01.03

15.09.03

02.01.03

03.02.03

02.01.03

166,454

1,322,428

17,553,537

675

431,166

94,094

5,320,419

3,932,045

1,070

683,371

3,764,259

54,433,352

55,244,377

1,673,922

9,812,357

3,480,285

2,749,309

1,024,239

3,687,381

3,724,459

Encargo Fiduciario Banco Santander

6.18

02.01.03

2,363,837

Fiduciaria Banco Colpatria

Fiduciaria Banco de Bogotá

Fiduciaria Bancolombia

Fiduciaria Cititrust

Fiduciaria de Crédito

Fiduciaria de Santander

Fiduciaria Lloyds Bank

Fiduciaria Cancolombia

Fiducolombia

Fiduganadero

Fiduoccidente

Fiduvalle

HSBC - Bamerindus

Megabanco

Merrill Lynch

Suvalor

Time Deposit

Unibanco

Total

8.12

6.55

9.00

7.73

7.66

3.00

1.50

9.04

7.00

01.01.03

02.01.03

01.01.03

06.01.03

02.01.03

19,448

6,292,881

41,848

297,505

23,540

52,337

1,431,793

125,117

774,567

5,070

586,792

42,296

226

475

161,687

9,728

761,371

5,450,031

8,211,535

4,015,453

1,038,629

08.09.03

2,124,229

178,113,234

145,626,894

ENERSIS 2002 ANNUA L REPORT

8 7

8 6
8 6

ACCOUNTS, NOTES AND OTHER RECEIVABLES

Current accounts, notes and other receivables and related allowances for doubtful accounts as of each December 31, are as

follows:

As of december 31,

Account

Under 90 days

91 days to 1 year

Sub total

Current

Long-term

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

Accounts receivable

576,467,295

487,395,335

17,305,993

76,912,334

564,307,669

550,248,992

458,839,724

Allowance for doubtful accounts

(105,467,945)

Notes receivable

6,295,375

4,653,993

407,105

1,442,684

6,096,677

5,683,330

5,131,349

Allowance for doubtful accounts

(965,328)

Other receivables

42,743,736

53,684,615

37,770,437

18,007,739

71,692,354

72,220,719

62,776,096

101,903,562

125,850,513

Allowance for doubtful accounts

(8,916,258)

Total

628,153,041

526,747,169

101,903,562

125,850,513

Current and long-term accounts receivable per country as of each December 31, are as follows:

Country

Chile

Peru

Argentina

Colombia

Brasil (1)

Total

2001
ThCh$

180,592,722

40,147,163

75,119,315

127,104,349

307,093,054

As of December 31,

24.74

5.50

10.29

17.41

42.06

2002
ThCh$

145,659,152

58,187,147

40,461,768

99,788,238

308,501,377

22.32

8.92

6.20

15.29

47.27

730,056,603

100.00

652,597,682

100.00

(1) In accordance with Decree Law N°14 and Resolution N°91 of the Council for Managing the Electric Energy Crisis (CGCEE), both dated December 21, 2001,

and based on Resolution N°31 of the National Agency of Electric Energy (ANEEL) dated January 24, 2002, the Company’s distribution subsidiaries in Brasil have
recongized as of December 31, 2001 and at March 1, 2002, a regulated asset, which will be recovered through extraordinary tarrifs in order to recover losses
experienced during the period of energy rationing from June 1, 2001 to March 1, 2002.

The Brazilian rationing program came to an end on March 1, 2002, the Brazilian Congress ratified the law to compensate

Brazilian electric companies on April 16, 2002. The law approved a 2.9% and 7.9% increase for residential and industrial

customers, respectively.

ANNEL subsequently established an 18.6% tariff adjustment for CERJ to be effective on January 1, 2002; also, ANNEL set a

14.3% tariff adjustment for Coelce, to become effective on April 22, 2002.

ENERSIS 20 02 ANNUAL REPORT

8 9

8 8

TRANSACTIONS WITH RELATED COMPANIES

Balances of accounts receivable and payable are as follows at December 31, 2001 and 2002:

a. Notes and accounts receivable:

Company

As of December 31,

Short-term

Long-term

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

Aguas Santiago Poniente S.A.

2,496,548

257,796

Atacama Finance Co.

4,297,348

182,046,895

169,196,652

Central Geradora Term. de Fortaleza

Cía. Interconexión Energética S.A.

Com. de Energía del Mercosur

Consorcio Energetico Punta Cana-Macao

Distrilec Inversora S.A.

Edenor S.A.

Elesur S.A.

Empresa Eléctrica de Bogotá S.A.

Empresa Eléctrica Piura S.A.

Endesa España

Endesa Internacional S.A.

Etevensa

Fundación Endesa

Gasoducto Atacama Generación

Gasoducto Tal Tal Ltda.

Ingendesa Do Brasil Ltda.

Inversiones Electrica Quillota S.A.

Sacme S.A.

Smartcom S.A.

Soc. de Inv. Chispa Uno S.A.

Transmisora Eléctrica de Quillota Ltda.

11,383

3,004,871

3,369,682

967

6,810

187,117

20,379

133,978

100,180

364,605

2,387,673

190,584

49,224

313,819

1,030

175,047

896,261

830

11,242

3,861

4,101,221

4,422,881

939

7,257

24,217

171,747

279,542

322,122

1,632,089

220,020

165,273

570,445

144,871

1,000

101,097

619,403

1,937

304,222

16,021

1,471,140

882,109

Total

18,019,578

195,398,835

170,667,792

898,167

ENERSIS 2002 ANNUA L REPORT

8 9

8 8
8 8

b. Notes and accounts payable:

Company

Aguas Santiago Poniente S.A.

Com. de Energía del Mercosur

Compañía Transmisión del Mercosur S.A.

Electrogas S.A.

Elesur S.A.

Empresa Eléctrica de Bogotá S.A.

Empresa Eléctrica Piura S.A.

Endesa Internacional S.A.

Endesa Inversiones Generales S.A.

Endesa Servicios

Etevensa S.A.

Gasoducto Tal Tal Ltda.

Mundivia S.A.

Sacme S.A.

Smartcom S.A.

Transmisora Eléctrica de Quillota Ltda.

2001
ThCh$

7,175,604

339,240

17,289,294

3,629,114

720,573

342,658

1,116,904

213,599

185,803

65,236

42,540

2002
ThCh$

2001
ThCh$

2002
ThCh$

631

760,170

107,045

233,837

11,465,695

984,980,016

987,371,066

1,226,667

857,426

1,109,741

8,589

116,041

160,559

101,720

55,189

82,402

16,727,143

920,539

Total

31,120,649

16,285,712

1,001,707,159

988,291,605

c. Effects in income (expense) in each year are as follows:

Company

Nature of Transaction

Atacama Finance Co.

Interest

Monetary correction

Exchange difference

Central Geradora Term. de Fortaleza

Services

Com. de Energía del Mercosur

Sale of energy

Exchange difference

Purchase of energy

Interest

Services

Income (expense)

2001
ThCh$

10,056,288

4,575,344

17,033,254

473,819

(21,636)

22,810,613

(15,347,195)

(62,519)

73,855

2002
ThCh$

6,659,856

498,688

11,107,652

19,152,859

(1,958,213)

Com. Transmisión del Mercosur S.A.

Purchase of energy

(3,985,903)

(1,397,696)

Cía. Interconexión Energética S.A.

Sale of energy

46,839,739

26,990,992

Exchange difference

Monetary correction

450

210

Inversiones Eléctrica Quillota S.A.

Exchange difference

Services

Interest

Services

Monetary correction

(3,523)

903,382

134,407

43,994

272,906

144,050

5,066

ENERSIS 20 02 ANNUAL REPORT

9 1

9 0

Company

Nature of Transaction

Empresa Eléctrica Piura S.A.

Gasoducto Tal Tal Ltda.

Elesur S.A.

Etevensa S.A.

Electrogas S.A.

Edenor S.A.

Smartcom S.A.

Aguas Santiago Poniente S.A.

Endesa Internacional S.A.

Sacme S.A.

Empresa Propietaria de la Red

Mundivía S.A.

Soc. de Inv. Chispa Uno S.A.

Sale of energy

Purchase of energy

Services

Exchange difference

Services

Interest

Services

Monetary correction

Exchange difference

Sale of energy

Services

Exchange difference

Services

Interest

Services

Interest

Services

Income (expense)

2001
ThCh$

938,354

(9,812,046)

1,213,149

(809)

2002
ThCh$

1,457,382

(9,619,648)

175,914

40,494

(51,512,360)

(43,408,831)

20,478

15,919

(30,547,186)

(29,082,684)

(753,213)

3,063,312

3,247,425

(563)

5,757,877

153,617

(2,449,634)

(2,978,702)

4,434,499

4,093,653

209,426

29,798

242,914

(2,193,466)

(823,528)

61,157

6,582

3,407,292

70,757

32,060

182,716

(1,026,534)

(364,396)

346,994

8,432

Total

3,317,895

(12,769,303)

The transfer of short-term funds between related companies, is on the basis of a current cash account, at a variable interest

rate based on market conditions. The resulting accounts receivable and accounts payable are essentially on 30 day terms,

with automatic rollover for the same period and settlement in line with cash flows.

Conditions of the long-term payables are as follows:

Transmisora Eléctrica de Quillota Ltda.

Account payable

Atacama Finance Co.

Account payable

ENERSIS 2002 ANNUA L REPORT

9 1

9 0
9 0

Company

Elesur S.A.

Type

Due Date

Currency

Capital

Account payable

May 2004

Aug 2004

2006

2003

35,827,780

22,873,999

266,448

70,242

US$

250,872,179

Interest
Rate

4.57%

1.46%

2.95%

9.00%

3.33%

INVENTORIES

Inventories include the following items and are presented net of an allowance for obsolescence amounting to ThCh$4,104,724

and ThCh$4,342,197 as of December 31, 2001 and 2002, respectively:

Real estate under development

Materials in transit

Operation and maintenance materials

Other

Total

As of December 31,

2001
ThCh$

27,262,972

499,963

41,944,252

7,716,887

2002
ThCh$

23,804,228

1,104,204

32,051,573

3,422,648

77,424,074

60,382,653

DEFERRED INCOME TAXES

a. Income taxes (recoverable) payable as of each year-end are as follows:

Income tax provision – current

Recoverable tax credits

As of December 31,

2001
ThCh$

77,283,022

(57,510,102)

2002
ThCh$

27,532,029

(54,435,976)

Total

19,772,920

(26,903,947)

b. The Company incurred taxable losses of ThCh$110,967,917 and ThCh$89,744,825 for the years ended December 31, 2002

and 2001, respectively.

c. The balance of taxed retained earnings and the related tax credits are as follows:

Year

2002

2001

Amount of

loss
ThCh$

23,698,947

(18,159,574)

Credit
ThCh$

4,524,557

ENERSIS 20 02 ANNUAL REPORT

9 3

9 2

d. The net effect of timing differences resulted in a net charge to income of ThCh$9,072,273 and a net credit of ThCh$18,862,491

during the years ended December 31, 2002 and 2001, respectively.

e. In accordance with BT N°60 and 69 of the Chilean Association of Accountants, and Circular N°1,466 of the SVS, the Company

and its subsidiaries have recorded consolidated deferred income taxes as of December 31, 2002 and 2001 as follows:

As of December 31, 2001

As of December 31, 2002

Asset

Liability

Asset

Liability

Short-term
ThCh$

Long-term
ThCh$

Short-term
ThCh$

Long-term
ThCh$

Short-term
ThCh$

Long-term
ThCh$

Short-term
ThCh$

Long-term
ThCh$

Allowance for doubtful accounts

26,027,011

12,307,740

Deferred income

Vacation accrual

Intangibles

Leasing assets

Depreciation

Severance indemnities

Other events

Contingencies

Bond discount

Cost of studies

Finance costs

Imputed interest on construction

Deferred charges

Withholdings

Regulated assets

Derivative contracts

Provision real estate projects

Materials used

Salaries for construction-in-progress

Tax losses

Hid. El Chocón investment

Capitalized expenses

Actuarial deficit (companies in Brazil)

7,487,563

684,649

1,822,685

3,475,357

1,395,215

24,954

24,128,592

8,089,173

921,547

1,824,544

1,211,297

2,301,708

3,730,312

5,248

63,991

425,486,736

814,241

3,500,985

115,620

388,240,574

4,166

1,954,040

1,507,717

1,859,468

6,603,676

3,707,977

4,211,789

2,083,015

4,376,406

9,391,056

4,325,818

39,102,316

6,594,295

38,042,633

194,771

421,131

1,704,883

4,675,640

8,304,618

4,830,117

1,510,731

1,230,644

4,339,981

6,766,431

117,034

154,508

1,717,127

7,972,554

13,755,855

4,863,433

2,301,708

566,417

1,597,733

5,659

2,391,794

860,956

5,494

193,144

3,828,000

2,775

1,000,985

5,843,294

2,905,532

77,167,379

512,289

350,818

234,174

2,656,047

3,926,807

15,305,920

99,985,069

3,349,399

119,374

552,418

4,506,944

1,086,289

2,897,754

770,801

3,112,269

447,462

1,179,874

517

516

1,475,222

1,288,870

3,866,610

Provision for labor benefits

306,354

192,678

559

Differences between the financial and

tax value of Río Maipo S.A.

Exchange difference -subsidiaries

Complementary account, net

(12,121,039)

(49,272,564)

(28,750)

(296,221,936)

(3,647,280)

(42,168,372)

(3,187)

(290,044,693)

Valuation allowance

(3,322,326)

(2,271,667)

Total

33,088,012

95,474,667

8,925,911

131,534,631

62,627,582

121,807,118

10,671,789

183,547,989

ENERSIS 2002 ANNUA L REPORT

9 3

9 2
9 2

f. Income tax expense for the years ended December 31, 2001 and 2002 is as follows:

Tax expense

Income tax provision

Deferred taxes

Adjustment for tax expense-prior year

Deferred taxes

Benefits for tax losses

Amortization of complementary accounts

Change in valuation allowance

Other charges or credits

2001
ThCh$

2002
ThCh$

(114,099,337)

(74,581,690)

3,111,691

(36,891,994)

13,509,821

6,143,861

(1,607,004)

(17,175)

(507,568)

24,471,978

5,043,185

(15,501,218)

(126,575)

(4,815,097)

Total

(129,850,137)

(66,016,985)

OTHER CURRENT ASSETS

Other current assets as of each year-end are as follows:

Forward contracts and swaps (1)

Guarantees and indemnities

Deferred expenses

Post-retirement benefits

Deposits for commitments and guarantees (2)

Investment projects

Fair value-derivates contracts

Reverse repurchase agreements

Other

Total

(1) See detail in Note 27.
(2) Infraestructura 2000 S.A. Th$25,342,941 of time deposits in 2002.

As of December 31,

2001
ThCh$

110,734,637

1,785,077

3,115,540

884,210

1,656,844

3,303,579

1,909,395

3,851,947

2002
ThCh$

72,800,589

1,183,406

5,709,113

908,669

26,098,519

8,399,481

11,603,424

5,318,407

127,241,229

132,021,608

The balance included under this item corresponds to time deposits invested with funds from the issuance of bonds and that

are to be kept in reserve accounts as agreed in the corresponding finance contracts.

ENERSIS 20 02 ANNUAL REPORT

9 5

9 4

10.

PROPERTY, PLANT AND EQUIPMENT

The composition of property, plant and equipment as of each year-end is as follows:

Land

As of December 31,

2001
ThCh$

2002
ThCh$

123,257,963

129,904,787

Buildings and infrastructure

Distribution and transmission lines and public lighting

Less: third party contributions

6,305,284,319

4,702,594,096

(55,731,873)

6,605,971,611

5,061,388,676

(45,056,759)

Sub-total

10,952,146,542

11,622,303,528

Machinery and equipment

1,823,140,358

1,978,358,503

Work in progress

Construction materials

Leased assets

Furniture and fixtures, tools, and computing equipment

Vehicles

Equipment in transit

Other assets

Sub-total

351,183,870

63,882,077

2,552,754

82,938,365

15,595,644

8,193,631

13,938,603

364,506,933

56,458,627

715,141

79,254,829

13,097,921

7,462,991

13,364,422

538,284,944

534,860,864

Technical appraisal

697,624,932

740,645,407

Total property, plant and equipment

14,134,454,739

15,006,073,089

Less: accumulated depreciation

(4,509,405,080)

(5,126,614,906)

Total property, plant and equipment, net

9,625,049,659

9,879,458,183

Enersis S.A. and its local subsidiaries have proceeded to carry out an analysis of the book values of their property, plant and

equipment and of the companies in which it has invested abroad. This analysis is motivated by the appearance of negative

circumstances in the economies of the region’s countries and by the fact that the property, plant and equipment in these

countries are measured in US dollars. The analysis consisted of evaluating both the recoverability of property, plant and

equipment of these companies’, and the recorded goodwill and negative goodwill, in accordance with accounting principles

generally accepted in Chile.

ENERSIS 2002 ANNUA L REPORT

9 5

9 4
9 4

The property, plant and equipment recoverability analysis, as explained in Note 2 k, was carried out considering that when

there is evidence that the company’s operations do not permanently have sufficient earnings to cover all costs, incluiding the

depreciation of property, plant and equipment taken as a whole, and when the book value of said assets exceed its realization

value, these values must be written down to recoverable amounts, charging non operating income.

The results of this analysis determined that no adjustments affecting the Company and its Subsidiaries’ book values of property,

plant and equipment are required.

11.

INVESTMENT IN RELATED COMPANIES

a. Investments as of each year-end are as follows:

Related Companies

Aguas Santiago Poniente S.A. (1)

Number of
shares

1,031,949

Cía. de Interconexión Energética S.A.

128,270,527

Gas Atacama Generación

Gasoducto Atacama Argentina Ltda.

Gasoducto Atacama Chile Ltda.

Inversiones Eléctricas Quillota S.A.

Inversiones Electrogas S.A.

608,676

425

Com. de Energía del Mercosur S.A.

6,305,400

Transquillota Ltda.

Atacama Finance Co.

Endesa Market Place

Sacme S.A.

Consorcio ARA - Ingendesa Ltda..

Electrogas S.A.

Distrilec Inversora S.A.

Consorcio Ingendesa – Minmetal Ltda.

Central Geradora Termelectrica Fortaleza
S.A.

3,150,000

210

12,000

4,416,141

20,246,908

Percentage
owned
%

Related
equity
ThCh$

Carrying Value

Equity in net
income (losses)

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2,270,319

1,248,675

118,325,971

50,667,801

53,246,687

(5,826,850)

7,230,684

67,770,629

36,300,892

33,885,315

(3,441,037)

(4,793,334)

64,226,451

27,899,622

32,113,226

(4,686,666)

55,859,069

23,197,393

27,929,534

3,303,780

7,602,220

6,037,668

4,680,261

2,389,373

2,555,396

602,376

41,818

2,038

11,288

23,623

17,127,364

15,712,743

7,614,035

5,032,660

5,179,023

3,199,945

78,684

105,854

11,190,123

3,676

8,563,682

6,677,916

3,426,316

2,516,330

2,589,511

(29,794)

34,091

48,872

87,840

120,819

479,992

(336,407)

39,342

52,883

2,378

1,838

(7,335)

11,289

22,564

5,386,640

21,333,090

49,599

57,442

2,386,141

3,212,680

1,310,128

638,377

(1,524,596)

126,529

(133,267)

(281,264)

15,523

56,927

339

18,916

55.00

45.00

50.00

42.50

45.00

50.00

15.00

50.00

0.02

51.50

50.00

48.82

Ingendesa do Brasil Limitada (1)

100.00

Total

167,448,008

194,164,157

(10,698,797)

8,263,783

(1) There subsidiaries were in development stage for the years shown and accordingly, were not consolidated under Chilean GAAP.

b. Income and (losses) recognized by Enersis S.A. based on the participation in the related companies as of December 31, 2002,

amounted to ThCh$14,996,244 (ThCh$6,732,461 in 2001), and ThCh$14,328,089 (ThCh$3,629,292 in 2001).

ENERSIS 20 02 ANNUAL REPORT

9 7

9 6

c. In accordance with Technical Bulletin N°64 of the Chilean Association of Accountants for the years ended December 31, 2002

and 2001, the Company has recorded foreign exchange gains and losses on liabilities related to net investments in foreign

countries that are denominated in the same currency as the functional currency of those foreign investments. Such gains and

losses are included in the cumulative translation adjustment account in shareholders’ equity, and in this way, act as a hedge

of the exchange risk affecting the investments. As of December 31, 2002 the corresponding amounts are as follows:

Company

Central Hidroeléctrica Betania

Cachoeira Dourada

Edegel S.A.

Cía. Interconexión Energética S.A.

Country of
Origin

Colombia

Brasil

Peru

Brasil

Atacama Finance Co.

Islas Caymán

Hidroeléctrica El Chocón S.A.

Com. de Energía del Mercosur S.A.

Central Costanera S.A.

Edesur S.A.

Edelnor S.A.

Cía. do Electricidade do Río do Janeiro

Codensa S.A.

Coelce

Total

Argentina

Peru

Brasil

Colombia

Brasil

Investment
ThCh$

Reporting
Currency

600,762,975

430,106,204

220,917,766

53,246,687

2,589,511

212,761,767

3,426,316

89,044,456

482,071,599

52,786,427

362,673,182

276,586,841

93,034,182

US$

Liability
ThCh$

336,577,165

530,228,953

243,486,508

62,574,905

1,854,668

121,855,669

3,952,377

65,498,672

392,146,648

23,385,019

385,080,177

306,287,700

116,004,085

2,880,007,913

2,588,932,546

d. The investments made by Enersis S.A. and it affiliates during the year ended December 31, 2002, amounted to ThCh$23,465,277,

which are detailed as follows:

Acquisitions

Luz de Río Ltda.

Central Termelétrica Fortaleza S.A.

Chilectra S.A.

Compañía Electrica del Río Maipo S.A.

Cachoeira Dourada S.A.

Aguas Santiago Poniente S.A.

Pangue S.A.

Inversiones Distrilima S.A.

Other

Total

As of December 31,

2001
ThCh$

5,911,275

4,982,826

498,137

1,487,500

2002
ThCh$

61,469

15,480,376

1,134

58,931

1,633,280

4,998,894

1,190,289

40,904

12,879,738

23,465,277

ENERSIS 2002 ANNUA L REPORT

9 7

9 6
9 6

• In May of 2002, Enersis S.A. acquired 6,824,495 Sociedad Inversiones Distrilima S.A. shares equivalent to 1.14% of

issued capital for US$1,767,761,22 increasing its direct interest from 14.79% to 15.93%.

•

In February and April of 2002 Enersis S.A. made contributions of US$22,773,195.87 to Central Geradora Termelétrica

Fortaleza S.A. for a capital increase, maintaining its 48.82% interest equivalent to 20,246,908 shares.

• During 2002, Lajas Inversora (Endesa subsidiary) acquired 753,627 (0.0803%) Central Eléctrica Cachoeira Dourada S.A.

(Brasil) shares for Th$58,931, increasing its interest to 99.59%.in said company.

• On September 13, 2002, Endesa acquired 7,275,433 (2.51%) Pangue S.A. (Chile) shares for Th$4,998,894, increasing

its interest to 94.97% in said company.

• Debenture capitalization in Cerj

On July 11, 2002, the company Luz de Río Ltda. and Endesa Internacional Energía Ltda., holders of convertible bonds

issued by Companhía de Electricidade do Río de Janeiro, exercised the option to capitalize their investment. To that effect,

420,705,127,532 no par value shares were issued.

Said capitalization resulted in a net increase of the consolidated interest in the company to 61.95%.

12.

INVESTMENTS IN OTHER COMPANIES

Investments in other companies at December 31, 2001 and 2002 are as follows:

Company

Distasa S.A. E.S.P.

Emgesa S.A. E.S.P.

Club de la Banca y Comercio

Club Empresarial

Edegas

Empresa Eléctrica de Aysen S.A

Inmobiliaria España S.A.

Inverandes S.A.

Cooperativa Eléctrica de Chillán

CDEC-SIC Ltda.

Empresa Eléctrica de Bogotá S.A.

Autopista del Río Maipo S.A.

Financiera Eléctrica Nacional

Saelpa

Teleceara

Supra CCVM Lltda.

Banco Destak

Menescal Produções Artisticas

Termocartagena

Coger

Total

Number of
shares

Percentage
owned
%

As of December 31,

2001
ThCh$

2002
ThCh$

2,516,231

1,011,899

12,818,264

0.001

0.010

30.770

11.000

0.200

0.100

2,699

6,150

3,422

2,572

6,328

2,616

1,978,031

3,420

12,907

153,100

3,420

12,907

223,114

147,160,783

156,799,970

4,827

124,006

1,036

738

37,906

61,376

8,344

2,909

4,827

353,555

725

516

26,525

42,947

5,838

2,035

149,560,997

159,466,785

ENERSIS 20 02 ANNUAL REPORT

9 9

9 8

13.

GOODWILL

a. In accordance with current standards, recognition has been given to the excess of purchase price of the proportional equity

in the net assets acquired (goodwill) in the purchase of shares as of December 31, 2001 and 2002, as follows:

Company

As of December 31,

2001

2002

Amortization
ThCh$

Net Balance
ThCh$

Amortization
ThCh$

Net Balance
ThCh$

Central Costanera S.A. (1)

Chilectra S.A.

Cía. de Electricidade do Río de Janeiro (1)

C. Hidroeléctrica Cachoeira Dourada (1)

(1,635,472)

(6,178,814)

(6,802,644)

(4,080,506)

22,542,503

(24,019,065)

112,424,542

(6,244,383)

106,276,518

102,650,570

(109,374,320)

65,288,089

(69,564,545)

(12,171,789)

200,834,527

(213,989,455)

(1,677,992)

26,569,990

(1,787,998)

26,522,265

Coelce (1)

Codensa

Distrilec Inversora S.A. (1)

Edegel S.A.

Edesur S.A. (1)

Emgesa S.A.

Empresa Eléctrica de Colina S.A.

Empresa Eléctrica de Pangue S.A.

(660,678)

(37,900)

(639,580)

(1,516,659)

(185,188)

10,926,526

(11,642,227)

609,554

8,900,820

24,013,765

2,731,517

(41,020)

(9,483,835)

(1,615,435)

(185,188)

(69,692)

608,459

23,970,674

2,546,329

3,275,515

Endesa (Chile)

(42,958,281)

710,600,834

(42,958,280)

667,642,554

Gasoducto Atacama y Cía Ltda.

Hidroeléctrica El Chocón S.A. (1)

Hidroinvest S.A. (1)

Inversiones Distrilima S.A.

Investluz S.A. (1)

Lajas Inversora S.A. (1)

Luz de Bogotá S.A.

Cía. Eléctrica del Río Maipo S.A.

(4,772)

(810,026)

(77,694)

(1,408)

(62,297)

(105,474)

(402,719)

(566,455)

81,927

9,450,309

1,294,904

18,301

1,027,913

1,687,590

6,376,384

10,802,028

(4,772)

(10,069,320)

(1,379,722)

(1,500)

(1,095,242)

(1,798,130)

(445,628)

(574,414)

77,154

18,000

6,348,417

10,227,614

Total

(80,576,348)

1,318,832,593

(506,344,171)

847,513,499

ENERSIS 2002 ANNUA L REPORT

9 9

9 8
9 8

b. Following current standards, recognition has been given to the excess of the equity in the net assets purchased over the

purchase price (negative goodwill) in the purchase of shares as of December 31, 2001 and 2002 as follows:

Company

Inversiones Destrilima S.A.
Hidroeléctrica El Chocón S.A. (1)
Synapsis Soluciones y Servicios IT Ltda.
Edelnor S.A.
Central Hidroeléctrica Betania S.A.
Cía. Eléctrica Cachoeira Dourada (1)
Edegel S.A.
Empresa de Energía de Bogotá S.A.
Cía. de Electricidade do Río de Janeiro (1)
Coelce (1)

As of December 31,

2001

2002

Amortization
ThCh$

Net Balance
ThCh$

Amortization
ThCh$

248,147
15,315
1,167,676
33,765,719
1,996,761
9,661,331
239,139
118,238
487,523

3,391,331
156,983
3,696,809
56,035,189
34,362,010
68,866,610
3,826,225
2,246,500
8,612,903

18,366
3,613,468
15,315
1,244,160
34,886,018
36,869,705
10,294,161
254,803
15,874,719
9,177,059

Net Balance
ThCh$

611,346

141,668
2,694,795
24,819,551

63,083,303
3,822,287

-
-

Total

47,699,849

181,194,560

112,247,774

95,172,950

(1) To carry out the analysis of the recoverability of goodwill and negative goodwill on investments abroad, as explained in Note 2 u, the Company used International

Accounting Standard (IAS) N°36.

The analysis determined that the impairment of goodwill and negative goodwill in the companies, related to investments in

Argentina and Brazil, is 100%, as, when comparing cash flows generated by the companies in said countries, such flows do

not cover the recorded goodwill and negative goodwill. Thus, these balances have been fully amortized, resulting in a higher

net charge to income for the period of ThCh$236,434,558, net of minorities, that are included in goodwill and negative goodwill

amortization in the income statement.

14.

OTHER ASSETS

Other assets as of each year-end are as follows:

Bond discount
Bond issuance cost
Forwards contracts and swaps
Deferred expenses
Deferred commissions on foreign currency loans
Post-retirement benefits
Guarantee deposits for contingencies
Presumed minimun net income
Reimbursable contributions
Argentinean Goverment bond (Edesur)
Income taxes recoverable
Regulated assets
Fair value-derivative contracts
Others

As of December 31,

2001
ThCh$

23,317,438
2,227,309
6,778,289
29,372,305
8,504,753
50,753,635
17,219,611
4,401,120
1,644,724
6,744,337
12,537,121
28,334,477

6,700,336

2002
ThCh$

20,817,166
11,513,319
9,363,825
32,395,491
10,428,709
19,278,057
23,650,617
6,185,401
1,445,742
793,976
8,390,378
36,046,501
51,900,113
6,546,301

Total

198,535,455

238,755,596

ENERSIS 20 02 ANNUAL REPORT

101

100

15.

DUE TO BANKS AND FINANCIAL INSTITUTIONS

a. Short-term debt due to banks and financial institutions:

Foreign Currency

Financial Institution

Short-term:

ABN Amro Bank

Banco Alfa

Banco Banrisul

Banco Bayernische Landes

Banco BBVA Argentaria

Banco BBVA BHIF

Banco Beal

Banco Brasiletros

Banco Granahorrar

Banco Continental - Perú

Banco Continental - Soles

Banco Crédito (Perú)

Banco Crédito Inversiones

Banco de Bogotá

Banco de Chile

Banco de Occidente

Banco Davivienda

Banco Europeu de Investimentos

Banco Ganadero

Banco HBSC

Banco Itau

Banco Lloyds

Banco Nationale de Paris

Banco Nazionale del Lavoro

Banco Real

Banco Río

Banco Safra

Banco Santander

Banco Santander Central Hispano

Banco Santiago

Banco Wiese

Bank Boston

Bank of América

Bank of Tokio

Barings

Bndes

BNP Paribas

Brandesco

Caixa General de Depósitos

Chase Manhattan Bank

Citibank

Deutsche Bank

Interbank

San Paolo IMI Bank

Santander Overseas Bank

Unibanco

Total

US$

Other foreign currencies

Ch$

Total

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

3,900

19,383,881

11,690,051

6,091,898

6,249

14,868,328

12,725,024

5,451,346

25,998

3,285,690

15,773,388

4,621,310

1,505,541

1,407,374

36,542

22,883,118

18,039,049

129,569

6,767,943

6,557,278

8,744,459

15,389,863

14,868,221

14,077,559

9,978,137

2,943,626

325,235

8,967

15,050,838

1,395,421

986,292

20,726,463

4,401,289

2,914,580

2,033,821

7,176,274

5,058,544

3,688,212

20,734,860

20,534,043

12,605,923

53,818

5,024,251

2,297,651

8,328,537

884,609

14,966,456

17,336,064

11,001,720

5,169,358

22,748

10,494,702

8,441,260

88,495

944,155

21,573,421

12,207,873

5,034,740

23,274

12,840,183

962,348

4,638,644

11,236,876

6,756,148

7,617,506

3,797,550

1,728,888

11,929,665

4,069,600

6,643,422

578

22,932,354

3,510,307

10,119,892

5,169,139

17,080,123

40,312,584

3,973,468

4,488,965

2,943,675

7,618,861

173

10,622,525

723,970

260

20,387,682

5,677,901

7,074,827

116

2,363,855

30,047,885

9,978,137

2,943,626

3,900

19,383,881

11,690,311

325,235

15,050,838

6,091,898

20,726,463

4,407,538

8,328,537

14,868,328

12,725,024

5,451,346

25,998

3,285,690

15,796,136

4,621,310

9,946,801

3,771,229

59,816

35,723,301

18,039,049

129,569

6,767,943

18,573,087

2,944,253

30,551,215

3,510,480

10,119,892

5,169,139

6,557,278

2,914,580

2,033,821

8,744,459

22,566,137

35,255,903

14,077,559

5,058,544

3,697,179

20,734,860

20,534,043

5,677,901

12,605,923

8,524,066

5,024,251

2,297,651

986,292

884,609

14,966,456

17,336,064

11,964,068

9,808,002

21,731,694

6,844,643

30,992,040

29,190,927

12,207,873

5,034,740

3,797,550

1,728,888

4,069,600

4,488,965

27,702,648

723,970

40,312,584

3,973,468

198,358,134

226,280,843

100,287,721

135,580,006

2,364,209

63,188,411

301,010,064

425,049,260

ENERSIS 2002 ANNUA L REPORT

101

100
100

Total Principal

161,053,463

172,781,954

66,462,707

122,203,397

2,364,209

63,024,860

229,880,379

358,010,211

Weighted average annual interest rate

10.98%

8.14%

11.28%

14.84%

4.62%

2.48%

10.99%

9.42%

Percentage of debt in foreign currency:
Percentage of debt in local currency:
Total

As of December 31,

2001
%

99.21
0.79
100.00

2002
%

85.13
14.87
100.00

b. Current portion of long-term debt due to banks and financial institutions:

Foreign Currency

Financial Institution

US$

Euros

Yen

Other foreign currency

Total

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

Current portion of long -term:

ABN Amro Bank

4,641,206

2,636,765

Corporación Fin. del Valle

Banco Bayernische Landes

Banco BBVA Bhif

Banco Beal

Banco de Chile

Banco do Brasil

Banco do Estado de Ceará

Banco do Nordeste do Brasil

Banco Estado

Bancolombia

Banco HBSC

Banco Hermes

Banco Lloyds

Banco Medio Crédito

Banco Nacional Desarrollo Soc.

Banco Real

Banco Rio

Banco Nacional del Lavoro

Banco San Paolo

Banco Santander

Banesto

Bank Boston

Bank of América

21,333,470

586,366

15,484,073

55,827

5,622,544

1,447,394

147,266

152,837

1,654,097

931,318

107,119

21,590

10,824,955

6,577,752

4,214,536

67,508,298

3,744,556

4,292,992

5,391,528

7,219,445

171,165

768,636

4,601,056

600,561

69,521,918

97,779,555

Bank of Tokio - Mitsubishi

56,082,775

46,988,580

Banque Nationale París

4,626,119

11,861,505

Birf

Chase Manhattan Bank

57,741,816

596,408

BNP Paribas

Citibank N.A.

Dresner B. Luxemburg

Electrobras - Brasil

Eximbank

Export Develop. Corp.

J.P.Morgan Chase Bank

22,631,820

24,295,402

232,752

82,932,830

1,681,533

2,506,978

408,710

3,624,390

4,545,759

Kreditanstal Fur Weideraubau

403,235

424,774

Midland Bank

5,085,611

5,668,452

Santander Central Hispano

215,947,206

Santander Inv. Bank

Scotiabank

Skandinaviska Enskildabnken

Societe Generale

Unibanco

5,063,018

6,349,226

559,807

2,229,111

1,740,953

2,375,122

1,845,522

7,067,648

3,365,645

14,637,719

916,285

6,865

185,154

1,896

2,178,745

127,292

395,184

14,585,777

496,814

651,402

2,019,382

470,332

2,409

6,481,411

456,684

1,066,471

2,969,352

1,195,763

6,615,690

459,473

73,033

52,797

882,985

1,987

17,742,450

4,641,206

2,636,765

55,827

21,333,470

586,366

15,484,073

17,742,450

1,063,551

6,865

185,154

5,622,544

1,447,394

152,837

882,985

1,987

42,548

19,679,568

1,739,232

21,333,665

2,713,098

17,742,450

107,119

21,590

10,824,955

6,577,752

5,391,528

14,287,093

4,214,536

651,402

2,019,382

470,332

1,896

3,539,219

67,508,298

23,665,751

768,636

4,292,992

4,601,056

15,238,280

69,521,918

97,779,555

56,974,773

61,701,649

4,626,119

12,318,189

1,066,471

57,741,816

1,792,171

6,615,690

22,631,820

24,295,402

232,752

82,932,830

2,969,352

459,473

1,681,533

3,624,390

403,235

2,506,978

4,954,469

424,774

5,085,611

5,668,452

222,428,617

5,063,018

6,349,226

559,807

2,229,111

1,740,953

73,033

2,375,122

1,845,522

52,797

Total

357,806,670

540,511,420

3,624,390

4,673,051

395,184

46,138,200

8,546,017

12,200,050

55,164,468

1,739,232

425,536,729

605,261,953

Total principal

307,836,499

513,485,849

3,624,390

4,647,499

395,184

45,826,512

8,544,119

8,884,706

55,164,468

1,554,097

375,564,660

574,398,663

Weighted average annual
interest rate

6.03%

3.24%

4.26%

3.79%

0.90%

2.08%

8.60%

8.53%

7.50%

8.73%

6.27%

3.30%

As of December 31,

2001
%

87.04

12.96

2002
%

99.71

0.29

100.00

Percentage of debt in foreign currency:

Percentage of debt in local currency:

Total

ENERSIS 20 02 ANNUAL REPORT

103

102

In order to develop their investment plans, Enersis S.A., Endesa S.A. (Enersis subsidiary) and Pehuenche S.A. (Endesa S.A.

subsidiary), have obtained financing from banks and financial institutions or through issuance of financial instruments, both

in the local market and abroad and which contain financial and non-financial covenants.

16.

LONG-TERM PORTION OF DEBT DUE TO BANKS AND FINANCIAL INSTITUTIONS

As of December 31, 2002

After 2 year
but within
3 years
ThCh$

After 3 year
but within
5 years
ThCh$

After 5 year
but within
10 years
ThCh$

After 10 yers

years

ThCh$

Financial Institution

Currency

ABN Amro Bank

Banco Bayernische Landes
Banco BBVA

Banco Estado

Banco Europeo de Investimentos

Banco do Brasil

Banco Medio Crédito

Banco Nacional Desarrollo Soc.
Banco Nacional del Lavoro

Banco Nacionale de Paris

Bancolombia

Banco Santander

Scotiabank

Banco Santander Central His.

Banesto
Bank Boston
Bank of America

Bank Tokio - Mitsubishi

Bco. do Estado de Ceará
Bco. do Nordeste do Brasil
BIRF

BNDES

J.P.Morgan Chase Bank

Citibank N.A.

Citibank N.Y.

Corfinsura
Electrobas - Brasil

Export Develop. Corp.

HBSC Bank
Kreditanstal Fur Weideraubau

Lloyd’s Bank

Midland Bank
Santander Investment
Skandinaviska Enskildabnken
Dresdner Bank
Societe Generale
Unibanco

US$
US$
US$
US$
US$
$ Reaj.
US$
US$
Rs
US$
US$
$ Arg
Rs
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
Yen
US$
US$
US$
US$
US$
US$
Lira
Pound
Yen
Euros
Rs
Rs
U.P.
Rs
Rs
US$
US$
US$
Euros
US$
US$
US$
US$
Rs
US$
US$
US$
US$
US$
US$
Yen
US$
US$
US$
US$
US$
Rs

After 1 year
but within
2 years
ThCh$
10,060,540
71,861,000
348,727
-
467,096,500
14,644,588
4,604
-
1,612,832
666,812
-
1,843,524
924,558
-
10,624,361
1,927,400
-
-
-
-
-
-
287,444,000
6,979,153
3,545,818
-
-
6,895,050
-
-
-
438,973
462,018
122,980
145,548
83,792
1,189,530
-
21,350,096
-
-
-
-
-
22,584,885
359,305,000
-
-
987,113
1,043,482
-
393,104
1,135,176
-
1,077,915
-
3,664,911
2,375,122
-
1,378,048
78,528

-
-
348,727
-
-
39,055,660
-
-
806,416
310,166
-
1,843,524
462,279
-
10,624,361
1,927,400
-
-
-
-
-
-
-
-
3,545,818
-
-
6,895,050
-
-
-
438,973
462,018
122,980
-
34,914
-
49,049,488
7,116,699
-
39,523,550
-
-
-
11,292,443
-
-
-
987,113
1,043,482
-
393,104
-
-
-
-
-
2,375,122
-
-
-

-
-
697,454
-
-
2,936,985
-
11,976,834
1,612,832
543,906
-
1,843,524
-
-
21,248,722
3,854,800
484,743
-
-
-
-
-
-
-
7,091,636
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,965,250
-
-
-
-
-
32,609,567
-
1,974,226
2,086,964
-
786,208
-
-
-
-
-
2,375,007
-
-
-

-
-
697,457
-
-
-
-
23,953,666
4,032,080
1,223,757
-
6,440,033
-
-
16,661,934
5,895,808
-
-
-
-
-
-
-
-
14,183,276
-
-
-
-
-
-
-
-
-
-
-
-
-
10,519,313
-
-
-
-
-
-
-
-
-
4,935,565
2,608,704
-
589,654
-
-
-
-
-
-
-
-
-

Total
Long-term
portion
ThCh$
10,060,540
71,861,000
2,092,365
-
467,096,500
56,637,233
4,604
35,930,500
8,265,761
4,547,135
-
11,970,605
1,386,837
-
59,159,378
16,180,874
484,743
-
-
-
-
-
287,444,000
6,979,153
28,366,548
-
-
13,790,100
-
-
-
877,946
924,036
245,960
145,548
118,706
1,189,530
49,049,488
38,986,108
-
57,488,800
-
-
-
33,877,328
359,305,000
32,609,567
-
10,858,246
6,782,632
-
2,162,070
1,135,176
-
1,077,915
-
3,664,911
7,125,251
-
1,378,048
78,528

Annual
interest
rate
average

Total
Long-term
portion - 2001
ThCh$

2.75%
2.81%
2.70%
0.00%
2.66%
4.32%
6.50%
1.37%
19.13%
4.05%
0.00%
1.75%
9.04%
0.00%
4.35%
4.70%
3.00%
0.00%
0.00%
0.00%
0.00%
0.00%
2.64%
2.09%
4.30%
0.00%
0.00%
2.66%
0.00%
0.00%
0.00%
4.81%
0.89%
4.13%
9.83%
8.04%
5.32%
10.00%
26.00%
0.00%
8.53%
0.00%
0.00%
0.00%
3.88%
2.56%
12.38%
0.00%
2.90%
2.75%
0.00%
4.85%
5.75%
0.00%
2.09%
0.00%
7.25%
0.65%
0.00%
1.62%
6.54%

1,963,737
67,443,370
-
2,085,128
406,852,130
58,028,908
864,034
-
10,016,239
4,363,330
35,267,772
-
2,548,105
3,303,104
65,648,923
7,477,621
7,327,862
7,729,276
708,728
20,680
130,840,138
366,386,108
-
-
32,850,615
14,247,345
27,584,337
14,785,268
8,138,664
19,413,538
293,321
1,115,357
1,173,625
-
166,106
221,316
2,056,583
9,441,620
-
74,113
53,954,696
5,395,470
3,589,264
52,991,219
36,311,511
362,170,897
-
524,017
6,478,693
7,552,397
10,116,506
2,398,095
6,744,337
1,011,651
-
12,525,197
9,307,185
8,916,338
77,627,317
3,017,776
180,353

-
-
-
-
-
-
-
-
201,601
1,802,494
-
-
-
-
-
2,575,466
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,974,229
-
-
-
-
-
-
-
-
-
-
-
-

6,553,790

1,691,338,670

1,971,249,920

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

ENERSIS 2002 ANNUA L REPORT

Total

1,304,295,688

178,659,287

110,088,658

91,741,247

Percentage of debt in foreign currency:

Percentage of debt in local currency:

Total

As of December 31,

2001
%

97.06

2.94

100.00

2002
%

97.13

2.87

100.00

103

102
102

17.

OTHER CURRENT LIABILITIES

Other current liabilities at each year-end are as follows:

Advances and guarantee on construction

Taxes payable

Contingencies - third party claims

Customer advances

Azopardo provision

Employee obligations

Forward contracts and swaps

Fair value - derivative contracts

Emergency energy provision (Brazil)

Other current liabilities

As of December 31,

2001
ThCh$

6,803,215

4,293,154

11,142,417

4,341,372

3,187,555

114,377,655

1,319,668

4,918,722

2002
ThCh$

601,997

2,482,871

15,212,625

3,293,578

2,336,683

2,228,103

5,729,893

11,251,521

10,708,453

5,696,233

Total

150,383,758

59,541,957

18.

PROMISSORY NOTES

Financial Instrument

2001-029

Commercial paper

Promissory note-AFR

OPP-027/2002

Promissory note - Banco
Santander

OPP-058/2002

Total

Face
Value
ThCh$

Maturity
Date

Interest
Rate
%

42,328,262

May 13, 2002

10,456,868

Feb 01, 2002

3,030,678

2,081,801

May, 2003

Aug, 2003

Dec, 2003

1,000

June, 2003

286,299

Jan, 2003

1,000

Sep, 2003

18.13

8.48

5.00

5.25

10.00

5.00

As of December 31,

2001
ThCh$

43,598,110

11,032,138

2002
ThCh$

3,089,607

2,124,305

122,129

3,465,944

286,299

4,101,230

54,630,248

13,189,514

ENERSIS 20 02 ANNUAL REPORT

105

104

19.

BONDS PAYABLE

a. Details of the current portion of bonds payable is as follows at each year-end:

Instrument

Series

Currency

Face Value
Outstanding
ThCh$

Interest
Rate
%

Bonds – Distrilima

Bond No.269

Yankee Bonds – Enersis

Bonds Endesa

1st Prog

B1 – B2

E-1, E-2

Bonds Endesa Internacional

Bonds Endesa

Bonds Pehuenche

Bonds Edegel

Bonds Emgesa

Bonds Endesa

Bonds Emgesa

Eurobonds

Bonds Autopista del Sol S.A.

Total

B-1, B-2

C2; D1, D2

B-1

B-5

B-7

B-10

C-10

B-10 2nd

A-5

B-3

A-1

C-10

First

A-1

A-2

B-1

B-2

9.61

7.50

6.50

6.34

7.50

6.90

5.63

6.90

7.45

6.63

7.88

7.33

8.13

7.75

8.50

6.20

7.20

6.00

6.80

7.30

8.75

8.41

8.75

8.44

11.50

15.80

14.95

15.27

15.60

10.25

15.78

8.35

14.79

13.95

6.20

9.88

3.34

5.80

Soles

US$

$ Col.

Euro

49,919,000

15,104,316

6,134,974

4,089,983

3,859,972

18,949,365

2,945,863

300,000,000

350,000,000

150,000,000

230,000,000

220,000,000

200,000,000

400,000,000

6,000,000

150,000,000

750,000

1,315,960

170,000,000

30,000,000

20,000,000

10,000,000

85,000,000

12,750,006

19,500,010

229,825,122

19,777,918

273,130

172,858

31,525,018

15,000,006

1,500,000

1,245,298

400,000,000

3,466,160

861,540

964,372

243,578

105

104
104

Maturity
Date

Feb 01, 2011

Jul 01, 2006

Jan 01, 2004

Oct 10, 2006

Jun 15, 2009

Nov 21, 2006

Nov 21, 2016

Nov 21, 2026

Feb 01, 2027

Feb 01, 2037

Feb 01, 2097

July 15, 2008

Apr 01, 2009

Aug 01, 2006

Apr 01, 2006

Oct 01, 2001

Nov 01, 2010

May 01, 2003

June 13, 2007

Feb 14, 2007

Jun 03, 2006

Nov 21, 2005

Feb 22, 2003

Jun 01, 2006

Oct 09, 2004

Oct 09, 2006

Oct 09, 2009

Nov 09, 2009

Oct 12, 2010

Feb 08, 2002

July 09, 2006

Aug 01, 2022

Oct 10, 2010

July 24, 2003

Oct 18, 2018

Oct 19, 2018

Oct 20, 2018

Jan 01, 2018

Par Value

2001
ThCh$

5,827

577,643

273,062

7,338,014

1,124,617

1,004,024

537,860

4,559,675

4,528,542

947,084

9,582,578

5,732,686

2,557,305

1,820,971

2002
ThCh$

5,946

595,057

178,340

49,009

43,787

289,297

7,707,332

1,198,281

1,069,787

573,091

4,858,340

4,825,168

1,009,124

10,210,249

6,108,185

2,556,325

1,940,247

2,332,264

2,448,643

1,394,954

123,650,025

139,657

648,384

91,499

123,910

280,254

1,721,866

119,042

186,358

148,805

690,620

97,493

135,327

7,450,131

74,909

118,162

2,247,058

1,435,070

136,358

336,523

228,550

9,461,897

108,833

639,327

43,693

220,970

70,046

10,162,475

1,426,838

639,081

80,679

2,061,700

303,740,866

1,632,119

408,030

486,834

122,963

62,848,322

498,501,344

ENERSIS 2002 ANNUA L REPORT

b. Details of the long-term portion of bonds payable is as follows at each year-end:

Series

Uno

I°Prog.

Uno

Dos

Tres

Uno

Dos

Tres

Uno

Unica

E-1 y E-2

C2; D1 Y D2

Unica

Uno

Dos

Tres

Cuatro

Cinco A

Cinco B

A-1

B-1

B-5

B-7

B-10

C-10

B-10 2° emision

A-1

A-2

B-1

B-2

Unica

Face Value
Outstanding
ThCh$

Currency

825,918

15,104,316

18,949,365

6,134,974

4,089,983

3,859,972

300,000,000

350,000,000

150,000,000

2,928,543

2,500,000

230,000,000

220,000,000

200,000,000

400,000,000

6,000,000

1,439,153

1,500,000

170,000,000

30,000,000

20,000,000

10,000,000

30,000,000

15,000,006

85,000,000

12,750,006

19,500,010

229,825,122

19,777,918

60,000,031

3,446,160

861,540

964,372

243,578

400,000,000

150,000,000

Soles

US$

U.F.

US$

U.F.

US$

Soles

$ Col.

U.F.

Euro

US$

Interest
Rate
%

9.61%

VAC + 7,5 %

VAC + 6,9 %

6.5%

6.34%

VAC + 7.5%

0.069

0.0745

0.0663

0.055

0.0575

0.0788

0.0733

0.0813

0.0775

0.085

0.062

0.068

0.062

0.073

0.0875

0.0841

0.0875

0.0844

0.1154

0.06

0.1343

0.1575

0.1495

0.1527

0.156

0.1025

0.1578

0.058

0.0334

0.072

Instrument

Bonos Edelnor

Yankee Bonds - Enersis

Bono N° 269

Bonos Endesa

Bonos Pehuenche

Bonos Edegel

Bonos Emgesa

Bonos Autopista del Sol S.A

Eurobono

Bonos Endesa Internacional

Total

Par Value

Maturity
Date

2001
ThCh$

2002
ThCh$

01.02.11

01.07.06

10.10.06

01.01.04

01.03.07

21.11.06

21.11.16

21.11.26

15.06.09

15.06.22

01.02.27

01.02.37

01.02.97

15.07.08

01.04.09

01.08.06

01.11.10

01.08.22

01.05.03

13.08.07

14.02.07

13.06.06

21.11.05

22.08.03

22.02.04

09.07.06

01.07.06

09.10.04

09.10.06

09.10.09

08.11.09

15.01.18

24.07.03

01.04.06

957,975

1,000,390

15,557,445

16,482,681

19,517,846

20,677,950

6,134,974

4,089,983

3,859,972

202,330,110

215,583,000

168,429,026

179,461,350

101,165,055

107,791,500

56,523,126

49,035,877

41,876,350

41,860,300

138,853,085

147,948,145

148,375,414

158,094,200

27,257,913

29,043,342

269,773,480

287,444,000

269,773,480

287,444,000

100,503,239

100,464,720

22,043,038

19,831,566

25,125,810

25,116,180

114,653,729

20,233,011

21,558,300

20,233,011

21,558,300

20,233,011

21,558,300

13,488,674

14,372,200

6,854,001

4,415,413

6,134,974

3,762,632

25,020,672

21,321,580

3,753,101

5,740,037

3,198,237

4,891,422

67,651,483

57,649,691

5,821,842

5,279,069

17,661,651

15,050,527

57,702,917

14,425,729

16,147,555

4,078,505

236,481,576

101,165,055

107,791,500

2,271,468,659

2,097,845,568

ENERSIS 20 02 ANNUAL REPORT

107

106

c. Bonds payable are comprised of the following:

i. Enersis S.A. Series B1-B2

On September 11, 2001, Enersis S.A. registered two series of bearer bonds as of June 14, 2001, as follows:

Series

Total amount
In UF

1,000,000

3,000,000

1,000,000

1,500,000

N°of bonds
per series

1,000

300

1,000

150

Face value
In UF

1,000

10,000

1,000

10,000

The scheduled maturity of the Series B-1 bonds is 8 years, interest and principal payable semi-annually. Annual interest is

5.50%, compounded semi-annually.

The scheduled maturity of the Series B-2 bonds is 21 years, principal payments beginning after 5 years, interest and principal

payable semi-annually. Annual interest is 5.75%, compounded semi-annually.

ii. Enersis S.A. (Yankee Bonds)

On November 21, 1996, the Company, acting through its agency in the Cayman Islands, issued corporate notes (Yankee

Bonds) for US$800 million in three series, as follows:

Series

Total amount
In US$

300,000,000

350,000,000

150,000,000

Years to maturity

Stated annual interest
rate

6.90%

7.40%

6.60%

Interest is payable on a semi-annual basis and principal is due upon maturity. The Series 3 bond holders have an option to

require the Company to redeem all or any US$1,000 portion thereof on December 31, 2003 at a redemption price equal to

face value.

Repurchase of Yankee Bonds

During November 2001, the Company made a tender offer to repurchase all or a portion of the Series 2 Yankee Bonds. The

offer expired November 21, 2001 and the Company repurchased a total of US$100,266,000 in bonds with accrued interest,

at a price of US$95,536,000, resulting in a gain of US$8,201,000 (ThCh$5,531,051), which is included in other non-operating

income (see Note 23a).

ENERSIS 2002 ANNUA L REPORT

107

106
106

iii. Edelnor Bonds (Subsidiary of Distrilima S.A.)

First issue

Date of Issue

Number of bonds subscribed

Face value

Redemption term

Interest rate

Interest payment

Principal amortization

Second issue

Date of Issue

Number of bonds subscribed

Face value

Redemption term

Interest rate

Interest payment

Anticipated redemption option

Third issue

Date of Issue

Number of bonds subscribed

Face value

Redemption term

Interest rate

Interest payment

First program of Corporate Bonds

First issue

Date of Issue

Face value

Redemption term

Interest rate

Interest payment

Second issue

Date of Issue

Number of bonds subscribed

Face value

Redemption term

Interest rate

Interest payment

March 1, 1996

49,919

100 soles each

15 years

9.6136% annual

Annually, on coupon maturity

Amortization of total principal upon maturity

November 10, 1998

146,300

1,000 soles each

4 years

14.396%

Accrued and paid within 90 days

Early redemption option

August 7, 1998

15,000

US$1,000 each

3 years

7.7%

Accrued and paid within 90 days

October 29, 2001

30,000 new soles each

2 years

7.5%

Semi – annual

October 19, 2001

20,000

5,000 new soles each

5 years

6.9%

Semi – annual

ENERSIS 20 02 ANNUAL REPORT

109

108

Third issue:

Date of issue

Number of bonds subscribed

Face value

Redemption term

Interest rate

Interest payment

Fourth issue:

Date of issue

Number of bonds subscribed

Face value

Redemption term

Interest rate

Interest payment

v. Endesa Chile S.A.

January 24, 2002

6,000

5,000 (new soles each)

2 years

6.5 % annual

Semi – annual

April 24, 2002

4,000

5,000 (new soles each)

2 years

6.34 % annual

Semi – annual

I The Company made four public offerings of bonds in the local market on the following dates:

• On September 12, 1988, the Company registered in the Securities Register of the Chilean Superintendency of Securities and

Insurance, under N°105, the first issuance of bonds for UF5,000,000, which was fully placed prior to the end of December

31, 1988. This issue was totally cancelled on September 1, 2000.

• On August 24, 1989, the second issuance of bonds was registered under N°111, for UF6,000,000, and was fully placed as

of December 31, 1990. This issue was totally cancelled on October 1, 2001.

• On December 7, 1990, the third bond issuance was registered under N°131 for UF4,000,000. Of this issuance, UF2,030,000

has been placed as of December 31, 1997. The balance of UF1,970,000 has been cancelled due to the expiration of the

placement period.

• On August 9, 2001, the fourth bond issuance was registered under N°264 for UF7,500,000, and was fully placed as of

December 31, 2001.

Risk rating of the issued bonds is as follows as of the date of these financial statements:

- Comisión Clasificadora de Riesgo

- Fitch IBCA Chile Clasificadora de Riesgo Ltda.

- Clasificadora de Riesgo Humphreys Ltda.

Category

BBB

Baa3

ENERSIS 20 02 ANNUAL REPORT

113

112

ISSUANCE TERMS

First Issuance

Issuer

Securities issued

Issuance Value

Capital amortization

Nominal interest rate

Interest Payments

Guarantee

Endesa Chile Internacional.

Marketable securities denominated in US$(150,000 bonds).

One hundred and fifty million Dollars (US$150,000,000):

Maturity as of April 1, 2006

7.2 % annually in arrears.

Interest will be paid semi-annually in arrears starting October 1, 1996.

Accrued interest as of the year end amounts to ThCh$1,940,247

(ThCh$1,820,971 in 2001) and is shown under current liabilities.

Guarantee from Empresa Nacional de Electricidad S.A.

As of July 24, 2000, the first issue of Eurobonds (European Medium Term Note Programme) was registered in England for

1,000 million Euros.

ISSUANCE TERMS

First Registration

Securities registered

Issuance value

Capital amortización

Nominal interest rate

Interest payments

Guarantee

1,000 million Euros

Euros 400,000,000 (*)

Principal due July 24, 2003

Euribor + 0.80

Quarterly beginning October 24, 2000 in arrears. Accrued interest as of the

year end amounts to ThCh$2,310,497 (ThCh$2,061,701 in 2001)

and is shown in current liabilities.

Empresa Nacional de Electricidad S.A.

(*) By way of a swap operation, the debt in Euro was changed to US dollars.

II Empresa Eléctrica Pehuenche S.A. issued bonds on May 2, 1996.

First Issuance

Issuer

Securities issued

Issuance Value

Capital amortization

Nominal interest rate

Interest payments

Empresa Eléctrica Pehuenche S.A.

Marketable securities denominated in US$.

One hundred and seventy million US Dollars (US$170,000,000)

Maturity as of May 1, 2003

7.3 % annually

Interest will be paid semi-annually in arrears, starting November 1, 1996.

Accrued interest as of the year end amounts to ThCh$1,486,325

(ThCh$1,394,954 in 2001) and is shown in Current Liabilities.

ENERSIS 2002 ANNUA L REPORT

113

112
112

III Edegel S.A. issued bonds on June 4, 1999, February 15, 2000, June 14, 2000 and November 27, 2000 and August 22,

2001 as per the following:

First Issuance

Issuer

Securities issued

Issuance value

Capital amortization

Nominal interest rate

Interest payments

Edegel S.A.

Marketable securities denominated in US$(120,000 bonds).

US$120,000,000

June 3, 2006, February 14, 2007, June 13, 2007, November 26, 2005 and

August 22, 2003, respectively.

8.75%, 8.41%, 8.75%, 8.4375% and 11.50% annually

Interest will be paid semi-annually, starting December 3, 1999. Accrued

interest as of the year-end amounts to ThCh$1,367,515

(ThCh$1,283,703 in 2001) and is shown in other current liabilities.

IV Emgesa S.A. issued bonds on October 8, 1999 and July 9, 2001 as per the following:

First Issuance

Issuer

Securities issued

Issuance Value

Capital amortization

Interest nominal rate

Interest payment

Emgesa S.A.

Marketable securities denominated in Colombian pesos

$Col 530,000,000

Maturities as of 2002, 2004, 2006, 2007, 2009 and 2010 for $Col 1,525,000;

$Col 15,000,000; $Col 85,000,000; $Col 81,407,744; $Col 19,500,000;

$Col 297,567,256 and $Col 30,000,000 respectively

15.5% annual average rate

Interest will be paid semi-annually. Accrued interest as of the year end

amounts to ThCh$5,385,981 (ThCh$5,715,660 in 2001) and is shown

under current liabilities.

V Sociedad Concesionaria Autopista del Sol S.A. issued bonds on March 8, 2002.

First Issuance

Issuer

Securities issued

Issuance Value

Indexation

Amortization period

Capital amortization

Interest nominal rate

Interest payment

Sociedad Concesionaria Autopista del Sol S.A.

Bearer bonds in local currency, denominated in Unidades de Fomento

U.F. 5,540,000 divided into:

- Series A – 1 U.F.3,460,000

- Series A – 2 U.F.865,000

- Series B – 1 U.F.970,000

- Series B – 1 U.F.245,000

Variation in the U.F.

16 years

Semi - annually and consecutive

5.8% annually in arrears, compounded semi - annually on outstanding

capital, readjusted for the value of the Unidad de Fomento.

The applicable semi-annually rate will be equal to 2.8591%

Interest will be paid semi-annually each January 15 and July 15 starting

January 15, 2003. Accrued interest at the year end amounts to

ThCh$2,427,752 and is show in current liabilities.

ENERSIS 20 02 ANNUAL REPORT

115

114

Bond discounts of Enersis S.A. and its affiliates of ThCh$23,317,438 and ThCh$20,817,166 as of December 31, 2001 and

2002, respectively are included in Other Assets (see Note 14).

20.

ACCRUED EXPENSES

a. Short-term accruals:

Accrued expenses included in current liabilities as of each year-end are as follows:

Profit sharing and other employee benefits

Litigation and contingencies

Construction and other

Energy purchases and other

Income tax installments and other taxes

Pension accruals

Suppliers and services

Others accruals

Total

As of December 31,

2001
ThCh$

29,586,443

21,817,851

7,757,541

10,004,985

192,034

1,282,688

2,891,319

6,387,468

2002
ThCh$

26,911,641

21,256,038

7,173,039

14,461,761

198,643

1,793,090

6,294,182

6,841,927

79,920,329

84,930,321

During the 2002 period, bad debts write-offs for an amount of ThCh$1,297,010 (ThCh$6,340,092 in 2001) were made.

b. Long-term accruals:

Provision for contingencies and lawsuits

Advance monthly corporate and other taxes

Post-retirement benefits-Chilean subsidiaries

Severance indemnity

Labour contingencies (Cerj)

Post-retirement benefits (Cerj Coelce)

Supplementary pension-foreign subsidiaries

Others

Total

As of December 31,

2001
ThCh$

143,903

10,659,029

8,686,281

7,091,909

83,342,951

80,089,342

44,375,523

2002
ThCh$

1,131,005

7,000,596

10,352,416

8,589,109

87,993,076

38,637,287

71,228,212

1,990,916

234,388,938

226,922,617

ENERSIS 2002 ANNUA L REPORT

115

114
114

Long-term accruals include employee severance indemnities, calculated in accordance with the policy described in Note 2n.

An analysis of the changes in the accruals in each year is as follows:

Opening balance as of January 1

Increase in accrual

Transfer to short-term

Payments during the year

As of December 31,

2001
ThCh$

6,396,342

2,352,065

(276,711)

(1,379,787)

2002
ThCh$

7,377,430

2,072,912

82,969

(944,202)

Total

7,091,909

8,589,109

21.

MINORITY INTEREST

a. Minority shareholders’ participation in the shareholders’ equity of the Company’s subsidiaries as of each year-end is as

follows:

As of December 31, 2001

As of December 31, 2002

Company

Autopista Los Libertadores S.A.
Cam Argentina S.A. (Ex - M.Velasco Arg.)
Cam Colombia S.A.
Capital de Energía S.A.
Central Hidroeléctrica Betania S.A.
Central Cachoeira Dourada
Central Costanera S.A.
Cía. do Electricidade do Río do Janeiro
Chilectra S.A.
Cía. Eléctrica San Isidro S.A.
Cía. Peruana de Electricidad S.A.
Codensa S.A.
Companhia Energetica Do Ceara - Coelce
Compañía Eléctrica del Río Maipo S.A.
Constructora y Proyectos Los Maitenes S.A.
Edegel S.A.
Edelnor S.A.
Edesur S.A.
Emgesa S.A.
Empresa Eléctrica Pangue S.A.
Endesa
Endesa Argentina S.A.
Generandes Perú S.A.
Hidroeléctrica El Chocón S.A.
Hidroinvest S.A.
Inecsa 2000 S.A.
Infraestructura 2000 S.A.
Ingendesa S.A.
Inmobiliaria Centro Nuevo Ltda.
Inmobiliaria y Constructora Stgo. 2000 Ltda.
Inversiones Distrilima S.A.
Investluz S.A.
Luz de Bogotá S.A.
Empresa Eléctrica Pehuenche S.A.
Soc. Agrícola de Cameros Ltda.
Soc. Agrícola Pastos Verdes Ltda.
Túnel El Melón S.A.

Equity
ThCh$

25,296,795
687,066
1,081,791
534,797,609
494,429,051
499,191,115
137,706,613
489,488,446
498,295,654
30,362,233
39,939,117
1,112,677,346
658,685,746
22,260,807
936,792
661,672,216
272,154,844
677,251,928
919,463,877
59,573,673
1,446,549,434
30,646,605
351,973,200
237,400,257
111,674,081
25,510,699
63,589,515
2,480,040
(12,043)
74,764
159,715,296
532,119,077
643,243,838
177,950,062
6,066,690
52,532,429
(1,313,139)

Participation
%

Total
ThCh$

0.05%
0.10%
0.001%
49.10%
14.38%
0.49%
48.07%
41.25%
1.76%
50.00%
49.00%
51.52%
43.41%
1.26%
45.00%
36.44%
40.00%
34.11%
51.52%
7.52%
40.02%
0.01%
40.37%
34.81%
30.07%
2.68%
40.00%
2.36%
0.08%
7.50%
32.75%
37.55%
55.00%
6.34%
42.50%
45.00%
0.05%

12,648
687
14
262,585,626
71,088,020
2,452,676
66,192,075
201,912,651
8,770,774
15,181,116
19,565,417
573,222,783
285,937,346
279,942
421,556
241,138,499
108,861,938
230,997,210
473,679,287
4,479,940
578,895,713
3,064
142,088,131
82,639,029
33,580,396
683,687
25,435,806
58,591
(9)
5,607
52,306,760
199,810,714
353,784,118
11,282,034
2,578,343
23,639,595
(656)

Equity
ThCh$

25,213,021
545,460
1,864,792
566,223,719
519,458,738
486,715,435
171,461,783
579,561,108
421,691,742
34,217,794
43,202,088
1,009,464,988
694,587,778
22,623,680
349,958
680,564,639
292,048,556
729,817,969
963,653,136
74,436,633
1,430,635,320
21,798,627
369,454,446
227,177,787
92,470,425
25,412,375
64,002,478
2,266,772
(13,327)
80,994
172,793,816
357,552,300
600,529,806
182,901,476
6,936,375
52,902,360
(4,230,882)

Participation
%

0.05%
0.10%
0.001%
49.10%
14.38%
0.41%
48.07%
37.42%
1.76%
50.00%
49.00%
51.52%
43.41%
1.26%
45.00%
36.44%
40.00%
34.11%
51.52%
5.01%
40.02%
0.01%
40.37%
34.81%
30.07%
2.68%
40.00%
2.36%
0.08%
7.50%
31.61%
37.55%
55.00%
7.35%
42.50%
45.00%
0.05%

Total
ThCh$

12,607
545
25
278,015,846
74,686,738
1,982,200
82,417,327
216,887,924
7,366,481
17,108,897
21,169,023
520,777,588
301,522,520
284,505
157,481
248,023,616
116,819,422
248,926,444
496,444,223
3,729,275
572,527,032
2,180
149,145,139
79,080,588
27,805,857
681,052
25,600,991
53,552
(10)
6,075
54,620,126
134,260,889
330,291,399
13,443,258
2,947,959
23,806,062
(2,115)

Total

4,073,571,128

4,050,602,721

ENERSIS 20 02 ANNUAL REPORT

117

116

b. Minority shareholders’ participation in the net income of the Company’s subsidiaries as of each year-end is as follows:

Year-ended December 31, 2001

Year-ended December 31, 2002

Net
income
ThCh$

Participation
%

Total
ThCh$

Net
income
ThCh$

Participation
%

Total
ThCh$

Company

Autopista Los Libertadores S.A.

Cam Argentina S.A. (Ex - M.Velasco Arg.)

Cam Colombia S.A.

Capital de Energía S.A.

Central Hidroeléctrica Betania S.A.

Central Cachoeira Dourada

Central Costanera S.A.

Inm. Centro Nuevo

Cía. do Electricidade do Río do Janeiro

Chilectra S.A.

Cía. Eléctrica San Isidro S.A.

Cía. Peruana de Electricidad S.A.

Codensa S.A.

Companhia Energetica Do Ceara - Coelce

Compañía Eléctrica del Río Maipo S.A.

Constructora y Proyectos Los Maitenes S.A.

Edegel S.A.

Edelnor S.A.

Edesur S.A.

Emgesa S.A.

Empresa Eléctrica Pangue S.A.

Endesa S.A.

Endesa Argentina S.A.

Generandes Perú S.A.

Hidroeléctrica El Chocón S.A.

Hidroinvest S.A.

Inecsa 2000 S.A.

Infraestructura 2000 S.A.

Ingendesa S.A.

Inmobiliaria Centro Nuevo Ltda.

Inmobiliaria y Constructora Stgo. 2000 Ltda.

Inversiones Distrilima S.A.

Investluz S.A.

Luz de Bogotá S.A.

Empresa Eléctrica Pehuenche S.A.

Soc. Agrícola de Cameros Ltda.

Soc. Agrícola Pastos Verdes Ltda.

Túnel El Melón S.A.

(45,093)

1,428,756

(414,777)

(8,602,334)

8,666,017

(25,841,820)

11,567,900

3,400,351

(73,185,248)

101,281

(3,074,599)

(22,798,893)

(13,440,399)

(9,261,986)

494,907

(28,636,179)

(18,672,139)

(83,679,490)

(18,796,538)

(6,568,538)

(72,160,018)

10,823,292

(27,929,472)

(8,929,943)

(2,636,004)

(32,301)

(996,272)

(873,679)

(1,449)

(2,763)

(12,342,281)

11,720,860

(11,524,049)

(4,963,596)

165,481

(3,031,153)

1,932,383

0.05%

0.10%

0.001%

49.10%

14.38%

0.49%

48.07%

41.25%

1.76%

50.00%

49.00%

51.52%

43.41%

1.26%

45.00%

36.44%

40.00%

34.11%

51.52%

7.52%

40.02%

0.01%

40.37%

34.81%

30.07%

2.68%

40.00%

2.36%

0.08%

7.50%

32.75%

37.55%

55.00%

6.34%

42.50%

45.00%

0.05%

(23)

1,429

(5)

(4,223,747)

1,245,983

(126,969)

5,560,396

1,402,635

(1,382,051)

50,641

(1,506,554)

(11,745,404)

(5,834,514)

(133,933)

222,708

(10,436,112)

(7,468,855)

(28,541,415)

(9,683,394)

(493,954)

(28,877,772)

1,083

(11,274,854)

(3,108,513)

(792,647)

(865)

(398,509)

(20,640)

(207)

(4,042,097)

4,401,183

(6,338,227)

(314,692)

70,329

(1,364,019)

966

83,773

186,609

(712,142)

(23,671,013)

7,354,973

35,501,840

(24,735,275)

1,285

9,012,430

31,001,664

(5,250,225)

(3,258,139)

6,655,951

(20,351,782)

(11,727,292)

586,836

(4,554,496)

(19,759,294)

(8,205,141)

(56,168,714)

(18,850,842)

9,319,056

10,781,159

(13,105,328)

25,772,502

26,502,276

98,323

(412,963)

(923,250)

(6,231)

(13,071,302)

198,253,211

4,512,003

(20,012,133)

(104,616)

(98,333)

2,917,743

0.05%

0.10%

0.001%

49.10%

14.38%

0.41%

48.07%

0.08%

37.42%

1.76%

50.00%

49.00%

51.52%

43.41%

1.26%

45.00%

36.44%

40.00%

34.11%

51.52%

5.01%

40.02%

0.01%

40.37%

34.81%

30.07%

2.68%

40.00%

2.36%

7.50%

31.61%

37.55%

55.00%

7.35%

42.50%

45.00%

0.05%

187

(9)

(11,622,467)

1,057,483

144,585

(11,889,619)

3,372,704

541,744

(2,625,113)

(1,596,488)

3,429,146

(8,834,766)

(147,477)

264,076

(1,659,831)

(7,903,718)

(2,798,611)

(28,936,380)

(944,427)

3,729,400

1,078

(5,290,492)

8,971,408

7,969,234

2,635

(165,185)

(21,812)

(468)

(4,131,839)

74,444,081

2,481,602

(1,470,892)

(44,462)

(44,250)

1,459

16,282,559

Total

(125,152,619)

ENERSIS 2002 ANNUA L REPORT

117

116
116

22.

SHAREHOLDERS’ EQUITY

a. Dividends

There are no restrictions on the payment of dividends. The following dividends were paid as of each year-end:

Dividend
Number

Payment
date

April 2001

Historical
value
Ch$ per share

1.806391

Type of
dividend

Final

Related to

2000

b. Number of shares

Series

First

As of December 31, 2002 Number of shares

Subscribed

Paid

With vote

8,291,020,100

c. Subscribed and paid capital is as follows as of the year-end:

Series

First

As of December 31, 2002

Capital subscribed
ThCh $

751,208,197

Capital paid
ThCh$

751,208,197

d. Other reserves

Other reserves are composed of the following as of December 31, 2002:

Accumulated net losses of development-stage subsidiaries

Reserve for equity fluctuations

Reserve for accumulated conversion differences

Total

ThCh$

(4,937,110)

1,177,508

45,702,079

41,942,477

Detail of changes in the reserve for accumulated conversion differences are as follows for the year ended December 31,

2002:

Cumulative translation adjustment

25,105,169

Initial
Balance
ThCh$

Reserve
for Assets
ThCh$

96,536,552

Reserve for
Liabilities
ThCh$

(75,939,638)

Final
Balance
ThCh$

45,702,079

ENERSIS 20 02 ANNUAL REPORT

119

118

The detail of the accumulated conversion difference reserve at December 31, 2002 is as follows:

Enersis Energía de Colombia S.A.

Distrilec Inversora S.A.

Inversiones Distrilima S.A.

Cía. Peruana de Electricidad S.A.

Edesur S.A.

Cía. de Electricidade do Río de Janeiro

Luz de Bogotá S.A.

Investluz S.A.

Endesa Market Place S.A.

Central Geradora Termoelétrica Fortaleza S.A.

Total

ThCh$

19,753

2,494,214

3,034,207

5,027,002

13,222,829

10,996,981

2,370,986

7,012,529

280,302

1,243,276

45,702,079

e. Net losses from operations and accumulated net income (losses) of development-stage subsidiaries are as follows:

Company

Compañía Eléctrica Taltal Ltda.

Central Geradora Termoelectrica Fortaleza S.A.

Aguas Santiago Poniente S.A.

Infraestructura 2000 S.A.

Gas Atacama Generación

Ingendesa (Ingendesa do Brasil)

Enigesa (Ingendesa do Brasil)

Cía. Eléctrica Conosur S.A. (CIEN)

As of December 31, 2002
Net income (losses)

Of the period
ThCh$

(939,553)

(111,586)

1,451

Accumulated
ThCh$

146,371

(1,302,505)

(111,586)

347,252

811,149

(46,306)

(642)

(4,780,843)

Total

(5,830,512)

(4,937,110)

ENERSIS 2002 ANNUA L REPORT

119

118
118

23.

OTHER INCOME AND EXPENSES

a. The detail of other non-operating income in each year is as follows:

Adjustments to investments in related companies

Gain on sale of property, plant and equipment

Gain on forward contracts and swaps

Services - proyects and inspections

Penalties charged to contractors and suppliers

CDEC-SING power settlement gain

Public lighting and telephone lines

Gain on sale of investments

Cost recoveries

Recoverable taxes

Effect of application of BT 64

Comahue fourth line income

Gain on repurchase of bonds

Dividend from investees

Other

Total

b. Other non-operating expenses in each year are as follows:

Adjustments to investments in related companies

Cost of sales – materials

Cost of projects, inspections and other

Effect of application of BT 64 (2)

Contingencies and litigation

Deferred expense amortization

SIC power settlement loss

Loss on forward contracts

Pension plan expense

Penalties and fines

Sales tax adjustment (Brazil)

Argentinean Government bond-market value adjustment

Provision for real estate projects

Provision for write off-work in progress

Other

Total

Year ended December 31,

2001
ThCh$

3,253,049

12,845,817

17,822,984

9,251,066

15,141,355

6,487,257

13,963,267

3,163,324

6,349,126

8,116,807

62,673,747

411,352

24,112,843

5,425,032

5,676,555

2002
ThCh$

512,200

6,131,310

4,815,297

14,382,141

10,129,602

11,153,158

13,525,674

5,112,788

6,387,623

210,813,735

337,450

10,732,246

14,110,663

194,693,581

308,143,887

Year ended December 31,

2001
ThCh$

2,181,904

14,806,557

8,290,316

39,426,469

35,163,985

1,224,252

9,450,051

23,575,152

22,407,456

15,663,147

11,739,955

2002
ThCh$

4,166,463

11,254,237

5,255,189

30,767,763

48,293,521

9,133,401

16,978,444

5,745,126

13,018,169

6,731,332

5,103,764

16,600,195

46,311,933

21,837,067

183,929,244

241,196,604

ENERSIS 20 02 ANNUAL REPORT

121

120

24.

PRICE-LEVEL RESTATEMENT

The (charge) credit to income for price-level restatement as of each year-end is as follows:

Assets

Inventory

Current assets

Accounts receivable from subsidiaries

Property, plant and equipment

Investment in subsidiaries

Amortization of goodwill

Other assets

Credit for cost and expense accounts

As of December 31,

2001
ThCh$

2002
ThCh$

679,797

86,825

4,575,344

69,607,844

30,582,762

27,626,882

25,101,509

8,601,641

1,081,801

6,108,070

5,032,682

71,181,494

35,860,652

25,787,859

2,282,536

18,269,156

Net credit - assets

166,862,604

165,604,250

Liabilities and Shareholders’ equity

Shareholders’ equity

Current and long-term liabilities

Minority interest

Accounts payable to subsidiaries

Non-monetary liabilities

Charge to income accounts

(34,756,513)

(95,013,142)

6,517,278

(30,547,186)

(679,233)

(10,208,733)

(35,375,590)

(86,890,351)

5,418,099

(24,050,002)

(51,951)

(19,689,565)

Net charge-liabilities and shareholders’ equity accounts

(164,687,529)

(160,639,360)

Net credits to income

2,175,075

4,964,890

ENERSIS 2002 ANNUA L REPORT

121

120
120

25.

EXCHANGE DIFFERENCES

The (charge) credit to income for foreign currency translation as of each year-end is as follows:

Assets

Liabilities

Current assets

Currency

Cash

Time deposits

Marketable securities

Accounts receivable, net

Other accounts receivable, net

Inventory

Prepaid expenses

Other current assets

Non-current assets

Long-term receivables

Amounts due from related companies

Deferred expenses

Other assets

Forward contracts and swaps

US$

Other

US$

Other

US$

Other

US$

Other

US$

Other

US$

Other

US$

Other

US$

Other

US$

As of December 31,

2001
ThCh$

2002
ThCh$

1,495,922

2,671,496

(56,291)

202,284

(77,389)

(13,698)

264,124

(31,054)

Current liabilities

Currency

Short-term debt due to banks
and financial institutions

11,797,767

6,855,639

Current portion of long-term debt due
to banks and financial institutions

(1,886)

104,099

(48,663)

489,200

1,124,688

218,125

Current portion of bonds payable

52,495

(11,824)

168,986

(2,365)

11,521,079

(264,455)

42,536

Current portion of notes payable

Dividends payable

29,442

(136,043)

(140,837)

Accounts payable

Notes payable

Miscellaneous payables

Other current liabilities

Accrued expenses

Deferred income

Long-term liabilities

1,054,144

277,166

599,944

202,009

17,033,254

11,082,499

246,859

228,059

Due to banks and financial institutions

28,336,082

6,541,035

Bonds payable

36,011,211

16,037,562

Notes payable

Accounts payable

Other long-term liabilities

As of December 31,

2001
ThCh$

2002
ThCh$

(6,823,954)

(2,633,314)

(1,890)

(2,346,817)

3,552,078

26,250

(63,570)

(71,707)

(242,103)

(26,128)

(3,831,594)

(2,102,419)

(1,426,092)

(856,727)

19,127

101

284,714

193,407

(307,780)

(81,896)

(430,288)

195,405

(921,658)

(11,922)

37,716

(29,947)

(56,780)

1,840

472,907

(861,657)

(649,158)

83,986

(103)

(362,291)

(42,070,677)

(22,646,874)

22,840

(246,923)

(180,770)

(60,487)

(368,719)

(52,035,450)

(24,995,100)

(6,734,909)

(2,814,391)

(995,614)

358,233

(21,897,139)

(6,647,384)

US$

Other

US$

Yen

Other

Euro

US$

Other

US$

Other

US$

Other

US$

Other

US$

Other

US$

Other

US$

Yen

Euro

Other

US$

Total gain

108,963,163

44,940,038

Total loss

(139,505,815)

(61,050,285)

Exchange difference - net loss

(30,542,652)

(16,110,247)

Other

29,525

ENERSIS 20 02 ANNUAL REPORT

123

122

26.

EXTRAORDINARY ITEMS

In this item, the Company shows the net equity 1.2% tax, in accordance with decree N°1,949 of August 29, 2002 of the Republic

of Colombia; a tax that will be used for said country’s democratic security.

At December 31, 2002, the subsidiaries paying this tax and the corresponding amounts are as follows:

Company
Central Hidroeléctrica de Betania S.A.
Capital de Energía S.A.
Emgesa S.A.
Cam Colombia S.A.
Codensa S.A.

Total

27.

FINANCIAL DERIVATIVES

ThCh$
2,025,115
67,124
8,837,853
33,540
11,412,008

22,375,640

As of December 31, 2002 the Company and its subsidiaries held the following financial derivative contracts with financial

institutions with the object of decreasing exposure to interest rate and foreign currency risk, as follows:

Type
(1)

COLLAR
COLLAR
COLLAR
COLLAR
COLLAR
FR
FR
FR
FR
FR
FR
FR
FR
FR
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S

Nominal
amount
US$

50,000,000
400,000,000
50,000,000
250,000,000
850,000,000
7,000,000
88,000,000
77,755,000
154,600,000
68,400,000
93,000,000
15,000,000
108,000,000
23,084,000
100,000,000
100,000,000
4,253,031
44,229,017
95,000,000
20,150,000
58,453,199
381,200,000
1,708,667
6,668,000
17,520,000
94,696,298
50,000,000
41,932,249
50,000,000
50,000,000
33,600,000
50,000,000
144,470,000
50,000,000
81,905,702

(1) Fr= Forward, S = Swap

Date of
Maturity

II quarter 2004
III quarter 2004
III quarter 2005
I quarter 2006
II quarter 2006
I quarter 2003
I quarter 2003
I quarter 2003
II quarter 2003
II quarter 2003
II quarter 2003
lI quarter 2003
IV quarter 2003
I quarter 2004
I quarter 2003
I quarter 2003
I quarter 2003
I quarter 2003
II quarter 2003
II quarter 2003
II quarter 2003
III quarter 2003
III quarter 2003
IV quarter 2003
IV quarter 2003
I quarter 2004
I quarter 2004
II quarter 2004
II quarter 2004
III quarter 2004
II quarter 2005
II quarter 2006
III quarter 2006
III quarter 2006
II quarter 2009

Item

Interest rate
Interest rate
Interest rate
Interest rate
Interest rate
Exchange rate
Exchange rate
Exchange rate
Exchange rate
Exchange rate
Exchange rate
Exchange rate
Exchange rate
Exchange rate
Interest rate
Interest rate
Interest rate
Exchange rate
Exchange rate
Interest rate
Interest rate
Exchange rate
Exchange rate
Interest rate
Interest rate
Interest rate
Interest rate
Exchange rate
Interest rate
Interest rate
Interest rate
Interest rate
Currency
Currency
Exchange rate

Sales/
Purchase

Hedged
Item

Initial hedged amount
ThCh$

Closing hedged amount
ThCh$

As of December 31, 2002

35,930,500
287,444,000
35,930,500
179,652,500
610,818,500
5,030,270
293,192,880
48,413,946
111,096,962
49,153,068
788,315,170
10,779,150
78,783,930
13,945,714
71,861,000
71,861,000
3,056,270
31,783,414
68,267,950
14,479,992
42,005,053
273,934,132
1,227,865
4,545,759
12,590,047
68,049,707
35,930,500
30,132,934
35,930,500
35,930,500
24,145,296
35,930,500
103,021,045
35,529,359
56,637,729

P/S
P/S
P/S
P/S
P/S
P
P
P
P
P
P
P
P
P
P/S
P/S
P
P
P
P
P
P/S
P
P
P
P
P/S
P
P/S
P/S
P
P
P
S
P

Bank obligations
Bank obligations
Bank obligations
Bank obligations
Bank obligations
Accounts payable
Bank obligations
Bank obligations
Yankee Bonds/Bank obligation
Bank obligations
Bank obligations
Accounts payable
Bank obligations
Bank obligations
Bonds
Bank obligations
Accounts payable
Bank obligations
Bank obligations
Bonds
Bank obligations
Bonds
Bank obligations
Bank obligations
Bank obligations
Bank obligations
Bank obligations
Bank obligations
Bank obligations
Bank obligations
Bank obligations
Bank obligations
Bonds
Bonds
Bonds

123

122
122

35,930,500
287,444,000
35,930,500
179,652,500
610,818,500
5,030,270
293,192,880
53,869,310
111,096,962
49,153,068
788,315,170
10,779,150
78,783,930
16,086,072
71,861,000
71,861,000
3,056,270
31,783,414
61,703,496
14,479,992
42,005,053
273,934,132
1,227,865
4,545,759
12,590,047
68,049,707
35,930,500
30,132,934
35,930,500
35,930,500
24,145,296
35,930,500
103,021,045
35,529,359
56,637,729

ENERSIS 2002 ANNUA L REPORT

28.

COMMITMENTS AND CONTINGENCIES

Direct guarantees held by third parties:

Guarantee

Subsidiary

Type of guarantee

Committed assets

Type

Currency

Pending balance at December 31,

Release of guarantees

Currency

2001

2002

2003

2004

2005

Cía. de Telecomunicaciones de Chile

Enersis S.A.

Pledge

Promissory note UF

Public Works Bureau

Banco Estado de Chile

Director Customs Office of Chile

Creditors Banks

Mitsubishi Corp.

Autopista del Sol

Pehuenche S.A.

Pangue S.A.

San Isidro S.A.

Public Works Bureau

Autop. Los Libertadores

Public Works Bureau

Autop. Los Libertadores

Tax Authorities of Chile

Banco Estado de Chile

Celta S.A.

Tunel el Melón

FSA Inc

Infraestructura 2000 S.A.

Autopista del Sol

Soc. de Energía de la Rep. Arg. S.A.

EASA

Complian. Operat. ctto. conc

Chat. Mortg. Whithout conveyan

Equipment

Bank bond

Bill of exchange

Mortgage and pledge

Chattel mortgage

Construction compliance
concession contract

Bond

Pledge over 45% of income
minim. guaranteed
Pledge

Pledge

Real estate prop. and Equip.

Facilities

Invest. Works of concession

Operation of concession

Bond

ThCh$

Indirect guarantees held by third parties:

Guarantee

Subsidiary

Type of guarantee

Committed assets

Type

Currency

Chase Manhattan Bank

CitbanK N.A.

Midlanbank

B. Santander C. Hispano

Endesa Chile International

J.P. Morgan and CSF Boston

Endesa Chile International

Banco San Paolo

BNP

BBVA

Mitsubishi Co.

B. Santander C. Hispano

Chase Manhattan Bank

Endesa Chile International

Cía. Eléctrica San Isidro S.A.

Cía. Eléctrica Tarapacá S.A.

Banco Español de Crédito

Cía. Eléctrica Tarapacá S.A.

ABN Amro Bank

Cía. Eléctrica Tarapacá S.A.

B. Estado de Chile and Santander

Autopista Del Sol S.A.

Chase Manhattan Bank

B. Santander C. Hispano

Endesa Colombia S.A.

Cía. Eléctrica Conosur S.A.

Banco de Santiago y de Chile

Autopista Del Sol S.A.

Subsidiary

ENERSIS 20 02 ANNUAL REPORT

Guarantor

ThCh$

Accounting

value

1,675

654,208

12,030,211

64,675

83,976,230

76,193,289

2,632,804

172,681

1,351,074

35,476,728

22,580,871

68,033,383

Accounting

value

359,688,633

5,668,452

110,922,308

109,731,747

151,870,433

49,098,687

768,635

32,967,603

4,267,923

205,521,266

137,655,836

ThCh$

Pending balance at December 31,

Release of guarantees

Currency

2001

2002

2003

2005

2004

359,688,633

2,632,804

Según Op

1,675

654,208

2,518,131

46,536

60,699

23,032,252

822,752

39,711,918

337,769,295

25,177,959

17,610,807

131,241,462

102,986,026

67,508,298

129,594,668

129,561,158

53,760,423

2,197,072

2,744,283

37,143,610

6,090,065

53,417,472

182,078,243

124,119,900

65,796,196

654,208

935,922

49,584

64,675

20,231,494

71,509,333

359,688,633

5,668,452

110,922,308

109,731,747

151,870,433

49,098,687

768,635

32,967,603

4,267,923

205,521,266

137,655,836

125

124

12,030,211

64,675

3,811,708

5,668,452

110,922,308

151,870,433

768,635

205,521,266

109,731,747

4,267,923

Guarantee

Subsidiary

Type of guarantee

Committed assets

Type

Currency

Cía. de Telecomunicaciones de Chile

Enersis S.A.

Pledge

Promissory note UF

Complian. Operat. ctto. conc

Chat. Mortg. Whithout conveyan

Equipment

Public Works Bureau

Banco Estado de Chile

Director Customs Office of Chile

Creditors Banks

Mitsubishi Corp.

Autopista del Sol

Pehuenche S.A.

Pangue S.A.

San Isidro S.A.

Public Works Bureau

Autop. Los Libertadores

Tax Authorities of Chile

Banco Estado de Chile

Celta S.A.

Tunel el Melón

FSA Inc

Infraestructura 2000 S.A.

Autopista del Sol

Soc. de Energía de la Rep. Arg. S.A.

EASA

Real estate prop. and Equip.

Facilities

Invest. Works of concession

Bank bond

Bill of exchange

Mortgage and pledge

Chattel mortgage

Construction compliance

concession contract

Construction compliance

concession contract

Pledge over 45% of income

minim. guaranteed

Bond

Pledge

Bond

Public Works Bureau

Autop. Los Libertadores

Operation of concession

Indirect guarantees held by third parties:

Guarantee

Subsidiary

Type of guarantee

Committed assets

Type

Currency

J.P. Morgan and CSF Boston

Endesa Chile International

Chase Manhattan Bank

CitbanK N.A.

Midlanbank

B. Santander C. Hispano

Banco San Paolo

BNP

BBVA

Mitsubishi Co.

B. Santander C. Hispano

Chase Manhattan Bank

Endesa Chile International

Cía. Eléctrica San Isidro S.A.

Cía. Eléctrica Tarapacá S.A.

Banco Español de Crédito

Cía. Eléctrica Tarapacá S.A.

ABN Amro Bank

Cía. Eléctrica Tarapacá S.A.

B. Estado de Chile and Santander

Autopista Del Sol S.A.

Chase Manhattan Bank

B. Santander C. Hispano

Endesa Colombia S.A.

Cía. Eléctrica Conosur S.A.

Banco de Santiago y de Chile

Autopista Del Sol S.A.

Subsidiary

ENERSIS 2002 ANNUA L REPORT

ThCh$

Guarantor

Accounting
value

1,675

654,208

12,030,211

64,675

83,976,230

76,193,289

2,632,804

172,681

1,351,074

35,476,728

22,580,871

68,033,383

Accounting
value

359,688,633

5,668,452

110,922,308

109,731,747

151,870,433

49,098,687

768,635

32,967,603

4,267,923

205,521,266

137,655,836

ThCh$

Pending balance at December 31,

Release of guarantees

Currency

2001

2002

2003

2004

2005

ThCh$

1,675

654,208

2,518,131

46,536

60,699

23,032,252

822,752

654,208

935,922

49,584

64,675

20,231,494

71,509,333

2,632,804

3,811,708

2,632,804

Según Op

12,030,211

64,675

3,811,708

Pending balance at December 31,

Release of guarantees

Currency

2001

2002

2003

2004

359,688,633

2005

39,711,918

337,769,295

25,177,959

17,610,807

131,241,462

102,986,026

67,508,298

129,594,668

129,561,158

53,760,423

2,197,072

2,744,283

37,143,610

6,090,065

53,417,472

182,078,243

124,119,900

65,796,196

5,668,452

110,922,308

151,870,433

768,635

205,521,266

359,688,633

5,668,452

110,922,308

109,731,747

151,870,433

49,098,687

768,635

32,967,603

4,267,923

205,521,266

137,655,836

125

124
124

4,267,923

109,731,747

Litigation and other legal actions:

Enersis S.A. Individual

i. Arbitration award (Case ICC N° 11046/KGA) substantiated before the Court of Arbitration of the International Chamber of

Commerce with headquarters in Paris, France, started with occasion of the claim lodged by Pérez Companc S.A. and PCI

Power Edesur Holding Limited. The claim requests that the Arbitration Court declare a sought after right of PCI Power Edesur

Holding Limited to designate a Regular Director and an Alternate Director in the Argentinean company Distrilec Inversora

S.A., a company holding Class “A” shares of Empresa Distribuidora Sur S.A. (Edesur S.A.), and on a subsidiary basis, for

the event that said Court estimates that PCI Power Edesur Holding Limited lacks such right, declare that Grupo Enersis and

Grupo Pecom, former Pérez Companc, have the same number of directors in Distrilec Inversora S.A.

The claim was answered timely by the Company on August 4, 2000. Together with the answer to the aforementioned claim,

Enersis S.A. presented a reconventional claim against the claimants, that is, against Pecom S.A. and PCI Power Edesur

Holding Limited, in order to request the annulment of various agreements entered into by the parties. This reconvention was

answered by the reconventional defendants on October 13, 2000. On December 4 2000, Grupo Enersis filed its arguments

expansion writ and the answer to the reply of the reconventional defendants.

On December 6, 2000, the reconventional defendants, in an “Additional Statements” writ, request, among other things that, in

case the reconventional claim lodged by Grupo Enersis is accepted, that a damages indemnity be declared in its favor. The

reconventional defendants have provisionally estimated this possible and required indemnity in an amount between US$180

and US$200 million.

On April 8, 2001 a Minutes of Mission was signed establishing the unquestionable facts, the controversial facts, the parties’

aims and the matters on which the Court will pronounce a judgment. On June 14, 2001 the parties submitted their evidence

offer writs.

On August 27 2001 presentation of the offered witnesses’ affidavits ceased. The testimonial audience was carried out on

November 12, 2001, in the city of Montevideo. On December 14, 2001 the parties presented their closing allegations and on

December 20 the Court officially closed the Arbitration proceeding.

On September 6, 2002 the Final award dated September 2, 2002 was notified to the parties, substantively establishing that

Grupo Pecom and Grupo Enersis maintain the right to designate the same number of directors in the Distrilec Inversora S.A.

Board and rejecting the contravention claim of Grupo Enersis. It also rejects the indemnity amounting between US$180 and

200 million claimed by Grupo Pecom against Grupo Enersis.

The Final Award has been impugned timely through an annulment appeal filed before Uruguayan Justice on September 18,

2002, based on that it has gross procedural vices that invalidate it. The filing of said appeal suspends compliance with the

verdict. On December 12, 2002 Pecom Energía answered said impugnation.

ii. Court : Honorable resolutive commission

Process number : 577-99

Cause : Requirements of the “Fiscal Nacional Economico” against Enersis S.A. for the increase of ownership in Endesa-

Chile S.A., asserting the transaction has considerably increased the vertical integration in the electric sector, affecting free

competition.

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126

Process status: The discussion stage has ended and the corresponding complaints have been made. The case is now in the

sentencing stage. It is important to note the Commission decided not to receive the case in trial. Additionally, the petitions

of the Fiscalía Nacional Económica have changed since the beginning of the case, limiting the request to the inability of

Enersis S.A. and Endesa Chile to have common directors and the necessity for these companies to hire different external

auditors.

Amounts involved: Undetermined.

On October 30, 2002 the Resolutive Commision pronounced sentence on the case, and which is summarized as follows:

a) “The position of principal or alternate director of Enersis S.A., Empresa Nacional de Electricidad S.A., or of some of them with

Chilectra S.A. and Compañía Eléctrica del Río Maipo S.A., shall be held by different and independent individuals. A director

will be regarded as independent when holding positions or carrying out employment or activities in a position of dependence

of any of these companies or of any of its directors; and

b) “The external audit of Enersis S.A., Empresa Nacional de Electricidad S.A., and Chilectra S.A. or Compañía Eléctrica del

Río Maipo S.A., which, pursuant to current open stock company legislation, will be performed by different external auditing

firms, having any relationship or tie of any nature between them. The same stipulation will be applied should the bylaws of

said companies contemplate the appointment of account inspectors;”

c) “By the exercise of its official faculties, the following measures will be adopted and in effect until the issue by the Resolutive

Commission of a resolution to the contrary:

“Enersis S.A., Elesur S.A., Empresa Nacional de Electricidad S.A., Chilectra S.A. and Compañía Eléctrica del Río Maipo S.A.,

may not enter into or execute any operation the objective of which would be the merger of the companies controlled by the

Enersis group, whose activity would be the generation and distribution of electricity, with Enersis S.A. having to maintain the

development of both segments separately, through different companies representing independent business units; and”

“Enersis S.A., Empresa Nacional de Electricidad S.A., Chilectra S.A. and Compañía Eléctrica del Río Maipo S.A., shall continue

to be subject to supervision of the Superintendency of Securities and Insurance and comply with provisions applicable to open

stock companies, even if they have ceased to have the staus of open stock companies;”

d) “In exercising the powers established in Decree Law Nº 211 article 17, letter b), this Resolutive Commission issues the following

general instructions which any individual who, by application of Ministry of Mining Electric Code article 240, Decree Nº 317,

of 1998, must publicly open to bid the supply and load in the terms of said norm:

e) All those companies, associations, or company consortiums with existing or potential supply capacity will be able to participate

in the supply bidding processes;

f) The bidding conditions shall allow the applicants to present bids for the total amount of the supply intended to be contracted

or for a part of the energy blocks and load open to bidding, and will include in their entirety the contracts which will be signed

by the parties to execute the delivery of the supply bid; and,

g) The receipt and opening of bids will be public. The bidding conditions to be established, as well as the result of the awarding,

shall be reported to the Economic National Legal Department simultaneously upon the execution of said acts.

ENERSIS 2002 ANNUA L REPORT

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126
126

h) Any other measure of a cautionary or precautionary nature taken in these cases are invalidated in particular, that ordered in

Resolution N° 542 numeral 1, dated May 10, 1999, as evidenced on page 132 of the precautionary measures record.”

On November 6, 2002, Messrs. Briones and Bosselin filed an appeal as a complaint against the aforementioned sentence,

which is currently in the procedural phase. Together with filing the appeal, the petitioners requested that an injunction order

be decreed, which was issued on November 14, 2002, thus suspending the sentence’s effects.

Amount: Not determined.

iii. Accusation filed by Empresa Nacional de Telecomunicaciones S.A. (ENTEL) before the Resolutive Commission against Enersis

S.A., started by presentment dated May 13, 2002. The aim was to inform the Commission about the data transmission services

provided through the electric networks by Compañía Americana de Multiservicios Limitada, Enersis S.A.’s subsidiary, so as

it took the necessary protection measures to guarantee free competition.

The Commission requested the Telecommunications Under-department some information, which was provided through a report

dated May 31, 2002.

On June 5, 2002, Enersis S.A. answered ENTEL’s presentment, requesting that the precautionary measures requested by ENTEL

be rejected because they are contrary to law and unnecessary and, also, because if they were accepted they would establish

an entry barrier to the industry and postpone the investments necessary for rendering the aforementioned services.

The issuance of a report by the Economic National Legal Department is pending, as well as the resolution of the precautionary

measures requested by ENTEL.

On July 19 of the current year, the Resolutive Commission acknowledged the Economic Legal National Department report,

resolving to thoroughly investigate the matter and rejecting the precautionary measured requested.

On last September 25, the case was heard and the trial turned into judicial decision term.

iv. Court : 2nd Labor Court of Santiago

Process number : 6061-2001

Cause : Complaint filed for severance pay for years of service on December 19, 2001 by Mr. Guillermo Calderón Ortega

against Enersis S.A.

Process status : First petition sentencing stage

Amounts involved: ThCh$52,858

v. The Labor Ordinary Trial, titled “Acevedo Bravo, Efraín and Others with Enersis S.A.”, case list N°4.175-2002, heard before

the 4th Labor Court for Santiago, arising from the claim for the payment of 2% monthly contribution made to finance the

claimants’ conventional severance indemnity. The claim was notified on 11/06/2002, against which dilatory exceptions were

opposed on 12/09/2002 and the claim was answered on a subsidiary basis. The case is currently in the approbatory term.

vi. Court : 25th Civil Court of Santiago

Process number : 3151-00

Cause : Complaint filed for compensation of damages by Mrs. Odette Legrand Halcartegaray against Enersis S.A..

Process status : First petition sentencing stage

Amounts involved: ThCh$50,000

ENERSIS 20 02 ANNUAL REPORT

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128

vii. Economic protection appeal, filed before the Court of Appeals for Santiago, List N°4591-2002, for Compañía de Teléfonos

Complejo Manufacturero de Equipos Telefónicos S.A.C.I., CMET, against Enersis S.A.. The appeal was filed on 08/27/02 by

CMET against Enersis S.A., which seemed to be based on the fact that Enersis S.A., through various acts, facts or omissions,

would have breached article 19 N°21 of the Political Constitution of the Republic, preventing CMET from developing its

commercial activities.

On 09.17.02, Enersis S.A. informed to Court, as requested, carrying out all the discharges it deemed reasonable in accordance

to law, expressly rejected CMET’s accusations because of their unfounded nature.

To date, the appeal is pending for its hearing and judgment, which is estimated to take place during March.

viii. Chilean Internal Revenue Service review of taxable income for the 2000, 2001 and 2002 tax years, and the tax trial in first

petition for the difference of First Category Income Tax and Reintegration of Monthly Tax Prepayments for absorbed net income

in the amount of ThCh$62,400, corresponding to the 1998 tax year.

ix. First instance tributary trial, that is, before the Internal Revenue Service, for Tax difference to First Category Income Tax and

Refund of Monthly Provisional Payments for absorbed earnings, in the amount of Th$1,461,000 corresponding to taxable year

1999. This proceeding is in the discussion term.

Chilectra S.A.

As of December 31, 2002, there are certain complaints against the Company for damages, which management believes are

not significant based on reports from its legal counsel or for which the Company has made provisions up to the corresponding

insurance coverage deductibles.

Compañía Eléctrica del Río Maipo S.A.

As of December 2001 and 2002 there are complaints against the Company for compensatory damages, which management

and its legal counsel believe are not significant since they have insurance coverage for this type of occurrence.

Inmobiliaria Manso de Velasco S.A.

i. Court : Arbitration Court

Process number : N/A

Cause : Originates in Mr. Valero’s intention to charge professional fees for measures on related to reducing the amount of

the Company’s Real Estate Taxes

Process status : First petition resolution, being appealed.

Amounts involved: Ch$ 100 million was claimed. The first petition resolution was for a sum of Ch$ 37 million, which is being

appealed. A provision was made for 50% of the claim.

ii. Court : Court of Appeals

Process number : 4087 - 2000

Cause : Sociedad Agrícola Pastos Verdes Ltda. (a subsidiary of Inmobiliaria Manso de Velasco S.A.), filed Indemnity

Assessment Complaint Proceeding for expropriation of Access Road to Aeropuerto Arturo Merino Benítez. The Chilean

Government expropriated a piece of land for construction of the access road; experts in accordance with the Expropriation

Procedure appraised the indemnity paid. The Appraisal was protested, there is a first petition judgment that raised the indemnity

by approximately UF35,000.

Process status : Pending in the Court of Appeals.

ENERSIS 2002 ANNUA L REPORT

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128

Cerj S.A.

The Company has civil, fiscal and labor legal proceedings for which it has made a provision of approximately

ThUS$122,000.

Codensa S.A.

The Company has lawsuits of a civil, fiscal and labor nature, for which it has registered provisions for approximately

ThUS$0.9.

Endesa-Chile Individual

Pending litigation

There is litigation pending against Endesa-Chile, for which defenses have been filed, totaling ThCh$2,242,254 and

ThCh$1,895,083 as of December 31, 2001 and 2002, respectively.

Other litigation

i. Court : Supreme Court of Argentina

Process number : 2753-4000/97

Cause : Dirección Provincial de Rentas, Provincia de Neuquén versus TGN (Transportadora de Gas del Norte S.A.). Resolution

regarding Stamp Tax sum that eventually should be paid jointly by TGN and ENDESA.

Process status : TGN requested a precautionary measure before the Supreme Court of Argentina to paralyze the proceeding

filed by the Province of Neuquen, which was accepted. Therefore the administrative complaint proceeding is paralyzed.

Amounts involved: $Arg 13,943,572.54 (Includes tax, interest and fines).

ii. Court : Arbitration Court

Process number : N/A

Cause : On December 27, 2001, Empresa Nacional de Electricidad S.A. was notified of an arbitration to resolve controversies

related to insurance policy N°94.676, issued by Compañía de Seguros Generales Consorcio Allianz, currently AGF/Allianz

Chile Compañía de Seguros Generales S.A., in favor of Endesa, for the construction of the Ralco Hydroelectric Plant.

Process status : Claimant and the Insurance Company have a period of 20 days to corroborate the complaint.

Amounts involved: ThUS$32,000.

iii. Declarative ordinary trial of mere certainty started by ENDESA against the Treasury of Chile to define the application criterion

of General Law of Electric Services concerning indemnities payment for supply interruptions during electric rationing periods,

filed before the Third Court of Civil First Instance for Santiago, list 3140-2000.

With the promulgation of the Supreme Ordinance N° 287, of 1999, the Ministry of Economy, Development and Reconstruction

that established the electric rationing between June 12 and August 31 1999 in the Central Interconnected System and the

modification of article 99 bis of D.F.L. N°1/82 of Mining, General Law of Electric Services introduced by Law 19.613 of June

8, 1999, the electric power generation companies that, in case of generation short fall due to either prolonged failures of

power plants or droughts, are not able to satisfy their distributor or final customers’ normal consumption or submitted to price

regulation, were forced to pay compensations or indemnities to those customers in accordance with the regulations and

procedures that are established in the rationing decree.

This situation affected ENDESA and its subsidiaries Pehuenche and Pangue.

In this respect, the declarative trial of mere certainty has been started, among others, an action in which Court is requested

to declare that, in accordance with Art.99 bis of D.F.L. 1/82, it is ENDESA’s obligation to pay their distributor customers the

ENERSIS 20 02 ANNUAL REPORT

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130

compensations or indemnities established in that provision only for the days and hours that during the validity of the rationing

Decree N° 287, electricity supply suspensions occurred and which affected those customers.

The Treasury has sustained in the trial that the indemnities should be paid for the rationing period.

Endesa-Chile Subsidiaries

Pehuenche S.A.

i. Court : 20th Civil Courthouse of Santiago

Process number : 5863-2001

Cause : Empresa Eléctrica Pehuenche S.A. versus Empresa Eléctrica Colbún S.A. This complaint is for services rendered

by Pehuenche S.A. to Colbún during the drought period.

Process status : Currently in the evidence term

Amounts involved: ThUS$2,000.

ii. Court : Court of Appeals of Talca

Process number : 39945

Cause : Asociación del Canal Maule versus DGA Resolution 1768 dated November 1984 related to the approval of reservoir

works and building of the Colbún power plant. Pehuenche also filed a complaint to reinforce the claim of the irrigation

subscribers that it is the obligation of Colbun S.A. to operate a reservoir above an elevation of 425 meters above sea level.

Process status : Judment was pronounced being rejected the clain reclamation.

Amounts involved: Undeterminable.

iii. Actions were filed related to the payment of compensation as per Supreme Decree N°287, dated 1999 and issued by the

Ministry of Economy, Development and Reconstruction and modification of Art. 99 bis of DFL N°1/82 of Mining Law.

iv. Court : 24th Civil Court of Santiago

Process number : 3908-99

Cause : A precautionary prejudicial measure was presented and was denied by the Tribunal. In the same proceeding Pehuenche

presented an ordinary public law motion to vacate against Sociedad Austral de Electricidad S.A. Witnesses gave evidence.

Process status : Verdict notification pending

Amounts involved: Undeterminable.

v. Court : 17th Civil Courthouse of Santiago

Process number : 3940-99

Cause : Pehuenche versus Chilectra S.A. A precautionary prejudicial measure was presented and denied by the Tribunal.

Pehuenche presented in the same case, an ordinary demand to annul public right against Chilectra S.A.

Process status : Summoned to hear verdict, judgment has not been pronounced yet.

Amounts involved: Undeterminable.

vi. Court : 20th Civil Courthouse of Santiago

Process number : 4005-99

Cause : A precautionary prejudicial measure was presented and denied by the Tribunal. Pehuenche presented in the same

case, an ordinary demand to annul public right against Empresa Electrica Atacama S.A.

Process status : Judgment pronouncement pending.

Amounts involved: Undeterminable.

131

130
130

ENERSIS 2002 ANNUA L REPORT

vii. Court : Santiago Court of Appeals

Process number : 6515-99

Cause : CDEC-SIC failure to provide timely information to the CNE. Resolution 1,557 dated October 1, 1999. The State

Defense Council made itself a party to the case.

Process status : Expert Appraisal.

Amounts involved: Five fines for a total of 1,610 UTM.

viii.Court : 5th Civil Courthouse of Santiago

Process number : 2272-99

Cause : Resolution 631 dated April 27, 1999, for not establishing Dispatch Center before January 1, 1999. The court informed

a resolution that it received the case for trial. Pending official letter to the Superintendency of Electricity and Fuels (SEC).

Process status : Verdict notification pending.

Amounts involved: Fine of 500 UTM.

ix. Court : 16th Civil Courthouse of Santiago

Process number : 4164-97

Cause : Claim against Resolution 856, resulting in a fine imposed on October 16, 1997, for failure on May 11, 1997.

Process status : Notification and appeal pending.

Amounts involved: Fine of 450 UTM

x. Court : 16th Civil Courthouse of Santiago

Process number : 1928-98

Cause : Claim against Resolution 331 dated May 8, 1998, for failure on October 13, 1997.

Process status : Notification and appeal pending.

Amounts involved: Fine of 300 UTM

xi. Court : SEC

Process number : N/A

Cause : Reposition appeal before the SEC for Resolution 805 dated May 2, 2000 for a fine for failure on July 14, 1999.

Process status : Pending resolution.

Amounts involved: Fine of 400 UTA

xii. Court : 3rd Local Police Court of Santiago

Process number : 50419-AGO

Cause : SERNAC with Pehuenche, claim for lack of electrical supply

Process status : Pending sentence.

Amounts involved: Undeterminable.

xiii. Court : 5th Labor Court of Santiago

Process number : 2923-2001

Cause : Labor lawsuit for work accident. There are incidents of former adjudication and prescription pending verdict. Second

petition verdict confirming First Petition verdict. Pending confirmation of appeal for dismissal.

Process status : Pending confirmation of appeal for dismissal.

Amounts involved: Undeterminable.

ENERSIS 20 02 ANNUAL REPORT

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Empresa Eléctrica Pangue S.A.

i. Court: 1st Civil Court of Santiago

Process number : 1294-99

Cause : Claim against Resolution SEC 415 dated March 12, 1999 which fined Pangue for not complying with Article 9 of

rationing Decree 640, which is to inform the SEC of normal customer consumption of its customers.

Process status : Remitted the file to the Santiago Court of Appeals.

Amounts involved: Fine of 10 UTM.

ii. Court: 1st Civil Court of Santiago

Process number : 2273-99

Cause : Claim against SEC Resolution N°631 dated April 27, 1999 that fined Pangue for infraction of Article 183 of the

Regulation when it did not build an independent Dispatch and Control Center.

Process status : Reception of case to trial was notified. A motion to set aside was presented against the writ of evidence.

Amounts involved: Fine of 500 UTM.

iii. Court: 23rd Court

Process number : 4293-97

Cause : Claim against SEC Resolution N°856 dated October 16, 1997, which fined for a blackout on May 1, 1997.

Process status : Verdict notification pending.

Amounts involved: Fine of 450 UTM.

iv. Court: 23rd Court

Process number : 1910-98

Cause : Claim against SEC Resolution N°331 dated May 8, 1998 that fined Pangue for a blackout on October 13, 1997. The

Tribunal rejected the recourse in its verdict dated July 30, 1999.

Process status : Appealed to the Court of Appeals and is pending hearing.

Amounts involved: Fine of 500 UTM.

v. Court: SEC

Process number : N/A

Cause : Appeal to set aside before the SEC by SEC Resolution N°740 dated April 26, 2000 which fined Pangue for blackout

on July 14, 1999.

Process status : Reversal verdict pending.

Amounts involved: Fine of 300 UTA.

vi. Court: 18th Civil Court of Santiago

Process number : 3886-99

Cause : Ordinary public right annulment complaint. Request to annul obligation to pay compensation to regulated price users

derived from electric rationing decree N°287 issued by the Ministry of Economy.

Process status : Judgment pronouncement pending

Amounts involved: Undeterminable.

vii. There are 37 administrative oppositions presented by Pangue S.A. before the Provincial Government of Malleco, to the

corresponding requests of diverse individuals to regularize water use rights in the Commune of Lonquimay.

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132

viii.Cerda with Pangue, electric right of way summary trial, list 992-96 of Santa Bárbara Court.

Brief review of the contingency: on SANTA BARBARA TRUPAN line. 2x220 KW, electric right of way had to be established in

SAN JOSÉ property whose appraisal by the arbitrator commission was impugned by the affected party, which was definitely

decided in the sum of $13,757,896. -

Status of the Proceeding: trial completed, promoted incident of incidental compliance, Forecast: The indemnity is judicially

regulated, and loan liquidation is pending.

San Isidro S.A.

i. Court: 7th Civil Court of Santiago

Process number : 2195-99

Cause : Claim against Resolution N°628 dated April 27, 1999, which applied a fine for infraction of Article 183 of D.S. N°327

dated 1997. (Non construction of independent Dispatch Center).

Process status : Official reports are being filed at the evidential stage.

Amounts involved: Fine of 500 UTM

ii. Court: SEC

Process number : N/A

Cause : Appeal to set aside before the SEC for SEC Resolution N°719 dated April 24, 2000, which fined San Isidro 150 UTA,

for blackout on July 14, 1999.

Process status : Pending reinstatement verdict.

Amounts involved: Fine of 150 UTA

Compañía Eléctrica de Tarapacá S.A.

i. Court: SEC

Process number: Official Letter 4966

Cause : Formulation of SEC charges, dated August 3, 2000 for SING blackout on September 23, 1999.

Process status : Pending SEC Resolution.

Amounts involved: Undeterminable.

ii. Court: 20th Civil Court of Santiago

Process number: 2760-2000

Cause : Verification of Credit in Inmobiliaria La Cascada Agreement for ThCh$203,718. There was a first distribution of funds

from the sale of goods.

Process status : Report N°1 from the Liquidating Commission was received.

Amounts involved: Celta received ThCh$60,557.

iii. Annulment ordinary trial and other actions presented by Compañía Punta de Lobos S.A. against Endesa, Celta and Treasury

of Chile before 30th Civil Court for Santiago LIST 4061-2002.

Review of legal contingency

On August 22, ENDESA and CELTA were notified of a claim interposed by Compañía Punta de Lobos S.A. before the 30th

Court for Santiago, against ENDESA, CELTA and TREASURY OF CHILE.

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In the claim, a request is made declare the absolute annulment of the assignment and transfer or of any juridical act carried out

by ENDESA to CELTA, regardless the capacity and object the real estate properties have had due to the nature or adherence

that comprise them or as integral part of the marine concession granted to ENDESA in Punta Patache’s sector.

A request is also made to declare the expiration of the concession because of ENDESA’s incurring in a series of serious

infractions to the legislation that regulates marine concessions and that are grounds for expiration and therefore the entirety

of the construction built on the concession’s lands must be incorporated at no cost to the equity of the Treasury of Chile and

that Compañía Punta de Lobos is entitled to obtain compensation, prize or recognition for 20% of the liquid value of said

common property for the recovery, for the Treasury of said assets.

ENDESA sustains that the claim is unfounded since no disposal act of the marine concession of ENDESA to CELTA has

ever existed or of the assets comprising the concession; that the constructions or improvements carried out by CELTA in the

concession’s assets, have been executed to comply with a mandate granted by its parent company ENDESA to act on its

own behalf; that the claimant lacks juridical interest in annulment it requests since it is not an integral part of the concession

contract.

Amount or repercussion of the litigation: the litigation does not have a specified amount, but in case the claim is successful,

especially if the marine concession expiration is declared, the pier’s facilities would be affected, which are worth US$15,000,000,

that would become Treasury’s equity, also seriously affecting the operation of Central Térmica Tarapacá.

Status of the Proceeding: On August 28, 2002, the claimant obtained a Court decree as a precautionary measure, prohibiting

the execution of acts and contracts on the marine concession granted to ENDESA and on the properties by nature or for

adherence that comprise or are an integral part of this concession.

Main Trial Settlement:

On August 9, 2002, the plaintiff filed with distribution to the court of appeals for Santiago, the contract annulment claim, in the

ordinary trial against Endesa, Celta and the Treasury of Chile, a claim that entered the court on September 12, 2002.

On September 9, 2002, ENDESA and CELTA opposed dilatory exceptions consisting in the Court’s incompetence to hear

the claim. A) as regards the expiration declaration, this being an exclusive competence matter of the Ministry of National

Defense B) as regards the annulment declaration, as a different sanction is contemplated by the law in the event of breach to

be applied by an authority other than that of Courts and C) as regards the prize or recognition the, being an exclusive faculty

of the President of the Republic.

On October 4, the Court accepted the incompetence exception with respect to the expiration and recognition, maintaining

its competence regarding the annulment action and orders the answering of the claim. On October 10, 2002: The claimant

appeals. On this same date Endesa and Celta appeals.

On October 14, the Court provides: On page 106: the appeal is accepted only in returnable effect. On page 122: the appeal

is accepted only in returnable effect.

On this same date the custody of the file is ordered.

On October 14 ENDESA and CELTA answer the claim. On October 15, 2002: The claimant attaches documents.

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On October 16, 2002, the court provides: On page 129: acknowledges claim answer. On page 138: Acknowledges attachment

of documents with summon.

On October 16, 2002, the Treasury of Chile answers the claim. On October 18, 2002: transfer was conferred for reply. On this

same date, Endesa makes use of summons and attaches documents as part of evidence with summons.

On October 21, 2002, the Court provides: On page 146: Be considered what is presented in connection with the document

attached to page 138.

On page 149: Be considered what is presented and acknowledge document attachment with summon. The reply term is

currently running.

On November 5, 2002, INJUNCTION AGAINST FURTHER MOVES arrives from the Court of Appeals.

PRECAUTIONARY MEASURE FILE: Endesa and Celta by virtue of the judgment that accepted the incompetence, requested

on October 14, 2002, to declare the release of the precautionary measure. The Court on October 16, 2002, provided: Transfer.

On 19-10: they issued the transfer. On October 21 and 22, 2002, Endesa submitted writs to he considered. On October 23,

2002, the Court provides: On page 73: On the merit of the case: acknowledge transfer, comply with what will be resolved;

in a first accessory petition, acknowledge attachment of documents with summon, exercise custody. On page 89 and 90: Be

considered. WHEREAS: an incidental term of evidence is opened setting the points on which the following will fall:

1st - Effectiveness in case of change of the circumstances considered when the precautionary measure on page 1 was

awarded;

2nd - In the affirmative term of the previous point, if there exist serious presumptions that the right claimed that merit that the

precautionary measure granted on page 8 is maintained. The last three days of the probatory term at 9 a.m., are indicated to

receive the pertinent testimony.

On October 25, 2002, the List of Witness is presented and Endesa makes use of summons.

On October 28, 2002 The Court provides: On page 95: On the merit of the case: Be considered the list of witnesses and summon

them; in first accessory petition: As requested, be exhorted; in second accessory petition: as requested and expanded for

only once the probatory term for 15 days, from the end of the term expiration of the ordinary one; in third accessory petition:

it is not accepted; in fourth accessory petition: As requested, be certified; in fifth accessory petition: be considered.

On October 31, 2002: it was certified by the court that the witnesses summoned to the audience did not appear.

On November 06, 2002 the claimant requested letters notifying witnesses. On November 7, 2002: The court provides: As

requested, be exhorted.

Forecast: In the current status of the trial, it is not possible to anticipate the outcome.

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iv. Empresa Eléctrica de Arica and others with Empresas Eléctricas del Norte Grande S.A. and others (Celta) list 5237-2002

twelfth civil court for Santiago.

Parties:

Claimant:

EMELARI and others

Defendant:

EDELNOR and others (CELTA)

Content of the Case: ordinary Trial for reimbursement of indemnities paid by the electricity distribution companies Empresa

Elécrica de Arica S.A., Empresa Eléctrica de Iquique S.A. and Empresa Eléctrica de Antofagasta S.A., to their customers

because of the blackout occurred in the SING on July 25, 1999.

The claim has been filed against EDELNOR, ELECTRANDINA, NORGENER, AES GENER AND CELTA, in order that they be

sentenced to jointly reimburse, or alternatively in equal parts, to the former the sums that each one of them has had to pay

to its end customers as compensation for delivered power as a result of the blackout of July 25, 1999, on the Greater North

Interconnected System (SING).

Amount: the claim amounts to $64,268,903, (US$91,378.02).

Status of the Proceeding: CELTA, prior to defending the claim, filed dilatory exception for incapacity of the libel due to the

absence of requisites in the claim. Same was done by the other defendants.

Pronouncement by the Court regarding the dilatory exceptions is pending.

Forecast: in the current status of the lawsuit, it not possible to anticipate the outcome.

Infraestructura Dos Mil S.A.

i. Court: Talagante Local Police Court

Process number: 217-00

Cause : Damage indemnity complaint for stoning at the Talagante Overpass

Process status: Pending judgment.

Amounts involved: Approximate amount of ThCh$3,839.

ii. There is a litigation between Infraestructura Dos Mil S.A. and the Chilean State for absolute nullity, under case number Nº 6504-

2002, at the 18th Civil Court for Santiago. The claim was filed on December 23, 2002, and was served to the defendant on

January 2, 2003, with the defense by the State’s Defense Council pending.

Autopista del Sol S.A.

There are lawsuits pending in favor of the company for indemnity claims for damages to the Autopista del Sol. The total

amount is ThCh$177,043.

There are lawsuits pending against the company, for which the corresponding defense has been filed. The total amount is

for ThCh$447,800.

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Inecsa Dos Mil S.A.

i. Court: Arbitration Commission

Process number: 3049-2000

Cause : Complaint for annulment of the public right of the bidding called by the Ministry of Public Works for the Northeast

Santiago Access.

Process status: Complaint has been suspended by court resolution

Amounts involved: Undeterminable.

Sociedad Concesionaria Autopista Los Libertadores S.A.

There are pending lawsuits in favor of the Company for a claim for indemnity payment for damages and losses on the

highway.

The entire sum amounts to ThCh$10,046.

There are pending lawsuits against the Company which the defense has appropriately answered.

The entire sum amounts to ThCh$2,200,830.

Hidroeléctrica el Chocón S.A.

Federal Public Revenues Administration – General Tax Services

The Federal Public Revenues Administration – General Tax Services (FPRA-GTS) notified the Company for alleged tax evasion

on revenues earned between tax year 1993 and 1994, due to deduction of certain start-up and financing costs incurred by

Hidroeléctrica el Chocón S.A. in the calculation of taxable income, which the FPRA-GTS considers to be capitalizable costs to

be depreciated in accordance with the terms of the concession. In addition, the FPRA-GTS claimed that the Company omitted

making certain withholding taxes on payments made outside of the country for a bank loan obtained in 1994. The Company

had not made these withholding taxes as it considered that they related to foreign-source income not subject to taxes.

The corresponding amount of taxes on these revenues in dispute is equivalent to approximately US$9.7 million, which does

not include accrued interest. The Company is disputing these charges.

On December 28, 2000 the FPRA-GTS notified the Company of Resolution N°166/00 in the amount of US$1,754,938 on

withholding taxes for foreign-source incomes. In addition it deemed that the Company should submit US$3,987,219 for accrued

interest up to December 20, 2000. Finally, the FPRA-GTS assessed a penalty of US$1,228,457 for alleged infraction of Article

45 of Law 11,683. Regarding the complaint against treatment of certain startup and financing expenses, it prescribed on

January 1, 2001.

On December 28, 2000 the Company was notified of Resolution N°204/00, which officially determined that the tax credits

and debits for the period from December 1993 to July 1995 , equaled to US$794,095 for interest assessed as of December

11, 2000. Additionally, it was resolved to fine the Company US$1,002,504 for alleged infraction of Article 45 of Law 11,683.

The FPRA-GTS considers the moment at which the Company determined that the taxable event was generated to be in error,

therefore it deems Article 18 of Regulatory Decree of the Value Added Tax Law to be applicable.

The Company rejected the pretension of the FPRA-GTS to apply Article 18 of the Regulatory Decree of the Value Added Tax

Law to the taxable events mentioned previously, before the date of publication of the regulation in the Official Bulletin. They

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invoked the inconstitutionality of the above-mentioned regulation and the application of decree 493/95, which condoned interest

and fines for obligations or infractions overdue or committed as of July 31, 1995. On February 20, 2001, the Company filed

an appeal before the Fiscal Court of the Nation.

Royalties

On June 26, 2000, the Company was notified of a complaint for interest charged for royalties allegedly paid outside the terms,

initiated by the province of Neuquén before the Nation’s Court of Supreme Justice. The complaint includes an initial amount

of approximately ThCh$335,636.

Additionally, on September 27, 2000 the Company was notified regarding a new complaint from the province of Neuquén against

the National State and hydroelectric generators of Comahue to obtain royalties charged on accumulated funds in the Sales

Account. The mentioned complaint does not state a precise amount or date as of which the sums claimed are considered

as owing, but the action would seek to charge each generator 12% of the funds the plaintiff understands were contributed by

them to the referred account.

Provincial Revenue Service of the Province of Buenos Aires

On September 10, 2001, the Company received the notification from the Provincial Revenue Services of the Province of

Buenos Aires of the beginning of an official determination for ThCh$404,145 (amount that does not include interest or fines),

for taxes on gross income for the fiscal periods from February 1995 to December 1998. The differences claimed originate in:

a) lack of presentation of tax in the Province of Buenos Aires between February 1995 and June.

1996 for contracts signed by the Company and b) for the use of an estimated tax payment less than what the government

deemed applicable.

Subsequently the Company resorted to a moratorium from the Province of Buenos Aires in which it input the differences claimed

by the government for lack of tax revenue in that province for contracts signed by the Company in the sum of US$642,575,

rejecting the differences claimed related to the applied estimated tax payment.

In the opinion of the Company’s Management and their legal counsel the complaints made by the government organizations

mentioned above are not applicable, except for the concepts mentioned in the previous paragraph, therefore it is not probable

that those matters will produce a significant adverse effect on the Company’s shareholders’ equity and income as of December

31, 2002.

Hidroinvest S.A.

On December 27, 2000, the AFIP-DGI served Hidroinvest S.A. Resolution Nº 519/00 which officially determined the amount

of Th$831,397 as income tax for the 1993 period that Hidroinvest S.A. was presumably to pay over the difference between the

acquisition and transfer values of the bonds delivered to the National State for having obtained a benefit in said operation, since

a greater debt than the stock purchase price was paid and Th$1,788,336 of compensatory interest. In addition, the AFIP-DGI

applied a fine of Th$581,978 on Hidroinvest S.A. for an alleged infringement of Art. 45 of Law Nº11,683. On February 19,

2001, Hidroinvest S.A. filed an appeal at the Nation’s Tax Court. On September 12, 2002, Hidroinvest S.A. was notified of the

registration of the General Asset Prohibition on the company’s assets within the scope of a precautionary proceeding started

by the AFIP-DGI in virtue of what is established under Law Nº11,683 article 111, as a result of the obligation to deliver the

sums mentioned above. An appeal injunction against the resolution which decided the origin of the precautionary measure,

was filed, appeal that was granted on November 25, 2002.

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The advisors to Hidroinvest S.A. believe that it is unlikely that said matters might produce a significant adverse impact on the

equity and income position of the company as of December 31, 2002.

Central Costanera S.A.

As for the debt corresponding to the “Agreement related to work order Nº 4322 (the “Agreement”), from the enforcement of Law

Nº25,561, Decree Nº214/02 and its regulatory provisions, the obligation of Central Costanera S.A. has been “pesified” upon

the basis of the exchange rate of one peso to one US dollar. Decree Nº53/03 of January 10, 2003 excludes some obligations

from the “pesification”. Should the Secretary of Energy understand that the mentioned Decree include the obligations arising

from the Agreement, Central Costanera S.A. will request the declaration of unconstitutionality of Decree Nº53/03 which, if it

did not have the expected results, would oblige Central Costanera S.A. to pay the sums owed as a result of the Agreement

in US dollars. This contingency would imply, at December 2002, a decrease in net income and an increase in indebtedness

of ThCh$26,228,000, approximately.

In the company’s legal counsels’ opinion, it is very unlikely that the above will have a negative impact on the Company’s equity

and income.

Edegel S.A.

i. From November, 2000, to October, 2001, the tax authority reviewed the income tax and turnover tax (IGV) of the Subsidiary

for the periods corresponding to 1995 to 1999. As a result of said review, in December 2001, the National Superintendency

of Tax Management (SUNAT) informed the Subsidiary of its findings through several resolutions to Set Fines, related to the

income tax and the IGV for the periods under review.

From the concepts indicated, the amount rejected and not paid by the Subsidiary mainly refers to the intent of the Tax

Administration to apply Law Nº27034 Seventh Transitory Final Provision and, therefore, not recognize, as of the 1999 period,

the Subsidiary’s right to deduct, as tax expense, the depreciation corresponding to the greater assigned value resulting from

the revaluation of its assets due to the purchase of the Subsidiary taken place in 1995, under Law Nº26,283, even when the

Subsidiary has a juridical stability agreement that has stabilized the income tax regime until 2005. The total estimated amount

for said item amounts to $60,941,002 (ThUS$84,804).

On February 11, 2002, the Subsidiary started an arbitration proceeding against the Peruvian State, represented by CONITE, as

provided under clause eight of the Juridical Stability Agreement. On April 22, 2002, the Arbitration Court issued the arbitration

award through which the complaints of the Subsidiary relating to the inapplicability of the Seventh Transitory Final Provision

of Law N°27024, are declared as substantiated, pursuant to the juridical stability agreement subscribed with the Peruvian

State. Therefore, the Arbitration Court recognizes the Subsidiary’s right to deduct from the income tax base the depreciation

corresponding to the higher value assigned by the revaluation in previous years.

Although the arbitration award granted, the contentious tax proceeding continued, reason by which, on July 12, 2002, the

Subsidiary filed a remedy of appeal before the Tax Court against the Resolutions to Set and Apply Fines related to income

taxes (1996, 1997, 1998 and 1999 periods).

In November, 2002, the Tax Court issued its pronouncement, indicating that: (i) SUNAT will have to carry out a new review

and issue a new pronouncement considering what was ruled in the award dated April 22, 2002, which was favorable to

Edegel S.A.A., and which relates to the deduction of the depreciation corresponding to the revaluation of fixed assets, and

(ii) it ruled against in other matters determined by the SUNAT.

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As for the items which are to be the subject of a new review carried out by SUNAT, Edegel’s management and its legal counsels

believe that the final outcome of said review will not result in additional liabilities other than those recorded at December 31,

2002.

ii. Lawsuits filed by (ESSALUD) for payment of contributions under Law Decrees 22482, 19990 and 18846 amounting to

ThUS$4,210 (equivalent to ThCh$3,025,000). In the opinion of management and their legal counsel, these proceedings will

be resolved in favor of Edegel S.A..

iii. Resolutions of Determination and fines in the amount of ThUS$581 (equivalent to ThCh$417,512) were issued against the

Talleres Moyopampa S.A. for which Edegel S.A. has filed the corresponding complaints and appeals when the referred company

split. These complaints and appeals are pending final resolution by the Tax Administration. It is the opinion of management

and their legal advisors that these actions will not have a significant negative effect, individually or jointly, on the financial

position, operating income, or liquidity of Edegel S.A..

iv. Complaint filed by Edegel’s workers union, which seeks that the percentage of participation, which the law sets at 5%, be

raised to 10%, in this way duplicating the payment of these profits for fiscal years 1994, 1995 and 1996 by approximately

ThUS$4,667 (equivalent to ThCh$3,353,753). On August 24, 2000 the sentence was issued in the first petition, declaring the

action unfounded. By means of the sentence dated December 12, 2000 (notified November 13, 2001) the Second Labor Court

Room of the Superior Court of Lima annulled the first petition sentence which declared the syndicate’s action unfounded. The

Company filed a motion to vacate against said sentence, which was not admitted, whereby the file will return to the court for

the issuing of a new sentence. In the opinion of the management and its external legal advisors, the final resolution would

be favorable to the Subsidiary, for which reason no liabilities for these items have been recorded at December 31 2001 and

2002.

Central Hidroeléctrica de Betania S.A.

Presumed income-tax contingency – In 1997, 1998 and 1999, Betania recorded tax losses and did not pay taxes through the

presumptive income system based on a concept of the national Tax Administration (DIAN) of 1995. Said concept was modified

in 1999 and ratified by the State Council in 2001, in that presumed income tax should have been paid for the presumptive

income. Consequently, the DIAN, on this matter, instructed Betania to make the appropriate correction to income forms for

the years 1997 and 1998. The approximate amount of the presumptive income contingency for 1997 and 1998 amounts to

Th$25,118,828 (including interest for Th$10,524,298 and fines for Th$8,987,422). Betania considers that DIAN’s intent is

not substantiated. Therefore, on September 13, 2002, a claim was filed at the Administrative Court for Huila, since the DIAN

resolved against the appeal for review filed by Betania regarding the official income payment for 1997. By 1998, the DIAN

has not replied to the appeal for review filed by the company.

At December 31, 2002, Betania carried a provision of Th$6,521,895 to cover this contingency.

Tax contingency for ordinary income – The National Tax Department issued the official liquidation relating to income tax for

1997 and 1998, based on the net income for the ordinary system, disregarding some tax deductions.

The estimated amount of the ordinary tax contingency is $12,173,619 and $47,836,345 for 1997 and 1998, respectively,

including taxes, fines and estimated interest on arrears.

The Company, for 1997 and 1998, has been audited for both the calculation of its regular income as well as the presumed

income, reason by which it is important to note that only the higher of these two items becomes taxable and pays income

upon which tax must be determined considering appropriate charges, fines and interest.

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Since the higher of the two is the tax base, it is impossible to pay contingencies on both, as the presumed income will only apply

as taxable income as long as it is higher than the ordinary income determined through the tax netting method on earnings.

In addition, for 1999, the DIAN issued the official liquidation on the income tax return, reason for which the company

filed an appeal for review on December 20, 2002. The estimated amount of the ordinary income contingency amounts to

$19,398,625.

Other contingencies

At December 31, 2002, the amount of the claims for administrative, civil and labor litigations amount to ThCh$5,590,769,

and others for undetermined amounts. Based on the evaluation of the probability of success in defending these cases, at

December 31, 2002, ThCh$1,005,512 has been provided to cover probable losses resulting from these contingencies.

Management believes that the outcome of the litigations corresponding to the unprovisioned portion will favorable to the

Companies and will not cause significant liabilities to be accounted for, or that, if any, these will not significantly affect its

financial position.

Restrictions:

Enersis S.A.

The Company’s loan agreements establish an obligation to comply with the following financial ratios, on a consolidated

level:

• The ratio between debt and debt plus equity, not exceeding 0.7;

• The ratio between operational cash flow and payment of debt interest, not less than 2.4;

• Net tangible equity not less than UF45 million;

• Assets corresponding to companies whose business is regulated, not less than 50% of total consolidated assets.

As of December 31, 2001 and 2002 all these obligations have been met.

Chilectra S.A.

The Company does not have any management restrictions or financial covenants during the years ended December 31, 2001

and 2002.

The Company holds long-term energy purchase contracts with Endesa, Gener S.A., Pangue S.A., Colbún Machicura S.A.,

Carbomet Energía S.A., Empresa Eléctrica Puyehue S.A. (formerly Pilmaiquén), Sociedad Canalistas del Maipo and Iberoamerica

de Energía IBENER S.A., the terms of which extend to beyond 2002, in order to ensure its supply and corresponding cost.

Compañía Eléctrica del Río Maipo S.A.

The Company holds signed energy purchase contracts with Chilectra S.A. and Gener S.A., in order to assure its supply and

corresponding cost.

The Company does not have any management restrictions or financial covenants during the years ended December 31, 2001

and 2002.

Endesa S.A.

On a consolidated level, Endesa must comply with financial covenants and requirements derived from loan agreements with

financial institutions, among which the following are emphasized:

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• Gross Cash Flows equal to or greater than 13% of the average consolidated financial debt for terms beyond one year,

plus short-term bank debt if its term is extendable to more than one year, obtained according to the debt reflected in the

consolidated financial statements at the closing date of the last four quarters.

• Gross Cash Flow equal to or greater than 1.9 times the consolidated financial expenses, obtained according to the expenses

reflected in the consolidated financial statements at the closing date of the last four quarters.

• The financial debt for terms greater than one year, plus short-term bank debt if its term is extendable to more than one

year, cannot exceed 58% of the sum of shareholders’ equity, plus minority interests, plus the financial debt for terms greater

than one year and short-term bank debt.

As of December 31, 2001 and 2002 al these obligations have been met.

Pehuenche S.A.

The Santander Investment Bank Ltd. and the Chase Manhattan Bank N.A., in relation to loans granted to the Company, place

obligations and restrictions on Pehuenche S.A., some of which are of a financial nature, such as: long-term financial liabilities

not exceeding 1.5 times the shareholders’ equity, and a minimum company equity of UF9,500,000.

Infraestructura Dos Mil S.A.

With the bond placement by the subsidiary, concession holder Autopista Del Sol S.A., Infraestructura Dos Mil S.A., concurred

as “Sponsor” to the contracts of said transaction, committing itself to comply with the restrictions to the transfer of its interest

in the bond issuer. Also, Infraestructura Dos Mil S.A., is not able to carry out major changes in its assets without the written

authorization of the insurance company guaranteeing the issuance (FSA Inc). Likewise, the shares of the concession holding

company Autopista de Sol S.A. owned by Infraestructura Dos Mil S.A. were pledged in favor of FSA Inc.

Sociedad Concesionaria Autopista del Sol S.A.

In virtue of the bond issuance agreement, the Company must comply with financial ratios based on the generation of operating

flows. In addition, the Company must request the authorization of the insurer to obtain funding other than the current sources.

These rations are compliant at December 31, 2002.

Other restrictions

As a common and habitual practice for some bank loan debts and also in capital markets, a substantial portion of Enersis S.A.’s

financial indebtedness is subject to cross-failure provisions. Some failures of Endesa-Chile or of its subsidiaries, if not corrected

in time (as to those specific provisions allowing a period of time to correct the problem), might result in the cross-failure at

Endesa-Chile and Enersis S.A. level., and, in this case, some sixty percent of Enersis S.A.’s consolidated liabilities might

eventually become on demand. On the other hand, certain failures of a distribution subsidiary, if not corrected in time, would

not affect Endesa-Chile, and the amount at risk of Enersis S.A.’s consolidated liabilities would decrease by thirty percent.

Some loan agreements include clauses should the risk category of the debt expressed in US dollars fall below the “investment

grade” level, according to the risk classification agency determining the applicable margin of the interest rate (which, for practical

purposes hereof, is S & P). Should the long-term US dollar unsecured debt fall into a “non-investment grade” category, or

below BBB – according to the nomenclature used by S & P, then, the obligation to prepay all the outstanding principal existing

under these loans within the following sixty days, unless agreed upon otherwise by the parties, arises. At December 31, 2002,

US$1,464 million of the company’s borrowings and US$718 million of Endesa-Chile’s loan agreements, include compulsory

prepayment clauses under the mentioned circumstances.

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There exist no clauses in the loan agreements penalizing the Company if it is ranked below the “Investment Grade” level.

Because of the above, no provisions have been recorded for said item.

At December 31 2002, these obligations and restrictions have been fully met.

29.

SURETIES OBTAINED FROM THIRD PARTIES

Chilectra S.A.

The Company presents among its current liabilities, guarantees received in cash for the use of temporary connections by

customers of the company for ThCh$44,929 and ThCh$126,805 at December 31, 2002 and 2001, respectively.

Inmobiliaria Manso de Velasco Ltda.

The Company has received guarantees from third parties to guarantee obligations incurred in the acquisition of assets of

MUF1,645 as of December 31, 2002.

Compañía Americana de Multiservicios Ltda.

The Company has delivered bank bonds for ThCh$734,870 and has received bank bonds for ThCh$1,511,865.

Endesa S.A.

The Company has received performance bonds from contractors and third parties to guarantee jobs and construction (mainly

the Ralco Project), for ThCh$24,799,372 as of December 31, 2002 (ThCh$29,321,593 in 2001).

The Company has delivered perfomance bonds in favor of third parties to guarantees compliance with works, and contration

for ThCh$1,122,609.

San Isidro S.A.

Documents in guarantee received for ThCh$4,676,984 as of December 31, 2002 (ThCh$4,386,107 in 2001).

Compañía Eléctrica de Tarapacá S.A.

The Company has received documents in guarantee for ThCh$287,026 as of December 31, 2002 (ThCh$920,761 in 2001).

Sociedad Concesionaria Autopista Los Libertadores S.A.

The Company has deposits and performance bonds for UF25,495 as of December 31, 2002.

Sociedad Concesionaria Autopista del Sol S.A.

The Company has deposits and performance bonds for UF27,395 as of December 31, 2002.

Pangue S.A.

The Company has received, bank issued performance bonds from contractors for ThCh$8,879 as of December 31, 2002

(ThCh$4,386,107 in 2001).

Synapsis, Soluciones y Servicios IT Limitada

At December 31, 2002, bank bonds issued amount to ThCh$1,018,136 (ThCh$1,806,488 in 2001). The documents received

as guarantees in 2002 amount to ThCh$102,417 (ThCh$479,225 in 2001).

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30.

FOREIGN CURRENCIES:

As of December 31, 2001 and 2002, foreign currency denominated assets and liabilities are as follows:

a. Current assets

Account

Cash

Time deposits

Marketable securities

Accounts receivable, net

Notes receivable

Other receivables

As of December 31,

Currency

Ch$

US$

Euro

Yen

$ Col.

Soles

$ Arg.

Reales

US$

$ Col.

Soles

$ Arg.

Reales

Ch$

US$

$ Col

Ch$

US$

$ Col.

Soles

$ Arg.

Reales

Ch$

US$

$ Arg.

Reales

Ch$

US$

$ Col.

Soles

$ Arg.

Reales

U.C.

2001
ThCh$

498,849

6,954,506

2,348,900

285

12,631,156

1,884,656

2,243,026

11,087,418

115,975,839

47,474,350

852,201

3,289,380

10,521,464

4,823

198,249

7,521,141

95,627,381

10,419,409

103,526,327

30,682,183

70,062,837

232,409,714

3,037,324

763,309

54,956

1,827,741

3,638,662

10,826,719

8,885,323

19,294,694

7,008,783

2,985,430

18,544,773

1,036,335

2002
ThCh$

45,990

5,731,512

2,139,191

326

12,399,246

1,273,600

4,467,055

22,127,958

75,154,206

31,582,158

4,856,855

9,413,216

24,620,459

4,822

1,264,075

274,393

6,605,028

105,038,323

6,738,638

79,625,850

35,764,701

42,172,533

182,894,651

2,125,118

1,108,267

25,028

1,872,936

57,647

11,843,434

3,413,113

14,381,770

10,462,278

1,256,478

20,201,788

1,159,588

ENERSIS 2002 ANNUA L REPORT

145

144
144

Subtotal

844,118,143

722,102,231

Account

Currency

Amounts due from related companies

Inventories, net

Income taxes recoverable

Prepaid expenses and other

Deferred income taxes

Other current assets

Subtotal

Ch$

US$

$ Col.

Soles

$ Arg.

Reales

Ch$

$ Col.

Soles

$ Arg.

Reales

Ch$

$ Col.

Soles

$ Arg.

Reales

Ch$

US$

$ Col.

Soles

$ Arg.

Reales

Ch$

$ Col

$ Arg.

Reales

Ch$

US$

$ Col.

Soles

$ Arg.

Reales

As of December 31,

2001
ThCh$

3,768,124

7,265,042

133,978

477,881

6,374,553

44,895,120

12,827,697

13,479,412

4,913,469

1,308,376

33,613,125

1,359,672

214,438

13,763,334

8,559,533

810

668,627

3,372,247

167,469

1,227,529

962,081

7,572,804

5,005,415

1,722,188

17,434,498

127,694

15,498,661

110,876,213

472,013

266,648

318,328,651

2002
ThCh$

1,899,674

184,198,792

171,747

499,562

4,523,978

4,105,082

35,357,403

8,864,940

12,534,464

1,958,287

1,667,559

27,521,833

473,718

229,625

10,743,267

15,467,533

928,209

2,570,012

124,219

553,358

479,327

3,010,893

22,814,199

1,151,172

7,429,959

20,560,463

693,297

43,131,732

38,147,413

888,202

400,509

3,001,474

45,758,981

501,860,883

Total current assets

1,162,446,794

1,223,963,114

ENERSIS 20 02 ANNUAL REPORT

147

146

b. Property, plant and equipment

Account

Land

Buildings, infrastructure and work in progress

Machinery and equipment

Other plant and equipment

Technical appraisal

Accumulated depreciation

Currency

Ch$

$ Col.

Soles

$ Arg.

Reales

Ch$

$ Col.

Soles

$ Arg.

Reales

Ch$

$ Col.

Soles

$ Arg.

Reales

Ch$

$ Col.

Soles

$ Arg.

Reales

Ch$

$ Col.

Soles

Reales

Ch$

$ Col.

Soles

$ Arg.

Reales

As of December 31,

2001
ThCh$

42,596,302

31,886,463

9,523,636

9,540,763

29,710,800

3,647,155,601

3,012,920,159

1,107,370,586

1,539,453,777

1,645,246,419

53,173,353

24,566,761

419,732,507

736,699,370

588,968,367

85,747,968

8,340,278

49,196,813

159,950,550

235,049,335

26,643,651

64,759,545

475,304,698

130,917,038

2002
ThCh$

41,451,908

34,137,051

10,210,210

9,940,165

34,165,453

3,750,803,720

3,259,152,642

1,176,938,743

1,643,686,859

1,791,721,564

55,260,210

15,475,472

457,417,069

781,090,841

669,114,911

119,396,976

4,099,024

59,948,689

161,835,159

189,581,016

25,917,954

73,406,012

505,989,949

135,331,492

(1,493,173,888)

(1,570,010,403)

(563,059,689)

(886,968,669)

(880,473,038)

(685,729,796)

(709,129,647)

(974,745,107)

(1,213,704,900)

(659,024,849)

Total property, plant and equipment

9,625,049,660

9,879,458,183

ENERSIS 2002 ANNUA L REPORT

147

146
146

c. Other assets

Account

Currency

Investments in related companies

Investments in other companies

Goodwill, net

Negative goodwill, net

Long-term accounts receivable

Amounts due from related companies

Other assets

Ch$

US$

$ Arg.

Ch$

$ Col.

Soles

Reales

Ch$

US$

$ Col.

Soles

$ Arg.

Reales

Ch$

US$

$ Col.

Soles

Reales

Ch$

US$

$ Col.

Soles

$ Arg.

Reales

U.C.

Ch$

US$

Reales

Ch$

US$

$ Col.

Soles

$ Arg.

Reales

As of December 31,

2001
ThCh$

103,502,429

63,903,764

41,815

2,152,383

147,284,788

11,516

112,310

840,970,393

247,066,350

26,569,990

204,225,860

(156,983)

(36,608,510)

(59,861,413)

(72,563,419)

(12,004,235)

8,228,092

2,963,790

25,698,682

4,283,328

2,456,197

2,016,092

54,310,825

1,946,556

1,471,140

169,196,652

3,661,762

37,004,148

44,408,302

43,811,194

4,202,184

921,919

111,074,956

2002
ThCh$

113,436,968

80,687,847

39,342

2,222,396

157,153,540

12,271

78,587

790,045,684

6,974,876

50,492,939

(141,668)

(611,346)

(28,641,838)

(2,694,795)

(63,083,303)

1,522,452

2,049,474

7,137,749

6,552,426

1,744,678

2,098,185

103,634,188

1,111,361

882,109

16,058

2,961,502

92,875,289

23,091,955

38,697,375

4,614,807

8,899,892

113,882,379

Total other assets

1,972,302,857

1,517,743,379

ENERSIS 20 02 ANNUAL REPORT

149

148

d. Total assets

Account

Currency

Total assets by currency

Ch$

US$

Euro

Yen

$ Col.

Soles

$ Arg.

Reales

U.C.

As of December 31,

2001
ThCh$

23,677,010

3,569,950,112

742,529,646

285

2,938,572,897

1,165,780,722

1,704,890,900

2,611,414,848

2,982,891

2002
ThCh$

11,291,688

3,582,702,998

526,451,759

525,982

326

3,052,761,648

1,306,348,863

2,400,792,004

1,738,018,459

2,270,949

Total assets

12,759,799,311

12,621,164,676

ENERSIS 2002 ANNUA L REPORT

149

148
148

e. Current liabilities

Account

Currency

As of December 31,2001

As of December 31,2002

As of December 31,2001

As of December 31,2002

Amount
ThCh$

Avg Rate
%

Amount
ThCh$

Avg Rate
%

Amount
ThCh$

Avg Rate
%

Amount
ThCh$

Avg Rate
%

Within 90 days

91 days to 1 year

$ Reaj.

$ no Reaj.

2,364,209

2,346,203

Short-term debt due to banks and
financial institutions

Current portion of long-term debt
due to banks and financial
institutions

Promissory notes

Current portion of bonds payable

Current portion of long-term
notes payable

85,478,976

10.98%

112,613,976

11,282,293

29,199,298

15.00%

12.20%

112,879,158

2,943,675

24,696,590

22,748

32,143,117

4.62%

10.98%

4.35%

60,842,208

113,666,867

4,542,783

2.48%

8.14%

4.38%

12.20%

6.80%

15.50%

7,602,894

37,190,394

16,254,518

8,745,951

14.35%

8.68%

6.00%

9.24%

2.21%

8.73%

3.24%

53,549,447

44,023,022

7.50%

5.17%

313,051

207,929,156

3,624,390

39,191,269

2.08%

395,184

1,896

5,638,384

8.60%

15.50%

1,365,862

2,136,708

22.75%

11.23%

5,086,095

10.00%

2,061,700

3.34%

122,129

5,603,166

10.00%

4.50%

856,532

10.00%

1,161,436

7.28%

1,615,021

313,783,648

1,342,452

1,066,471

394,123

102,691

5,946,043

7.50%

6.15%

4.26%

0.90%

15.50%

5.32%

5.38%

4.44%

6.92%

2.48%

8.14%

14.75%

4.07%

6.00%

8.73%

3.24%

3.79%

2.08%

43,699,361

14,525,801

3,018,304

1,426,181

332,582,264

4,673,051

6,946,931

655,929

5,154,483

1,195,763

456,684

1,234,621

1.75%

11.23%

5.32%

4.81%

7,464,219

4.50%

43,598,110

12,866,910

32,236,441

18.13%

5.80%

7.06%

16,001,327

156,514,742

303,740,866

14,546,485

280,254

90,293

13.70%

11.50%

13,501,963

7,581,010

5.80%

7.06%

3.34%

13.70%

$ no Reaj.

18,039,328

7.40%

29,756,019

9.00%

8,450,719

7.20%

11,872,895

9.00%

US$

Euro

Yen

$ Col.

Soles

$ Arg.

Reales

$ no Reaj.

$ Reaj.

US$

Euro

Yen

Soles

$ Arg.

Reales

U.P.

Pound

Other

$ Reaj.

Soles

Other

$ Reaj.

US$

Euro

$ Col.

Other

US$

$ Arg.

Other

Soles

$ Arg.

Reales

Other

36,707

1,444

5,060,346

Accounts payable

$ no Reaj.

48,354,696

US$

Euro

$ Col.

Soles

$ Arg.

Reales

Other

$ no Reaj.

Reales

U.P.

$ Reaj.

$ no Reaj.

US$

$ Col.

14,703,322

137,924

20,517,413

19,275,090

44,832,831

93,916,602

216

45,428,854

15,105,006

11,929,531

9,077,611

Short-term notes payables

Miscellaneous payables

ENERSIS 20 02 ANNUAL REPORT

18,529

727,268

54,262,880

12,342,737

27,173,942

23,788,231

26,949,437

59,659,028

10,963,983

571

1,056,663

16.89%

4,328,842

1,740,700

8,982,460

2,026,856

138,564

9,244,324

8,228,015

22,549,403

84,334

156,864

71,993

71,686

4,122,352

5,812,077

1,123,669

9.00%

3,775,840

16.89%

416,874

8,648,943

151

150

Account

Currency

As of December 31,2001

As of December 31,2002

As of December 31,2001

As of December 31,2002

Within 90 days

91 days to 1 year

Amount
ThCh$

3,185,984

105,397

13,531,642

17,289,294

321,383

528,537

1,837,477

7,514,844

Soles

$ Arg.

Reales

Other

$ Reaj.

$ no Reaj.

US$

$ Col.

Soles

$ Arg.

$ Reaj.

$ no Reaj.

16,211,086

US$

$ Col.

Soles

$ Arg.

Reales

Other

$ no Reaj.

$ Col.

Soles

$ Arg.

Reales

Other

5,127,068

1,649,379

4,531,574

26,514,775

5,881,699

1,830,706

2,534,964

17,117,232

25,614,845

430,473

15,582,792

158,987

10,192,095

33,165,210

252,972

1,497,876

411,679

1,193,328

2,621,386

45,345

13,478,269

12,004,488

184,577,161

90,720,028

203,707,905

5,143,299

69,303,461

54,277,055

293,018,263

97,798,330

Avg Rate
%

9.14%

8.49%

Amount
ThCh$

5,838,886

3,054

6,773,826

375,753

11,465,695

532,618

1,234,371

1,226,667

857,426

968,935

14,153

12,393,170

101,572

13,279,185

2,315,644

2,133,800

23,708,069

80,987

7,127,750

1,872,570

5,113,011

10,827,560

29,114,712

2,556

537,181

19,911,919

683

3,332,909

1,110,901

5,816,007

413,656

15,111,509

1,996,817

50,146

15,875,558

20,281,534

11,918,345

151,641,354

653,397,898

4,542,783

39,191,269

104,312,240

81,937,552

152,587,392

77,711,633

12,150,547

Avg Rate
%

Amount
ThCh$

Avg Rate
%

Amount
ThCh$

Avg Rate
%

4,395

3,629,114

8,375

20,763,097

186,815

3,219,760

1,708,400

978,146

9,038,936

2,948,539

5,765,990

3,680,493

5,471,544

1,029,544

5,718,123

20,527,792

46,280,476

447,701,090

3,624,390

395,184

31,163,396

44,418,667

44,940,561

4,474

1,066,471

394,123

241,255

11,338,473

8,372

28,578,032

89,246

2,228,091

1,427,600

2,638,436

2,856,011

287,973

17,441,649

47,882,353

366,156,187

308,413,917

6,946,931

57,201,324

38,325,899

13,052,675

3,674,233

1,195,763

456,684

1,234,621

Amounts payable to related
companies

Accrued expenses

Withholdings

Income tax payable

$ no Reaj.

Deferred income

Total current liabilities by currency

$ Col.

Soles

$ Arg.

Reales

$ Reaj.

$ no Reaj.

US$

$ Col.

US$

$ Col.

Soles

$ Arg.

Reales

$ Reaj.

$ no Reaj.

US$

Euro

Yen

$ Col.

Soles

Reales

$ Arg.

U.P.

Libra

Others

ENERSIS 2002 ANNUA L REPORT

151

150
150

Total current liabilities

998,545,502

1,289,391,013

640,757,879

861,982,236

f. Long-term liabilities, December 31, 2002

Account

Currency

As of December 31,2001

As of December 31,2002

As of December 31,2001

As of December 31,2002

Amount
ThCh$

Avg Rate
%

Amount
ThCh$

Avg Rate
%

Amount
ThCh$

Avg Rate
%

Amount
ThCh$

Avg Rate
%

Within 90 days

91 days to 1 year

Due to banks and financial
institutions

Bonds payable

Long-term notes payable

Accounts payable

Amounts payable to related
companies

Accrued expenses

US$

Euro

Yen

$ Arg.

Reales

U.P.

Libra

$ Reaj.

US$

Euro

$ Col.

Soles

US$

Reales

$ Reaj.

$ no Reaj.

US$

Reales

$ Reaj.

$ Col.

$ Reaj.

$ no Reaj.

US$

$ Col.

Reales

Deferred income taxes

$ no Reaj.

Other long-term liabilities

Total long-term liabilities by
currency

$ Col.

Soles

$ Arg.

Reales

$ Reaj.

$ no Reaj.

US$

Soles

$ Arg.

Reales

$ Reaj.

$ no Reaj.

US$

Euro

Yen

$ Col.

Soles

$ Arg.

Reales

U.P.

Libra

Other

$ Reaj.

53,700,248

1,332,607,989

245,960

8,981,104

3,687,048

81,665,150

1,189,530

877,946

3.66%

3.19%

4.13%

1.96%

1.75%

17.11%

5.32%

4.81%

2,936,985

103,695,317

3.66%

3.19%

70,749,821

3.19%

6,352,189

3.19%

1,843,524

1,612,832

1.75%

11.23%

6,440,033

14,551,393

1.75%

11.23%

201,601

11.23%

100,464,720

337,746,700

7.00%

352,118,900

6.20%

8.06%

68,867,443

287,444,000

6.00%

8.50%

159,331,186

622,338,537

53,520,562

7.19%

33,173,871

3,859,972

14.35%

7.19%

77,979,287

1,000,390

7.50%

9.50%

41,870,347

4,601,606

7.50%

9.50%

59,468,978

8,700,083

6.00%

8.06%

9.50%

247,133

161,781

50,546

7,451,115

67,686,226

49,113,709

28,873,945

3,588,783

13,681,297

4.55%

159,492,967

50,056,903

628,690,726

71,275,009

49,562,443

14.35%

7.19%

7.50%

9.50%

10,535,563

9.48%

10.10%

7,608,279

2,099,410

13,997,687

591,537

467,614

4,683,227

2,213,674

69,335,057

26,289,193

428,198,362

77,979,287

3,214,064

7,031,570

25,350,886

988,291,605

3.33%

44,459,671

61,538,872

2,130,335

7,144,040

2,584,264

3,496,393

3,732,305

839,764

9,390,063

197,179

10,805

4,264,255

38,021,057

4,611,282

7,456,475

13,384,938

1,042,002,658

19,281,046

1,763,711,762

245,960

8,981,104

58,131,844

11,340,702

160,012,988

1,189,530

877,946

57,281

3,256,075

81,582,060

3,745,511

1,224,714

131,452

10,015

4.55%

14,800,247

4.55%

256,932

114,044

103,469,001

21,801,833

497,684,564

33,173,871

5,341,618

2,089,020

87,796,498

Total long-term libilities

3,065,775,540

751,356,405

637,398,419

959,078,048

ENERSIS 20 02 ANNUAL REPORT

153

152

g. Long-term liabilities, December 31, 2001

Within 90 days

91 days to 1 year

As of December 31,2001

As of December 31,2002

As of December 31,2001

As of December 31,2002

Account

Currency

Due to banks and financial
institutions

Bonds payable

Long-term notes payable

Accounts payable

Amounts payable to related
companies

Accrued expenses

$ Reaj.

US$

Yen

Euro

Reales

U.P.

Libra

Otras

$ Reaj.

US$

Euro

$ Col.

Soles

US$

Reales

$ Reaj.

$ no Reaj.

US$

$ Col.

Reales

$ Reaj.

US$

$ no Reaj.

$ Col.

Reales

Deferred income taxes

$ no Reaj.

Other long-term liabilities

Total long-term liabilities by
currency

Soles

$ Arg.

$ Reaj.

$ no Reaj.

US$

Euro

Soles

$ Arg.

Reales

$ Reaj.

$ no Reaj.

US$

Euro

Yen

$ Col.

Soles

$ Arg.

Reales

U.P.

Libra

Other

Amount
ThCh$

37,847,407

1,628,044,049

782,417

3,491,490

15,012,070

2,056,583

743,571

195,548

Avg
Rate
%

7.44%

4.01%

0.90%

4.26%

12.00%

5.32%

5.38%

4.44%

Amount
ThCh$

20,181,501

140,188,179

391,208

97,774

2,521,157

Avg
Rate
%

6.93%

4.01%

0.90%

4.26%

Amount
ThCh$

Avg
Rate
%

Amount
ThCh$

Avg
Rate
%

92,749,098

4.04%

20,913,780

1.75%

12.00%

4,409,782

10.93%

1,154,746

10.93%

78,566,164

539,546,960

6.30%

7.90%

67,002,160

584,080,493

6.30%

7.90%

5.38%

4.44%

6.30%

7.90%

371,786

97,774

364,194,198

100,503,239

128,142,403

236,481,576

3,753,101

6,854,001

55,606,642

35,644,558

77,590

2,122,540

23,496,465

443,215

8,407,133

984,980,016

16,727,143

2,466,172

8,935,898

10,254,481

8,034

15,941,073

20,612,549

6,166,036

8,743,924

751,117

1,022,913,047

30,784,266

1,872,629,251

239,973,066

782,417

4,196,316

13,020,037

8,743,924

68,750,776

2,056,583

743,571

195,548

7.90%

3.34%

14.95%

11.54%

7.13%

10.27%

6.50%

4.90%

7.07%

35,176,122

36,033,266

42,364,204

4,590,609

13.70%

7.50%

7.13%

10.27%

91,134,976

13.70%

52,625,655

9,974,948

7.13%

10.27%

2,499,291

16,984,432

10.00%

143,792,604

10.00%

5,471,684

9,108

3,250,257

362,744

1,494,952

120,693,848

11,221,232

546,746,581

97,774

391,208

52,160,554

36,396,010

1,494,952

150,904,370

371,786

97,774

10.00%

4,888,461

1,785,890

13,704,756

480,589

3,359,972

2,022,283

1,637,101

79,046,753

21,953,189

684,921,713

91,134,976

2,022,283

1,637,101

16,170,620

14,706,614

7.13%

9.50%

10.00%

181,599

18,406

6,405,087

40,734,446

5,896,657

6,629,043

2,388,266

67,183,759

15,440,802

619,700,887

40,734,446

7,051,403

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152

Total long-term libilities

3,264,788,802

920,576,089

896,886,635

750,111,297

31.

SANCTIONS

Endesa Chile

On February 22, 2002, the Superintendency of Securities and Insurance, through Executive Resolution N°044, censured Mr.

Héctor López Vilaseco, the company’s Chief Executive Office, for infringement of what is provided in Section III of Form Letter

N°1,481, dated May 25, 2000, for having tardily submitted to the Superintendency of Securities and Insurance the list of the

company’s shareholders at December 31, 2001.

Neither the Company nor its Board of Directors has been fined by the Superintendency of Securities and Insurance or any

other administrative authority.

32.

SUBSEQUENT EVENTS

Enersis S. A.

On December 10, 2002, a Special General Shareholders’ Meeting of Cerj, an Enersis S.A. subsidiary, was held, where a

capital increase was approved for Cerj, in an amount of ThUS$105,000, approximately.

This increase took place on January 10, 2003, through the issuance and subscription of 770,833,333,333 new ordinary shares,

at a value of R$0.48 in one thousand-share batches, totaling the ThUS$100,000 approved at the Meeting, with the Company’s

capital amounting to ThUS$259,085.

With this operation, the percentage of direct participation held by Enersis S.A., through its agency, will increase from 20.38%

to 40.03%.

As a relevant event on January 15, 2003, it was reported that Enersis S.A.’s Board of Directors, at a special meeting held on

that day, agreed to take note that the Company will make accounting adjustments and special charges in its balance sheet

for its investments in its Chilean and foreign subsidiaries for a total amount of US$387 million, in its equivalence in Chilean

pesos, these special adjustments being reflected in income for 2002.

Such special adjustments and charges have no impact on the Company’s cash flow and will be reflected in Enersis’ 2002

financial statements. The special adjustments and charges made as well as the provisions made at November 30, 2002, are

detailed as follows: (the figures shown correspond to the impact on Enersis S.A.’s financial statements):

Generation:

Brazil

Argentina

US$ 60 million

US$ 23 million

Total Generation

US$ 83 million

Distribution:

Brazil

US$ 255 million

Argentina

US$ 26 million

Total distribution

US$ 281 million

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Services:

Chile

Total services:

US$ 23 million

Total adjustment

US$ 387 million

It must be noted that, of the US$387 million, US$329 million will be from the acceleration of the amortization of the net balance

of negative goodwill and goodwill of investments made in Brazil and Argentina in generation and distribution.

Subtracted from the figure above are the provisions made at November 30, 2002, as shown below:

Brazil

Argentina

Total Provisions

US$ 81 million

US$ l6 million

US$ 97 million

In view of the above, and having considered these provisions, the effect of the adjustments and special charges on the

company’s income will amount to the equivalent in Chilean pesos of US$290 million, approximately.

In the period between January 1, 2003 and the date of presentation of these financial statements, no other significant event

that might affect their presentation has occurred.

33.

ENVIRONMENT:

Edesur S.A.

As of December 31, 2002, the Company incurred environmental expenses of ThCh$59,645 and investments of

ThCh$15,809.

Endesa S.A.

During the period from January 1 to December 31, 2002, the Company and its subsidiaries have made disbursements for a

value of ThCh$3,786,874, which mainly correspond to:

• Operating expenses: corresponding to studies, follow-up procedures and laboratory analysis (ThCh$323,387 expenses

in 2002), Environment Law N°99 (Colombia) and ISO 14,001 certification in Central Costanera and El Chocón

(US$955,245).

•

Investments related to the following projects:

- Central Ralco’s environmental program.

- Central San Isidro, Pangue, Tal Tal, Pehuenche, Loma Alta and Curilligue environmental management system (EMS)

installation and its ISO 14,001 certification.

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154

34.

DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES

Chilean GAAP varies in certain important respects from U.S. GAAP. Such differences involve certain methods for measuring

the amounts shown in the financial statements.

DIFFERENCES IN MEASUREMENT METHODS

The principal differences between Chilean GAAP and U.S. GAAP are described below together with an explanation, where

appropriate, of the method used in the determination of the adjustments that affect net income and total stockholders’ equity.

References below to “SFAS” are to Statements of Financial Accounting Standards issued by the Financial Accounting Standards

Board in the United States.

a. Inflation accounting

The cumulative inflation rate in Chile as measured by the Consumer Price Index for the three-year period ended December

31, 2002 was approximately 11.2%. Pursuant to Chilean GAAP, the Company’s financial statements recognize certain effects

of inflation. The inclusion of price-level adjustments in the accompanying consolidated financial statements is considered

appropriate under the prolonged inflationary conditions affecting the Chilean economy even though the cumulative inflation

rate for the last three years does not exceed 100%. As allowed pursuant to Form-20-F the reconciliation included herein of

consolidated net income, comprehensive income and shareholders’ equity, as determined in accordance with U.S. GAAP,

excludes adjustments attributable to the effect of differences between the accounting for inflation under Chilean GAAP versus

U.S. GAAP.

b. Reversal of revaluation of property, plant and equipment

In accordance with standards issued by the SVS., certain property, plant and equipment are recorded in the financial statements

at amounts determined in accordance with a technical appraisal. The difference between the carrying value and the revalued

amount is included in shareholders’ equity, beginning in 1989, in “Other reserves”, and is subject to adjustments for price-level

restatement and depreciation. Revaluation of property, plant and equipment is an accounting principle not generally accepted

under U.S. GAAP, therefore, the effects of the reversal of this revaluation, as well as of the related accumulated depreciation

and depreciation expense are included in paragraph (bb) below.

c. Depreciation of property, plant and equipment

Under Chilean GAAP, certain costs related to the cost of acquisition of Edesur S.A., at the time of the acquisitions in 1992

and 1994 by Distrilec Inversora S.A., were charged to earnings as incurred. Under U.S. GAAP, these costs would have been

included in the purchase price and would have been allocated to the net assets acquired based upon fair values. For purposes

of the reconciliation to U.S. GAAP, these costs were considered to be a part a property, plant, and equipment, the primary

assets of Edesur S.A.

As discussed in paragraph (i), under Chilean GAAP, assets acquired and liabilities assumed are recorded at their carrying

value, and the excess of the purchase price over the carrying value is recorded as goodwill. Under U.S. GAAP, assets acquired

and liabilities assumed are recorded at their estimated fair values, and the excess of the purchase price over the estimated

fair value of the net identifiable assets and liabilities acquired is recorded as goodwill. As part of the purchase of the majority

ownership interest in Endesa-Chile, under U.S. GAAP, the cost of the purchase price would have been allocated to the fair

value of property, plant and equipment.

The effect on shareholders’ equity and net income for the years presented is included in paragraph (bb) below.

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d. Intangibles

Under Chilean GAAP, the Company has recorded intangible assets relating to the transfer of revalued assets which originate in

the predecessor company, “Compañía Chilena de Distribución Eléctrica S.A.” at the time of the Company’s formation. Under

U.S: GAAP, such intangible assets would not have been recorded as the assets would have been recorded at the Predecessor

Company’s carrying values. The effects of adjusting shareholders’ equity for the intangible asset net of accumulated amortization,

inclusive of accumulated price-level restatement, and net income statement for the annual amortization expense are included

in paragraph (bb) below.

e. Deferred income taxes

Under Chilean GAAP, until December 31, 1999, deferred income taxes were recorded based on non-recurring timing differences

between the recognition of income and expense items for financial statement and tax purposes. Accordingly, there was an

orientation toward the income statement focusing on differences in the timing of recognition of revenues and expenses in

pre-tax accounting income and taxable income. Chilean GAAP also permitted not providing for deferred income taxes where

a deferred tax asset or liability, was either offsetting or not expected to be realized. Starting January 1, 2000, the Company

recorded income taxes in accordance with Technical Bulletin No. 60 of the Chilean Association of Accountants, recognizing,

using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and

liabilities. As a transitional provision, a contra (referred to as “complementary”) asset or liability has been recorded offsetting

the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such complementary asset or

liability are being amortized to income over the estimated average reversal periods corresponding to the underlying temporary

differences to which the deferred tax asset or liability relates.

Under U.S. GAAP, companies must account for deferred taxes in accordance with SFAS No. 109, which requires an asset

and liability approach for financial accounting and reporting of income taxes, under the following basic principles:

i. A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and

tax loss carryforwards.

ii. The measurement of deferred tax liabilities and assets is based on the provisions of the enacted tax law. The effects of

future changes in tax laws or rates are not anticipated.

iii. The measurement of deferred tax assets are reduced by a valuation allowance, if, based on the weight of available evidence,

it is more likely than not that some portion of the deferred tax assets will not be realized.

Temporary differences are defined as any difference between the financial reporting basis and the tax basis of an asset and

liability that at some future date will reverse, thereby resulting in taxable income or expense. Temporary differences ordinarily

become taxable or deductible when the related asset is recovered or the related liability is settled. A deferred tax liability or

asset represents the amount of taxes payable or refundable in future years as a result of temporary differences at the end of

the current year.

The principal difference relates to the reversal of the complementary assets and liabilities recorded as a transitional provision

for unrecorded deferred taxes as of January 1, 2000 and their corresponding amortization into income. The effect of these

differences on the net income and shareholders’ equity of the Company is included in paragraph (bb) below.

f. Severance indemnity

As described in Note 2 n, under the Company’s employment contracts, it has committed to provide a lump sum payment to each

employee at the end of their employment, whether due to death, termination, resignation or retirement. Those obligations are

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calculated based on the present value of the liability determined at each year-end based on the current salary and average

service life of each employee. The Company and certain of its subsidiaries used a real discount rate of 9.5% for the years

ended December 31, 2001 and 2002, and assumed an average service life which varies based upon years of service with the

Company. The real annual discount rate does not include a projection of inflation and, accordingly, future salary increases

are also excluded from the calculation of the obligation, because all such future increases are expected to approximate the

increase in inflation over a long-term period.

Under US GAAP, this arrangement is considered to be a termination indemnity plan and should therefore be accounted for in

accordance with SFAS No. 87, “Employers’ Accounting for Pensions”. The liability would be measured by projecting future

expected payments using an assumed salary progression rate and discounting the resulting amounts to their present value.

In practice, the Company believes that the salary progression rate will not differ significantly from the general inflation rate.

The application of U.S. GAAP would no have produced results materially different from the acceptable method under Chilean

GAAP.

g. Pension and post-retirement benefits

The Company has obligations related to complementary pension plan benefits and other post-retirement benefits as stipulated

in collective bargaining agreements. Under U.S. GAAP, post-retirement employee benefits have been accounted for in

accordance with SFAS No. 87 and SFAS No. 106. The effects of accounting for post-retirement benefits under U.S. GAAP

have been presented in paragraph (bb).

h. Investments in related companies

The Company’s equity share of the effect of the adjustments from Chilean GAAP to U.S. GAAP of equity accounted investees

is included in paragraph (bb) below. The principal U.S. GAAP adjustments affecting the Company’s equity investees are as

follows:

(a) The recording of pension benefits in accordance with SFAS No. 87.

(b) Reversal of complementary accounts (asset or liability) recorded as a transitional provision as of January 1, 2000.

(d) For the year beginning January 1, 2001, the recording of derivative instruments in accordance with SFAS No. 133.

(e) The deferred income tax effects of adjustments (a), (c) and (d).

i. Goodwill and long-lived assets

(i) Under Chilean GAAP, assets acquired and liabilities assumed are recorded at their carrying value, and the excess of the

purchase price over the carrying value are recorded as goodwill. Circular No. 1358, dated December 3, 1997 issued by

the SVS, extended the maximum amortization period of goodwill to 20 years form the previous 10 years.

Under U.S. GAAP, assets acquired and liabilities assumed are recorded at their estimated fair values, and the excess

of the purchase price over the estimated fair value of the net identifiable assets and liabilities acquired are recorded as

goodwill. Up until December 31, 2001, the Company amortized goodwill on a straight-line basis over the estimated useful

lives of the assets, ranging from 20 to 40 years. Goodwill acquired after June 30, 2001 is not amortized (see Note 34 II

(o)). In accordance with SFAS No. 142, the Company discounted amortizing goodwill on January 1, 2002. The effects of

recording the different amortization periods and reversing the amortization of goodwill for 2002 are included in paragraph

(bb) below.

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(ii) Under Chilean GAAP, the Company has evaluated the carrying amount of goodwill net of negative goodwill for impairment.

The measurement of the impairment loss was based on the fair value of the investment which the Company determined

using a discounted cash flow approach and recent comparable transactions in the market. In order to estimate fair value,

the Company made assumptions about future events that are highly uncertain at the time of estimation. The results of

this analysis showed that the goodwill and negative goodwill associated with investments in Argentina and Brazil were

impaired because estimated future discounted cash flows were not sufficient to recover goodwill and negative goodwill.

During 2002, under Chilean GAAP the Company recorded a net charge related to its investments in Central Costanera S.A.,

Hidroeléctrica El Chocón S.A., Hidroinvest S.A., Lajas Inversora S.A., Central Eléctrica Cachoeira Dourada S.A., Cía. de

Electricidade do Rio de Janeiro S.A., Coelce S.A., Distrelec Inversora S.A., Edesur S.A., and Investluz S.A., in the amount

of ThCh$236,434,558 net minority interest, to write-off all amounts of goodwill and negative goodwill, see Note 13.

In accordance with U.S. GAAP, the Company adopted SFAS No. 142 “Goodwill and Other Intangible Assets”, (SFAS No.

142) as of January 1, 2002. SFAS 142 applies to all goodwill and intangible assets acquired in a business combination.

Under the new standard, all goodwill, including that acquired before initial application of the standard, and indefinite-lived

intangible assets are not amortized, as of the effective date but must be tested for impairment at least annually. The

transitional impairment test required by the standard was performed and no adjustment for impairment was required.

However, based on subsequent testing of the Company’s investments in Argentina and Brazil performed as of December

31, 2002, it was determined that these investments were impaired. The following net effects are included in the net income

(loss) and shareholders’ equity reconciliation to U.S. GAAP under paragraph (bb) below:

(a) the reversal of goodwill amortization related to reporting units that were not found to be impaired under U.S. GAAP for

the year ended December 31, 2002, and adjustment of amortization goodwill which is different in amount because of

goodwill basis differences in 2000 and 2001.

(b) the adjustment to record the reversal of the impairment recorded under Chilean GAAP during 2002, which is different

in amount because of goodwill basis differences,

The adjustment as of each year are as follows:

Adjustment of goodwill amortization

Reversal of impairment record under Chilean
GAAP
Impaiment of goodwill under US GAAP

2000
ThCh$
(7,541,119)

As of December 31,

2001
ThCh$
(1,099,881)

2002
ThCh$
53,928,310

452,415,861

(600,380,013)

Totals

(7,541,119)

(1,099,881)

(94,035,842)

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158

Had we adopted SFAS No 142 effective January 1, 2000 and accordingly not amortized goodwill for the years ended December

31, 2001 and 2000 our net gain (loss) and basic income (loss) per share should have been as follows:

Net income (loss) under US GAAP

74,431,407

3,088,583

(329,910,417)

Goodwill amortization under US GAAP

(79,254,926)

(81,676,229)

2000
ThCh$

2001
ThCh$

2002
ThCh$

Adjusted net income (loss) under US GAAP

153,686,333

84,764,812

(329,910,417)

Basic earnings per share:

Reported net income (loss)

Goodwill amortization

Adjusted net income (loss)

2000
Ch$

2001
Ch$

2002
Ch$

10.4

(11.0)

21.4

0.4

(9.9)

10.3

(39.8)

(iii) The company has considered important factors, which could trigger an impairment review, such the following:

• Significant underperformance relative to expected historical or projected future operating results;

• Significant changes in the manner of use of the acquired assets or the strategy for our overall business; and

• Significant negative industry or economic trends

In accordance with SFAS No.121, “Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to Be

Disposed Of’ during 2000 and 2001, which was superceded by SFAS No.144, “Accounting for the Impairment or Disposa1 of

Long-Lived Assets” beginning in 2002, the Company eva1uates the carrying amount of property, plant and equipment and other

long-lived assets, in relation to the operating performance and future undiscounted cash flows of the underlying business. These

standards require that an impairment loss be recognized in the event that facts and circumstances indicate that the carrying

amount of an asset may not be fully recoverable. Impairment is recorded based on an estimate of future discounted cash flows,

as compared to current carrying amounts. For the years ended December 31, 2000, 2001, and 2002, no additional amounts

were recorded for impairment under U.S. GAAP, except for adjustments for this concept recorded under Chilean GAAP in the

subsidiaries Centrais Eléctrica Cachoeira Dourada S.A. and Inmobiliaria Manso de Velasco Limitada, which are included in

other non-operating expenses (see Note 23). This amount are reclassified to operating income for US GAAP purposes.

j. Negative Goodwill

Under Chilean GAAP, the excess of the carrying value of the assets assumed in a business combination over the purchase

price is recorded as negative goodwill. Circular No. 1358, dated December 3, 1997 issued by the SVS, extended the maximum

amortization period of negative goodwill to 20 years from the previous 5 years. Under U.S. GAAP, the fair values of the assets

acquired less the fair values of the liabilities assumed in excess of over the purchase price is allocated proportionately to reduce

the values assigned to non-current assets. If the allocation reduces the non-current monetary assets to zero, the remainder

of the excess is recorded as a deferred credit account called negative goodwill upon adoption of SFAS 142 in January 1, 2002

the excess will no longer be deferred but recognized immediately in income. The effect of reducing depreciation expense, due

to the proportionate allocation of the excess purchase price to property, plant and equipment, as compared to the amortization

of negative goodwill under Chilean GAAP and the reversal of negative goodwill write-offs described in paragraph (i), which

ENERSIS 20 02 ANNUAL REPORT

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did not meet the U.S. GAAP impairment criteria for long-lived assets under SFAS No. 144 described above, and conforming

depreciation methods are included in paragraph (bb) below.

k. Capitalized interest and exchange differences

In accordance with Chilean GAAP, the Company has capitalized both interest on debt directly related to property, plant and

equipment under construction and finance costs corresponding to exchange differences generated by the loans associated

with such assets. The capitalization of interest costs associated with projects under construction is optional when incurred on

debt that is not directly related to such projects.

Under U.S. GAAP, the capitalization of interest on qualifying assets under construction is required, regardless of whether interest

is associated with debt directly related to a project. In addition, under U.S. GAAP, foreign translation exchange differences may

not be capitalized. The accounting differences between Chilean and U.S. GAAP for financing costs and the related depreciation

expense are included in the reconciliation to U.S. GAAP under paragraph (bb) below.

l. Accumulated deficit during the development stage

Under Chilean GAAP, the losses incurred during the development stage of subsidiary companies is recorded directly in the

parent company’s equity. Under U.S. GAAP, such costs must be charged to income as incurred. The effects are included in

paragraph (bb) below.

m. Minimum dividend

As required by the Chilean Companies Act, unless otherwise decided by the unanimous vote of the holders of issued and

subscribed shares, the Company must distribute a cash dividend in an amount equal to at least 30% of its net income for each

year as determined in accordance with Chilean GAAP, unless and except to the extent the Company has unabsorbed prior

year losses. Since the payment of the 30% dividend out of each year’s income is required by Chilean law, an accrual has been

made in the reconciliation in paragraph (bb) below to reflect the unrecorded dividend liability for 2001, whenever and to the

extent the recorded interim dividends do not reach to 30% minimum dividend.

In April 2002, the meeting of shareholders decided, that dividends would consist of the income from normal company operations

defined as income before amortization of negative goodwill in the income statement. Therefore, the distributable profit at

December 31, 2001 was zero, necessitating a reversal of the prior year accrual under U.S. GAAP.

n. Capitalized general and administrative expenses

Until 1993, Endesa-Chile capitalized a portion of its administrative and selling expenses as part of the cost of construction in

progress because a substantial portion of the efforts of management were involved in the administration of major projects.

Under U.S. GAAP, general and administrative expenses are charged to expense unless they can be directly identified with the

supervision of the construction of specific projects. The effects of eliminating capitalized general and administrative expenses

and the related depreciation for U.S. GAAP purposes are shown below under paragraph (bb).

o. Involuntary employee termination benefits

Under Chilean GAAP, the Argentine subsidiaries, Central Costanera and Hidroelectricidad, recorded an accrual of certain

involuntary employees termination benefits related to the restructuring plan announced in 1997. Since that date employees

have continued to be made redundant pursuant to this plan. In accordance with U.S. GAAP, at that time in order to recognize

a liability at the balance sheet date for the cost to terminate employees involuntarily, there must be a plan that specifically

includes notification to employees prior to the balance sheet date. As of December 31, 2002, this requirement had not been

met. The effect of eliminating the accrued liability recognized is presented in paragraph (bb) below.

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160

p. Adjustment in selling price of investment

Under Chilean GAAP, pursuant to the share transaction contract entered into in 1995 between Endesa-Chile and Endesa Overseas

Co. with Enersis Intemational Limited, Chilectra S.A. and Chilectra IntemationaI Limited, Endesa Argentina recognized income

related to an adjustment of the share purchase price. Under U.S. GAAP, the contingent price adjustment would be considered

a part of the purchase price, and would therefore be offset against the amount of goodwill that was originally determined. As

described in paragraph (i), the Company determined goodwill amounts recorded in investments in Argentina were impaired as

of December 31, 2002, thus the adjustment in selling price of investment is a basis difference between Chilean and U.S. GAAP

that will be eliminated after the impairment charge is recorded. The effects of the adjustments to conform to U.S. GAAP are

included under paragraph (bb) below.

q. Elimination of capitalized legal reserve

Under Chilean GAAP, the Company capitalized interest to property, plant and equipment as a result of the creation of a legal

reserve specifically permitted in Brazil for the electricity industry. Under U.S. GAAP, interest capitalized must be based on

actual interest incurred, and as such the effects of the elimination of the interest capitalized to property, plant and equipment

and the effects on depreciation expense are included in paragraph (bb) below.

r. Organizational and start-up costs

Certain costs related to the organization and creation of certain subsidiaries of the Company are deferred and capitalized under

Chilean GAAP and amortized. Under U.S. GAAP, such organizational and start-up costs may not be deferred and must be

included in income as incurred. The effects of the difference are included in paragraph (bb) below.

s. Translation of Financial Statements of Investments Outside of Chile

Under Chilean GAAP, in accordance with Technical Bulletin 64 (“B.T. 64”) the financial statements of foreign subsidiaries that

operate in countries exposed to significant risks (“unstable” countries), and that are not considered to be an extension of the

parent company’s operations, are remeasured into US dollars. The Company’s foreign subsidiaries in Argentina, Perú, Brazil,

and Colombia all meet the criteria of foreign subsidiaries that operate in countries exposed to significant risks under BT 64, and

are remeasured into US dollars. The Company has remeasured its foreign subsidiaries into US dollars under this requirement

as follows:

• Monetary assets and liabilities are translated at year-end rates of exchange between the US dollar and the local

currency.

• All non-monetary assets and liabilities and shareholder’s equity are translated at historical rates of exchange between the

US dollar and the local currency.

•

Income and expense accounts are translated at average rates of exchange between the US dollar and local currency.

• The effects of any exchange rate fluctuations between the local currency and the US dollar are included in the results of

operations for the period.

Under BT 64, the investment in the foreign subsidiary is price-level restated, the effects of which are reflected in income, while

the effects of the foreign exchange gains or losses between the Chilean Peso and the US dollar on the foreign investment

measured in US dollars, are reflected in equity in the account “Cumulative Translation Adjustment”.

The amount of foreign exchange gain included in income that is attributable to operations in unstable countries because these

amounts have been remeasured into US dollars was ThCh$39,503,788, ThCh$23,247,278 and ThCh$180,045,972 for the years

ended December 31, 2000, 2001 and 2002, respectively (See Note 23 (a)).

In the opinion of the Company, the foreign currency translation procedures described above are part of the comprehensive

basis of preparation of price-level adjusted financial statements required by Chilean GAAP. Inclusion of inflation and translation

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162

effects in the financial statements is considered appropriate under the inflationary conditions that have historically affected the

Chilean economy, and accordingly, are not eliminated in the reconciliation to U.S. GAAP as permitted by Form 20-F.

t. Derivative instruments

Under Chilean GAAP, forward foreign exchange contracts and currency swaps are used to hedge existing balance sheet risks

or “fair value” hedges, while interest swaps and collars are used to hedge against future transaction risks or “cash flow” hedges.

Fair value hedges are recorded at fair values with losses recorded at the time of their estimation and gains deferred until the

transaction date or to the extent losses have been previously recorded, while gains and losses from cash flow hedges are

deferred as either an assets or a liability until the transaction date. The hedging criteria and documentation requirements under

Chilean GAAP are less onerous than U.S. GAAP. Realized gains and losses are recorded in “Other non-operating income and

expense”.

Prior to January 1, 2001. under U.S. GAAP, contracts that were designated and effective as hedges of existing assets and

liabilities were recorded at the closing spot exchange rate and included in earnings with the initial discount or premium is amortized

over the life of the contract as interest expense. However, contracts not designated or effective as hedges were recorded at

fair value with the unrealized gains and losses recognized in income. For contracts with fair values different from the values

of the contracts at the closing spot exchange rate, a difference between U.S. and Chilean GAAP resulted. The effects of the

difference were not considered material to the consolidated financial statements and accordingly were not previously included

in paragraph (u) below.

Currently under U.S. GAAP, the accounting for derivative instruments is described in SFAS No. 133 “Accounting for Certain

Derivative Instruments and Certain Hedging Activities” (SFAS No. 133) and other complementary rules and amendments. SFAS

No. 133, as amended, establishes accounting and reporting standards requiring that every derivative instrument (including certain

derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at

its fair value. SFAS No. 133 requires that changes in the derivative instrument’s fair value be recognized currently in earnings

unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative instrument’s

gains and losses to offset related results on the hedged item in the income statement, to the extent effective, and requires that

a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

The Company adopted SFAS No. 133, as amended, on January 1, 2001. SFAS No. 133 required that as of the date of initial

adoption, the difference between the market value of derivative instruments recorded on the balance sheet and the previous

carrying amount of those derivatives be reported in net income or other comprehensive income, as appropriate, as the cumulative

effect of a change in accounting principle in accordance with Accounting Principles Board Opinion No. 20, “Accounting Changes.”

Statement 133 cannot be applied retroactively. SFAS No. 133 must be applied to (a) derivative instruments and (b) certain

embedded derivative instruments. As permitted under this standard, the Company has applied SFAS No. 133 to only those

embedded instruments that were issued, acquired, or substantively modified after January 1, 1999.

SFAS No. 133, in part, allows special hedge accounting for “fair value” and “cash flow” hedges. SFAS No. 133 provides that the

gain or loss on a derivative instrument designated and qualifying as a “fair value” hedging instrument as well as the offsetting loss

or gain on the hedged item attributable to the hedged risk be recognized currently in earnings in the same accounting period. The

accounting standard provides that the effective portion of the gain or loss on a derivative instrument designated and qualifying as

a “cash flow” hedging instrument be reported as a component of other comprehensive income and be reclassified into earnings

in the same period or periods during which the hedged forecasted transaction affects earnings. The remaining gain or loss on

the derivative instrument, if any, must be recognized currently in earnings. While the Company enters into derivatives for the

purpose of mitigating its global financial and commodity risks, these operations do not meet the documentation requirements to

qualify for hedge accounting under U.S. GAAP. Therefore changes in the respective fair values of all derivatives are reported

in earnings when they occur.

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162

Current Chilean accounting rules do not consider the existence of derivative instruments embedded in other contracts and

therefore they are not reflected in the financial statements. For U.S. GAAP purposes, certain implicit or explicit terms included

in host contracts that affect some or all of the cash flows or the value of other exchanges required by the contract in a manner

similar to a derivative instrument, must be separated from the host contract and accounted for at fair value. The Company

separately measures embedded derivatives as freestanding derivatives instruments at their estimated fair values recognizing

changes in earnings when they occur.

Estimates of fair values of financial instruments for which no quoted prices or secondary market exists have been made using

valuation techniques such as forward pricing models, present value of estimated future cash flows, and other modeling techniques.

These estimates of fair value include assumptions made by the Company about market variables that may change in the future.

Changes in assumptions could have a significant impact on the estimate of fair values disclosed. As a result such fair value

amounts are subject to significant volatility and are highly dependent on the quality of the assumptions used.

The Company is also exposed to foreign currency risk arising from long-term debt denominated in foreign currencies, the

majority of which is the US dollar. This risk is mitigated, as a substantial portion of the Company’s revenues are either directly

or indirectly linked to the US dollar. Additionally, the Company records the foreign exchange gains and losses on liabilities

related to net investments in foreign countries which are denominated in the same currency as the functional currency of

those foreign investments. Such unrealized gains and losses are included in the cumulative translation adjustment account in

shareholders’ equity, and in this way act as a net investment hedge of the exchange risk affecting the investments (see Note

11 (c) and Note 22 (e) for further detail). The Company also uses short duration forward foreign currency contracts and swaps,

and cross-currency swaps, where possible, to manage its risk related to foreign currency fluctuations.

The effect of adopting SFAS No. 133 as of January 1, 2001, resulted in a cumulative effect on net income of ThCh$21,015,046

net of deferred taxes for ThCh$46,575,921 and minority interest for ThCh$62,621,442, which is presented under the caption

“Cumulative effect of changes in accounting principles”, the effects of the adjustment with respect to financial derivatives,

commodity derivatives, and embedded derivatives for the year ended December 31, 2002 is included in the net income and

shareholders’ equity reconciliation to U.S. GAAP under paragraph (bb) below.

u. Fair value of long-term debt assumed

As discussed in paragraph (i), under Chilean GAAP, assets acquired and liabilities assumed are recorded at their carrying value,

and the excess of the purchased price over the carrying value are recorded as goodwill. Under U.S. GAAP, assets acquired

and liabilities assumed are recorded at their estimated fair values, and the excess of the purchased price over the estimated

fair value of the net identifiable assets and liabilities acquired are recorded as goodwill. As part of the purchase of the majority

ownership interest in Endesa-Chile, under U.S: GAAP, the cost of the purchase price would have been allocated to the fair

value of long-term debt. The effect on shareholder’s equity and net income for the years presented is included in paragraph

(bb) below.

v. Sale of subsidiaries

This corresponds to the reversal of the December 31, 1999 accumulated adjustments to U.S. GAAP which under U.S. GAAP

would have been included in the determination of any gain or loss on sale made in connection with the subsidiaries Compañía

Nacional de Transmisión Eléctrica S.A. (Transelec), Aguas Cordillera S.A., and Aguas Puerto S.A., as these subsidiaries were

sold during 2000.

w. Deferred income

During 2000, fiber optic cable was contributed to the Company in return for granting the contributing company access to the

fiber optic network after installation in the Company’s electricity distribution system. Under Chilean GAAP, the contributed

ENERSIS 20 02 ANNUAL REPORT

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164

assets were recorded at their fair market value, with a corresponding credit recognized as income in 2000. Under U.S. GAAP,

this item. This adjustment reverses the gain under Chile GAAP and records the amortization of the deferred income under U.S.

GAAP. The effect on shareholders’ equity and net income for the years presented is included in (bb) below. The amount was

deferred and amortize over the life of the related service contract.

x. Regulated assets and deferred costs

The electricity sector in Chile and other countries of operation in Latin America is regulated pursuant to the Chilean and other

country electricity laws. Most of the Company’s sales are subject to node price regulation, which is designed to ensure an

adequate supply of energy at reasonable, determined prices, which considers a variety of factors. The marginal cost pricing

model is not solely based upon costs incurred by the Company, and as a result, the requirements of U.S. GAAP under SFAS

No.71, “Accounting for the Effects of Certain Types of Regulation”, related to a businesses whose rates are regulated are not

applicable to the Company’s financial statements, except for the Company’s operations in Brazil as described below.

As a result of changes in Brazilian Electricity Laws and Regulations, the Company’s distribution subsidiaries in Brazil, Companhia

de Electricidad do Rio de Janeiro (Cerj) and Companhia Energética do Ceará (Coalce), are subject to the provisions of SFAS No.

71 beginning on January 1, 2001. With the new regulations issued by the National Agency of Electrictric Energy (ANEEL), the

rate-setting structure in Brazil is now designed to provide recovery for allowable costs incurred, which will be recovered through

future increases in energy tariffs in order to recover losses experienced during the period of Brazilian Federal Government

mandated energy rationing from June 1, 2001 to December 31, 2001. The Company estimates costs will be recovered over a

period estimated to be three years (as described in Note 5).

Accordingly, the Company capitalizes incurred costs as deferred regulatory assets when there is a probable expectation

that future revenue equal to the costs incurred will be billed and collected as a direct result of the inclusion of the costs in an

increased rate set by the regulator. The deferred regulatory asset is eliminated when the Company collects the related costs

through billings to customers. ANEEL perform a rate review on an annual basis. If ANEEL excludes all or part of a cost from

recovery, that portion of the deferred regulatory assets is impaired and is accordingly reduced to the extent of the excluded

cost. The Company has recorded deferred regulatory assets, which it expects to pass on to its customers in accordance with

and subject to regulatory provisions.

The regulations also included certain VPA costs, which are certain that each distribution company is permitted to defer and pass

on the their customers using future rate adjustments. VPA costs are limited by concession contracts to the cost of purchased

power and certain other costs and taxes. Due to uncertainly in the Brazilian economy, ANEEL delayed the approval of such VPA

rate increases. An Executive Order in October 2001 created a tracking account mechanism, in order to calculate the variation

in the VPA costs for future rate adjustment calculation purposes. The Company has not recognized any regulatory assets for

VPA costs incurred prior to 2001, because costs incurred prior to January 1, 2001, are not recoverable through the tracking

account.

Under Chilean GAAP, the Company recognized revenue and deferred costs related to the regulated assets. Under U.S. GAAP,

in accordance with Emerging Issues Taskforce (EITF) No. 92-7, “Accounting by Rate Regulated Utilities for the Effects of Certain

Alternate Revenue Programs”, revenue amounts not expected to be collected within 24 months, have been deferred. The effect

of deferring revenues expected to be collected after two years is included in (bb) below.

y. Reorganization of subsidiaries

Corresponds to the reorganization of the Company’s subsidiaries Central Costanera and Central Buenos Aires (CBA) during

2001, in which Central Costanera acquired the minority interest in CBA from third parties and exchanged shares with Endesa

Argentina. Under Chilean GAAP, the Company recorded the goodwill for the proportional minority interest acquired as the

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164

difference between the purchase price and the carrying values of the assets acquired and liabilities assumed. Under U.S.

GAAP, the proportional fair value of the assets acquired compared to the purchase price is recorded as goodwill. The effect on

shareholders’ equity is included in (bb) below.

z. Assets held for sale

Under Chilean GAAP the Company records divestitures of investments or assets in the year in which they occur. Under U.S.

GAAP, in accordance with SFAS No. 144, long-lived assets for which there is a plan to sell the assets within the following year,

shall be disclosed separately from the Company’s other assets, provided all the criteria are met. Additionally, long-lived assets

classified as held for sale must be measured at the lower of their carrying amount or fair value less cost to sell. Long-lived

assets shall not be depreciated while they are classified as held for sale, while interest and other expenses attributable to the

liabilities of a disposal group classified as held for sale shall continue to be accrued.

The Company’s Board of Directors approved a plan to sell a number of the Company’s assets during October 2002. The following

assets to be sold meet the definition of segments, reporting units or long-lived assets held for sale:

• Compañía Eléctrica del Río Maipo S.A.

• Central Canutillar power plant

• Gas Atacama transmission lines

• CELTA transmission lines

• Infraestructura 2000 S.A.

The Company evaluated the carrying values of all assets held for sale, recording a loss to the extent that one of the assets’

fair values less cost to sell was lower than the carrying value of those assets. Additionally, the Company ceased recording

depreciation expense once the assets met the qualification criteria of held for sale, which varied from October to December

2002, no impairment was required to these assets as of December 31, 2002. The effect of these adjustments is included in the

net income and shareholders’ equity reconciliation to U.S. GAAP under paragraph (bb) below.

aa. Elimination of discontinued operations

Under Chilean GAAP, no restatement to the financial statement information presented in previous years is required after a

divestiture has occurred. Under US GAAP, in accordance with SFAS No. 144, the discontinued operations of a component

must be retroactively separated from the continuing operations of an entity, when the operations and cash flows of a component

which will be eliminated from the ongoing operations of an entity as a result of a disposal transaction will not have any significant

continuing involvement in the operations of a component after the disposal transaction.

The Company evaluated whether any of the assets held for sale met either criteria, noting that the transmission lines and power

plant are not components, as they are included as a part of larger cash flow generating groups, and the operations of these

assets cannot be separated from their respective groups. Additionally, Endesa-Chile plans to continue generating revenues

from Canutillar through a purchase power agreement, management agreement, and a transmission leasing arrangement with

the future buyer. Infraestructura 2000 S.A. does meet the conditions for discontinued operations because it has distinct and

separable financial results from operations and cash flows. As a result of the disposal the results of operations of the reporting

unit have been eliminated from the ongoing operations of Enersis, as Enersis will not have any continuing involvement in the

operations of Infraestructura 2000 S.A. after it is sold. The Rio Maipo facility was classified as “held for sale” on December 31,

2002. In April, 2003, the Company sold facility. In accordance with SFAS 144, the Company determined that the Rio Maipo did

not must the criteria to be classified as a discontinued operations as of the Enersis will have a significant continuing involvement

through continuing sales to Rio Maipo’ though its subsidiary Endesa – Chile. The effect of restating discontinued operations is

included in the net income reconciliation to U.S. GAAP under paragraph (bb) below.

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166

bb. Effect of conforming to U.S. GAAP

The reconciliation of reported net income required to conform with U.S. GAAP is as follows:

Net income (loss) in accordance with Chilean GAAP

Reversal of amortization of revaluation of property, plant and equipment (paragraph b)

Depreciation of property, plant and equipment and difference in fixed assets value at acquisition date (paragraph c)

Amortization of intangibles (paragraph d)

Deferred income taxes (paragraph e)

Pension and post-retirement benefits (paragraph g)

Investments in related companies (paragraph h)

Amortization and impairment of goodwill (paragraph i)

Amortization of negative goodwill (paragraph j)

Capitalized interest and exchange differences (paragraph k)

Accumulated deficit during the development stage (paragraph l)

Capitalized general and administrative expenses (paragraph n)

Involuntary employee termination benefits (paragraph o)

Adjustment in selling price of investment (paragraph p)

Elimination of amortization of capitalized legal reserve (paragraph q)

Amortization of organizational and start-up costs (paragraph r)

Derivative instruments (paragraph t)

Fair value of long-term debt assumed (paragraph u)

Sale of subsidiaries (paragraph v)

Deferred income (paragraph w)

Regulated assets (paragraph x)

Reorganization of subsidiaries (paragraph y)

Asset held for sale (paragraph z)

Reclassification of discontinued operations (paragraph aa)

Effects of minority interest on the U.S. GAAP adjustments

Deferred tax effects on the U.S. GAAP adjustments

Reclassification extraordinary gain

For the year ended December 31,

2000
ThCh$

2001
ThCh$

2002
ThCh$

95,661,404

42,154,033

(223,748,087)

2,597,035

(1,459,538)

1,373,576

(69,517,707)

(11,014,880)

(7,541,119)

(19,035,079)

34,392,221

156,769

(1,614,199)

(2,693,048)

133,953

(3,338,239)

821,187

133,411

21,574,004

(3,212,407)

(161,966)

58,059,875

(21,143,846)

1,899,779

(1,845,429)

191,035

(28,618,834)

3,738,634

(18,119,651)

(1,099,881)

(26,903,634)

4,887,915

(411,369)

(126,967)

(8,797)

(76,429)

591,479

3,960,274

65,189,655

(174,229)

165,419

3,336,808

(5,455,684)

121,840

(21,149,128)

23,130,027

20,860,935

(94,035,842)

(82,314,299)

(32,529,417)

(5,830,512)

1,958,425

(347,089)

4,491,313

903,367

5,365,083

(78,076,325)

(91,559)

274,829

(41,903,240)

(51,237,932)

(358,538)

(4,203,667)

(17,138,430)

(24,112,843)

(319,781)

(887,241)

(148,617)

127,629,376

78,023,974

Net income (loss) in accordance with U.S. GAAP before effect of discontinued
operations, extraordinary gain and cumulative effect of change in accounting principle

74,171,407

(42,323,715)

(330,075,536)

Income from discontinued operations net of taxes and minority interest (paragraph aa)

260,000

284,410

165,119

Net income (loss) in accordance with U.S. GAAP before effect of extraordinary
gain and cumulative effect of change in accounting principle

74,431,407

(42,039,305)

(329,910,417)

Extraordinary gain (net of taxes)

24,112,843

Net income (loss) in accordance with U.S. GAAP before cumulative effect of change in accounting principle

74,431,407

(17,926,462)

(329,910,417)

Cumulative effect of change in accounting principle, net of the tax and minority interest

21,015,045

Net income (loss) in accordance with U.S. GAAP

74,431,407

3,088,583

(329,910,417)

Other comprehensive income (loss):

Cumulative translation adjustment determined under Chilean GAAP

Cumulative translation adjustment related to U.S GAAP adjustments

1,336,996

(4,410,079)

19,459,326

(3,494,198)

20,596,914

(12,536,493)

Comprehensive income (loss) in accordance with U.S.GAAP

71,358,324

19,053,711

(321,849,996)

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166

The reconciliation to conform shareholders’ equity amounts to U.S. GAAP is as follows:

Shareholders’ equity in accordance with Chilean GAAP

1,214,561,981

1,005,580,294

Reversal of revaluation of property, plant and equipment net of accumulated
amortization revaluation of property, plant and equipment (paragraph b)

Depreciation of property, plant and equipment and difference in fixed asset value
at acquisition date (paragraph c)

(17,254,120)

(14,150,945)

763,072

(3,065,017)

As of December 31,

2001
ThCh$

2002
ThCh$

Intangibles (paragraph d)

Deferred income taxes (paragraph e)

Pension and post-retirement benefits (paragraph g)

Investments in related companies (paragraph h and paragraph z)

Goodwill (paragraph i)

Negative goodwill (paragraph j)

Capitalized interest and exchange differences (paragraph k)

Minimum dividend (paragraph m)

Capitalized general and administrative expenses (paragraph n)

Reversal of accrual of certain involuntary employee termination benefits (paragraph o)

Adjustment in selling price of investment (paragraph p)

Elimination of capitalized legal reserve (paragraph q)

Amortization organizational and start-up costs (paragraph r)

Derivative instruments (paragraph t)

Fair value of long-term debt assumed (paragraph u)

Reorganization of subsidiaries (paragraph y)

Asset held for sale (paragraph z)

Deferred income (paragraph w)

Regulated assets (paragraph x)

Effects of minority interest on the U.S. GAAP adjustments

Elimination of result of discontinuing operations

Deferred tax effects on the U.S. GAAP adjustments

(1,218,399)

(244,411,924)

(48,110,011)

(17,385,748)

326,090,688

(205,876,773)

44,949,920

(12,646,210)

(27,225,414)

412,753

(4,215,211)

(9,378,001)

(39,325,555)

210,367,650

1,357,440

5,997,065

(3,391,114)

(41,903,240)

96,667,003

(74,152,019)

(1,096,559)

(277,953,317)

(29,532,561)

4,286,240

236,394,374

(298,291,399)

16,939,438

(25,675,535)

92,700

(9,362,051)

(37,681,753)

149,900,318

1,265,881

6,070,100

(887,241)

(3,437,112)

(97,106,372)

225,171,613

724,763

(2,715,812)

Shareholders’ equity in accordance with U.S. GAAP

1,154,673,833

845,470,047

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168

The changes in shareholders’ equity in U.S. GAAP as of each year-end are as follows:

As of December 31,

2001
ThCh$

2002
ThCh$

Shareholders equity in accordance with U.S. GAAP - January 1,

1,131,339,028

1,154,673,833

Dividends paid during the year

Reversal of dividends payable as of previous balance sheet date

Minimum dividend (paragraph m)

Cumulative translation adjustment

Reorganization of subsidiaries (paragraph y)

Net income (loss) in accordance with U.S. GAAP for the year

(15,426,129)

28,698,421

(12,646,210)

15,965,128

3,655,011

3,088,584

12,646,210

8,060,421

(329,910,417)

Shareholders equity in accordance with U.S.GAAP-December 31,

1,154,673,833

845,470,047

II. Additional disclosure requirements:

a. Goodwill and negative goodwill

The following is an analysis of goodwill and negative goodwill, determined on Chilean GAAP basis, as of December 31, 2001

and 2002, respectively:

Goodwill

Less: accumulated amortization

As of December 31,

2001
ThCh$

1,652,861,416

(334,028,823)

2002
ThCh$

1,235,470,632

(387,957,133)

Goodwill, net

1,318,832,593

847,513,499

Negative goodwill

Less: accumulated amortization

(382,125,693)

200,931,133

(342,816,906)

247,643,956

Negative goodwill, net

(181,194,560)

(95,172,950)

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168

b. Basis and diluted earnings per share:

Chilean GAAP (loss) earnings per share

U.S. GAAP (loss) earnings per share:

For the year ended December 31,

2000
Ch$

13.32

2001
Ch$

5.08

2002
Ch$

(26.99)

U.S. GAAP (loss) earnings per share before effect of discontinued operations, extraordinary
gain and cumulative effect of change in accounting principle

10.33

(5.10)

(39.81)

Discontinued operations (net of tax)

0.04

0.03

0.02

U.S. GAAP (loss) earnings per share before effect of extraordinary
gain and cumulative effect of change in accounting principle

10.37

(5.07)

(39.79)

Extraordinary gain (net of tax)

2.91

U.S. GAAP (loss) earnings per share before cumulative effect of change in accounting
principle

10.37

(2.16)

(39.79)

Cumulative effect of change in accounting principle (net of tax)

Basic and diluted U.S. GAAP (loss) earnings per share

10.37

2.53

0.37

(39.79)

Weighted average number of common shares outstanding (000’s)

7,180,409

8,291,020

(1) The earnings per share figures for both U.S. GAAP and Chilean GAAP purposes have been calculated by dividing the respective earnings (loss) amounts in accordance with U.S. GAAP and Chilean GAAP,

respectively, by the weighted average number of common shares outstanding during the year. The Company has not issued convertible debt or equity securities. Consequently, there are no potentially dilutive
effects on the earnings per share of the Company

ENERSIS 20 02 ANNUAL REPORT

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170

c. Income taxes:

The provision (benefit) for income taxes charged to the results of operations determined in accordance with U.S. GAAP is a

follows:

Chile
ThCh$

Argentina
ThCh$

Perú
ThCh$

2000

Brazil
ThCh$

Colombia
ThCh$

Other
ThCh$

Total
ThCh$

Income tax provision under Chilean GAAP

Current income taxes as determined under Chilean GAAP (1)

65,016,882

38,213,657

1,288,064

21,480,003

33,103,382

321,727

159,423,715

Deferred income taxes as determined under Chilean GAAP

(8,963,932)

661,396

16,646,200

(23,941,812)

(1,705,564)

(17,303,712)

Total income tax provision under Chilean GAAP

56,052,950

38,875,053

17,934,264

(2,461,809)

31,397,818

321,727

142,120,003

U.S. GAAP adjustments:

Deferred tax effect of applying SFAS No. 109

9,209,924

(5,563,761)

10,295,909

54,698,116

877,519

Deferred tax effect of adjustments to U.S. GAAP

(331,518)

5,685,557

78,602

15,804,001

Total U.S. GAAP adjustments

8,878,406

121,796

10,374,511

70,502,117

877,519

69,517,707

21,236,642

90,754,349

Total Income tax provision under U.S. GAAP

64,931,356

38,996,849

28,308,775

68,040,308

32,275,337

321,727

232,874,352

Chile
ThCh$

Argentina
ThCh$

Perú
ThCh$

2001

Brazil
ThCh$

Colombia
ThCh$

Other
ThCh$

Total
ThCh$

Income tax provision under Chilean GAAP

Current income taxes as determined under Chilean GAAP (1)

12,794,860

45,203,098

8,212,337

22,660,803

31,499,043

71,781

120,441,922

Deferred income taxes as determined under Chilean GAAP

6,062,958

2,397,955

13,173,620

(13,678,191)

172,468

8,128,810

Total income tax provision under Chilean GAAP

18,857,818

47,601,053

21,385,957

8,982,612

31,671,511

71,781

128,570,732

U.S. GAAP adjustments:

Deferred tax effect of applying SFAS No. 109

994,832

23,387,331

690,007

3,382,515

164,149

Deferred tax effect of adjustments to U.S. GAAP

(2,963,740)

3,033,510

(776,899)

(6,378,222)

24,355,649

Deferred tax effect of comulative effect of change

in accounting principle

Total U.S. GAAP adjustments:

(1,841,380)

41,529,856

214,348

(203,244)

6,876,341

(3,810,288)

67,950,697

127,456

(3,198,951)

31,396,139

28,618,834

17,270,298

46,575,921

92,465,053

Total Income tax provision under U.S. GAAP

15,047,530

115,551,750

21,513,413

5,783,661

63,067,650

71,781

221,035,785

Chile
ThCh$

Argentina
ThCh$

Perú
ThCh$

2002

Brazil
ThCh$

Colombia
ThCh$

Other
ThCh$

Total
ThCh$

Income tax provision under Chilean GAAP

Current income taxes as determined under Chilean GAAP

13,292,208

(62,123)

12,661,339

2,602,883

45,248,145

Deferred income taxes as determined under Chilean GAAP

3,214,739

(34,075,899)

30,322,409

(5,879,658)

(1,307,058)

Total income tax provision under Chilean GAAP

16,506,947

(34,138,022)

42,983,748

(3,276,775)

43,941,087

U.S. GAAP adjustments:

Deferred tax effect of applying SFAS No. 109

2,298,780

(30,426,372)

21,488,911

24,299,705

3,488,104

Deferred tax effect of adjustments to U.S. GAAP

(13,217,783)

13,786,982

(21,585,415)

(20,363,366)

(36,644,392)

Total U.S. GAAP adjustments:

(10,919,003)

(16,639,390)

(96,504)

3,936,339

(33,156,288)

73,742,452

(7,725,467)

66,016,985

21,149,128

(78,023,974)

(56,874,846)

Total Income tax provision under U.S. GAAP

5,587,944

(50,777,412)

42,887,244

659,564

10,784,799

9,142,139

(1) The income tax provisions under Chilean GAAP for the years ended December 31, 2000 and 2001 are stated net of income tax recovery of ThCh$4,207,583 and ThCh$8,116,807.

ENERSIS 2002 ANNUA L REPORT

171

170
170

Deferred tax assets (liabilities) as of balance sheet dates are summarized s follows:

As of December 31, 2001

As of December 31, 2002

SFAS No. 109
Applied to
Chilean
GAAP
Balances

ThCh$

SFAS No.
109 applied
to U.S. GAAP
Adjustments

ThCh$

Total
Deferred
Taxes under
SFAS No. 109

ThCh$

SFAS No. 109
Applied to
Chilean
GAAP
Balances

ThCh$

SFAS No.
109 applied
to U.S. GAAP
Adjustments

ThCh$

Total
Deferred
Taxes under
SFAS No. 109

ThCh$

6,976,342

4,386,013

11,362,355

6,032,020

13,837,806

19,869,826

14,247,101

8,406,250

1,152,980

7,555,125

16,365,659

14,247,101

8,406,250

38,334,751

7,487,563

3,660,314

2,164,150

8,558,885

4,166

1,395,215

16,864,691

80,072,911

46,795,319

194,771

5,843,294

32,217,765

6,766,431

2,746,091

3,252,750

2,656,047

584,992

5,248

1,211,297

1,627,336

116,468,223

50,931,732

117,034

3,926,807

5,155,480

(3,322,326)

(3,448,901)

33,016,167

22,148,453

1,168,618

8,998,383

415,266

10,850,823

5,583,440

33,016,167

22,148,453

32,217,765

6,766,431

3,914,709

3,252,750

2,656,047

9,583,375

420,514

1,211,297

12,478,159

116,468,223

50,931,732

117,034

9,510,247

5,155,480

(3,448,901)

38,334,751

7,487,563

2,507,334

2,164,150

1,003,760

4,166

1,395,215

499,032

80,072,911

46,795,319

194,771

5,843,294

(3,322,326)

Deferred income tax assets

Property, plant and equipment

Regulated assets and related deferred

cost (conpanies in Brazil)

Negative goodwill

Allowance for doubtful accounts

Actuarial deficit (companies in Brazil)

Deferred income

With-holdings

Provision real estate projects

Derivative contracts

Severance indemnities

Vacation accrual

Post retirement benefits

Tax loss carryforwards (1)

Contingencies

Finance costs

Salaries for construction-in progress

Exchange difference -subsidiaries

Valuation allowance

Total deferred income tax assets

189,956,282

52,113,128

242,069,410

230,250,352

96,018,956

326,269,308

Deferred income tax liabilities

Negative goodwill

Property, plant and equipment

Severance indemnities

Intangibles

Regulated assets

Deferred charges

Actuarial deficit (companies in Brazil)

Finance costs

Derivative contracts

Bond discount

Cost of studies

Imputed interest on construction

With-holdings

Materials used

Hid. El Chocón investment

Capitalized expenses

Capitalized interest

Post retirement benefits

Contingencies

Others

Differences between the financial and

tax value of Río Maipo S.A.

5,229,011

464,500,827

388,356,194

1,954,040

24,954

1,510,731

5,570,625

8,304,618

512,289

2,126,014

4,675,640

4,830,117

5,659

3,349,399

119,374

5,059,362

559

10,311,653

1,927,532

6,019,514

86,306,393

26,738,515

8,255

229,961

1,927,532

394,375,708

1,954,040

24,954

459,271,816

814,241

3,828,000

1,510,731

5,570,625

8,304,618

86,818,682

2,126,014

4,675,640

4,830,117

5,659

3,349,399

119,374

5,059,362

26,738,515

8,814

10,311,653

229,961

2,301,708

13,755,855

69,744,951

1,871,635

7,972,554

4,863,433

198,638

1,086,289

2,897,791

3,883,070

1,033

13,767,462

20,896,091

525,304

2,339,411

1,475,222

814,241

3,828,000

2,301,708

13,755,855

69,744,951

1,871,635

7,972,554

4,863,433

198,638

1,086,289

2,897,791

3,883,070

20,896,091

526,337

13,767,462

2,339,411

1,475,222

Total deferred income tax liabilities

436,711,228

121,230,170

557,941,398

517,988,747

98,734,768

616,723,515

Net deferred assets (liabilities)

(246,754,946)

(69,117,042)

(315,871,988)

(287,738,395)

(2,715,812)

(290,454,207)

(1) Tax loss carryforwards relate primarily to Peruvian, Chilean and Brazilian entities. In accordance with the current enacted tax law in Chile and Brazil, such tax losses may be carried-forward indefinitely, however

Peruvian tax carryforwards expire after five years.

ENERSIS 20 02 ANNUAL REPORT

173

172

A reconciliation of the Chilean Statutory Income Tax rate to the Company’s effective tax rate on net income is as follows:

Chile
ThCh$

Argentina
ThCh$

Perú
ThCh$

2000

Brazil
ThCh$

Colombia
ThCh$

Other
ThCh$

Total
ThCh$

Statutory Chilean tax

42,274,015

20,326,388

12,194,040

6,526,106

16,240,891

(32,646,249)

64,915,191

Effect of higher foreign tax rates

18,710,018

8,064,200

1,091,686

8,940,850

(3,439,430)

33,367,324

Increase (decrease) in rates resulting from:

Price-level restatement not accepted for tax
purposes

Non-taxable items

Non-deductible items

Prior years income tax

Other

8,795,897

(305,904)

2,898,307

(5,955,061)

4,666,333

10,099,572

(24,795,443)

267,276

4,808,544

2,240,689

5,065,308

36,085,678

23,672,052

40,180,413

6,590,676

(8,077,733)

(887,189)

(1,575,934)

(6,157,565)

343,646

69,386,194

37,806,167

61,996,341

52,408

(434,042)

2,828,427

(1,750,855)

321,727

1,017,704

Tax expense at effective tax rate

64,931,356

38,996,847

28,308,776

68,040,308

32,275,338

321,726

232,874,351

Chile
ThCh$

Argentina
ThCh$

Perú
ThCh$

2001

Brazil
ThCh$

Colombia
ThCh$

Other
ThCh$

Total
ThCh$

Statutory Chilean tax

35,207,167

33,046,613

8,262,496

(750,031)

19,766,103

(32,573,861)

62,958,487

Effect of higher foreign tax rates

63,649,632

16,461,874

1,640,641

30,099,172

(6,560,221)

105,291,098

Increase (decrease) in rates resulting from:

Price-level restatement not accepted for tax
purposes

10,831,171

(471,398)

(472,813)

(1,154,998)

14,976,551

23,708,513

Non-taxable items

Non-deductible items

Prior years income tax

Effect of Chilean tax rate increase

(21,005,978)

12,895,204

4,689,412

94,672

39,134,083

35,807,393

(24,172,189)

20,330,824

(7,574,107)

(316,500)

(719,668)

1,986,643

8,212,618

401,288

(2,163,759)

(12,451,640)

224,172

8,212,618

Other

3,988,096

(13,899,124)

(254,737)

8,433,636

(1,054,508)

71,781

(2,714,856)

Tax expense at effective tax rate

15,047,528

115,551,751

21,513,413

5,783,661

63,067,650

71,782

221,035,785

Chile
ThCh$

Argentina
ThCh$

Perú
ThCh$

2002

Brazil
ThCh$

Colombia
ThCh$

Other
ThCh$

Statutory Chilean tax

Effect of higher foreign tax rates

(66,503,282)

426,279

165,774

196,856

12,985,063

(74,011,455)

6,766,510

14,202,414

(57,760,020)

(6,900,286)

Increase (decrease) in rates resulting from:

Price-level restatement not accepted
for tax purposes

Non-taxable items

Non-deductible items

Prior years income tax

Other

6,829,025

(23,354,798)

565,546

1,932,546

13,543,094

(1,268,782)

7,828,561

8,312,037

43,976,453

(199)

64,855,138

(35,286,731)

6,987,296

87,266,915

(4,057,934)

2,669,791

1,354,580

(509,651)

(1,420,225)

(327,074)

(1,519,692)

(744,875)

1,943,265

Total
ThCh$

(120,597,390)

(49,834,757)

(484,587)

58,848,070

119,764,684

3,514,720

(2,068,601)

Tax (benefit) expense at effective tax rate

5,587,944

(50,777,412)

42,887,244

659,564

10,784,799

9,142,139

ENERSIS 2002 ANNUA L REPORT

173

172
172

d. Acquisitions

In May of 2002, Enersis S.A. acquired 6,824,495 Sociedad Inversiones Distrilima S.A. shares equivalent to 1.14% of issued

capital for US$1,767,761.22 increasing its direct interest from 14.79% to 15.93%.

In February and April of 2002 Enersis S.A. made contributions of US$22,773,195.87 to Central Generadora Termelétrica

Fortalez S.A. for a capital increase, maintaining its 48.82% interest equivalent to 20,246,908 shares.

During 2002, Lajas Inversora (Endesa subsidiary) acquired 753,627 (0.0803%) of Central Eléctrica Cachoeira Dourada S.A.

(Brasil) shares for Th$58,931, increasing its interest to 99.59% in said Company.

On September 13, 2002, Endesa acquired 7,275,433 (2.51%) Pangue S.A. (Chile) shares for Th$4,998,894, increasing its

interest to 94.97% in said Company.

Debenture capitalization in Cerj

On July 11, 2002, the Company Luz de Río Ltda. and Endesa International Energía Ltda., holders of convertible bonds

issued by Companhía de Electricidade do Río de Janeiro, exercised the option to capitalize their investment. To that effect,

420,705,127,532 no par value shares were issued.

During the year ended December 31, 2001, the Company did not have significant acquisitions.

For acquisitions accounted as a business combination using the purchase method, assets and liabilities have been consolidated

as of the purchase date and earnings from the acquisitions have been included in consolidated earnings of the Company from

to the purchase date.

e. Segment disclosures

The Company is primarily engaged in the distribution, generation and transmission of electricity in Chile, Argentina, Brazil,

Colombia and Perú. Enersis provides these and other services through four business segments:

• Generation

• Distribution

• Engineering Services and Real State

• Corporate and other

Generation involves the generation of electricity primarily through its subsidiary Endesa-Chile. Distribution involves the supply

of electricity to regulated and unregulated customers. Engineering Services and Real Estate includes engineering services

and real estate development. Corporate and other includes computer-related data processing services and the sale of electric-

related supplies and equipment. The Company’s reportable segments are strategic business units that offer different products

and services and are managed separately. The methods of revenue recognition by segment are as follows:

ENERSIS 20 02 ANNUAL REPORT

175

174

• Generation

Revenue is recognized when energy and power output is delivered and capacity is provided at rates specified under contract

terms or prevailing market rates.

• Distribution - Operating Revenues

Revenue is recognized when energy and power is provided at rates specified under contract terms or prevailing market

rates.

• Distribution - Non Operating Revenues

Revenue is recognized as services are provided, such as public light posts, telephone poles, and other services related to

distribution services.

• Engineering Services and Real Estate

Revenue is recognized as services are provided, or when projects are sold.

• Corporate and Other

Revenue is recognized as services are provided, or when supplies or equipment are sold.

ENERSIS 2002 ANNUA L REPORT

175

174
174

The following segment information has been disclosed in accordance with U.S. reporting requirements, however, the information

presented has been determined in accordance with Chilean GAAP:

2000

Sales to unaffilated customers

Intersegment sales

Total revenues

Operating income

Generation

Distribution

Engineering
services and
real estate

Corparate
and other

Eliminations

Consolidated

ThCh$

700,831,148

1,972,978,680

236,819,167

29,428,862

937,650,315

2,002,407,542

47,820,038

32,294,269

80,114,307

35,417,231

2,757,047,097

25,803,150

(324,345,448)

61,220,381

(324,345,448)

2,757,047,097

266,929,009

271,970,486

14,955,921

(8,807,981)

7,702,184

552,749,619

Participation in net income of affialate companies

3,556

73,197

76,753

Depreciation and amortization

169,553,126

243,552,307

1,264,335

49,658,881

(266,434)

463,762,215

Identifiable assets including investment in related companies

6,016,567,836

6,005,278,026

143,109,885

4,729,152,140

(5,138,754,125)

11,755,353,762

Capital expenditures

89,662,770

250,520,763

1,028,999

1,796,973

343,009,505

2001

Sales to unaffilated customers

Intersegment sales

Total revenues

Operating income

Generation

Distribution

Engineering
services and
real estate

Corparate
and other

Eliminations

Consolidated

ThCh$

836,144,871

2,126,128,164

209,134,449

43,705,715

1,045,279,320

2,169,833,879

35,046,655

28,336,648

63,383,303

62,061,071

3,059,380,761

30,562,731

(311,739,543)

92,623,802

(311,739,543)

3,059,380,761

347,975,163

386,500,673

10,133,274

(4,545,293)

14,479,950

754,543,767

Participation in net income of affialate companies

(10,355,056)

(343,742)

(10,698,798)

Depreciation and amortization

150,091,696

260,276,949

1,241,298

56,491,985

(266,433)

467,835,495

Identifiable assets including investment in related companies

6,361,571,367

6,310,062,578

135,386,583

4,945,729,831

(4,992,951,048)

12,759,799,311

Capital expenditures

(52,972,422)

(287,990,889)

(415,494)

(174,931)

(341,553,736)

2002

Sales to unaffiliated customers

Intersegment sales

Total revenues

Operating income

Generation

Distribution

Engineering
services and
real estate

Corparate
and other

Eliminations

Consolidated

ThCh$

724,708,753

1,712,052,829

213,390,398

50,057,741

34,157,580

71,166,328

14,954,058

42,859,584

(377,474,051)

2,485,873,220

938,099,151

1,762,110,570

105,323,908

57,813,642

(377,474,051)

2,485,873,220

336,622,006

183,495,124

13,379,302

(111,044)

(741,027)

532,644,361

Participation in net income of affiliate companies

8,541,745

(277,962)

8,263,783

Depreciation and amortization

221,359,385

512,547,464

1,411,217

110,822,164

12,816,588

858,956,818

Identifiable assets including investment in related companies

6,524,201,396

6,105,423,113

140,950,745

4,294,946,364

(4,444,356,942)

12,621,164,676

Capital expenditures

134,858,115

181,859,234

755,092

443,002

317,915,443

ENERSIS 20 02 ANNUAL REPORT

177

176

A summary of activities by geographic area is as follows:

Chile
ThCh$

Argentina
ThCh$

Perú
ThCh$

Brazil
ThCh$

Colombia
ThCh$

Total
ThCh$

2000

Total revenues

699,239,131

759,355,551

233,989,079

634,011,382

430,451,955

2,757,047,098

Long lived assets (net) (1)

2,803,069,054

1,440,626,633

1,064,776,614

1,254,692,103

2,381,648,403

8,944,812,807

2001

Total revenues

805,112,327

827,352,863

265,489,142

691,658,117

469,768,312

3,059,380,761

Long lived assets (net) (1)

2,365,838,917

1,562,886,168

1,173,962,317

1,944,053,053

2,578,309,204

9,625,049,659

2002

Total revenues

799,462,080

297,634,006

292,427,127

624,290,007

472,060,000

2,485,873,220

Long lived assets (net) (1)

2,374,734,591

1,551,821,292

1,235,792,237

2,039,631,354

2,677,478,709

9,879,458,183

(1) Long-lived assets include property, plant and equipment.

f. Concentration of risk:

The Company does not believe that it is exposed to any unusual credit risk from any single customer. The Company’s debtors

are dependent on the economy in Latin America, which could make them vulnerable to downturns in the economic activity in

the countries in which the Company operates.

No single customers accounted for more than 10% of revenues for the years ending December 31, 2001 and 2002.

g. Schedule of debt maturity:

Following is a schedule of debt maturity in each of the next five years and thereafter:

2003

2004

2005

2006

2007

Thereafter

Total

ThCh$

1,558,378,097

2,355,368,823

177,943,497

611,688,751

155,949,924

1,518,063,448

6,377,392,540

ENERSIS 2002 ANNUA L REPORT

177

176
176

h. Disclosure regarding interest capitalization:

Interest cost incurred

Interest capitalized under Chilean GAAP

Interest capitalized under U.S. GAAP

i. Cash flow information:

Year ended December 31,

2000
ThCh$

520,328,589

21,323,611

55,715,832

2001
ThCh$

457,221,298

24,250,320

29,138,235

2002
ThCh$

446,064,039

19,467,730

23,656,508

(i) The statement of cash flows under Chile GAAP differs in certain respects from the presentation of a statement of cash flow

under U.S. GAAP as follows:

Cash provided by operating activities under Chilean GAAP

Development stage companies

2000
ThCh$

538,690,847

Cash provided by (used in) operating activities under U.S. GAAP

538,690,847

Cash provided by (used in) financing activities under Chilean GAAP

(814,290,090)

Development stage companies

Repurchase of Yankee Bonds

Cash provided by (used in) financing activities under U.S.GAAP

(814,290,090)

Year ended December 31,

2001
ThCh$

662,920,609

1,303,896

664,224,505

(61,414,127)

(985,718)

(177,168,871)

(239,568,716)

2002
ThCh$

627,782,332

(285,039,864)

Cash provided by (used in) investing activities under Chilean GAAP

176,616,070

(503,639,589)

(336,878,757)

Development stage companies

Repurchase of Yankee Bonds

Time deposits (1)

(310,893)

177,168,871

Cash provided by (used in) investing activities under U.S.GAAP

176,616,070

(326,781,611)

(1) Time deposits with maturities longer than 90 days

(10,176,847)

(347,055,604)

ENERSIS 20 02 ANNUAL REPORT

179

178

(ii) Cash and cash equivalents includes all highly liquid debt instruments purchased with a maturity of three months or less:

Cash

Time deposits

Marketable securities

Other current assets

2000
ThCh$

28,073,249

79,697,694

12,264,761

Year ended December 31,

2001
ThCh$

37,648,796

178,113,234

198,248

1,867,323

2002
ThCh$

48,184,878

135,450,047

1,543,290

25,836,618

Total cash and cash equivalents

120,035,704

217,827,601

211,014,833

(iii) Additional disclosures required under U.S. GAAP are as follows:

Interest paid during the year

Income taxes paid during the year

Assets acquired under capital leasing

Year ended December 31,

2000
ThCh$

381,782,050

154,341,501

2,314,164

2001
ThCh$

405,238,393

132,198,412

238,590

2002
ThCh$

455,550,047

136,413,682

j. Disclosures about fair value of financial instruments

The following methods and assumption were used to estimate the fair value of each class of financial instruments as of

December 31, 2001 and 2002 for which it is practicable to estimate that value:

• Cash

The fair value of the Company’s cash is equal to its carrying value.

• Time deposits

The fair value of time deposits approximates carrying value due to the relatively short-term nature.

• Marketable securities

The fair value of marketable securities is based on quoted market prices of the common stock held and approximates carrying

value.

• Long-term accounts receivable

The fair value of long-term accounts receivable was estimated using the interest rates that are currently offered for loans with

similar terms and remaining maturities.

• Long-term debt

The fair value of long-term debt was based on rates currently available to the Company for debt with similar terms and remaining

maturities.

ENERSIS 2002 ANNUA L REPORT

179

178
178

• Derivative instruments

Estimates of fair values of derivative instruments for which no quoted prices or secondary market exists have been made

using valuation techniques such as forward pricing models, present value of estimated future cash flows, and other modeling

techniques. These estimates of fair value include assumptions made by the Company about market variables that may change

in the future. Changes in assumptions could have a significant impact on the estimate of fair values disclosed. As a result such

fair value amounts are subject to significant volatility and are highly dependent on the qualify of the assumptions used.

The estimated fair values of the Company’s financial instruments compared to Chilean GAAP carrying amounts are as

follows:

Cash

Time deposits

Marketable securities

Accounts receivable

Notes receivable, net

Other accounts receivable, net

Amounts due from related companies

Long-term accounts recievable

Accounts payable and other

Notes payable

long-term debt

Derivatives instruments

As of December 31,

2001

2002

Carrying
amount

ThCh$

37,648,796

178,113,234

203,072

550,248,992

12,018,206

65,885,843

188,687,370

101,903,562

Fair
Value

ThCh$

37,648,796

178,113,234

203,072

550,248,992

12,018,206

65,885,843

188,687,370

101,903,562

Carrying
amount

ThCh$

48,184,878

145,626,894

1,543,290

458,839,724

5,131,349

62,776,096

196,297,002

125,850,513

(265,964,525)

(279,395,725)

(265,964,525)

(279,395,725)

(236,630,187)

(225,719,764)

Fair
Value

ThCh$

48,184,878

145,626,894

1,543,290

458,839,724

5,131,349

62,776,096

196,297,002

125,850,513

(236,630,187)

(225,719,764)

(6,232,523,988)

(6,191,284,245)

(6,377,392,540)

(6,342,731,573)

(79,982,358)

130,385,292

128,686,537

k. Derivative instruments

The Company is exposed to the impact of market fluctuations in the price of electricity, primary materials such as natural gas,

petroleum, coal, and other energy-related products, interest rates, and foreign exchange rates. The Company employs policies

and procedures to manage its risks associated with these market fluctuation on a global basis through strategic contract

selection, fixed-rate and variable-rate portfolio targets, net investment hedges, and financial derivatives. All derivatives that

do not qualify for the normal purchase and sales exemption under SFAS No. 133 are recorded at their fair value. On the date

that swaps, futures, forwards or option contracts are entered into, the Company designates the derivatives as a “hedge”, if

the documentation is not appropriate to designate as a “hedge” the derivative’s mark-to-market adjustment flows through the

income statement. The Company does not have the appropriate documentation in place to designate contracts as hedges of a

forecasted transaction or future cash flows (cash flow hedge) or as a hedge of a recognized assets, liability or firm commitment

(fair value hedge).

The Company has classified its derivatives into the following general categories: commodity derivatives, embedded derivatives,

and financial derivatives. Certain energy and other contracts for the Company’s operations in Chile are denominated in the

US dollar. According to SFAS No. 133, an embedded foreign currency derivative should be separated from the host contract

because none of the applicable exclusions are met (See Embedded Derivative Contracts below). For purposes of evaluating

the functional currency of the Company’s subsidiaries in Argentina, Perú, Brazil, and Colombia, the Company applied BT 64,

ENERSIS 20 02 ANNUAL REPORT

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180

consistent with the methodology described in paragraph (s), thus the functional currency of these subsidiaries was the US

dollar as these subsidiaries were remeasured into US dollars because foreign subsidiaries operate in countries exposed to

significant risks as determined under BT 64.

The following is a summary of the Company’s adjustment to fair values for all identified derivative contracts at the date of

implementation of SFAS No. 133 on January 1, 2001 and as the year-ended December 31, 2001 and 2002.

Commodity derivatives

Embedded derivatives

Financial derivatives

Effects of minority interest

Deferred tax effects

As of January 1, 2001

Distribution

Generation

ThCh$

16,330,955

25,266

(1,650,130)

14,706,091

(7,947,755)

(5,185,287)

ThCh$

127,914,469

(8,631,797)

(3,776,374)

115,506,298

(54,673,667)

(41,390,634)

Total

ThCh$

144,245,424

(8,606,531)

(5,426,504)

130,212,389

(62,621,422)

(46,575,921)

Cumulative change in accounting principle

1,573,049

19,441,997

21,015,046

Commodity derivatives

Embedded derivatives

Financial derivatives

Investment in related companies

Derivative instruments U.S.GAAP
Shareholders equity adjustment

Commodity derivatives

Embedded derivatives

Financial derivatives

Investment in related companies

Derivative instruments U.S.GAAP
Shareholders equity adjustment

ENERSIS 2002 ANNUA L REPORT

181

180
180

ThCh$

80,927,204

(23,089,669)

352,726

58,190,261

ThCh$

(11,240,489)

262,190

(28,432,901)

(39,411,200)

As of December 31, 2001

Distribution

Generation

ThCh$

135,782,017

(3,876,022)

(19,026,564)

Total

ThCh$

216,709,221

(26,965,691)

(18,673,838)

112,879,431

39,297,958

171,069,692

39,297,958

58,190,261

152,177,389

210,367,650

As of December 31, 2002

Distribution

Generation

ThCh$

218,474,062

(12,209,854)

(16,952,690)

Total

ThCh$

207,233,573

(11,947,664)

(45,385,591)

189,311,518

7,649,226

149,900,318

7,649,226

(39,411,200)

196,960,744

157,549,544

Certain Company’s generation and distribution commodity contracts could be seen as contracts that meet the definition of

a derivative under SFAS No. 133 and would be required to be accounted for at fair value. These conditions are (i) have an

underlying, which is the market price of power at the delivery location and a notional amount specified in the contract; (ii) have

no initial payment on entering into the contract; and (iii) do not have a net settlement provision have has the characteristic

of net settlement because power is readily convertible to cash, as it is both fungible and actively traded in the country of

generation or country of distribution.

The Company assessed that its commodity contracts that are requirements contracts do no meet the above definition because

the contracts do not have notional amounts, as they only have maximum amounts or no specified amounts, and do not include

an implicit or explicit minimum amount in a settlement or a default clause. A requirements contract allows the purchaser to

use as many units of power as required to satisfy its actual needs for power during the period of the contract, and the party

is not permitted to buy more than its actual needs.

The Company concluded that all of its power is readily convertible to cash as energy is actively traded, or the Company has

access, to markets where energy is actively traded. However, only certain participants have access to the energy markets,

thus determination as to whether energy could be considered readily convertible to cash was analyzed on a country by country

basis. Currently, Chilean distributors do not have access to the Chilean spot market, however this could change in the future

if energy regulations are changed. The Company has also concluded that multiple-delivery long-term power contracts meet

the net settlement characteristic. Management multiple-delivery long-term power contracts are readily convertible to cash

because the Company operates in countries with active spot markets, that although they contain varying levels of liquidity,

can rapidly absorb the contract’s quantities at each delivery date without significantly affecting the price, and thus meet the

definition of net settlement, consequently these contracts are accounted as derivatives that under SFAS No.133.

The Company’s Argentine generation entities have access to the Brazilian energy market through an interconnection system

between the two markets. In order to calculate the fair values of the purchase and sale contracts related to the energy to be

sold in the Brazilian market, the Argentine market prices were used. The Company believes this is the best measure for fair

value, because in the event that the Brazilian market prices are below the cost to produce the energy in Argentina, the Company

will sell the energy in Argentina and purchase the energy from the spot market in Brazil. Additionally, the interconnection line

was established to sell energy generated in Argentina in the Brazilian market, as the Brazilian energy market heavily relies

on hydro-electric generation and has historically had significant problems with meeting its energy needs economically due to

lack of rainfall.

Because both the purchases and sales interconnection contracts are for periods up to 20 years in complex markets, where no

similar term forward market information is available, the Company has estimated such values based on the best information

available, including using modeling and other valuation techniques. The Company has recorded the best estimate of fair value,

however with different assumptions such as interest rates, inflation rates, exchange rates, electricity rates, and increases in

cost trends, materially different fair values could result. As a result such estimates are highly volatile and dependent upon the

assumptions used. The assumption to measure the fair value of these interconnection related contracts using the Argentine

market prices has a significant effect on the Company’s net income and shareholder equity.

If Brazilian market prices had been used instead of Argentine prices estimated fair values of the related energy contracts a

significantly different fair value would result. The Company considers the Argentine prices to be the correct benchmark to

value the fair value of the interconnection contracts because the Company does not have concessions to sell the Argentine

generated energy in the Brazilian market to any parties other than those currently contracted. Therefore the Company views

the interconnection as an extension of the Argentine market and as a more appropriate measure of the fair value of energy.

ENERSIS 20 02 ANNUAL REPORT

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182

Such values are included in the reconciliation to U.S. GAAP in paragraph (aa).

Embedded Derivative Contracts

The Company enters into certain contracts that have embedded features that are not clearly and closely related to the host

contract. As specified in SFAS No. 133, bifurcation analysis focuses on whether the economic characteristics and risks of the

embedded derivative are clearly and closely related to the economic characteristics and risks of the host contract. In certain

identified contracts, the host service contract and the embedded feature are not indexed to the same underlying and changes

in the price or value of service will not always correspond to changes in the price of the commodity to which the contract

is indexed. U.S. GAAP requires embedded features to be measured at fair value as freestanding instruments. Unless the

embedded contracts are remeasured at fair value under otherwise applicable GAAP, the embedded feature must be valued

at fair value with changes in fair value reported in earnings as they occur.

Embedded foreign currency derivative instruments are not separated from the host contract and considered a derivative

instrument if the host contract is not a financia1 instrument and it requires payments denominated in either: (1) the functional

currency of any substantial patty to the contract. (2) the local currency of any substantial party to the contract, (3) the currency

used because the primary economic environment is highly inflationary, or (4) the currency in which the good or service is

routinely denominated in international commerce.

Financial Derivatives

Changes in interest rates expose the Company to risk as a result of its portfolio of fixed-rate and variable rate debt. The

Company manages interest rate risk exposure on a global basis by limiting its variable rate and fixed-rate exposures to certain

variable/fixed mixes set by policy. The Company manages interest rate risk through the use of interest rate swaps and collars

and cross-currency swaps. The Company does not enter into financia1 instruments for trading or speculative purposes.

Net lnvestment Hedges

The Company is also exposed to foreign currency risk arising from long-term debt denominated in foreign currencies, the

majority of which is the US dollar. This risk is mitigated, as a substantial portion of the Company’s revenues are either directly

or indirectly linked to the US dollar. Additionally, the Company records the foreign exchange gains and losses on liabilities

related to net investments in foreign countries which are denominated in the same currency as the functional currency of

those foreign investments. Such unrealized gains and losses are included in the cumulative translation adjustment account in

shareholders equity, and in this way act as a net investment hedge of the exchange risk affecting the investments (see Note

ll (c) and Note 22 (f) for further detail). The Company also uses short duration forward foreign currency contracts and swaps,

and cross-currency swaps, where possible, to manage its risk related to foreign currency fluctuations. These contracts are

considered “cover” contracts under Chilean GAAP. In accordance with Chilean GAAP the gain and losses on these contracts

are deferred until realized as assets or liabilities.

For U.S. GAAP purposes, as the Company has not met the requirements for designating these derivatives contracts as

“hedges”, the contracts are recorded at fair value in the balance sheet with any unrealized gain and/or losses being directly

recorded in the income statement.

l. Reclassification to U.S. GAAP

Certain reclassifications would be made to the Chilean GAAP income statement in order to present Chilean GAAP amounts

in accordance with presentation requirements under U.S. GAAP. Amortization of negative goodwill, amortization of goodwill,

and certain other non-operating income and expense, would be included in operating income. Recoverable taxes included

in other non-operating revenues would be recorded as part of income taxes under U.S. GAAP. The gain from the repurchase

ENERSIS 2002 ANNUA L REPORT

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182
182

of Yankee bonds by Enersis S.A. and Endesa Chile S.A. included in non-operating income under Chilean GAAP would be

presented as an extraordinary gain according to U.S. GAAP. Equity participation in income or losses of related companies

included in non-operating income would be presented after income taxes and minority interest in accordance with U.S.

GAAP. The following reclassifications included in the column labeled “Reclassifications” disclose amounts using a U.S. GAAP

presentation, although the amounts displayed have been determined in accordance with Chilean GAAP:

Operating income

Non-operating expense, net

Income taxes

Minority interest

Year ended December 31, 2000

Chilean GAAP

Reclassification

U.S. GAAP
Presentation

ThCh$

552,749,621

258,352,632

811,102,252

(169,411,441)

(219,985,929)

(389,397,370)

(146,323,505)

(184,000,228)

4,203,502

(142,120,003)

(184,000,228)

Equity participation in income of related companies, net

76,753

Amortization of negative goodwill

42,646,957

(42,646,957)

76,753

Net income

95,661,405

Operating income

Non-operating expense, net

Income taxes

Minority interest

Year ended December 31, 2001

Chilean GAAP

Reclassification

U.S. GAAP
Presentation

ThCh$

754,543,767

(84,016,035)

670,527,732

(498,001,278)

(136,687,539)

(125,152,619)

109,936,884

(388,064,394)

8,116,807

(128,570,732)

(125,152,619)

Equity participation in income of related companies, net

(10,698,797)

Amortization of negative goodwill

47,451,702

(47,451,702)

Net income before extraordinary gain

42,154,033

(24,112,843)

24,112,843

18,041,190

24,112,843

Extraordinary gain

Net income

42,154,033

ENERSIS 20 02 ANNUAL REPORT

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184

Operating income

Non-operating expense, net

Income taxes

Minority interest

Equity participation in income of related companies, net

Year ended December 31, 2002

Chilean GAAP

Reclassification

U.S. GAAP
Presentation

ThCh$

532,644,361

(443,002,361)

89,642,000

(796,530,156)

540,598,729

(255,931,427)

(66,016,985)

(15,988,017)

(82,005,002)

16,282,559

8,263,783

16,282,559

8,263,783

Amortization of negative goodwill

112,247,774

(112,247,774)

Net loss before extraordinary items

(201,372,447)

(22,375,640)

(223,748,087)

Extraordinary items

(22,375,640)

22,375,640

Net loss

(223,748,087)

Certain reclassifications would be made to the Chilean GAAP balance sheet in order to present Chilean GAAP amounts in

accordance with presentation requirements under U.S. GAAP. Deferred taxes from depreciation differences that are recorded as

short-term under Chilean GAAP would be recorded as long-term under U.S. GAAP. Real estate properties under development

and construction-in-progress are included in current assets as inventory in Chilean GAAP and under U.S. GAAP such assets

would have been included as property, plant and equipment. Additionally, the regulated asset recorded during 2001 by Coelce

and Cerj, Brazilian subsidiaries, has been partially recorded in trade receivables and an additional component was recorded in

current assets by Coelce under Chilean GAAP. However, under U.S. GAAP the presentation of these regulated assets should

be classified as non-current assets as the recovery of these assets is not expected in the short term. These reclassifications

exclude consolidation of development stage companies, the effect of which is immaterial.

The effect of the following reclassifications included in the column labeled “Reclassifications” discloses amounts using a U.S.

GAAP presentation although the amounts displayed have been determined in accordance with Chilean GAAP:

Current assets

Year ended December 31, 2001

Chilean GAAP

Reclassification

U.S. GAAP
Presentation

ThCh$

1,162,446,794

(211,305,194)

951,141,600

Property, plant an equipment, net

9,625,049,659

27,262,972

9,652,312,631

Other assets

Total assets

Current liabilities

Long-term liabilities

Minority interest

Shareholders’s equity

1,972,302,858

(52,706,143)

1,919,596,715

12,759,799,311

(236,748,365)

12,523,050,946

1,639,303,381

(110,607,126)

1,528,696,255

5,832,362,823

(126,141,239)

5,706,221,584

4,073,571,128

1,214,561,979

4,073,571,128

1,214,561,979

Total liabilities and shareholders’ equity

12,759,799,311

(236,748,365)

12,523,050,946

ENERSIS 2002 ANNUA L REPORT

185

184
184

Current assets

Year ended December 31, 2002

Chilean GAAP

Reclassification

U.S. GAAP
Presentation

ThCh$

1,223,963,114

(84,691,477)

1,139,271,637

Property, plant an equipment, net

9,879,458,183

23,804,228

9,903,262,411

Other assets

Total assets

Current liabilities

Long-term liabilities

Minority interest

Shareholders’s equity

1,517,743,379

(24,600,329)

1,493,143,050

12,621,164,676

(85,487,578)

12,535,677,098

2,151,373,249

(28,554,145)

2,122,819,104

5,413,608,412

(56,933,433)

5,356,674,979

4,050,602,721

1,005,580,294

4,050,602,721

1,005,580,294

Total liabilities and shareholders’ equity

12,621,164,676

(85,487,578)

12,535,677,098

m. Employee Benefit Plans

Enersis S.A. and its subsidiaries sponsor various benefit plans for its current and retired employees. A description of such’

benefits follows:

Severance indemnities

The provision for severance indemnities, included in the account “Accrued expenses” short and long-term is calculated in

accordance with the policy set forth in Note 2 (n), using the current salary levels of all employees covered under the severance

indemnities agreement, an assumed discount rate of 9.5% for the years ended December 31,1999,2000 and 2001, and an

estimated average service period based on the years of services for the Company.

Benefits for Retired Personnel

Other benefits provided to certain retired personnel of Enersis include electrical service rate subsidies, additional medical

insurance and additional post-retirement benefits. Descriptions of these benefits for retired personnel are as follows:

i) Electrical rate service

This benefit is extended only to certain retired personnel of Enersis. These electric rate subsidies result in the eligible retired

employees paying a percentage of their total monthly electricity costs, with Enersis paying the difference.

ii) Medical benefits

This benefit provides supplementary health insurance, which covers a portion of health benefits not covered under the

institutional health benefits maintained by employees of Enersis. This benefit expires at the time of death of the pensioner.

iii) Supplementary pension benefits

Eligible employees are able to receive a monthly amount designed to cover a portion of the difference between their salary

at the point of retirement and the theoretical pension that would have been received had the employee reached the legal

retirement age of the Institución de Previsión Social (Institute of Social Welfare). This benefit expires upon the death of

the pensioner for the Enersis employee, however, continues to cover the surviving-spouse in the case of employees of the

subsidiary Endesa-Chile.

ENERSIS 20 02 ANNUAL REPORT

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186

iv) Worker’s compensation benefits

Employees that were entitled to Worker’s compensation insurance in prior years for work related accidents receive benefits

from the Company as such insurance has expired. This benefit continues at the time of death of the pensioner, to cover the

surviving-spouse.

The Company has recognized liabilities related to complementary pension plan benefits and other postretirement benefits as

stipulated in collective bargaining agreements. Under U.S. GAAP, post-retirement employee benefits have been accounted

for in accordance with SFAS No. 87 and SFAS No. 106, with inclusion of prior-period amounts in current year’s income as

the amounts are not considered significant to the overall financia1 statement presentation. The effects of accounting for post-

retirement benefits under U.S. GAAP have been presented in paragraph (bb), above. The following data are presented under

U.S. GAAP for Company’s post-retirement benefit plans.

Changes in benefit (obligations)

Pension Benefits

Other Benefits

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

Benefit (obligations) at January 1

(127,276,623)

(158,318,450)

(5,630,758)

(18,790,555)

Price-level restatement

Foreign exchange effect

Net periodic expense

Benefits paid

Company contributions

3,826,939

(15,743,272)

(14,783,599)

1,130,278

8,250,286

4,141,331

(2,514,206)

(13,649,465)

14,647,166

32,554,873

136,056

468,722

(12,326,341)

(18,982,900)

906,077

(170,245)

4,029,429

Benefit (obligations) at December 31

(144,595,992)

(123,138,751)

(16,914,966)

(33,445,549)

Funded Status of the Plans

Proyected Benefit Obligation

Fair value of the plan’s assets

(224,243,937)

(208,863,000)

(19,442,624)

(33,293,198)

93,527,895

93,196,829

Funded Status

(130,716,041)

(115,666,171)

(19,442,624)

(33,293,198)

Unrecognized loss

Unrecognized net transition obligation

(30,531,801)

16,651,850

(17,138,790)

9,666,203

2,527,658

(13,056,708)

12,904,357

Net liability recorded under U.S. GAAP

(144,595,992)

(123,138,758)

(16,914,966)

(33,445,549)

Adjustment required to reflect minimum liability:

Additional minimum liability

Intangible asset

(291,282)

291,282

(299,601)

299,601

Balance of additional liability

ENERSIS 2002 ANNUA L REPORT

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186
186

Change in the plan assets

Fair value of plans assets, January 1

Foreign exchange effect

Actual return on the plan assets

Employer contributions

Plan participant contributions

Benefits paid

Fair value of plans assets, December 31

Pension Benefits

2002
ThCh$

86,445,632

(19,338,142)

28,063,671

13,665,577

4,110,398

(19,750,307)

93,196,829

Assumptions as of December 31

Discount rate

Salary increase

Return on plan assets

Components of net periodic
Benefits expenses

Service cost

Interest cost

2000
ThCh$

15.0%

9.6%

10.4%

Pension Benefits

2001
ThCh$

12.2%

7.0%

10.4%

2002
ThCh$

12.97%

6.86%

10.96%

2000
ThCh$

Other Benefits

2001
ThCh$

9.5%

11.8%

2002
ThCh$

11%

(748,873)

(697,719)

(905,752)

1,272,083

(11,129,179)

(4,407,258)

(16,106,429)

(23,595,153)

(13,605,434)

(716,812)

(986,524)

(2,586,994)

Expected return on assets

1,026,865

15,826,320

6,541,907

Amortization gain (loss)

6,101,489

(3,838,806)

Amortization of transition asset

(1,482,653)

(2,478,241)

(4,040,437)

(1,639,750)

(10,120,907)

217,167

(210,638)

(1,867,741)

Net periodic expenses

(11,209,601)

(14,783,599)

(13,649,466)

772,438

(12,326,341)

(18,982,900)

ENERSIS 20 02 ANNUAL REPORT

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188

n. Comprehensive income (loss)

In accordance with U.S. GAAP, the Company reports a measure of all changes in shareholders’ equity that result from transactions

and other economic events of the period other-than transactions with owners (“comprehensive income”). Comprehensive

income is the total of net income and other non-owner equity transactions that result in changes in net shareholders’ equity.

The following represents accumulated other comprehensive income balances as of December 31, 2000, 2001 and 2002 (in

thousands of constant Chilean pesos as of December 31,2002).

Chilean GAAP
cumulative translation
adjustment

2000

Effect of U.S. GAAP
adjustments on
cumulative
translation adjustment

Accumulated other
comprehensive
income (loss)

ThCh$

8,454,732

1,336,996

ThCh$

4,135,642

(4,410,079)

ThCh$

12,590,374

(3,073,083)

Beginning balance

Credit (charge) for the period

Ending balance

9,791,728

(247,437)

9,517,291

Chilean GAAP
cumulative translation
adjustment

2001

Effect of U.S. GAAP
adjustments on
cumulative
translation adjustment

Accumulated other
comprehensive
income (loss)

ThCh$

9,791,728

19,459,327

ThCh$

(274,437)

(3,494,199)

ThCh$

9,517,291

15,965,128

Beginning balance

Credit (charge) for the period

Ending balance

29,251,055

(3,768,636)

25,482,419

Chilean GAAP
cumulative translation
adjustment

2002

Effect of U.S. GAAP
adjustments on
cumulative
translation adjustment

Accumulated other
comprehensive
income (loss)

ThCh$

29,251,055

20,596,914

ThCh$

(3,768,636)

(12,536,493)

ThCh$

25,482,419

8,060,421

Beginning balance

Credit (charge) for the period

Ending balance

49,847,969

(16,305,129)

33,542,840

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188
188

o. Discontinued operations

In October of 2001, the FASB issued SFAS No. 144 which is effective for fiscal years beginning after December 15, 2001. SFAS

No. 144 establishes accounting and reporting standards for the impairment and disposal of long-lived assets and discontinued

operations. The Company adopted SFAS No. 144 in 2002. All prior year reporting periods have been restated to reflect the

adoption. The application of this statement resulted in the classification, and separate financial presentation of certain entities

as discontinued operations, the results of which are not included in continuing operations. There was no impairment of assets

related to discontinued operations, as their fair value exceeded their carrying value. Fair values used in these calculations

has been determined by using the agreed upon sales prices.

In 2002, the Endesa Chile (Enersis Subsidiary) committed to a plan to dispose the 60% equity participation it held in the

consolidated subsidiary, Infraestructura Dos Mil S.A. It was accounted for as discontinued operations in accordance with SFAS

No. 144 and, accordingly, amounts in reconciliation of net income to US GAAP and the additional disclosure notes required

under US GAAP for all periods shown, reflect that component as a discontinued operation.

The net sales from discontinued operations for the years 2000, 2001 and 2002 were ThCh$15,081,812, ThCh$20,150,123 and

ThCh$20,202,007, respectively. The major classes of discontinued consolidated assets, consolidated liabilities and minority

interest included in the Chilean GAAP Endesa Chile consolidated Balance Sheet are as follows:

Assets:

Cash

Account receivable, net

Other current assets

Property, plant and equipment, net

Intangibles

Other assets

As of December 31,

2001
ThCh$

2002
ThCh$

543,989

7,276,944

2,556,811

177,536,030

21,445

2,517,470

190,065

14,769,412

35,355,119

168,496,330

34,420

18,055,721

Total assets of discontinued operations

190,452,689

236,901,067

Liabilities:

Current liabilities

Long term liabilities

Income taxes payable (including deferred)

122,970,123

2,621,183

536,942

74,178,107

97,156,269

835,078

Minority interest

734,927

729,136

Total liabilities and minority interest of discontinued operations

126,863,175

172,898,590

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The major classes of consolidated revenues and expenses included in the Chilean GAAP Enersis consolidated Income

Statement are as follows:

Sales

Costs of sales

Gross profit

Administrative and selling expenses

2000
ThCh$

15,081,812

(8,689,379)

6,392,433

(985,710)

As of December 31,

2001
ThCh$

20,150,123

(10,457,778)

9,692,345

(1,291,432)

2002
ThCh$

20,202,007

(9,961,732)

10,240,275

(1,309,638)

Operating income

5,406,723

8,400,913

8,930,637

Non operating (loss) income

(4,836,751)

(7,003,803)

(7,501,002)

Income before taxes and minority interest

569,972

1,397,110

1,429,635

Income tax

Minority interest

155,745

(465,717)

(605,137)

(507,563)

(972,455)

(292,061)

Net income for the year

260,000

284,410

165,119

p. Goodwill and intangible assets

As discussed in paragraph (i), Enersis S.A. adopted SFAS 142, which requires companies to stop amortizing goodwill and

certain intangible assets with an indefinite useful life. Instead, FAS 142 requires that goodwill and intangible assets deemed

to have an indefinite useful life be reviewed for impairment upon adoption of SFAS 142, effective January 1, 2002 and

annually thereafter. Under SFAS 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds

its estimated fair value. The Company’s reporting units are at the operating subsidiary level. This methodology differs from

Enersis’s previous policy, as provided under accounting standards existing at that time of using undiscounted cash flows on

an enterprise-wide basis to determine if goodwill was recoverable. Upon adoption of SFAS 142 in 2002, the Company has

recognized a non-cash charge of ThCh$600,380,013 to reduce the carrying value of goodwill.

In calculating the impairment charge, the fair value of the impaired reporting units underlying the segments were estimated

using discounted cash flow methodology. The ThCh$600,380,013 goodwill impairment is associated entirely with goodwill

associated with investments in Argentina and Brazil. The impairment reflects the decline in the Company’s revenues and

forecasted cash flows in their Argentina and Brazilian subsidiaries and the increase in inflation and interest rates and decreasing

expectations of the currencies in Argentina and Brazil. Prior to performing the review for impairment, SFAS 142 required that

all goodwill deemed to be related to the entity as a whole be assigned to all of the Company’s reporting units, including the

reporting units of the acquirer.

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190

A summary of the changes in the Company’s goodwill under U.S. GAAP during the year ended December 31, 2002, by country

of operation is as follows:

January 1,
2002 (1)

ThCh$

998,343,122

83,196,029

482,974,835

60,415,564

19,993,731

Acquisitions

ThCh$

3,333,940

Goodwill

Translation
adjustment

ThCh$

Impairment

December 31,
2002

ThCh$

(1,713,130)

999,963,932

6,624,271

(89,820,300)

25,871,748

(508,846,583)

2,225,133

1,309,513

62,640,697

21,303,244

Chile

Argentina

Brazil

Colombia

Peru

Total

1,644,923,281

3,333,940

36,030,665

(600,380,013)

1,083,907,873

(1) In thousands of constant Chilean pesos as of December 31, 2002, using exchange rate of Ch$ 718,61 per US$

The Company’s intangible assets were ThCh$71,697,080 and ThCh$80,915,893 and related accumulated amortization were

ThCh$25,148,069 and ThCh$34,648,290 as of December 31, 2001 and 2002, respectively. There is no difference between

Chilean and U.S. GAAP in the amortization of intangible assets because all of the Company’s intangible assets are subject

to amortization, since they relate to finite contracts or concessions.

q. Recent accounting pronouncements

In January 2003, the Chilean Association of Accountants issued Technical Bulletin No. 72, “Combinación de Negocios Inversiones

Permanentes y Consolidación de Estados Financieros”. This standard complements or replaces existing accounting literature

for business combinations under Chilean GAAP, and requires all acquisitions initiated after January 1, 2003 to be accounted for

using the purchase method based on fair values of assets acquired and liabilities assumed. In addition, in exceptional cases,

the pooling-of-interest method may be used in reorganizations between related parties or for those transactions, where there

is no clear acquirer. Technical Bulletin No. 72 continues to require the amortization of goodwill, and specifies the requirement

for an impairment test. Notwithstanding any future transactions, the adoption of Technical Bulletin No. 72 is not expected to

have a significant effect on the results of operations, financial position or cash flows of the Company.

In June 2001 the Financia1 Accounting Standards Board issued Statement of Financia1 Accounting Standards No. 143,

“Accounting for Asset Retirement Obligations” (“SFAS No. 143”). This standard requires that obligations associated with the

retirement of tangible long-lived assets be recorded as liabilities when those obligations are incurred, with the amount of the

liability initially measured at fair value. Upon initially recognizing a liability for an asset retirement obligation, an entity must

capitalize the cost by recognizing an increase in the carrying amount of the related long-lived asset. Over time, this liability is

accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement

of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. If the

Company reported in accordance with U.S. GAAP, the Company would be required to adopt SFAS No. 143 effective January

1, 2003. The Company expects that the adoption of this statement will not result in a significant difference between Chilean

GAAP and US GAAP in future periods, however the Company is still assessing the impact.

In April 2002, the FASB issued Statement of Financia1 Accounting Standards No. 145, “Rescission of FASB Statements No.

4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. This statement rescinds FASB Statement

No. 4, “Reporting Gains and Losses from Extinguishments of Debt”, and an amendment of that Statement, Statement No. 64,

“Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements” This Statement also amends other existing authoritative

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pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed

conditions. The provisions of SFAS 145 related to the rescission of SFAS No. 4 shall be applied in fiscal years beginning

after May 15, 2002, although early application is encouraged. Any gain or loss on extinguishments of debt that was classified

as an extraordinary item in prior periods presented that does not meet the criteria in APB Opinion 30, “Reporting the Results

of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently

Occurring Events and Transactions” for classification as an extraordinary item shall be reclassified. Debt extinguishments

used as part of an entity’s risk management strategy represent one example of debt extinguishments that do not meet the

criteria for classification as extraordinary items in APB Opinion No. 30. The Company will apply SFAS 145 beginning January

1, 2003. The Company’s application of SFAS 145 will require the reclassification of the extraordinary gain on early retirement

of Yankee bonds of ThCh$23,410,527 (as presented in Note 34 l(l) to other non-operating income, so upon application there

will be no presentational difference between Chile and U.S. GAAP for the early extinguishments of debt.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement

addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues

Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an

Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires that a liability for a cost associated with

an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred, not when it is

“planned”. The Company is required to adopt the provisions of SFAS No. 146 for exit or disposal activities that are initiated

after December 31, 2002 and does not expect the adoption to have a material impact on the Company’s results of operations

or financial position.

In April 2003, the Financial Accounting Standards Board (FASB) issued Statement N°149 (SFAS N°149), Amendment of

Statement 133 on Derivative Instruments and Hedging Activities. FAS N° 149 amends and clarifies accounting for derivative

instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS N°133.

SFAS N°149 is applied prospectively and is effective for contracts entered into or modified after June 30, 2003, except for

SFAS N°133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003, and certain

provisions relating to forward purchases or sales of when-issued securities or other securities that do not yet exist. Enersis

is evaluating the effect, if any, that SFAS N°149 will have on its results of operating its financial position and its cash flows.

In June, 2003, the Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards No.

150 (“SFAS No. 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This

Statement clarifies classification and measurement of certain financial instruments with characteristics of both liabilities and

equity. It requires classification of financial instruments within a company’s scope as liabilities. Such financial instruments

may include mandatorily redeemable shares, financial instruments which embody an obligation to repurchase shares or require

issuer to settle the obligation by transferring assets, or financial instruments that embody an unconditional obligation, or, in

certain circumstances, an unconditional obligation. The Company believes that the adoption of this pronouncement will not

have an impact on its statements of financial condition, its statements of operations or cash flows.

In January, 2003, Emerging Issues Task Force (“EITF”) 00-21, “Revenue Arrangements with Multiple Deliverables,” was

issued , which is applicable for all revenue arrangements of this nature entered into after June 15, 2003. This EITF applies

to all deliverables within contractually binding arrangements in all industries in which a vendor will perform multiple revenue-

generating activities with certain exceptions. The application guidance contains guidance on 1) how these arrangements should

be measured; 2) whether the arrangement should be divided into separate units of accounting, and 3) how the arrangement

consideration should be allocated among the separate units of accounting. The Company believes that the issuance of this

EITF will have no impact on its statements of financial condition, its statements of operations or cash flows.

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192

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees,

Including Indirect Guarantees of Indebtedness of Others” (FIN 45). The Interpretation will significantly change current practice in

the accounting for, and disclosure of, guarantees. In general, the Interpretation applies to contracts or indemnification agreements

that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is

related to an asset, liability, or an equity security of the guaranteed party. Guarantees meeting the characteristics described

in the Interpretation, are required to be initially recorded at fair value, which is different from the general current practice of

recording a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement

No. 5, “Accounting for Contingencies”. The Interpretation also requires a guarantor to make significant new disclosures for

virtually all guarantees even when the likelihood of the guarantor’s having to make payments under the guarantee is remote.

The Interpretation’s disclosure requirements are effective for financial statements of interim or annual periods ending after

December 15, 2002. The Interpretation’s initial recognition and initial measurement provisions are applicable on a prospective

basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The Company

has implemented FIN 45 during December 31, 2002, noting no adjustments to US GAAP were necessary as the fair values

of all direct and indirect guarantees were zero, see Note 28 for a detail of the Company’s guarantees.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities-an interpretation of ARB

51,” to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial

statements the assets, liabilities and activities of another entity. Many variable interest entities have commonly been referred

to as special-purpose entities or off-balance sheet structures, but the guidance applies to a larger population of entities. In

general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes

that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial

resources for the entity to support its activities. The Company must apply Interpretation No. 46 immediately to variable interest

entities created after January 31, 2003 and apply it to existing variable interest entities in the first fiscal year or interim period

beginning after June 15, 2003. The Company does not expect the interpretation to have a material impact on the Company’s

results of operation or financial position.

r. Subsequent events

(1) During January 2003, the governor of the State of Paraná in Brazil suspended payment and announced its intention

to cancel or renegotiate the long-term energy contracts between Copel and Endesa-Chile’s equity method investment,

CIEN. The 20-year long-term contracts were negotiated during almost two years of negotiations and aim to relieve the

energy-suppy shortages in Brazil, and were complied with through December 31, 2002. An investment of more than

US$ 700 million was made to build the Interconnection-line between Brazil and Argentina. During 2002, approximately

R$1.2 billion (or approximately US$ 340 million) of energy was sold by CIEN to Copel through the long-term energy

contracts. CIEN has notified the Ministry of Mines and Energy and the Electric Energy Regulatory Agency (“ANEEL”) of

Copel’s default. CIEN has 20-year long-term energy purchase commitments in Argentina to satisfy the supply contracts

with Copel. Additionally, the estimated fair value of these long-term energy contracts with Copel was US$ 350 million

as of December 31, 2002, and any changes or cancellation of the contracts would likely have a material impact in the

Company’s consolidated net income and shareholders’ equity.

(2) On March 28, 2003, Enersis announced that the board of directors awarded the sale of its 98.7% equity stake in Río

Maipo to CGE Distribución S.A. for US$ 203 million. Enersis’ shareholders approved the sale of Río Maipo at a March

31, 2003 Extraordinary Shareholders’ Meeting. Enersis estimates that the sale of Río Maipo will contribute US$ 126

million before taxes to its income statement for the year ended December 31, 2003, and expects to apply the proceeds

of this sale to reduce its debt. On April 30, 2003, Río Maipo was sold for US$ 203 million, including US$ 33 million in

debt.

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(3) On March 31, 2003, at an Extraordinary Shareholders’ Meeting, Enersis’ management approved a capital increase for

the equivalent of up to US$ 2 billion. The capital increase, which commenced on May 31, 2003, already allowed for the

capitalization of all of Endesa-Spain’s loan to Enersis (with a face value of approximately US$ 1.37 billion), and will allow

the capitalization of Enersis’ local bonds (with a face value of approximately US$ 151 million), as well as the subscription

of shares for cash. All existing shareholders, other than Endesa-Spain, will have two pre-emptive rights periods in which

they are allowed to subscribe their pro rata equity shares, or sell their rights in the market. Endesa-Spain exercised its

rights on June 2, 2003, and has voluntarily excluded itself from the second pre-emptive rights period. The new shares

to be offered in the capital increase will not be registered with the Securities and Exchange Commission (the “SEC”),

and may not be offered or sold in the United States absent registration or an applicable exemption from the registration

requirements of the U.S. Securities Act of 1933, as amended. Enersis’ shareholders approved the removal of the 65%

maximum limit that a single shareholder was permitted to own in Enersis.

(4) In April 2003, CELG initiated legal proceedings against Cachoeira Dourada and ANEEL demanding the annulment of the

energy sale contract signed with Cachoeira Dourada in 1998, alleging, among other things, that the contract is extremely

onerous and damaging to the financial stability of CELG, causing it supposed damages of approximately US$ 250 million

from 1997 to 2003.

CELG obtained a preliminary and provisional judgment that suspends the effects of the contract and authorizes CELG

to stop payments, also provisionally, of the amounts contractually due to Cachoeira Dourada which correspond to the

energy sale price.

Both Cachoeira Dourada and ANEEL presented their defenses and legal argument against the decision to suspend the

contract. All parties are waiting for the judge to decide whether or not to confirm the preliminary decision of suspending

the effects of the contract. Should the judge confirm the decision to suspend the effects of the contract, Cachoeira

Dourada and ANEEL will have the opportunity to appeal to an appropriate authority.

Both Cachoeira Dourada and its lawyers believe that there is a high probability of obtaining a favorable final decision.

(5) On April 8, 2003 Endesa Chile (Enersis Subsidiary) sold 285 kilometers of 220 kV transmission lines to Transelec for

US$ 32 million (approximately ThCh$ 22,400,000). The carrying value of net assets under Chilean GAAP sold amounted to

ThCh$21,562,962 as of December 31, 2002. Additionally, GasAtacama Generación Limitada, of which Endesa Chile has a

50% participation, sold 673 kilometers of 220 kV line transmission lines for approximately US$ 78 million (ThCh$54,600,000

approximately). The carrying value of net assets under Chilean GAAP sold amounted to ThCh$53,458,465 as of December

31, 2002. In both cases, the transaction included the transfer of the respective substations.

(6) On April 25, 2003, Enersis, Endesa-Chile, Enersis Internacional, Chilectra Internacional, and Chilectra filed an action before

the Centro Internacional de Arreglo de Diferencias relativas a Inversiones (“CIADI”) in Washington, D.C., requesting an

arbitration for resolving a dispute with the Republic of Argentina. The grounds of this action are the damages suffered by

the investments of Enersis and our subsidiaries in Argentina, as a consequence of the approval of Economic Emergency

Law, Decree N°214/2002, Decree N°293/2002 and Resolution N°38/2002 of the Ministry of Economy. The outcome of

these new rules has been a complete new legal framework for the Argentine investments of Enersis and its subsidiaries,

which originally date back to September 1992. The original commitments assumed by the Republic of Argentina regarding

these investments have not been met. The arbitration action argues that the Republic of Argentina’s failure to comply

with its commitments in relation to our investments by the part of the Republic of Argentina is against the letter and the

spirit of the Treaty.

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194

(7) On April 30, 2003 Endesa Chile (Enersis Subsidiary) sold Canutillar Plant to Cenelca S.A. for US$ 174 million (approximately

ThCh$121,800,000). The carrying value of net assets sold under Chilean GAAP amounted to ThCh$ 125,925,381 as of

December 31, 2002 and its installed capacity was 172 MW.

(8) In May 2003 Chilectra increased its interest in Cerj in Brazil from 33.4% to 41.2% through a capital increase to which

Enersis subscribed in January 2003, and later sold a share to Chilectra. Its interest in Coelce in Brazil was also indirectly

increased, through Cerj, from 12.8% to 14.4%. Chilectra also owns a 9.9% interest in Codensa in Colombia and a 15.6%

interest in Edelnor in Peru.

(9) On May 15, 2003, Enersis and Endesa-Chile refinanced US$ 2.33 billion in syndicated loans and bilateral credit agreements

structured as:

•

a US$ 200 million Senior Secured Syndicated Term Loan Facility for Enersis and a US$ 1,388 billion Senior Secured

Syndication Term Loan Facility for Enersis, acting through its Cayman Islands Branch (the “Enersis Facility”) each for

five years; and

•

a US$ 743 million Senior Guaranteed Syndicated Term Loan Facility for Endesa-Chile, acting through its Cayman Islands

Branch (the “Endesa-Chile Facility”, and together with the Enersis Facility, the “Facilities”).

The refinancing of bank obligations with the Facilities has allowed Enersis and Endesa-Chile to: (a) make payments for

the bond maturities and put option coming due in 2003 for a total of US$ 701 million, (b) lengthen the maturity profile

of our debt, (c) allow a greater period of time before amortizing principal payments on our debt and (d) provide better

conditions for the planned capital increase process.

The following table shows the effects that would have been recognized under Chilean GAAP from the refinancing of

liabilities mentioned before.

CURRENT LIABILITIES:

Short-term debt due to banks and financial institutions

Current portion of long-term debt due to banks and financial institutions

Other current liabilities

As of December 31, 2002

Before refinancing

After refinancing

ThCh$

425,049,260

605,261,953

1,121,062,036

384,736,676

226,914,211

1,121,062,036

Total assets of discontinued operations

2,151,373,249

1,732,712,923

LONG-TERM LIABILITIES:

Due to banks and financial institutions

Other long-term liabilities

1,691,338,670

3,722,269,742

2,109,998,996

3,722,269,742

Total liabilities and minority interest of discontinued operations

5,413,608,412

5,832,268,738

(10) On May 15, 2003 the Supreme Court of Chile made its final verdict as a consequence of an appeal against Resolution

No. 667, ruling in favor of Enersis and confirming Resolution No. 667 from Comisión Resolutiva.

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On May 28, 2003, a private complaint against Enersis was filed with the Comisión Resolutiva alleging that Enersis has

failed to comply with Resolution No. 667 since Enersis, Endesa-Chile and Chilectra have supposedly shared finance,

auditing and communication departments. The complaint alleges that by joining these departments, Enersis is frustrating

the Comisión Resolutiva’s objective of preventing energy companies from sharing essential information and keeping

the electricity business of generation and distribution independent. Enersis believes that the Comisión Resolutiva’s

investigation will not lead to a prohibition of Enersis’s control over the energy distribution and generation markets,

because we believe this matter was clearly resolved by Resolution No.667.

(11) The Sixth Civil Court of Santiago recently issued its ruling in relation to a lawsuit opposing the Ralco Project filed by

a group of people belonging to the Pehuenche ethnic group. The lower court’s sentence concludes that the voluntary

procedure undertaken by Endesa-Chile for the assessment of the environmental impact of the Ralco Project is null

since, in the court’s opinion, CONAMA, the Environmental Government Agency, was not legally entitled to assess the

environmental impact study presented by the Company to CONAMA. Both defendants, the Company and CONAMA,

consider this questioning of the legitimacy of the process is unjustified. The resolution dictated by the Sixth Civil Court

of Santiago does not imply the penalization of the project, which to date has achieved more than 80% completion.

On May 30, 2003, the plaintiffs requested the suspension of the Ralco Project, which was rejected by the court. Instead,

of suspending the entire project, the judge ruled that the flooding of the dam should not proceed. Endesa plans to appeal

this ruling before the Appeals Court of Santiago.

Schedule II – Valuation and Qualifying Accounts

Balance at
beginning
of period

Additions
charged to
costs and
expenses

Deductions

Others

Balance
at end of
period

ThCh$

December 31, 2000

Allowance for doubtful accounts receivable

78,303,154

64,414,380

(10,600,402)

(10,783,848)

121,333,284

December 31, 2001

Allowance for doubtful accounts receivable

121,333,284

42,858,379

(6,340,092)

(11,474,437)

146,377,134

December 31, 2002

Allowance for doubtful accounts receivable

146,377,134

18,798,815

(1,297,010)

(48,529,408)

115,349,531

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196

JUAN CARLOS WIECZOREK

General Account

ENRIQUE GARCIA

Chief Executive Officer

Enersis S.A. Consolidated Relevant Facts

Provisional Dividends

The Board of Directors of Enersis S.A., as of January 31, 2002 agreed, upon unanimous vote of its members, not to distribute

in February 2002, a provisional dividend charged to the results of December 2001, due to not satisfying the requirements

provided for such action in the Dividend Policy of the Company.

In the Ordinary Meeting of the month of May, the Board of Directors of Enersis S.A. agreed, upon unanimous vote of its present

members, not to distribute in May 2002, a provisional dividend charged to the results of March 2002, according to the policy in

force on this subject, due to not satisfying the requirements provided for such action in the above mentioned Dividend Policy

of the Company.

In the Extraordinary Meeting held on July 31, 2002, the Board of Directors of Enersis S.A. agreed, upon unanimous vote of

its present members, not to distribute in August 2002, a provisional dividend charged to the results of June 2002, according

to the policy in force on this subject, due to not satisfying the requirements provided for such action in the above mentioned

Dividend Policy of the Company.

In the Ordinary Meeting held on October 28, 2002, the Board of Directors of Enersis S.A. agreed, upon unanimous vote of

its present members, not to distribute in November 2002, a provisional dividend charged to the results of September 2002,

according to the policy in force on this subject, due to not satisfying the requirements provided for such action in the above

mentioned Dividend Policy of the Company.

Changes to the Board of Directors

In the Extraordinary Meeting held on July 25, 2002, the resignation of Director Mr. Luis Rivera to the Board of Directors of

the Company was accepted. Likewise, in the Ordinary Meeting held on July 26, 2002, the resignation of Mr. Alfredo Llorente

to the positions held by him as Chairman of the Board, Director, President of the Committee of Directors and member of this

Committee, was accepted.

In the same Ordinary Meeting held on July 26, 2002, the following was agreed upon:

- To appoint Mr. Pablo Yrarrázaval as Director and Chairman of the Board of Enersis S.A.

- To appoint Mr. Pablo Yrarrázaval, Mr. Hernán Somerville and Mr. Ernesto Silva as members of the Committee of

Directors.

- Finally, Mr. José Luis Palomo was appointed Director.

Relevant aspects on the businesses of Endesa España

As of September 20, 2002, our parent company, Endesa S.A. (Spain) has presented to the Comisión Nacional de Mercado de

Valores de Madrid (Madrid Stock Exchange National Commission), the Superintendence of Securities and Insurance and the

S.E.C., a report on the relevant aspects of its businesses. This report and how the situation of its businesses in Latin America

affects Endesa España, states the following:

“No extraordinary rightoffs, such as those already carried out by other national and international companies, are foreseen.

The rightoffs have been made in each quarter by adjusting the value of the investments according to the devaluation of the

Latin American currencies, additionally supplying the provisions deemed necessary. This has meant an accumulated rightoff,

from the time when these investments were made, of 2,700 million euros of the Latin American investment. The book value

of the Latin American assets reasonably corresponds to the market value of same.

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Businesses in Latin America show a general positive behavior during the year, as reflected in the operating result of the Latin

American business which was increased by 6% in the first half of the year compared to the previous year. Without taking

Argentina into consideration, the operating result has increased by 25%.

Brazil. The impact caused by the devaluation of the Real is very limited, because 55% of the debt of our Brazilian subsidiaries

is denominated in Reales. The remainder is in US dollars, financing a company, CIEN, whose income is linked to the US dollar.

The strong increase in the demand during July and the full operation of the second interconnection line between Argentina and

Brazil will contribute to improve the profitability of our operations between these two countries. Additionally, US$ 62 million

have already been collected from the BNDES loan due to the electric rationing.

Chile. The recovery of the hydraulic production in Chile is largely contributing to a strong operating improvement during the

year. The operating result for the generation business in Chile was increased by 55% during the first half.

Argentina. Provision has been made for 100% of Endesa’s investment in that country. Taken together, the Argentinean

companies have a positive operating result, which is higher than the interests corresponding to the debt.

Indebtedness and liquidity of the Latin American companies.

- Neither Enersis nor Endesa (Chile) have liquidity problems.

- The Enersis group has reduced its indebtedness by 1,140 million euros during the first half.

- These companies may, in the short term, dispose assets for a minimal amount of 600 million euros which, taken together

with the debt associated with these assets, will represent a total reduction in indebtedness of 1,000 million euros.

- The companies have closed August with a positive cash situation of US$ 460 million, and maintain an absolutely normal

financial situation with the exception of Argentina, where the general situation of the country is affecting the financial

activities. Notwithstanding, the Endesa subsidiaries are serving the interest payments and are obtaining extensions for

the maturities of the principal of their debts.

- Endesa (España) would be willing to capitalize the loan granted to Enersis for an amount of 1,440 million euros, which

would represent an important improvement of its equity situation.

- Standard & Poors has ratified in last July, the BBB+ rating for the long term debt of Enersis and Endesa Chile.

- Finally, the debt of Enersis with Endesa has no warranty or coverage has been given on this debt and there are no “cross-

default” clauses with said debt.

Financial strengthening plan

In the Extraordinary Meeting held on October 4, 2002, the Board of Directors of Enersis S.A. agreed, upon unanimous vote

of its present members, to announce that a financial and economic strengthening plan has been approved for Enersis S.A.,

intended to strengthen its equity, via improving its financial structure and allowing the Company to face the regional situation

which affects its investments. Said plan contemplates the following operations:

a) Increase of capital: The Board of Directors of Enersis has decided to initiate a capital increase process for an amount of

up to US$ 1,500 million, which includes cash and/or financial loan contributions. Said process will involve summoning, in

one of the following meetings of the Board of Directors of the Company, an Extraordinary Shareholders’ Meeting which will

decide on the terms of this capital increase, anticipating that this meeting should take place during the first four months

of 2003;

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b) Disposal of the following assets:

(1) Compañía Eléctrica del Río Maipo S.A. distributing company.

(2) Inmobiliaria Manso de Velasco Limitada real estate company.

(3) Several real properties owned by Enersis S.A. and its subsidiaries.

Regarding the sale of Compañía Eléctrica del Río Maipo S.A., and considering that it is an asset deemed essential within

the policy of investment and financing of Enersis, said divestment should be authorized by the Extraordinary Shareholders’

Meeting which will be summoned in due time.

Regarding the real properties owned by the subsidiaries of Enersis S.A., this Company will propose the divestment of same

to the pertinent companies.

The amount expected to be raised through the process of divestment of assets contemplated in the financial and economic

strengthening plan of Enersis S.A. will be assigned to reduce the financial indebtedness of the Company;

c) Refinancing the intercompany loans of some of the subsidiaries with Enersis S.A.: Part of the Enersis financing with its

subsidiaries will be substituted by loans directly contracted in the market. This will result in a substantial improvement in

the leverage (ratio between debt and equity) of the balance sheet of Enersis S.A.; and

d) Improvement in free cash flow. Enersis S.A. will continue to enforce the efficiency measures for operations and investments,

in order to increase its yearly operating consolidated free cash flows by at least US$ 130 million, achievable in a three-year

term. These higher flows will be in addition to those derived from demand variations and unit margins for energy sales and

purchases.

On the other hand, the above mentioned capital increase will benefit the company with an additional increase in cash flow

due to the consequent reduction in financial expenses.

All of these measures should allow a reduction in the indebtedness of Enersis, S.A. by up to US$ 2,200 million, as well as the

attainment of a ratio of debt/funds of its own of about 0.6.

The Board of Directors agreed to authorize the Management of the Company to propose to the Board of Directors the appointment

of an investor bank to conduct the above mentioned alienation processes, as well as to adopt all of the measures leading to

the adequate materialization of the above described operations.

Study of stock placement

As of November 7, Enersis S.A. has initiated negotiations with the following investment banks, in order to study the possibility

of placing shares in foreign markets: Deutsche Bank, Salomon Smith Barney and Santander Investment, leading the process

jointly.

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CHILECTRA AND SUBSIDIARIES

DIVIDENDS

1. The Board of Directors of the Company, in the meeting held on January 29, 2002, agreed to distribute as of February 21,

2002, a provisional dividend of Ch$ 14.00 per share, charged to the profits of the period 2001.

2. In the Ordinary Meeting held on March 22, 2002, the Board of Directors of Chilectra S.A. agreed, upon unanimous vote of its

present members, to propose to the Ordinary Shareholders’ Meeting, in respect of definitive dividend No. 67:

It is agreed to propose to the Ordinary Shareholders’ Meeting to be held on April 10, 2002, the distribution of the definitive

dividend for a total amount of Ch$ 16,821,431,731, to be paid as of April 19, 2002. This amount is made up of an additional

definitive dividend of Ch$ 16,753,684,391 and an eventual definitive dividend of Ch$ 67,747,340.

3. The Board of Directors of the Company, in the meeting held on April 29, 2002, agreed to distribute as of May 23, 2002, a

provisional dividend of Ch$ 39.60 per share, charged to the profits of the period 2002.

4. The Board of Directors of the Company, in the meeting held on July 30, 2002, agreed to distribute as of August 23, 2002, a

provisional dividend of Ch$ 45.90 per share, charged to the profits of the period 2002.

5. The Board of Directors of the Company, in the meeting held on October 28, 2002, agreed to distribute as of November 29,

2002, a provisional dividend of Ch$ 20.60 per share, charged to the profits of the period 2002.

CHANGES AND APPOINTMENTS

1. In the meeting of the Board of Directors held on January 29, Mr. Marcelo Castillo was appointed Communications Executive

Officer, in place of Mr. Guillermo Amunátegui.

Additionally, the Planning and Control Executive Officer, Mr. Alfonso Prieto, has disassociated from the Company, and the

position has been assumed by Mr. Jorge Faúndez as Planning and Control Deputy Executive Officer.

Finally, the position of Economic Planning and Control Executive Officer held by Mrs. Ana Gete, reporting to the Regional

Distribution Chief Executive Officer, has been deleted from the organizational structure of the Company.

2. The Board of Directors of Chilectra S.A., in its Ordinary Meeting No.13/2002 held on December 19, 2002, was informed of

and accepted the resignation of Mr. Enrique García to his position as Director. Likewise, it is stated that Mr. García was one

of the members of the Committee of Directors.

3. In its Ordinary Meeting No.13/2002 held on December 19, 2002, the Board of Directors of Chilectra S.A. appointed Mr. Alberto

Martín and Mr. Marcelo Llévenes as Directors, in place of Mr. Enrique García and Mr. Juan Ignacio Domínguez. On the other

hand, the Board of Directors appointed Mr. Jorge Rosenblut, Mr. Hernán Felipe Errázuriz and Mr. Alberto Martín as members

of the Committee of Directors.

Consequently, the Board of Directors of Chilectra S.A. is now constituted as follows: Jorge Rosenblut (Chairman), José

Manuel Fernández (Vice-Chairman), Pedro Buttazzoni, Hernán Felipe Errázuriz, Alvaro Quiralte, Alberto Martín and Marcelo

Llévenes.

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COMPAÑÍA ELÉCTRICA DEL RÍO MAIPO S.A.

DIVIDENDS

The Board of Directors of the Company, in the meeting held on January 29, 2002, agreed to distribute a provisional dividend

of Ch$ 4.81 per share, charged to the profits of the period 2001, which was paid as of February 21, 2002.

The Board of Directors of the Company, in its Ordinary Meeting held on April 26, 2002, agreed to distribute a provisional

dividend of Ch$ 5.92, charged to the profits of the period 2002, which was paid as of May 23, 2002.

The Ordinary Shareholders’ Meeting held on April 9 agreed to distribute a definitive dividend of Ch$ 1,348,832,902 and an

eventual dividend of Ch$ 8,623,813, charged to the profits of the period 2001, which was paid as of April 18, 2002.

The Board of Directors of the Company, in its meeting held on July 25, 2002, agreed to distribute a provisional dividend of

Ch$ 5.2 per share, charged to the profits of the period 2002, which was paid as of August 23, 2002.

The Board of Directors of the Company, in its meeting held on October 25, 2002, agreed to distribute a provisional dividend

of Ch$ 6.48 per share, charged to the profits of the period 2002, which was paid as of November 29, 2002.

BOARD OF DIRECTORS

According to the General Rule No.30, we announce as an essential fact, the reception of Mr. Alberto López’s letter of resignation

to his position as Chairman of the Board. The resignation of Mr. López García was informed to the Board of Directors in the

meeting held on July 25, 2002.

In that same meeting, Mr. Marcelo Silva was appointed in place of Mr. López. Mr. Silva Iribarne was also appointed Chairman

of the Board and member of the Committee of Directors of this Company.

According to the General Rule No.30, we inform as an essential fact, the reception of Mr. Marcelo Silva’s letter of resignation

to his position as Chairman of the Board. The resignation of Mr. Silva Iribarne was informed to the Board of Directors of the

Company in the meeting held on this date.

In that same meeting, Mr. Guillermo Pérez was appointed in place of Mr. Silva.

In view of the foregoing, Mr. Julio Valenzuela was appointed Chairman of the Board and member of the Committee of Directors

of this Company.

ENDESA S.A. AND SUBSIDIARIES

During the period January-December 2002, and according to the General Rule No. 30, the Company informed of the following

essential or relevant facts to the Superintendence of Securities and Insurance:

ENDESA MAIN OFFICE

On March 6, 2002, it is informed as a relevant fact, that on March 5 of the present year, ENDESA was notified of a suit for

arbitral trial filed by the insurance company AGF/ALLIANZ CHILE COMPAÑÍA DE SEGUROS GENERALES S.A., requesting

from the referee Mr. Ricardo Peralta, the rescission of insurance policy No. 96676. Said policy protects agains all building

and installation risks, including civil liability and anticipated loss of benefits for the construction of Ralco Hydroelectric Power

Station. Said policy is in force from May 1, 1999 to May 1, 2003.

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The arbitral suit has, as a direct antecedent, the accident at the cofferdam of the Ralco Project occurred on May 27, 2001,

and is founded on the existence of true risks; subsidiarily, on the aggravation of same; and, finally, on the lack of information

about the nature and extension of the risks under contract.

It is worth pointing out that the settlement of the above mentioned accident is pending until the issuance of the final report by

the liquidator appointed in the policy.

From the preliminary analysis of the plaintiff’s claims, we can inform that, in our opinion, the suit filed by the insurance

company requesting the rescission of the insurance contract lacks support. Therefore, ENDESA, together with adopting all

of the pertinent securities for the protection of the assets insured by the referred policy, will respond to the above mentioned

suit according to the arguments to which it is entitled in fact and by right, in order to obtain its complete rejection.

On March 19, 2002, it is informed as a relevant fact, that the present day press announces extensively that the node price

will be reduced by 12% in the next tariff setting process. These news are sourced from a release from the National Energy

Commission, to the companies of the energy sector and to the media, of the preliminary report on node prices.

Regarding the above and considering the negative effect observed today in the share price of our company in the stock

exchange centers where they are traded, we have considered pertinent to point out the following:

The thus announced 12% reduction in the node prices corresponds to the result of a model with which the National Energy

Commission estimates the level of the node prices in a preliminary calculation and report. However, according to DFL No.1

(Electric Law) which rules this subject, said preliminary calculation must be revised by the National Energy Commission,

taking into consideration the observations set forth by the companies. The process ends with a new calculation which should

be carried out next April, in view of said observations. Therefore, the present calculation does not constitute in itself the node

price setting it is just a step of the process. Endesa anticipates right now, at this point that a preliminary analysis of this first

calculation suggests several alternatives of correction, which the Company will present to the authority within the referred

process.

However, DFL No.1 also establishes as mandatory that the final calculation should be contrasted with the average price level

of the non regulated market, through a price band which, in the eventual case of a rise or fall in the prices resulting from the

theoretical model, would act to attenuate any effect of rise or fall in the final price that will be set. It is of common knowledge

to the companies of the sector and the authority that, if in April the theoretical model maintains results such as those of this

preliminary calculation, the referred band would act to significantly attenuate the theoretical effect announced.

In view of the foregoing, it is premature and distorting for the market to anticipate falls in the node prices such as those

announced, without describing the complete process and without disclosing the existence of the referred band.

In the Ordinary Shareholder’s Meeting of the Company held on April 11, 2002, the following decisions were adopted:

Approval of the Financial Report, Balance Sheet, Other Financial Statements and Report from the External Auditors,

corresponding to the period ended at December 31, 2001.

Approval of a definitive dividend for the period 2001, which represents a total dividend to be paid of Ch$ 0.94 per share, which

will be paid as of April 22, 2002.

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The following Directors were elected:

Mr. Jaime Bauzá

Mr. Emilio García

Mr. José María Hidalgo

Mr. Pablo Yrarrázaval

Mr. Rodolfo Martín

Mr. Antonio Pareja

Mr. Andrés Regué

Mr. Antonio Tuset

Mr. Leonidas Vial

On this same date, the Board of Directors of the Company was constituted, appointing Mr. Pablo Yrarrázaval and Mr. Antonio

Pareja as Chairman and Vice-Chairman of the Board, respectively.

In this same meeting, Mr. Jaime Bauzá, Mr. Pablo Yrarrázaval and Mr. Antonio Tuset were appointed members of the Committee

of Directors of the Company.

On June 27, 2002, it is informed that the Board of Directors of the Company, in a meeting held on this same date and in

compliance with the resolution adopted by the last Ordinary Shareholder’s Meeting of Endesa, appointed the firm Langton

Clarke Auditores y Consultoría Ltda. as external auditors of the Company for the period 2002.

It is stated that this appointment is applicable to the continuator of said firm, considering the incorporation process presently

in progress with the international network of Ernst & Young International.

On July 25, 2002, it is informed as an essential fact, that in an Extraordinary Meeting of the Board of Directors of the Company

held on this same date, Mr. Luis Rivera was appointed as new Chairman of the Board and of the Company. Mr. Rivera was

incorporated as Director of Endesa in this same meeting, in place of Mr. Pablo Yrarrázaval, who resigned to the positions he

held as Director and Chairman of the Company.

On October 4, 2002, it is informed as an essential fact, that in the Extraordinary Meeting held on October 3, 2002, the Board

of Directors of the Empresa Nacional de Electricidad S.A. agreed, upon unanimous vote of its present members, to approve a

financial and economic strengthening plan for Endesa, and consequently for its national and foreign subsidiaries, via improving

its credit structure, expediting the investment process presently in progress, and reasserting the financial strength of Endesa to

allow it to face, more easily, the regional situation which affects its investments. Said plan contemplates the disinvestment of

several assets, and the refinancing and reduction of debts, with the purpose of achieving an equity and financial strengthening

of the Company.

The referred plan basically contains the following operations:

Initiation of the divestment process of Canutillar Hydroelectric Power Station owned by Endesa, having an installed capacity

of 172 MW and a mean production of 950 GWh, and representing 4.4% of the installed capacity of Endesa in Chile. Within

this process, an Extraordinary Shareholders’ Meeting will be held for its approval.

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Promote the refinancing of the GasAtacama Project in order to replace the debt held by the companies involved in the project

with their owners, through external financing granted by international banks.

Alienation of transmission lines owned by Endesa and its subsidiaries.

To all of the above is added the divestment of Endesa’s stake in Infraestructura Dos Mil S.A., a process presently in progress

which, in addition to the price corresponding to the divestment in itself, approximately US$ 50,000,000, will permit the reduction

of the consolidated debt by approximately US$ 20,000,000.

Compliance with the financial strengthening plan, which comprises the global process of disposal of assets, the effect for the

company of the refinancing of Gas Atacama and the consolidated debt reduction through the sale of Infraestructura Dos Mil

S.A., will result in an estimated income of US$ 600 million to US$ 700 million, which will be assigned to reduce the financial

indebtedness of the Company. The compliance of the plan is progressive, although it should be completed during next year.

Also, the Board of Directors agreed to authorize the executive management of the Company to carry out the referred financial

strengthening plan, to this effect being able to carry out all the initiatives and actions leading to its complete materialization.

On October 29, 2002, it is informed as an essential fact that, in the Ordinary Meeting of the Board of Directors held on October

28, 2002, it was unanimously agreed by all present members, to create a subsidiary named “Empresa Eléctrica Canutillar S.A.”,

in which Endesa will own 99.9% of the capital stock and which, in due time and after obtaining the corresponding corporate

authorizations, will be provided with all the assets of Canutillar Power Station, today owned by Endesa. All of this is within the

process for the alienation of this hydroelectric asset to third parties, as reported in our essential fact of October 4, 2002.

On January 15, 2003, it is informed as an essential fact, that the Board of Directors of Empresa Nacional de Electricidad, in

an Extraordinary Meeting held today, agreed to will make accounting adjustments and extraordinary charges to its balance

sheet, due to its investments in Brazil and Argentina, for a total amount of US$ 137.4 million, or its equivalent in national

currency, said extraordinary adjustments being reflected on the results of the period 2002.

The above mentioned figure can be broken up as follows for each country:

Brazil:

US$ 100 million

Argentina:

US$ 37.4 million.

The agreement of accounting adjustments is taken in compliance with the application of the new accounting regulation

promulgated in the USA, which is mandatory for the companies listed (registered) in said country. This regulation, incorporated

in the generally accepted accounting principles applied by the external auditors of the Company, corresponds to the Rule FAS

142 and its first application will be to the financial statements of December 2002.

The extraordinary adjustments will have no impact on the cash flow of the Company and will not affect its liquidity situation,

this extraordinary measure being inserted for this only one time as a complement of the financial and economic strengthening

plan for the Company, approved by the Board of Directors in October 2002.

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PEHUENCHE S.A.

On January 30, 2002, it is informed as an essential fact, that in the meeting held on January 29, 2002, the Board of Directors

of Empresa Eléctrica Pehuenche S.A., considering that the profits of the period January-November 2001 are substantially

lower than the expectations considered in the estimated budget for said period, approved upon unanimous vote of its present

members, not to distribute during the month of January 2002 the provisional dividend charged to net and realized income for

the period January-November 2001, as the amount to be distributed would be immaterial. In fact, the financial statements

of the Company as of November 30, 2001 show a net and realized income for the period of Ch$ 59,124,009, a figure which

includes an approximate estimate of the tax payments for this period. Therefore, if the provisional dividend were distributed,

as contemplated in the dividend policy informed to the Ordinary Shareholders’ Meeting of the Company held on March 30,

2001, and which corresponds to 70% of the net and realized income for the above mentioned period, said provisional dividend

would be approximately Ch$ 0.07 per share.

All of the above is without prejudice (independent) of the definitive dividend, regarding which the Ordinary Shareholders’

Meeting scheduled for the month of April 2002 should issue a pronouncement.

The Ordinary Shareholder’s Meeting of the subsidiary “Empresa Eléctrica Pehuenche S.A.”, held on April 8, 2002, approved

the balance sheet corresponding to the period ended at December 31, 2001.

On this occasion, the Shareholders’ Meeting approved the proposal of the Board of Directors to pay a definitive dividend for

the period 2001, representing a total dividend of Ch$ 7.866182 per share which will be paid as of April 22, 2002.

The Board of Directors of the Company, in a meeting held on June 27, 2002, agreed to distribute to the shareholders a

provisional dividend, according to the provisions of the dividend policy informed to the Ordinary Shareholder’s Meeting held

on April 8, 2002. Said provisional dividend will amount to Ch$ 4.090154 per share and will be paid as of July 25, 2002.

The Board of Directors of the Company, in a meeting held on September 26, 2002, agreed to distribute to the shareholders a

provisional dividend, according to the provisions of the dividend policy informed to the Ordinary Shareholder’s Meeting held

on April 8, 2002. Said provisional dividend will amount to Ch$ 5.534918 per share and will be paid as of October 11, 2002.

The Board of Directors of the Company, in a meeting held on December 17, 2002, agreed to distribute to the shareholders a

provisional dividend, according to the provisions of the dividend policy informed to the Ordinary Shareholder’s Meeting held

on April 8, 2002. Said provisional dividend will amount to Ch$ 9,702599 per share and will be paid as of January 15, 2003.

AUTOPISTA DEL SOL S.A.

As of March 27, 2002, it is informed as an essential fact, that the Board of Directors of the Company in a meeting held on

March 26, 2002, agreed to propose to the Ordinary Shareholder’s Meeting of “Sociedad Concesionaria Autopista del Sol”

scheduled for April 5, 2002, to pay a definitive dividend charged to the profits of the period 2001, of Ch$ 429.5 per share, as

of April 10, 2002.

The Ordinary Shareholder’s Meeting of the subsidiary “Sociedad Concesionaria Autopista del Sol S.A.”, held on April 5, 2002,

approved the balance sheet corresponding to the period ended at December 31, 2001.

On this occasion, the Shareholder’s Meeting approved the proposal of the Board of Directors of the Company to pay a definitive

dividend for the period 2001, which represents a total dividend of Ch$ 429.53440535 per share, which will be paid as of April

10, 2002.

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According to the provisions of the law and the by laws of the Company, the Board of Directors of the Company was elected,

being constituted by the following Directors:

Mr. Mario Valcarce

Mr. Víctor Bezanilla

Mr. Jorge Alé

Mr. Rodolfo Nieto

Mr. Alexander Fernández

On September 3, 2002, it is informed as an essential fact, that the Extraordinary Shareholder’s Meeting of Sociedad

Concesionaria Autopista del Sol S.A., held on August 30, 2002, agreed on a unanimous vote to reduce the capital stock

which presently amounts to Ch$ 35,452,296,130 divided into 3,740,916 nominative shares, belonging to only one series and

with no face value, to Ch$ 32,947,307,337 divided into 3,740,916 nominative shares belonging to only one series and with

no face value, representing a reduction of Ch$ 2,504,988,793, an amount which will be distributed among the shareholders

at Ch$ 669.6190967667 per share.

AUTOPISTA LOS LIBERTADORES S.A.

The Ordinary Shareholder’s Meeting of the subsidiary “Sociedad Concesionaria Autopista Los Libertadores S.A.”, held on

April 5, 2002, approved the balance sheet corresponding to the period ended at December 31, 2001.

According to the provisions of the law and the by laws of the Company, the Board of Directors of the Company was elected,

being constituted by the following Directors:

Mr. Mario Valcarce

Mr. Víctor Bezanilla

Mr. Jorge Alé

Mr. Rodolfo Nieto

Mr. Alexander Fernández

INFRAESTRUCTURA DOS MIL S.A.

The Ordinary Shareholder’s Meeting of the subsidiary “Infraestructura Dos Mil S.A.”, held on April 5, 2002, approved the

balance sheet corresponding to the period ended at December 31, 2001.

According to the provisions of the law and the by laws of the Company, the Board of Directors of the Company was elected,

being constituted by the following Directors:

Mr. Mario Valcarce

Mr. Juan Benabarre

Mr. Jorge Alé

Mr. Maximiliano Ruiz

Mr. Rodolfo Nieto

Mr. Víctor Bezanilla

Mr. Fernando Larraín

Mr. Horacio Peña

Mr. Alexander Fernández

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PANGUE S.A.

The Ordinary Shareholder’s Meeting of the subsidiary “Empresa Eléctrica Pangue S.A.”, held on April 8, 2002, approved the

balance sheet corresponding to the period ended at December 31, 2001.

According to the provisions of the law and the by laws of the Company, the Board of Directors of the Company was elected,

being constituted by the following Directors:

Mr. Enrique Bordiú

Mr. Claudio Iglesis

Mr. Osvaldo Muñoz

Mr. Alan Fisher

Mr. Alejandro Wendling

The meeting of the Board of Directors of the Company, held on December 17, 2002, agreed to distribute to the shareholders

a provisional dividend, according to the provisions of the dividend policy informed to the Ordinary Shareholder’s Meeting held

on April 8, 2002. Said provisional dividend will amount to Ch$ 13.774273 per share and will be paid as of January 27, 2003.

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Consolidated Management Analysis

ECONOMIC-FINANCIAL SUMMARY

As of December, 2002, Net Income registered a loss of Ch$ 223.748 million, compared to the profit of Ch$ 42.154 million as of

December, 2001. This decrease is basically related to the Accounting Adjustments made by the Company for our investments

in Argentina and Brasil. In any event, it is important to highlight that these one time adjustments, are merely accounting issues,

and do not represent cash flow reduction. Therefore, these will not affect the liquidity of the Company.

Operating Income amounted to Ch$ 532.644 million, which represents a 29.4% respect to the year 2001. This fall is mainly

explained by the economic instability in Argentina and the strong devaluation in Brazil. It is important to highlight, however,

the improved Operating Income achieved during this period by Chilean subsidiaries.

In this respect, this is clearly shown when isolating the effect of subsidiaries in Argentina, in which case the Operating Income

decreased only 8.6%, equivalent to Ch$ 50.009 million, as shown in the Pro-Forma Income Statement.

In the Distribution Business, it is important to highlight improvement of 1.6% in consolidated Physical Sales, reaching

48,955 GWh, is equivalent to 767 GWh of higher sales compared to 2001, which shows the recovery of some key ratios of the

business. On the other hand, physical sales in generation, decrease mainly in Argentina, from 12.988 GWh to 7.897 GWh.

Also in the Distribution Business, there is a 2.8% increase in the number of clients, reaching 275,000 new customers, equivalent

to add a company like Río Maipo. This growth in clients, with the recovery of the demand, makes us to believe that sales will

increase during the year 2003.

Another important element in the operating side is the labor productivity, that increase 2.2%, from 1,379 clients per employee

to 1,409 clients per employee, confirming the positive trend shown in the last three years.

Energy losses, another key variable in the distribution business, increase from 11.9% to 12.1%, primarily due to Edesur, offset

by the decrease of Codensa, from 11.8% to 10.3%, as well as the other subsidiaries.

Net Financial Result improved by Ch$ 41.957 million or 10.6%, from a loss of Ch$ 396.208 million as of December 2001 to a

loss of Ch$ 354.251 million this year. This variation is the result of lower interest rates on the international markets respect

to the previous year.

Ch$ 573,508 million of lower operating revenues, offset by a decrease of operating costs in 14.6%, equivalent to Ch$ 295.262

million, additionally Ch$ 56.346 million of lower administrative and selling expenses, equivalent to a 20%. Excluding our

Argentinean subsidiaries, the decrease in operating revenues have been only 2.2%.

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MARKETS IN WHICH THE COMPANY OPERATES

Enersis’ commercial activities are handled through subsidiaries that operate the various businesses in the countries where

the company has a presence. For Enersis, the most important activities are the Distribution and Generation of electricity.

The following tables illustrate the evolution of the key ratios in the different countries

Distribution Business

Company

Chilectra

Río Maipo

Edesur

Edelnor

Cerj

Coelce

Codensa

Energy sales
(GWh) ( * )

Energy losses
(%)

Clients
(thousand)

Clients / Employees
(thousand)

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dec-02

9,585

1,245

9,952

1,274

12,909

12,138

3,685

6,739

5,352

8,673

3,872

7,146

5,558

9,015

5.4%

6.4%

9.9%

8.9%

22.7%

13.0%

11.8%

5.6%

6.2%

11.6%

8.5%

22.6%

12.9%

10.3%

1,289

294

2,097

867

1,691

1,917

1,850

1,319

302

2,090

871

1,778

2,009

1,911

1,785

3,764

925

1,557

1,249

1,309

2,276

1,833

4,021

928

1,465

1,226

1,434

2,382

Total

48,188

48,955

11.9%

12.1%

10,005

10,280

1,379

1,409

(*) It includes sales to final clients, tools, and intercompany sales.

Generating Business

Country

Chile

Argentina

Perú

Colombia

Brasil

Total

Market
of operations

SIC y SING

SIN

SICN

SIN

SICN

Energy sales (GWh)

Market share

Dec-01

18,673

12,988

4,239

14,590

3,743

Dec-02

18,344

7,897

4,158

14,639

3,591

Dec-01

Dec-02

49.0%

13.5%

23.0%

23.3%

1.2%

46.1%

10.9%

21.2%

21.4%

1.1%

54,233

48,629

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ANALYSIS OF THE FINANCIAL STATEMENTS

1. ANALYSIS OF THE INCOME STATEMENTS

As of December, 2002, Net Income registered a loss of Ch$ 223.748 million, compared to the profit of Ch$ 42.154 million as of

December, 2001. This decrease is basically related to the Accounting Adjustments made by the Company for our investments

in Argentina and Brasil.

The variations of the income statements are as follows:

Income Statement (million Ch$)

Dec-01

Dec-02

Var Dec 02- 01

%Var 02-01

Operating Revenues

Operating Costs

Operating Margin

Selling and Administrative Expenses

Operating Income

Profit (Loss) in Related Companies.

Inet Others non Operating Income

Net Financial Margin

Positive Goodwill Amortization

Monetary

Exchange Difference

Non Operating Income

Income Tax

Itemes extraordinarios

Minority Interest

Negative Goodwill Amortization

Net Income

3,059,381

2,485,873

(573,508)

(2,025,312)

(1,730,050)

295,262

1,034,069

(279,525)

754,544

(10,699)

10,764

(396,208)

(80,576)

2,175

(30,543)

(505,087)

(129,850)

(125,153)

47,700

42,154

755,823

(278,246)

(223,179)

56,346

532,644

(221,900)

8,264

66,947

(354,252)

(506,344)

4,965

(16,110)

18,963

56,183

41,956

(425,768)

2,790

14,433

(796,530)

(291,443)

(66,017)

(22,376)

16,283

112,248

63,833

(22,376)

141,436

64,548

(223,748)

(265,902)

(18.7%)

(14.6%)

(26.9%)

(20.2%)

(29.4%)

(177.2%)

522.0%

(10.6%)

528.4%

128.3%

(47.3%)

57.7%

(49.2%)

100.0%

(113.0%)

135.3%

(630.8%)

R.A.I.I.D.A.I.E. (*)

Earnings per Share $

1,207,029

1,079,877

(127,152)

(10.5%)

5,08

(26,99)

(32,07)

(630.8%)

(*) Earning before taxes, interests, depreciation, amortization and extraordinary items.

a. Operating Income

Operating Income amounted to Ch$ 532.644 million, which represents a decrease of Ch$ 221.900 million or 29.4% respect

to the year 2001. This fall is mainly explained by the economic instability in Argentina and the strong devaluation in Brazil. It

is important to highlight, however, the improved Operating Income achieved during this period by Chilean subsidiaries. This

is clearly shown when isolating the effect of subsidiaries in Argentina, in which case the Operating Income decreased only

8.6%, equivalent to Ch$ 50,009 million, as shown in the Pro-Forma Income Statement.

ENERSIS 2002 ANNUA L REPORT

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210
210

Proforma - Income Statements

With Edesur, Central Costanera and Chocón subsidiaries under equity method

Income Statement (million Ch$)

Dec-01

Dec-02

Var Dec 02- 01

%Var 02-01

Operating Revenues

Operating Costs

Operating Margin

Selling and Administrative Expenses

Operating Income

Profit (Loss) in Related Companies.

Inet Others non Operating Income

Net Financial Margin

Positive Goodwill Amortization

Monetary

Exchange Difference

Non Operating Income

Income Tax

Itemes extraordinarios

Minority Interest

Negative Goodwill Amortization

Net Income

2,238,527

2,188,614

(1,455,061)

(1,467,935)

783,466

720,679

(203,571)

(190,793)

579,895

59,734

(3,900)

(365,448)

(80,576)

2,178

(16,083)

(404,095)

(82,283)

(99,063)

47,700

42,154

529,886

9,678

46,413

(303,963)

(506,344)

4,967

(16,101)

(765,350)

(100,155)

(22,376)

21,999

112,248

(49,913)

(12,874)

(62,787)

12,778

(50,009)

(50,056)

50,313

61,485

(425,768)

2,789

(18)

(361,255)

(17,872)

(22,376)

121,062

64,548

(2.2%)

(0.9%)

(8.0%)

6.3%

(8.6%)

(83.8%)

(1.290.1%)

16.8%

(528.4%)

(128.1%)

0.1%

(89.4%)

(21.7%)

N/A

122.2%

135.3%

(223,748)

(265,902)

(630.8%)

In the Generation Business, the Operating Income of Endesa Chile amounted to Ch$ 346.224 million, a decrease of 0.5%,

basically due to a lower Operating Income in Argentina and Brazil, compensated by improvements in Chile and Peru.

In Argentina, Operating Income amounted to Ch$ 12.256 million, a fall of Ch$ 30.784 million respect to December 2001. This

decrease is due to the drop in average sales prices of energy from El Chocón as a result of the devaluation of the Argentine

Peso and also 39.2% decrease in physical sales. Furthermore, lower energy prices in Brazil as a result of a surplus water

supply in the zone, implied that in 2002 only 2% needed to be purchased from CIEN interconnection line.

In Brazil, Operating Income of Cachoeira Dourada decreased by 39.2% to Ch$ 16.981 million. This decrease was result of

20.3% lower average energy sales prices, due to the devaluation of the Brazilian currency respect to the US$ and greater

energy purchases associated to the recovery of reservoirs after the drought in southeastern Brazil.

In Chile, Operating Income amounted to Ch$ 171.136 million, reflecting an increase of 25.4%, mainly due to the result of higher

hydroelectric generation associated to an improvement in the reservoirs levels. Another contributing factor, was the increase in

average sales prices resulting from the marketing policies that enabled the company to obtain the best prices on unregulated

clients and spot markets. Furthermore, the reduction in the generation of thermoelectric meant a decrease of Ch$ 24.155

million in the cost of fuel and transport of gas and the greater volumes of water allowed for a reduction of Ch$ 10.909 million

in the cost of energy purchases.

ENERSIS 20 02 ANNUAL REPORT

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212

In Colombia, Operating Income increased by 1.1% to Ch$ 75.373 million, basically as a result of an increase in physical sales

of energy due to an improvement in water supplies and rainfall and to higher energy sales prices on the spot market.

In Peru, Operating Income rose by 6.7% to Ch$ 70.477 million mainly due to higher average sales prices on the spot market

which more than compensated the reduction in physical sales.

The Distribution Business shows an improvement of 1.6% in consolidated Physical Sales, reaching 48,955 GWh, which is

equivalent to 767 GWh of higher sales compared to 2001. There is a 2.7% increase in the number of clients, reaching 275,000

new customers.

In Chile, Chilectra shows an improvement of Ch$ 5.651 million, equivalent to 6.9%, basically due to greater physical sales,

compensated by an increase in Selling and Administrative Expenses related to higher salaries expenses. In the case of Rio

Maipo, Operating Income increased by Ch$ 223 million due to greater Energy Sales and lower Selling and Administrative

Expenses.

In Brazil, the Operating Income of our subsidiaries Cerj and Coelce show a decrease of Ch$ 49.609 million and Ch$ 19.720

million, respectively. This variation is due to Regulatory Asset that both companies recognized on December 2001, addressed

to the recovery of financial and economic equilibrium of the concessions contracts, and by that way, recover the consumption

losses registered during the rationing in place during the year 2001 and early 2002.

In Colombia, Codensa shows a decrease of Ch$ 7.226 million, mainly explained by the increase in Operating Expenses and

Administrative Expenses, which was partially compensated by the increase in Operating Revenues, due to greater physical

energy sales and lower energy losses, improving from 11.8% as of December 2001, to a 10.3% as of December 2002.

In Peru, the subsidiary Edelnor reduced its Operating Income by Ch$ 1.749 million, basically due to an increase in Operating

and Maintenance Costs.

In Argentina, Edesur registered a loss of Ch$ 12.737 million as of December 2002. This lower result is due to the economic

instability of the country, that implied lower revenues on sales, due to a freeze on tariffs, a reduction in physical sales a as a

result of a lower demand of energy, losses arising from the devaluation of the Argentine Peso and to an increase of energy

losses due to theft. This significant negative impact on the Operating Income led to a net reduction in the consolidated Operating

Income of Enersis, in comparison with the same period of the previous year.

ENERSIS 2002 ANNUA L REPORT

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212
212

Operating income and expenses, as well as administrative and selling expenses, by subsidiaries, for the year ended December

2002 and 2001, are shown below:

Company

Endesa S.A.

Chilectra S.A.

Río Maipo S.A.

Edesur S.A.

Edelnor S.A.

Cerj

Coelce

Codensa S.A.

Cam Ltda.

Inmob. Manso de Velasco Ltda.

Synapsis Soluc.y Servicios Ltda.

Holding Enersis y soc. inversión

Dec-01

Dec-02

Operating
Revenues

Operating
Costs

Selling &
Adm,
Expenses

Operating
Income

Operating
Revenues

Operating
Costs

Selling &
Adm,
Expenses

Operating
Income

1,045,279

(662,608)

370,833

53,150

599,372

189,080

376,867

247,525

326,902

93,646

12,162

45,898

10,405

(257,611)

(38,976)

(408,059)

(135,220)

(274,819)

(158,451)

(269,908)

(72,841)

(7,438)

(32,651)

(6,485)

(34,697)

(31,554)

(4,124)

(73,464)

(19,220)

(32,035)

(45,361)

(28,400)

(8,406)

(1,725)

(5,862)

(21,140)

347,974

81,668

10,050

117,849

34,640

70,013

43,713

28,594

12,399

2,999

7,385

(17,220)

938,099

397,937

56,670

199,479

203,634

345,161

227,725

331,505

93,946

11,378

49,533

4,281

(555,586)

(278,725)

(42,428)

(181,631)

(151,209)

(303,347)

(163,320)

(277,641)

(73,685)

(5,977)

(37,231)

(1,086)

(36,289)

(31,893)

(3,969)

(30,585)

(19,534)

(21,410)

(40,412)

(32,496)

(7,915)

(1,625)

(6,117)

346,224

87,319

10,273

(12,737)

32,891

20,404

23,993

21,368

12,346

3,776

6,185

(21,852)

(18,657)

Consolidation Adjustment

(311,738)

299,755

26,463

14,480

(373,475)

341,816

30,918

(741)

Consolidated Total

3,059,381

(2,025,312)

(279,525)

754,544

2,485,873

(1,730,050)

(223,179)

532,644

Operating Income by Line of Business

Operating income and expenses by subsidiaries, for the year ended December 2002 and 2001, broken down by line of business

are shown below:

Company

Generation

Distribution

Eng. services
& Real Estate

Parent Co &
Others services

Adjustments

Total

Operating revenues

1,008,053

897,530

2,169,834

1,762,110

100,609

51,948

92,624

147,760

(311,739)

(373,475)

3,059,381

2,485,873

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dec-02

Operating Costs

(636,535)

(526,866)

(1,548,686)

(1,398,301)

(73,207)

(34,697)

(66,641)

(112,002)

299,757

341,816

(2,025,312)

(1,730,050)

Operating margin

371,518

370,664

621,148

363,809

27,402

17,251

25,983

35,758

(11,982)

(31,659)

1,034,069

755,823

Selling & Adm. Expenses

(32,542)

(34,042)

(234,647)

(180,314)

(8,270)

(3,872)

(30,528)

(35,869)

26,462

30,918

(279,525)

(223,179)

Operating income

338,976

336,622

386,501

183,495

19,132

13,379

(4,545)

(111)

14,480

(741)

754,544

532,644

ENERSIS 20 02 ANNUAL REPORT

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214

b. Non–operating Income

Non-Operating Income shows a greater loss of Ch$ 796.530 million. This is mainly explained by the Accounting Adjustments

made by the Company. These adjustments are in accordance to Chilean generally accepted accounting rules and have been

applied for the first time on our Financial Statements. Adjustments correspond to the acceleration of net balance of negative and

positive goodwill of investments in distribution and generation located in Argentina and Brazil, and due to the socioeconomic

instability experienced in that countries.

Net Financial Result improved by Ch$ 41.957 million or 10.6%, from a loss of Ch$ 396.208 million as of December 2001 to

a loss of Ch$ 354.251 million this year. This variation is the result of lower interest rates on the international markets respect

to the previous year.

Investment in Related Companies registered a net profit of Ch$ 8.264 million, a positive variation of Ch$ 18.963 million

when compared to the net loss of Ch$ 10.699 million registered in December 2001. This is principally due to the better result

of Ch$ 13.058 million of CIEN, and the effects of the exchange rates in the results for both periods of the Endesa Chile´s

related companies.

The Amortization on Positive Goodwill for the year 2002, amounted to Ch$ 506.344 million, an increase of Ch$ 425.768

million respect to Ch$ 80.576 million as of December 2001. The increase in the amortization is related to the acceleration

of amortization of the net balance of Negative and Positive goodwill of investments in distribution and generation located in

Argentina and Brazil, accelerating the amortization of positive goodwill of this investments for $424.698 million ($273.790

million net of minorities). The final net effect, including the negative goodwill, represent a loss of $362.179 million ($236.435

million net of minorities).

Net Other Non-Operating Income increased by Ch$ 56.212 million, reaching a total amount of Ch$ 66.976 million.

This increase is mainly due to:

• An increase of Ch$ 156.799 million derived from the adjustment on converting over to Chilean Accounting Rules on applying

the norms contained in Technical Bulletin N°64, particularly respect to subsidiaries in Brazil and Argentina. This was principally

due to the devaluation of both Brazilian Real and the Argentine Peso against its monetary assets and liabilities structure.

• An increase of Ch$ 10.567 million in profits from forward contracts, which recovered from a loss of Ch$ 5.752 million as of

December 2001 to a profit of Ch$ 4.815 million this year.

• Higher dividends received from related companies of Ch$ 5.307 million.

This was partially compensated by:

• Provisions made during 2002 of Ch$ 62.912 million for real estate projects in course.

• Lower profits booked during the year 2001 of Ch$ 24.113 million, due to the repurchase of the Yankee Bonds made by Enersis

and Endesa Chile on November 2001.

ENERSIS 2002 ANNUA L REPORT

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214

• An increase of Ch$ 13.130 million in provisions for contingencies and lawsuits.

• Net losses of Ch$ 7.528 million resulting from the recalculations of energy in the SIC-SING system.

• Taxes adjustment of the sales in a Brazilian subsidiary during the past year of Ch$ 6.731 million.

• Adjustment to the market value of the Sovereign Bond of the Argentinean Government by Ch$ 5.103 million.

Price Level Restatement and Exchange Differences show lower losses of Ch$ 17.223 million. This was caused principally

by the effects of the nominal devaluation of 9.75% of the Ch$ against the US$, compared to a devaluation of 14.14% as the

same date last year. These effects were compensated to a large extent by forward contracts held by the Company.

Income Tax and Deferred Taxes registered a reduction of Ch$ 63.833 million. This is mainly explained by a fall of Ch$ 51.205

million in Income Tax, mainly due to the effects of the Argentinean subsidiaries and by a decrease of Ch$ 12.628 million in

Deferred Taxes.

Extraordinary Items as of December, 2002 show a loss of Ch$ 23.552 million as a result of a new tax imposed by the

Colombian Government (Tax to contribute to security´s purposes) upon all companies established in that country.

Interest rate risks

On a consolidated basis, as of December 31st, 2001, 42% of the total debt was expressed in variable terms (mainly Libor

USD and Chilean TAB), while 58% was at fixed rates and secure.

At the end of 2002, the debt linked to variable rates represented 30% of the total debt, while 70% was at fixed rates.

The reduction in the percentage of debt at variable rates during this year is explained basically by the refinancing of obligations

(previously at variable terms) into fixed rates, and by hedge operations of Libor US$ rate for US$ 1,000 million, of which

US$ 700 million were done by Enersis and US$ 300 million by Endesa Chile.

The Company manages its interest rate risk by concentrating its debt structure on the long term with a suitable combination

of debt at fixed rates and at variable rates.

In the Argentinean subsidiaries, most of the debt is linked to the Libor.This rate have been decreasing, so we decide to maintain

a high percentage of debt in variable rate.

In Brazil, our subsidiaries has a natural coverage, tariffs are updated with the local price index correlated with the local interest

rate. Because of that we have decided to maintain important part of the debt in variable rate, due to the good moments of the

market to fixed some interest periods.

ENERSIS 20 02 ANNUAL REPORT

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216

Exchange risk

The Company’s exposure to an exchange risk is derived from the assets and liabilities denominated in foreign currency, mainly

US$.

On a consolidated basis, as of December 2001, Enersis had 72% of its total debt expressed in US$. With the US$/Ch$ forward

position, the weight of this debt in US$ was reduced to 67%.

As of December 31st, 2002, 69% of the debt was denominated in US$. Considering the US$/Ch$ hedging policy mentioned

below, the percentage of the debt denominated in US$ is reduced to 65%.

The reason behind the largest part of our debt being denominated in US$ is the fact that an important proportion of our

revenues is directly or indirectly related to US$. Thus, the tariffs of the majority of the countries in which we have operations

are tied to a large extent to the evolution of the US$. Particularly in Chile and Peru. In countries where the indexation to the

US$ is lower, the companies borrow a greater proportion of their loans in local currency.

In our generation subsidiaries, in the case of Argentina, a large part of Central Costanera´s income come from exports to

Brazil with contracts indexed to the US$. On the other hand, El Chocon contracts, expressed in US$, are currently being paid

in Argentine Pesos. In Colombia the contracts are at spot and at short term and, to a large extent follow the variation of the

US$ exchange rate. In Chile and Peru, the tariff process and the contracts are indexed to changes in the US$. Finally, the

tariffs set for Cachoeira Dourada (in Brazil) are not indexed to US$. Revenues are in local currency and are indexed to the

inflation.

In the case of Distribution companies in Argentina which operates under a federal concession, their tariffs are established

in US$ in contracts and are indexed to the United States inflation, this is the case of our subsidiary Edesur. Nevertheless,

the Emergency Law promulgated in January 2002 expressed the tariffs in Pesos and has maintained them frozen. For this

reason, the companies have had to absorb, with no compensation whatsoever, the effects of devaluation and of inflation.

Within the framework of renegotiation that is ongoing between the government and the companies, must established the

conditions under which the tariffs will be set in the future. In Brazil, tariffs are indexed to the General Market Price Index. In

Colombia the Added Distribution Value (VAD) is adjusted in accordance with the Producers Price Index every time that this

rises by more than 3% in any of its components.

Operating income and expenses, for the year ended December 2002 and 2001, broken down by countries are shown

below:

Company

Chile

Argentina

Brazil

Perú

Colombia

Total

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dec-02

Dec-01

Dic-02

Dic-01

Dic-02

Operating Revenues

805,113

799,462

827,353

297,634

691,658

624,290

265,489

292,427

469,769

472,060

3,059,380

2,485,874

% r / consolidado

26%

32%

27%

12%

23%

25%

12%

15%

19%

Operating Costs

(516,954)

(479,952)

(571,916)

(262,424)

(469,877)

(499,243)

(137,902)

(160,438)

(328,664)

(327,993)

(2,025,312)

(1,730,050)

% r / consolidado

26%

28%

15%

23%

29%

16%

19%

Operating Margin

288,159

319,510

255,437

35,210

221,781

125,047

127,587

131,989

141,105

144,067

1,034,068

755,824

% r / consolidado

28%

42%

25%

21%

17%

12%

17%

14%

19%

Selling & Adm, Expenses

(68,485)

(68,064)

(76,185)

(32,410)

(78,028)

(60,105)

(23,942)

(22,486)

(32,884)

(40,113)

(279,524)

(223,180)

% r / consolidado

25%

30%

27%

15%

28%

27%

10%

12%

18%

Operating Income

219,674

251,446

179,252

2,800

143,753

64,942

103,645

109,503

108,221

103,954

754,544

532,644

ENERSIS 2002 ANNUA L REPORT

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216
216

In Argentina, generating subsidiaries have their debts expressed in US$, given that their operating cash flows are largely

related to that currency. Edesur has most of its debts in US$, because before the emergency law, its tariffs were indexed to

that currency. Since then, the restrictions impossed, and the volatility on the local financial market have prevented any form

of hedging the exchange risk. Thus, to date, the exposure to the US$ remains. On the other hand, in Brazil, our generating

subsidiary is not exposed to the US$ as it has very low debt in Reales. Distribution subsidiaries used to have loans with third

parties in local currencies. Only Cerj has received inter-company loans in US$ and for this reason has adopted a hedging

policy, tending to maintain its US$ exposure at around 20%.

In the particular case of Chile, the exchange risk depends on the variation in the exchange rates of the currencies in which

assets and liabilities are booked. For accounting purposes and bearing in mind the instructions contained in Bulletin Nº 64, our

results are also affected. According to this Chilean accounting norm, debts in foreign currency utilized to finance investments

in countries considered to have an unstable currency are matched against the corresponding investments and the result of

the variations of the Dollar against the Chilean Peso from the crossed debts are not reflected in the income statement.

Currently, the exchange risk is managed on a consolidated basis, taking into consideration the part of these risks that our

Chilean subsidiaries have not covered. The company’s policy is set on maintaining between 70% and 85% of the booked

exposure to exchange risk covered.

The current exchange exposure between the Chilean Peso and the US Dollar is controlled with financial derivative instruments,

basically USD/CLP forward contracts, to cover the exchange risk.

Others

As is customary in most of debts contracts from bank borrowings, and also on the capital markets, a substantial proportion

of the financial debt of Enersis S.A. is subject to cross-default conditions. Some defaults on the part of Endesa Chile or its

subsidiaries, if not cured in time (in those specific conditions that permit some time to resolve the problem), could result in a

cross-default for Endesa Chile and for Enersis S.A.

We give below a detail of the defaults by Enersis or its subsidiaries that, if not cured in time, could result in a cross-default

for Enersis and/or its subsidiaries:

• Failure to pay capital and interest on the corresponding debt.

• Failure by Enersis, Endesa Chile or of one of their respective subsidiaries to pay a single debt of USD 30 million or more on

the date the corresponding payment should be paid (be it on the maturity date or by acceleration).

• Bankruptcy or suspension of payments by Enersis, Endesa Chile or one of their respective subsidiaries.

• Legal resolutions against Enersis, Endesa Chile or of one of their respective subsidiaries that imply an obligation for an

amount equivalent or superior, jointly, to USD 30 million, and legal resolutions whose contents are different to a payment of

a monetary obligation against Enersis, Endesa Chile or of one of their respective subsidiaries that could have an important

adverse effect on Enersis (consolidated), or on Endesa Chile (consolidated), whichever the case.

• Government action by virtue of which all or a major part of the property or assets of Enersis, Endesa Chile or of one of their

respective subsidiaries is nationalized, embargoed, expropriated, or government action impedes the continuity of operations,

or a major part of them, of Enersis, Endesa Chile or of one of their respective subsidiaries.

ENERSIS 20 02 ANNUAL REPORT

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218

•

In certain cases, Enersis.’s or Endesa Chile’s (whichever the case) debt expressed in US Dollars is rated below the “investment

grade” category by the corresponding Risk Rating Agency (which, in this case, is Standard & Poor’s).

• Failure to comply with the clauses of the corresponding contract and that are not regularized during the grace period established

such as commitments to maintain specific ratios on debt, interest coverage and a minimum net worth.

In most credits –and in general terms– the expression “affiliate” relates to those which are relevant, both in Chile and

abroad.

Liabilities which could become due and payable regarding each default and the respective creditor subsidiary are detailed

below:

Bilateralls and Sindicated Bank Loans

Amounts in US$ millions at December 31, 2002

Bilateral

Syndicated

Enersis

Endesa Chile

Total

614

162

776

900

556

Total

1,514

718

1,456

2,232

Potentially Active Events of Default in Affiliates (would trigger cross cross default in parent company)

Enersis

1. Default of debt >= 30 MMUS$ (1)

2. Bankruptcy or Discontinuance of payment (2)

3. Material Adverse Effect Fallos

4. Government Action (3)

Endesa Chile

1. Default of debt >= 30 MMUS$ (1)

2. Bankruptcy or Discontinuance of payment (2)

3. Material Adverse Effect Fallos

4. Government Action (3)

Principal Subsidiaries

Subsidiaries

Endesa Chile

Cono Sur

Endesa Argentina

Other affiliates

(affected amounts in brackets, MMUS$)

sí ($1,514)

sí ($1,150)

sí ($1,464)

n/a

yes ($718)

yes ($500)

yes ($718)

yes ($500)

yes ($718)

yes ($1,150)

yes ($1,464)

yes ($500)

yes ($718)

Notes:
(1) For an individual debt or for a sum of debts of a Principal Subsidiary Cono Sur and Endesa Argentina have no debts with third parties
(2) Only affecting Principal Subsidiaries
(3) Nationalization, expropriation, dissolution, etc.

International Yankee Bonds

Amounts in US$ millions at December 31, 2002

Enersis

Endesa Chile

Total

Yankee B.

700

1,416

2,116

ENERSIS 2002 ANNUA L REPORT

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218

Potentially Active Events of Default in Affiliates (would trigger default in parent cross company)

Enersis
1. Default of debt> 30 MMUS$ (1)
2. Start-up of Bankruptcy Process (2)
Endesa Chile
1. Default of debt > 30 MMUS$ (1)

2. Start-up of Bankruptcy Process (2)

Chilectra

Edesur

Enersis
Internacional

Endesa Chile

Cono Sur

Endesa
Argentina

Endesa Chile
Internacional

(affected amounts in brackets, MMUS$)

Significant Subsidiaries

yes ($700)

sí ($700)

yes ($700)

n/a

yes ($1,416)

n/a

yes ($1,416)

Subsidiaries (3)

Celta

San Isidro

Pehuenche

A. Del Sol

Costanera

(affected amounts in brackets, MMUS$)

Enersis
1. Default of debt > 30 MMUS$ (1)

yes ($700)

2. Start-up of Bankruptcy Process (2)

Endesa Chile
1. Default of debt > 30 MMUS$ (1)

yes ($1,416)

2. Start-up of Bankruptcy Process (2)

Notes:
(1)
(2)
(3)

Only for individual debt. Significant Subsidiaries having a “no” in default of debt, have no individual debts with third parties over $30 m.
Voluntarily or involuntarily, or else a court rules 1) its bankruptcy, 2) its insolvency, 3) names a receiver or 4) decides on dissolution/winding-up.
Subsidiaries with individual debts of over $30 m (at December 2002).
CHILE: Pehuenche $170 Yankee and $55 Private Placement. Celta $40 Banesto; San Isidro $58 Mitsubishi; Autopista del Sol $130 Local Bonds;
ARGENTINA: Costanera $95 Syndicated and $179 Mitsubishi; Betania $45 Syndicated.

Local Bonds

Amounts in US$ millions at December 31, 2002

Enersis

Endesa Chile

Total

Local Bonds

140

208

348

The ENERSIS bond has cross default with its own debt exceeding 3% of assets (>500 MMUS$)

Potentially Active Events of Default in Affiliates woud (would trigger cross default in parent company)

Endesa Chile
1. Insolvency or inability to pay debts

2. Default of debt >= 2 MMUF

3. Start-up of Bankruptcy Process

Important Affiliates

Cono Sur

Affiliates

Others Affiliates

(affected amounts in brackets, MMUS$)
yes ($208)

yes ($31)

yes ($178)

ENERSIS 20 02 ANNUAL REPORT

221

220

2. ANALYSIS OF THE BALANCE SHEET

Total assets of the Company show a decrease of $138,635 million compared to the same period the year before. This is mainly

due to:

Assets (millions of $)

Current Assets

Fixed Assets

Other Assets

Dec-01

1,162,447

9,625,049

1,972,303

Dec-02

1,223,963

9,879,458

1,517,743

Var Deec 02- 01

%Var 02-01

61,516

254,409

(454,560)

5.3%

2.6%

(23.0%)

Total Assets

12,759,799

12,621,164

(138,635)

(1.1%)

• An increase in fixed assets by $254,409 million as a result of new capitalizations of $317,915 million and of the methodology

of booking the non-monetary assets in historical dollars, in accordance with Technical Bulletin No. 64, in the affiliates

located in unstable countries. This is partially offset by the depreciation in the period of $454,471 million.

• Current assets show an increase of $61,516 million, mainly due to the increase in accounts collectable from EE.RR. in

the short term, by a transfer from the long term of $177,379 million, an increase in short-term deferred taxes of $27,794

million, an increase in cash of $10,536 million and the increase of other current assets by $4.780 million, partially offset

by the decrease in debtors for sales by $91,409 million, a decrease in time deposits by $32,486 million, a decrease in

inventories by $17,041 million and a decrease in various debtors of $9,445 million.

• Other long-term assets show a reduction of $454,560 million, explained by the decrease in the net balance of goodwill

and negative goodwill by $385,297 million, basically as a result of the write-off carried out for the impairment of goodwill

and negative goodwill of investments in Argentina and Brasil. A decrease in accounts collectable from EE.RR. in the long

term of $169,770 million, partially offset by the increase in capital expenditures in related companies of $26,716 million,

an increase in long-term debtors for $23.947 million and the increase of other long-term assets for $40,220 million.

Total liabilities of the Company show a reduction of $138,635 million in respect of the same period the year before. This is

mainly due to:

Liabilities (millions of $)

Current Liabilities

Long-term Liabilities

Minority Interest

Shareholders’ Equity

Dec-01

1,639,303

5,832,363

4,073,571

1,214,562

Dec-02

2,151,373

5,413,608

4,050,603

1,005,580

Var Dec 02- 01

%Var 02-01

512,070

(418,755)

(22,968)

(208,982)

31.2%

(7.2%)

(0.6%)

(17.2%)

Total Liabilities

12,759,799

12,621,164

(138,635)

(1.1%)

Due and payable liabilities show a net increase of $512,070 million, equivalent to 31.2%, mainly explained by the increase in

Public Obligations of $435,653 million, due to the transfer from the long term to the short term of the Pehuenche Bonds and the

Endesa Chile Euro Bonds, an increase in long-term Bank Obligations, current portion, by $179,725 million, and an increase in

short-term Bank Obligations byr $124,039 million, partially offset by a decrease in other current liabilities by $90,842 million,

a reduction in income tax of $49,751 million and a decrease in accounts payable for $40,596 million.

ENERSIS 2002 ANNUA L REPORT

221

220
220

Long-term liabilities decreased by $418,755 million, mainly as a result of a reduction in long-term Bank Obligations by $279,911

million, basically due to the transfer, and also the reduction in Public Obligations of $173,623 million due to the transfer from

the long term to the short term of the Pehuenche Bonds and the Endesa Chile Euro Bond, partially offset by the increase of

bonds due to the issuance made by Autopista del Sol, equivalent to $92,355 million.

Minority interest decreased by $22,968 million due to a decrease in shareholders’ equity because of the losses for the accounting

period 2002, offset by an increase in the equity of the foreign affiliates due to the methodology of booking the non-monetary

liabilities (equity) in historical dollars.

Regarding shareholder’s equity, it should be stated that it decreased by $208.982 compared to December, 2001. This variation

is explained mainly by the recognition of the loss for the period of $ 223,748 million, the increase in shortfall in tax revenue

by $5,830 million, partially offset by an increase in reserves by $20,597.

The evolution of the main financial indicators is as follows:

Indicator

Liquidity

Current Liquidity

Acid-test ratio (1)

Working Capital

Indebtedness

Indebtedness Ratio

Short-term Debt

Long-term Debt

Unit

Times

MM$

Times

Interest expense coverage (2)

Times

Profitability

Return on Investment

Return on Assets

(1) Current assets, net of prepaid expenses
(2) RAIIDAIE divided by interst expense was used

Dec-01

Dec-02

Var Dec 02-01

%Var 02-01

0,71

0,70

0,57

0,56

(0,14)

(476,856)

(927,410)

(450,554)

1,41

0.22

0.78

2,67

3.47

0.33

1,50

0.28

0.72

2,46

(22.25)

(1.77)

0,09

0.06

(0.06)

(0,21)

(25.72)

(2.10)

(19.7%)

(20.0%)

(94.5%)

6.4%

29.6 %

(8.3)%

(7.8%)

(741.1)%

(636.6)%

Liquidity ratio at December, 2002 is 0.57, showing a worsening of 0.14 points compared to the same date the year before.
Such worsening is because there is less than one year left for the maturity dates of the Endesa Chile Internacional Bond por
MM$ 400 Euros, the Pehuenche Bond for MM US$ 170 and, at the Cayman Branch of Enersis, the bank debt for MM US$ 460,
which were transferred to the short term.

The company is negotiating with the Banks for the refinancing of its debt which will mature in the following years, therefore,

once such operation is performed, the liquidity ratio will substantially improve.

The indebtedness ratio, which at December 31, 2002 was 1.50 times higher than in the same period of 2001, shows an
increase of 0.09 points. The increase is basically due to the effect of the exchange rate, because a great portion of the debt
is indexed to the US dollar, and to the equity reduction due to the loss in the accounting period.

On the other side, return on investment is (22,25%), compared to the same date the year before when it reached 3.47%. This
decrease in return is the result of the loss obtained at December 2002, compared to the profits obtained at the same date the
year before, going from a profit of $ 42,154 million to a loss of $223,748 million.

Return on assets changed from 0.33% in December, 2001 to (1.77%) in December, 2002. This is basically explained by the

decrease in the profits of the period.

ENERSIS 20 02 ANNUAL REPORT

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222

3. PRINCIPALES FLUJOS DE EFECTIVO

During the period, the Company generated a net cash flow of Ch$ 5,864 million, explained as follows:

Cash Flow (millions of $)

Operating

Fixancing

Investing

Dec-01

560,521

40,985

(503,639)

Dec-02

627,783

(285,040)

(336,879)

Var Dec 02-01

%Var 02-01

67,262

(326,025)

166,760

12.0%

(795.5%)

(33.1%)

Net cash flow

97,867

5,864

(92,003)

(94.0%)

Operating activities generated a net positive cash flow of Ch$ 627,783 million, 12% greater than year 2002. This flow is

mainly related to a loss for the period of Ch$ 223,748 million, plus net charges to income that do not represent cash flow for

Ch$ 836,377 million that correspond mainly to Depreciation by Ch$ 454,471 million and Amortization of Negative and Positive

Goodwill for Ch$ 394,096 million.

Financing activities produced a negative cash flow of Ch$ 285,040 million mainly due to loan payment for Ch$ 1,094,546

million, dividend payment for Ch$ 100,446 million, Bonds payment for Ch$ 29,347 million and capital reduction in subsidiaries

for Ch$ 119,287 million. These were partially compensated by loans received and Bonds issued fur Ch$ 978,914 million and

Ch$ 131,515 million, respectively.

Investment activities generated a net negative cash flow of Ch$ 336,879 million, basically explained by the addition of

fixed assets by Ch$ 317,915 million, here it is worth mentioned Endesa Chile’ investment in Ralco for Ch$ 122,725 million.

Other important factors in Investment Activities are, investment in subsidiaries, basically Central Fortaleza in Brazil, for

Ch$ 15,480 million, investments in financial instruments for Ch$ 724 million and other disbursements for Ch$ 35,935 million.

These were partially compensated by the sale of fixed assets for Ch$ 22,605 million and other income for Ch$ 18,556

million.

Fixed Assets by Company

(millions of Ch$)

Empresa

Endesa S.A.

Chilectra S.A.

Río Maipo S.A.

Edesur S.A.

Edelnor S.A.

Cerj

Coelce

Codensa S.A.

Cam Ltda.

Inmobiliaria Manso de Velasco Ltda.

Synapsis Soluciones y Servicios Ltda.

Holding Enersis

Payments of additions of fixed Assets

Fixed Asset Depreciation

Dec-01

52,973

11,915

3,476

85,880

29,608

64,839

52,144

40,128

433

159

Dec-02

134,858

Dec-01

185,421

Dec-02

195,859

19,750

6,067

21,410

23,621

34,402

48,141

28,468

314

441

443

11,953

1,553

69,258

15,612

45,243

38,079

55,645

959

242

1,255

801

12,683

1,889

65,881

17,322

54,971

42,084

60,072

1,083

220

1,366

1,041

Total Consolidado

341,554

317,915

426,020

454,471

ENERSIS 2002 ANNUA L REPORT

223

222
222

4. BOOK VALUE AND ECONOMIC VALUE OF THE ASSETS

Among the most important assets, we can mention the following:

The values for fixed assets are adjusted according to the accounting criteria established by the Superintendencia de Valores
y Seguros (S.V.S., Superintendence of Securities and Insurance) in Resolutions Nos. 550 and 566 of 1985. In the case of
Sociedad Extranjera Inversiones Distrilima S.A., the fixed asset values were adjusted according to the exception criterium
established in Technical Bulletin No. 45 of the Colegio de Contadores de Chile A.G. (Chilean Accounting Association), a rule
in force at the time when the investment was made and which was not modified by Technical Bulletin No.51 which replaced
the former.

Depreciation is calculated on the updated value of the property according to the remaining years of useful life of each piece

of property.

Investments in related companies are presented updated to their proportional equity value. In the case of foreign companies,
as of the second quarter of 1998, this methodology has been applied on financial statements prepared according to Technical
Bulletin No.64 of the Colegio de Contadores de Chile A.G., and the intangible values are price level restated and amortized
according to the dispositions of Technical Bulletin No.55 of the Colegio de Contadores de Chile A. G.

According to Oficio Circular No. 150 of January 31, 2003 of S.V.S., the company has evaluated the recovery of the assets
associated to its investments at the closing date of the financial statements, by applying the accounting principles generally
accepted in Chile, which are Technical Bulletins No.33 for fixed assets and, according to the ranking defined in Technical
Bulletin No. 56, NIC 36 has been applied for goodwill and negative goodwill related to such investments.

Assets expressed in foreign currency are presented at the exchange rate effective at the closing of the period.

Investments in financial instruments in repos are presented according to their purchase value plus the proportion of the
corresponding interests according to the implicit rate for each operation.

Accounts and documents to be collected from related companies are classified according to their maturity dates into short-
and long-term documents. The operations are adjusted to fairness conditions similar to those customarily prevailing in the
market.

In summary, the assets are shown updated according to generally accepted accounting principles and rules, and to the
instructions issued by the Superintendencia de Valores y Seguros, as disclosed in Note 2 to the Financial Statements.

ENERSIS 20 02 ANNUAL REPORT

225

224

ENERSIS 2002 ANNUA L REPORT

225

224
224

Unconsolidated
Enersis Unconsolidated Financial Statements

ENERSIS 2002 ANNUAL RE POR T

INDEX

Accounts Inspector`s Report

Independent Accountant’s Report

Unconsolidated Balance Sheets

Unconsolidated Statements of Income

Unconsolidated Statements of Cash Flow

Notes to the Unconsolidated Financial Statements

Unconsolidated Relevant Facts

Unconsolidated Management Analysis

228

229

230

232

233

235

271

274

ENERSIS 2002 ANNUA L REPORT

227

226
226

ACCOUNTS INSPECTOR’S REPORT

Pursuant to the provisions in law No. 18,046 on Limited Liability Stock Companies and in compliance with the mandate

granted by the Ordinary Shareholders’ Meeting held on April 11, 2002, we have examined the Consolidated Financial

Statements of Enersis S.A. for period between January 1 and December 31, 2002.

Our assignment was focused on verifying, on a selecyive basis, the coincidence of the fi gures presented in the Financial

Statements with the offi cial records of the Company and its subsidiaries and to such and end we compared the fi gures

presented in the ledger with the grouping and classifi caton worksheets. To subsequently ascertain if these amounts which

are the balances of accounts of the same nature match with those included in the Financial Statements, a revision which

entailed no objections.

Marcela Araya

Accounts Inspector

Marco Acevedo

Accounts Inspector

Santiago, January 31, 2003

ENERSIS 20 02 ANNUAL REPORT

229

228

ENERSIS 2002 ANNUA L REPORT

229

228
228

Enersis S.A. Balance Sheets

(Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2002 and thousands of US dollars)

ASSETS

CURRENT ASSETS:

Cash

Time deposits

Notes receivable, net

Other accounts receivable, net

Amounts due from related companies

Income taxes recoverable

Prepaid expenses

Deferred income taxes

Other current assets

Total current assets

PROPERTY, PLANT AND EQUIPMENT

Buildings and infrastructure

Machinery and equipment

Other assets

Technical appraisal

Sub-total

Less: accumulated depreciation

Total property, plant and equipment, net

OTHER ASSETS:

2001
ThCh$

2002
ThCh$

554,859

3,339,638

759

9,653,095

78,688,804

11,993,039

23,545

2,890,033

113,427,127

220,570,899

20,592,396

1,547,428

1,351,831

32,871

23,524,526

(9,832,948)

13,691,578

419,971

4,599,104

737

4,723,505

187,939,210

9,252,460

23,946

13,703,886

5,003,039

225,665,858

20,592,331

2,237,900

778,024

32,853

23,641,108

(10,674,829)

12,966,279

Investments in related companies

2,422,927,530

2,293,369,227

Goodwill, net

Negative goodwill, net

Long-term receivables

845,668,431

(1,104,295)

489,642

787,722,648

(753,014)

475,380

Amounts due from related companies

663,834,927

500,634,149

2002
ThUS$
(Note 2)

584

6,400

6,573

261,532

12,876

19,070

6,962

314,031

28,656

3,114

1,083

32,899

(14,855)

18,044

3,191,396

1,096,175

(1,048)

662

696,670

1,981

(484)

73,218

Intangibles

Accumulated amortization

Other assets

Total other assets

1,423,691

(276,786)

14,444,523

1,423,691

(348,105)

52,615,157

3,947,407,663

3,635,139,133

5,058,570

TOTAL ASSETS

4,181,670,140

3,873,771,270

5,390,645

The accompanying notes are an integral part of these financial statements

ENERSIS 20 02 ANNUAL REPORT

231

230

2002
ThUS$
(Note 2)

370,953

15,277

292

489

314

49,178

7,651

281

276

5,648

450,382

1,150,000

926,489

1,402,906

2,775

5,843

52,909

LIABILITIES AND SHAREHOLDERS’ EQUITY

2001
ThCh$

2002
ThCh$

CURRENT LIABILITIES:

Current portion of long-term debt due to banks
and financial institutions

41,978,939

266,570,546

Current portion of bonds payable

10,407,623

10,978,002

Dividends payable

Accounts payable

Miscellaneous payables

Amounts payable to related companies

Accrued expenses

Withholdings

Income taxes payable

Unearned income

Other current liabilities

Total current liabilities

LONG-TERM LIABILITIES:

Due to banks and financial institutions

Bonds payable

388,968

487,375

1,103,337

105,642,409

2,580,316

919,521

17,175

423,677

114,353,517

278,302,857

210,095

351,012

225,262

35,340,092

5,498,327

201,903

16,675

198,493

4,058,871

323,649,278

992,321,281

637,946,436

826,401,500

665,784,177

Amounts payable to related companies

1,052,651,113

1,008,142,313

Accrued expenses

Deferred income taxes

Other long-term liabilities

Total long-term liabilities

SHAREHOLDERS’ EQUITY:

Paid-in capital, no par value shares

Additional paid-in capital

Other reserves

Retained earnings

Net income (loss) for the year

Accumulated development period
surplus (deficit) of subsidiaries

Total shareholders’ equity

1,820,408

4,066,066

1,994,209

4,198,442

38,021,057

2,688,805,304

2,544,541,698

3,540,922

751,208,197

33,370,057

26,282,673

360,653,617

751,208,197

33,370,057

46,879,587

402,807,650

42,154,033

(223,748,087)

1,045,363

46,437

65,236

560,537

(311,362)

893,402

(4,937,110)

(6,870)

1,214,561,979

1,005,580,294

1,399,341

ENERSIS 2002 ANNUA L REPORT

231

230
230

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

4,181,670,140

3,873,771,270

5,390,645

The accompanying notes are an integral part of these financial statements

Unconsolidated Statements of Income

(Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2002 and thousands of US dollars)

OPERATING INCOME:

Sales

Cost of sales

2001
ThCh$

2002
ThCh$

2002
ThUS$
(Note 2)

4,300,825

(844,901)

4,281,520

(1,085,952)

5,958

(1,511)

GROSS PROFIT

3,455,924

3,195,568

4,447

ADMINISTRATIVE AND SELLING EXPENSES

(20,641,463)

(21,829,565)

(30,378)

OPERATING LOSS

(17,185,539)

(18,633,997)

(25,931)

NON-OPERATING INCOME AND EXPENSE:

Interest income

Equity in income of related companies

Other non-operating income

Equity in losses of related companies

Amortization of goodwill

Interest expense

Other non-operating expenses

Price-level restatements, net

Exchange difference, net

47,004,483

248,764,514

29,498,296

(10,134,537)

(50,470,996)

(161,691,390)

(16,282,459)

1,583,108

(37,302,866)

57,094,170

71,887,722

22,378,615

(80,331,239)

(107,888,725)

(144,154,767)

(18,068,458)

1,580,699

(18,141,777)

79,451

100,037

31,141

(111,787)

(150,135)

(200,602)

(25,144)

2,200

(25,246)

NON-OPERATING RESULT

50,968,153

(215,643,760)

(300,085)

INCOME (LOSS) BEFORE INCOME TAXES AND
AMORTIZATION OF NEGATIVE GOODWILL

33,782,614

(234,277,757)

(326,015)

Income Tax

8,306,245

9,486,627

13,201

INCOME (LOSS) BEFORE AMORTIZATION
OF NEGATIVE GOODWILL

42,088,859

(224,791,130)

(312,814)

Amortization of negative goodwill

65,174

1,043,043

1,451

NET INCOME (LOSS) FOR THE YEAR

42,154,033

(223,748,087)

(311,362)

The accompanying notes are an integral part of these financial statements

ENERSIS 20 02 ANNUAL REPORT

233

232

Unconsolidated Statements of Cash Flows

(Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2002 and thousands of US dollars)

Years ended December 31,

2001
ThCh$

2002
ThCh$

2002
ThUS$
(Note 2)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) for the year

42,154,033

(223,748,087)

(311,362)

Gain (losses) from sales of assets:

Losses on sales of property, plant and equipment

5,794

Charges (credits) to income which do not represent cash flows:

Depreciation

Amortization of intangibles

Equity in income of related companies

Equity in losses of related companies

Amortization of goodwill

Amortization of negative goodwill

Price-level restatement, net

Exchange difference, net

Other credits to income which do not represent cash flows

Other charges to income which do not represent cash flows

Changes in assets which affect cash flows:

800,193

71,317

(248,764,514)

10,134,537

50,470,996

(65,174)

(1,583,108)

37,302,866

1,041,243

71,319

(71,887,722)

80,331,239

107,888,725

(1,043,043)

(1,580,699)

18,141,777

(13,949,057)

21,108,650

1,449

(100,037)

111,787

150,135

(1,452)

(2,200)

25,246

(19,411)

29,374

Decrease (increase) in trade receivables

Decrease in other assets

(30,322)

414,999

83,828,481

30,360,554

578

42,249

Changes in liabilities which affect cash flows:

Increase (decrease) in accounts payable associated
with operating results

Increase in interest payable

Decrease in income tax payable

Increase in other accounts payable associated
with non-operating results

Net decrease in value added tax and other similar taxes
payable

(15,756,346)

1,108,510

1,543

32,220,008

(8,306,245)

41,853,397

(9,486,628)

58,242

(13,201)

16,250,794

9,771,445

13,598

(2,274,805)

(675,243)

(940)

Net cash flows used in operating activities

(3,541,495)

(10,278,621)

(14,303)

The accompanying notes are an integral part of these financial statements

ENERSIS 2002 ANNUA L REPORT

233

232
232

Unconsolidated Statements of Cash Flows

(Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2002 and thousands of US dollars)

CASH FLOWS FROM FINANCING ACTIVITIES:

Loans obtained

Proceeds from bond issuances

Loans obtained from related companies

Dividends paid

Payment of loans

Payment of bonds

Payment of loans granted by related companies

Payment of other loans obtained from related companies

Payment of bond issuance costs

Other disbursements for financing

Years ended December 31,

2001
ThCh$

2002
ThCh$

2002
ThUS$
(Note 2)

730,193,952

102,320,957

66,040,029

91,900

7,174,169

56,352,557

(15,856,258)

(136,002)

(405,705,901)

(76,693,051)

(3,399,930)

(153,799,591)

(161,245,309)

(996,147)

(5,741,087)

(7,050,306)

(98,911,652)

(22,172,355)

78,419

(189)

(106,724)

(9,811)

(137,643)

(30,855)

Net cash provided by (used in) financing activities

92,944,855

(82,570,780)

(114,903)

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sales of long-term investments

Proceeds from loans obtained from related companies

Other receipts from investments

Additions to property, plant and equipment

Long-term investments

Loans granted to related companies

Other loans granted to related companies

Other investment disbursements

95,851,021

13,400,097

(73,425)

1,131

254,952,492

29,481,330

(11,392,238)

(16,732,134)

(183,688,465)

(162,862,889)

(20,756)

(1,576,335)

(9,060,476)

354,786

41,025

(23,284)

(226,636)

(2,194)

(12,608)

Net cash provided by (used in) investing activities

(85,923,766)

94,203,119

131,091

NET CASH FLOW FOR THE YEAR

3,479,594

1,353,718

1,884

EFFECT OF PRICE-LEVEL RESTATEMENT ON CASH
AND CASH EQUIVALENTS

377,555

(229,140)

(319)

NET INCREASE IN CASH AND CASH EQUIVALENTS

3,857,149

1,124,578

1,565

CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR

37,348

3,894,497

5,419

CASH AND CASH EQUIVALENTS AT END OF YEAR

3,894,497

5,019,075

6,984

The accompanying notes are an integral part of these financial statements

ENERSIS 20 02 ANNUAL REPORT

235

234

Enersis S.A. Notes to the Financial Statements

(Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2002, except as stated)

DESCRIPTION OF BUSINESS

Enersis S.A. (the “Company”) is registered in the Securities Register under N°0175 and is regulated by the Chilean

Superintendency of Securities and Insurance (the “SVS”). The Company issued American Depositary Receipts in 1993 and

1996 and is also subject to the regulation of the securities and exchange Commission (SEC) of the United States.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Periods covered

These financial statements cover the years ended December 31, 2002 and 2001.

b. Basis of preparation

The financial statements have been prepared in accordance with generally accepted accounting principles in Chile and the

regulations established by the SVS (collectively “Chilean GAAP”), except for the investment in subsidiaries, which is shown in

one line of the balance sheet under the equity method and, therefore, have not been consolidated line by line. This treatment

does not affect the net income of the year or shareholders’ equity.

These financial statements have been prepared order an individual analysis of the Company and they should be read along

with the consolidated financial statements required by accounting principles accepted in Chile.

These financial statements include assets, liabilities and result of the agency established in 1996 by Enersis S.A. in Cayman

Islands.

c. Basis of presentation

The 2001 financial statements and its corresponding notes are presented updated and restated by 3.0% to facilitate comparison.

This percentage corresponds to the Consumer Price Index variation within the last twelve months, with a one-month lag.

d. Price-level restatement

The financial statements have been price-level restated in accordance with generally accepted accounting principles, to reflect

the effects of the changes in the purchasing power of the Chilean peso for the years ended December 31, 2002 and 2001 in

3.0% and 3.1% respectively. The effects of these off-the-books restatements are shown in Note 17.

e. Currency conversion

Assets and liabilities denominated in foreign currencies and/or Unidad de Fomento (UF, Inflation index linked units of accounts)

are shown at their corresponding values and/or exchange rates effective at each year end using the following year-end

rates:

Currency

United States dollar (Observed)

Euro

Symbol
used

US$

2001
Ch$

654.79

578.18

2002
Ch$

718.61

752.55

Unidad de Fomento (UF)

16,262.66

16,744.12

ENERSIS 2002 ANNUA L REPORT

235

234
234

Convenience translation to U.S. dollars

The financial statements are stated in Chilean pesos. The translations of Chilean pesos into US dollars are included solely for

the convenience of the reader, using the observed exchange rate reported by the Chilean Central Bank as of December 31,

2002 of Ch$718.61 to US$1.00. The convenience translations should not be construed as representations that the Chilean

peso amounts have been, could have been, or could in the future be, converted into US dollars at this or any other rate of

exchange.

f. Time deposits

Time deposits are presented at original placement plus accrued interest and UF indexation adjustments at each year end.

g. Property, plant and equipment

Property, plant and equipment are stated at cost plus price-level restatement.

In 1986, the increase resulting from a technical appraisal of property, plant and equipment was recorded in the manner authorized

by the SVS in Circulars No.’s 550 and 566 dated October 15 and December 16, 1985, respectively, and Communication

N°4790, dated December 11, 1985.

The Company has evaluated the recoverability of the book value of its property, plant and equipment in accordance with

Technical Bulletin N°33 of the Chilean Accounting Association. As a result of this evaluation no adjustments have been

determined that affect the book values of these assets.

h. Depreciation

Depreciation expense is calculated on the revalued balances using the straight-line method over the estimated useful lives

of the assets. Depreciation expense was ThCh$800,193 and ThCh$1,041,243 in 2001 and 2002, respectively.

i. Intangibles

Intangibles are mainly easements, and amortized in accordance with Technical Bulletin N°55 of the Chilean Association of

Accountants.

j. Investments in related companies

Investments in related companies are presented under the equity method of accounting, on the basis of the corresponding

financial statements of the investee.

Investments in foreign affiliates are recorded in accordance with Technical Bulletin No.64 of the Chilean Association of

Accountants.

The Company has evaluated the recoverability of the book value of its investments abroad in accordance with Technical

Bulletins N°33 and N° 42 of the Chilean Accounting Association.

As a result of this evaluation no adjustments have been determined that affect the book values of these assets.

k. Goodwill and negative goodwill

Goodwill and negative goodwill are determined according to Circular N°368 of the SVS. Amortization is calculated using

the straight-line method, considering the nature and characteristic of each investment, foreseeable life of the business and

investment return, and does not exceed 20 years.

ENERSIS 20 02 ANNUAL REPORT

237

236

The Company has evaluated the recoverability of its goodwill and negative goodwill arising on investments abroad, and in

virtue of Technical Bulletin N°56 of the Chilean Association of Accountants, it has resorted to IAS 36 “Impairment of Assets

Value” (See Note 9).

l. Bonds

Bonds payable are recorded at the face value of the bonds. The difference between the face value and the placement value,

equal to the premium or discount, is deferred and amortized over the term of the bonds.

m. Income tax and deferred income taxes

At December 31, 2002 and 2001, the Company recorded current tax expense according to the tax laws and regulations in

each country. The Company records income taxes in accordance with Technical Bulletin N°60 and its complements of the

Chilean Association of Accountants, and with circular N°1466 issued on January 27, 2000 by the SVS, recognizing, using the

liability method, recognizing the deferred tax effects of temporary differences between the financial and tax values of assets

and liabilities.

n. Severance indemnity

The severance indemnity that the Company is obliged to pay to its employees under collective bargaining agreements is stated

at the present value of the benefit under the vested cost method, discounted at 9.5% and assuming an average employment

span which varies based upon years of service with the Company.

o. Revenue recognition

The Company recognizes revenues for amounts received from substations rental and electrical distribution lines in accordance

with contracts with Chilectra S.A. These amounts are presented in current assets as amounts due from related companies

and the corresponding cost is included in cost of sales as depreciation of the aforementioned equipment and electrical

installations.

p. Pension and post-retirement benefits

Pension and post-retirement benefits are recorded in accordance with the respective Collective Bargaining Contracts of the

employees based on the actuarially determined projected benefit obligation.

q. Accrued vacation expense

In accordance with Technical Bulletin No.47 issued by the Chilean Association of Accountants, employee vacation expense

is recorded on the accrual basis.

r. Financial derivative contracts

As of December 31, 2002 the Company has forward contracts, currency swaps, and interest swaps and collars with several

financial institutions, defined as cover, which are recorded according to Technical Bulletin N°57 of the Chilean Association of

Accountants.

s. Software

Software has acquired by the Company and its subsidiaries as computing packages and is amortized over a 3-year term.

t. Research and development costs

During 2001 and 2002 there have been no expenses under this caption which require footnote disclosure as required by

Circular No. 981 of SVS dated December 28, 1990.

ENERSIS 2002 ANNUA L REPORT

237

236
236

u. Statements of cash flows

Investments considered as cash equivalents, as indicated in point 6.2 of Technical Bulletin N°50 issued by the Chilean

Association of Accountants, include cash and time deposits.

For classification purposes, cash flows from operations include collections and payments to related companies for services

and dividends paid.

v. Reclassification

The following reclassification was made at December 31, 2001:

• From “other reserves”, a charge of M$1,210,739 to “Accumulated development period deficit of subsidiaries”.

CHANGE IN ACCOUNTING PRINCIPLES

There were no changes in accounting principles during 2002 that would effect comparison with the prior year financial

statements.

ENERSIS 20 02 ANNUAL REPORT

239

238

TRANSACTIONS WITH RELATED COMPANIES

Balances of accounts receivable and payable are as follows at December 31, 2001 and 2002:

a. Notes and accounts receivable:

Company

Chilectra S.A.

Synapsis, Soluciones y Servicios IT Ltda.

Inmobiliaria Manso de Velasco Ltda.

Cía. Americana de Multiservicios Ltda. (*)

Compañía Eléctrica del Río Maipo S.A.

Enersis Internacional

Chilectra S.A. (Cayman Islands Agency)

Enersis de Argentina S.A.

Empresa Eléctrica de Panamá S.A.

Edelnor S.A.

Sociedad Panameña de Electricidad S.A.

Companhia de Eletricidade do Río de Janeiro

Interocean Developments Inc.

Luz de Bogotá S.A.

Edesur S.A.

Luz de Río Ltda.

Cerj Overseas

Codensa S.A.

Empresa Eléctrica de Colina Ltda.

Endesa S.A. (Chile)

Cía. Americana de Multiservicios Uno Ltda. (*)

Elesur S.A.

Inversiones Distrilima S.A.

Ingendesa S.A.

Infraestructura 2000 S.A.

Túnel el Melón S.A.

Smartcom S.A.

Compañía Eléctrica Tarapacá (Celta)

Autopista Los Libertadores S.A.

Endesa S.A. (España)

Endesa Inversiones Generales S.A.

Autopista del Sol S.A.

Chispa Uno S.A.

Luz Andes Ltda.

Agencia Endesa Chile S.A.

Endesa Internacional S.A.

Empresa Eléctrica Pangue S.A.

Empresa Eléctrica Pehuenche S.A.

Compañía Eléctrica San Isidro S.A.

As of December 31,

Short -term

Long-term

2001
M$

2002
M$

2001
M$

2002
M$

3,929,476

145,737,576

266,810,206

37,809,713

44,952,377

309,730,584

355,502,853

15,762,739

79,637

11,115,948

6,531,582

80,700

538,764

11,012

1,164

45,072

64,875

361

20,220

1,111

23,410

60,115

16,160

35,785

36,812

4,573,693

3,851,691

2,201,202

9,631

1,234

69,123

21,544

24,944

64,053

17,219

41,032,618

1,132,342

1,122,995

33,721,685

35,930,500

13,795

1,147

49,286,910

5,016,632

17,098

503

69,341

180,391

52,178

11,077

1,676

364,605

16,238

2,618

170

14,698

735

29,318,877

21,094

488

59,209

42,592

79,817

341

31,875

2,526

322,122

3,363

279

241,975

2,458

31,561

23,215,801

ENERSIS 2002 ANNUA L REPORT

239

238
238

Total

78,688,804

187,939,210

663,834,927

500,634,149

(*) As of January 1, 2002, these companies merged with Compañía Americana de Multiservicios Ltda.

b. Notes and accounts payable:

Sociedad

Chilectra S.A.

Synapsis, Soluciones y Servicios IT Ltda.

Inmobiliaria Manso de Velasco Ltda.

Cía. Americana de Multiservicios Ltda. (*)

Compañía Eléctrica del Río Maipo S.A.

Enersis Internacional

Endesa S.A. (Chile)

Edelnor S.A.

Cía. Americana de Multiservicios Uno Ltda. (*)

Enersis de Argentina S.A.

Edesur S.A.

Elesur S.A.

Smartcom S.A.

Infraestructura 2000 S.A.

Túnel el Melón S.A.

Ingendesa S.A.

Interocean Developments Inc.

Chilectra Internacional

Chilectra S.A.(Cayman Islands Agency)

Endesa Inversiones Generales S.A.

As of December 31,

Short - term

Long- term

2001
M$

79,520,696

4,745,883

72,232

146,446

3,239,105

16,333

410,965

15,829

80,414

36,150

15,065

2002
M$

2,231,300

6,208,252

6,114,375

243,558

7,183,321

1,601,141

66,590

16,866

38,872

24,802

2001
M$

2002
M$

60,326,128

13,263,199

2,274,676

5,070,293

2,314,836

5,193,212

17,289,294

11,465,695

984,980,016

987,371,066

19,978

422

387

4,423

28,724

19,397

410

376

36,753

88,274

Total

105,642,409

35,340,092

1,052,651,113

1,008,142,313

(*) As of January 1, 2002, these companies merged with Compañía Americana de Multiservicios Ltda.

ENERSIS 20 02 ANNUAL REPORT

241

240

c. Effects in income (expense) in each year are as follows:

Company

Nature of
Transaction

Chilectra S.A.

Inmobiliaria Manso de Velasco Ltda.

Compañía Americana de Multiservicios Ltda. (*)

Synapsis, Soluciones y Servicios IT Ltda.

Compañía Eléctrica del Río Maipo S.A.

Empresa Distribuidora Sur S.A.

Elesur S.A.

Endesa S.A. ( Chile )

Enersis Internacional

Endesa Inversiones Generales S.A.

Loans

Property rental

Services

Loans

Property rental

Loans

Services

Materials

Property maintenance

Loans

Services

Loans

Services

Loans

Services

Loans

Property rental

Compañía Americana de Multiservicios Uno Ltda. (*)

Property maintenance

Endesa S.A. (España)

By agency intermediation:

Chilectra S.A. (Cayman Islands Agency)

Luz de Río

Empresa Eléctrica de Panamá S.A.

Enersis Internacional

Endesa Chile Internacional

Chilectra Argentina

Cerj Overseas

Endesa Agencia

Total

Services

Loans

Dividend

Loans

(*) As of January 1, 2002, these companies merged with Compañía Americana de Multiservicios Ltda.

Income (expense)

2001
ThCh$

9,484,345

4,284,015

4,406,319

1,966,529

(468,575)

251,133

196,741

(159,444)

(549,590)

(557,875)

(43,535)

550,635

6,993,370

(51,512,360)

(295,391)

125,029

(209,716)

320,387

(472,297)

400,968

346,528

20,910,865

1,253,136

(1,957,587)

(15,483,679)

1,168,581

647,454

2002
ThCh$

12,982,335

4,281,520

3,994,044

137,190

(373,130)

345,502

128,439

(18,054)

(414,343)

(446,668)

(554,104)

(282,920)

514,630

1,772,601

(43,408,831)

2,828,813

714,607

(678,420)

322,122

24,543,397

2,417,389

1,487,546

434,481

2,820,765

280,544

(18,404,014)

13,829,455

ENERSIS 2002 ANNUA L REPORT

241

240
240

The transfer of short-term funds between related companies is on the basis of a current cash account, at a variable interest

rate based on market conditions. The resulting accounts receivable and accounts payable are essentially on 30 day terms,

with automatic rollover for the same period and settlement in line with cash flows.

Conditions of the long-term receivables and payables are as follows:

Company

Tipo

Due Date

Currency

Capital

Chilectra S,A,

Compañía Americana de Multiservicios Ltda.

Compañía Eléctrica del Río Maipo S.A.

Elesur S.A.

By agency intermediation:

Chilectra S.A. (Cayman Islands Agency)

Enersis Internacional

Cerj Overseas

Luz de Río Ltda.

Endesa S.A. (Cayman Islands Agency)

Account payable

Account receivable

29/8/04

5/6/04

25/7/04

13/5/04

28/8/04

28/4/07

7/12/04

7/6/04

5/7/04

2/8/04

26/2/07

25/3/04

US$

339,609.70

452,501.10

138,247.70

310,151.38

35,827,779.56

22,873,999.43

266,447.80

494,709,026.48

35,055,847.92

10,156,566.67

17,342,208.65

50,000,000.00

57,099,981.62

32,306,537.11

Interest
Rate

1.52%

3.63%

2.33%

4.57%

1.46%

2.95%

7.01%

3.45%

2.95%

7.88%

6.80%

2.72%

DEFERRED INCOME TAXES

a. The income tax to be received and to be paid as of December 2002 and 2001, is shown as follows:

Credit for absorbed profits

PPM, donations, training expense

Total income taxes recoverable

Income tax prior year

As of December 31,

2001
ThCh$

11,859,244

133,795

11,993,039

17,175

2002
ThCh$

9,122,561

129,899

9,252,460

16,675

Total income tax payable

17,175

16,675

ENERSIS 20 02 ANNUAL REPORT

243

242

b. The Company has tax losses of ThCh$110,967,917 and ThCh$89,744,825 for the years ended December 31, 2002 and 2001,

respectively.

c. The balance of taxed retained earnings and related tax credits are as follows:

Year

2002

2001

Loss
ThCh$

23,698,947

18,159,574

Credit
ThCh$

4,524,557

d. In accordance with BTs N°60 and 69 of the Chilean Association of Accountants, and Circular N°1,466 of the SVS, the Company

has recorded deferred income taxes as of December 31, 2002 and 2001 as follows:

As of December 31,2001

As of December 31,2002

Asset

Liability

Asset

Liability

Short-term
ThCh$

Long-term
ThCh$

Short-term
ThCh$

Long-term
ThCh$

Short-term
ThCh$

Depreciation

Severance indemnities

Tax losses

Unearned income

Deferred charges

Vacation accrual

Other events

Provisions

Differences between the financial
and tax value of Río Maipo S.A.

Bond discount

Complementary account, net

2,905,532

72,025

39,777

88,543

13,656

193,618

91,600

Long-term
ThCh$

1,907,756

96,345

15,305,920

33,744

259,464

604,637

98,178

72,829

5,659

13,103

387,316

161,469

1,704,883

(3,474)

(169,058)

Long-term
ThCh$

1,831,029

103,679

561,812

1,035,445

5,494

6,884

1,475,222

154,508

1,482,485

(2,935)

(166,996)

94,084

Total

3,313,151

91,600

423,118

4,157,666

15,897,987

94,084

2,194,101

4,292,526

e. Income tax expense for the years ended December 31, 2001 and 2002 is as follows:

Effect on deferred tax assets or liabilities for the year

Adjustment for tax expense-prior year

Benefits for tax losses

Amortization of complementary accounts

Other charges or credits

As of December 31,

2001
ThCh$

(1,031,239)

(1,286,954)

10,535,996

105,617

(17,175)

2002
ThCh$

10,644,800

(1,160,596)

2,423

Total

8,306,245

9,486,627

ENERSIS 2002 ANNUA L REPORT

243

242
242

OTHER CURRENT ASSETS

Other current assets as of each year-end are as follows:

Forward contracts

Deferred costs-loans

Post-retirement benefits

Deferred expense Collar contracts

Bond discount

Unrealized lesson fair value-of interest rate swap

Other

Total

As of December 31,

2001
ThCh$

110,607,126

810,843

35,368

810,810

1,009,179

153,801

2002
ThCh$

11,782

810,844

34,338

2,700,479

965,677

349,531

130,388

113,427,127

5,003,039

ENERSIS 20 02 ANNUAL REPORT

245

244

PROPERTY, PLANT AND EQUIPMENT

The composition of property, plant and equipment as of each year-end is as follows:

Buildings and infrastructure

Machinery and equipment

Other assets in transit

Technical appraisal of buildings and infrastructure

As of December 31,

2001
ThCh$

20,592,396

1,547,428

1,351,831

32,871

2002
ThCh$

20,592,331

2,237,900

778,024

32,853

Total fixed assets

23,524,526

23,641,108

Accumulated depreciation at beginning of year

Buildings and infrastructure

Machinery and equipment

Other assets in transit

(8,414,833)

(597,691)

(8,869,519)

(709,508)

(33,160)

Total accumulated depreciation at beginning of year

(9,012,524)

(9,612,187)

Accumulated depreciation at beginning of year-
technical appraisal of buildings and infrastructure

(20,231)

(21,399)

Total accumulated depreciation at beginning of year
Technical appraisal

(20,231)

(21,399)

Depreciation of the year

(800,193)

(1,041,243)

Total accumulated depreciation at end of year

(9,832,948)

(10,674,829)

Total property, plant and equipment, net

13,691,578

12,966,279

The depreciation charge was ThCh$1,041,243 and ThCh$800,193 as of December 31, 2002 and 2001, respectively. Depreciation

expense of ThCh$1,014,633 and ThCh$773,582 were included in cost of sales and ThCh$26,610 and ThCh$26,610, were

included in Administrative and selling expenses, respectively.

ENERSIS 2002 ANNUA L REPORT

245

244
244

INVESTMENT IN RELATED COMPANIES

a. Investments as of each year-end are as follows:

Related Companies

Empresa Nacional de Electricidad S.A.

Chilectra S.A.

Enersis Internacional

Luz de Bogotá S.A.

Number of
shares

4,919,488,794

359,602,436

360,557,687

100.00%

8,660,073,943,175

Companhia de Eletricidade do Río de Janeiro

432,923,636,114

Empresa Distribuidora Sur S.A.

Investluz S.A.

Distrilec Inversora S.A.

Inmobiliaria Manso de Velasco Ltda.

Inversiones Distrilima S.A.

Compañía Eléctrica del Río Maipo S.A.

Central Geradora Termelétrica Fortaleza S.A.

Compañía Americana de Multiservicios Ltda. (*)

Synapsis, Soluciones y Servicios IT Ltda.

Endesa Market Place

Enersis Energía de Colombia S.A.

Enersis de Argentina S.A.

Synapsis Colombia S.A.

Constructora El Gobernador

Codensa S.A.

Luz de Río Ltda.

Interocean Developments Inc. (**)

Empresa Eléctrica de Panamá S.A. (**)

Compañía Americana de Multiservicios Uno Ltda. (*)

Total

143,996,758

15,681,945,734

101,684,374

29,462,253

95,363,337

356,078,645

20,246,908

210

30,000,001

119,999

Percentage owned

Shareholders’ equity of investee

Net income of investees

Equity in income

Share of equity

Unrealized income

Investment book value

%
2001

59.98%

98.24%

25.71%

7.99%

16.02%

20.43%

99.99%

14.79%

98.74%

48.82%

99.93%

99.99%

15.00%

99.99%

0.10%

100.00%

80.99%

99.99%

%
2002

59.98%

98.24%

100.00%

25.71%

20.38%

16.02%

15.61%

20.43%

99.99%

15.93%

98.74%

48.82%

99.99%

15.00%

99.99%

0.10%

0.00%

2001
ThCh$

2002
ThCh$

2001

ThCh$

2002

ThCh$

2001

ThCh$

2002

ThCh$

2001

ThCh$

2002

ThCh$

2001

ThCh$

2002

ThCh$

2001

ThCh$

2002

ThCh$

1,446,549,434

1,430,635,321

72,160,017

(9,319,056)

43,282,249

(5,589,656)

867,653,826

858,108,391

498,295,654

421,691,742

73,185,247

(31,001,664)

71,803,197

(30,455,987)

489,524,879

414,269,316

302,294,900

348,705,819

61,920,890

38,943,177

56,389,840

38,493,177

302,294,900

348,705,819

643,243,838

600,529,806

11,524,049

(4,512,003)

2,963,329

(1,160,229)

165,405,561

154,421,958

489,488,447

579,561,108

(3,400,351)

(9,012,430)

(271,964)

(1,836,324)

39,149,928

118,088,246

677,251,929

729,817,969

83,679,490

8,205,141

13,409,499

1,314,860

108,528,496

116,952,117

357,552,301

(198,253,211)

(30,947,018)

55,813,358

381,690,644

411,308,793

47,181,754

4,616,907

943,440

77,996,456

84,048,767

50,236,353

40,188,546

5,596,173

(9,936,221)

(9,936,217)

50,236,335

40,188,532

159,715,296

172,793,816

12,342,281

13,071,302

2,082,258

23,621,892

27,526,055

22,260,807

22,623,680

9,261,986

11,727,292

11,579,815

21,980,865

22,339,175

11,033,676

43,697,439

5,386,640

21,333,090

5,275,364

7,530,032

4,015,840

302,146

98,015

592,009

25,033,298

8,759,604

3,199,945

216,301

79,107

821,658

20,481,983

21,085,334

4,115,693

5,473,684

7,981,909

4,396,039

(2,242,714)

(1,875,096)

(253,587)

(105,636)

15,469,249

458,354

1,830,559

(18,908)

573,630

267,223

1,112,677,346

1,009,464,988

22,799,906

(6,655,951)

43.24%

3,629,879

22,334,017

9,658,166

1,569,712

136,776,971

134,654,968

11,496,195

5,477,758

(11,447,640)

4,192,075

5,477,758

(9,272,580)

4,192,074

238,629,977

(8,443,517)

2,422,927,530

2,297,930,593

(4,561,366)

2,422,927,530

2,293,369,227

9,641,341

5,596,171

1,825,424

9,128,053

4,112,862

5,473,137

(336,406)

(253,587)

15,469,120

457

4,775,935

3,039,497

(281,264)

(105,636)

(18,908)

574

5,271,737

7,529,280

602,376

302,146

98,014

591

136,776,971

109,070,408

11,496,191

25,031,071

8,758,728

479,992

216,301

79,106

822

867,653,826

858,108,391

489,524,879

414,269,316

302,294,900

348,705,819

165,405,561

154,421,958

39,149,928

118,088,246

108,528,496

116,952,117

55,813,358

77,996,456

84,048,767

50,236,335

40,188,532

23,621,892

27,526,055

21,980,865

22,339,175

5,386,640

21,333,090

5,271,737

7,529,280

602,376

302,146

98,014

591

136,776,971

109,070,408

11,496,191

21,825,807

7,402,626

479,992

216,301

79,106

1,569,712

822

(3,205,264)

(1,356,102)

(*) As of January 1, 2002, these companies merged with Compañía Americana de Multiservicios Ltda.
(**) Companies dissolved in 2002..

b. In accordance with Technical Bulletin N°64 of the Chilean Association of Accountants, at December 31, 2002 and 2001, the

Company has recorded foreign exchange gains and losses on liabilities related to net investments in foreign countries that

are denominated in the same currency as the functional currency of those foreign investments. Such gains and losses are

included in the cumulative translation adjustment account in shareholders’ equity, and in this way, act as a hedge of the

exchange risk affecting the investments. As of December 31, 2002 the corresponding amounts are as follows:

Company

Edesur S.A.

Country
of origin

Argentina

Companhia de Eletricidade do Río de Janeiro

Brasil

Luz de Bogotá S.A. (Codensa S.A.)

Investluz S.A. (Coelce)

Colombia

Brasil

Total

Reporting
currency

US$

Investment
ThCh$

198,370,509

118,088,246

158,042,551

55,813,358

530,314,664

Liability
ThCh$

186,980,271

188,262,271

232,445,627

97,921,693

705,609,862

ENERSIS 20 02 ANNUAL REPORT

247

246

Percentage owned

Shareholders’ equity of investee

Net income of investees

Equity in income

Share of equity

Unrealized income

Investment book value

2001

ThCh$

2002

ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

Empresa Nacional de Electricidad S.A.

1,446,549,434

1,430,635,321

72,160,017

(9,319,056)

43,282,249

(5,589,656)

867,653,826

858,108,391

360,557,687

100.00%

302,294,900

348,705,819

61,920,890

38,943,177

56,389,840

38,493,177

302,294,900

348,705,819

8,660,073,943,175

643,243,838

600,529,806

11,524,049

(4,512,003)

2,963,329

(1,160,229)

165,405,561

154,421,958

498,295,654

421,691,742

73,185,247

(31,001,664)

71,803,197

(30,455,987)

489,524,879

414,269,316

Companhia de Eletricidade do Río de Janeiro

432,923,636,114

489,488,447

579,561,108

(3,400,351)

(9,012,430)

(271,964)

(1,836,324)

39,149,928

118,088,246

357,552,301

(198,253,211)

(30,947,018)

55,813,358

677,251,929

729,817,969

83,679,490

8,205,141

13,409,499

1,314,860

108,528,496

116,952,117

381,690,644

411,308,793

47,181,754

4,616,907

50,236,353

40,188,546

5,596,173

(9,936,221)

159,715,296

172,793,816

12,342,281

13,071,302

22,260,807

22,623,680

9,261,986

11,727,292

9,641,341

5,596,171

1,825,424

9,128,053

943,440

77,996,456

84,048,767

(9,936,217)

50,236,335

40,188,532

2,082,258

23,621,892

27,526,055

11,579,815

21,980,865

22,339,175

11,033,676

43,697,439

5,386,640

21,333,090

5,275,364

7,530,032

4,015,840

302,146

98,015

592,009

25,033,298

8,759,604

3,199,945

216,301

79,107

821,658

20,481,983

21,085,334

4,115,693

5,473,684

7,981,909

4,396,039

(2,242,714)

(1,875,096)

(253,587)

(105,636)

15,469,249

458,354

1,830,559

(18,908)

573,630

267,223

1,112,677,346

1,009,464,988

22,799,906

(6,655,951)

3,629,879

22,334,017

4,112,862

5,473,137

(336,406)

(253,587)

15,469,120

457

4,775,935

3,039,497

(281,264)

(105,636)

(18,908)

574

9,658,166

5,271,737

7,529,280

602,376

302,146

98,014

591

136,776,971

134,654,968

11,496,195

5,477,758

(11,447,640)

4,192,075

5,477,758

(9,272,580)

4,192,074

136,776,971

109,070,408

11,496,191

25,031,071

8,758,728

479,992

216,301

79,106

822

1,569,712

238,629,977

(8,443,517)

2,422,927,530

2,297,930,593

867,653,826

858,108,391

489,524,879

414,269,316

302,294,900

348,705,819

165,405,561

154,421,958

39,149,928

118,088,246

108,528,496

116,952,117

55,813,358

77,996,456

84,048,767

50,236,335

40,188,532

23,621,892

27,526,055

21,980,865

22,339,175

5,386,640

21,333,090

(3,205,264)

(1,356,102)

5,271,737

7,529,280

602,376

302,146

98,014

591

136,776,971

109,070,408

11,496,191

21,825,807

7,402,626

479,992

216,301

79,106

822

1,569,712

(4,561,366)

2,422,927,530

2,293,369,227

Related Companies

Chilectra S.A.

Enersis Internacional

Luz de Bogotá S.A.

Empresa Distribuidora Sur S.A.

Investluz S.A.

Distrilec Inversora S.A.

Inmobiliaria Manso de Velasco Ltda.

Inversiones Distrilima S.A.

Compañía Eléctrica del Río Maipo S.A.

Central Geradora Termelétrica Fortaleza S.A.

Compañía Americana de Multiservicios Ltda. (*)

Synapsis, Soluciones y Servicios IT Ltda.

Endesa Market Place

Enersis Energía de Colombia S.A.

Enersis de Argentina S.A.

Synapsis Colombia S.A.

Constructora El Gobernador

Codensa S.A.

Luz de Río Ltda.

Interocean Developments Inc. (**)

Empresa Eléctrica de Panamá S.A. (**)

Compañía Americana de Multiservicios Uno Ltda. (*)

Total

Number of

4,919,488,794

359,602,436

143,996,758

15,681,945,734

101,684,374

29,462,253

95,363,337

356,078,645

20,246,908

210

30,000,001

119,999

2001

59.98%

98.24%

25.71%

7.99%

16.02%

20.43%

99.99%

14.79%

98.74%

48.82%

99.93%

99.99%

15.00%

99.99%

0.10%

100.00%

80.99%

99.99%

2002

59.98%

98.24%

100.00%

25.71%

20.38%

16.02%

15.61%

20.43%

99.99%

15.93%

98.74%

48.82%

99.99%

15.00%

99.99%

0.10%

0.00%

43.24%

c. Investments

The investments made by Enersis S.A. during the year ended December 31, 2002, are detailed as follows:

Acquisitions

Central Geradora Termelétrica Fortaleza S.A.

Inversiones Distrilima S.A.

Luz de Río Ltda.

Chilectra S.A.

Compañía Eléctrica del Río Maipo S.A.

As of December 31,

2001
ThCh$

5.911.275

4.982.826

498.137

2002
ThCh$

15.480.376

1.190.289

61.469

Total

11.392.238

16.732.134

ENERSIS 2002 ANNUA L REPORT

247

246
246

• In May 2002, Enersis S.A. acquired 6,824,495 Sociedad Inversiones Distrilima S.A. shares equivalent to 1.14% of issued

capital for US$1,767,761,22 increasing its direct interest from 14.79% to 15.93%.

• In February and April 2002 Enersis S.A. made contributions of US$22,773,195.87 and US$86,600 to Central Geradora

Termelétrica Fortaleza S.A. and Luz de Río for a capital increase, respectively maintaining its 48.82% and 43.24%.

d. Dissolution of investment vehicles

At December 31, 2002, Empresa Eléctrica de Panamá S.A. and Interocean Development Inc. were liquidated and absorbed

by Agencia Enersis Cayman.

As a result of the liquidation of Empresa Eléctrica Panamá S.A., Agencia Enersis Cayman received 296,633,449,926 shares

in Companhia de Electricidade do Rio de Janeiro, thus increasing its interest to 25.41%, and as a result of the liquidation

of Interocean Development Inc., 15,681,945,734 shares were received from Investluz, thus increasing the direct interest to

15.61%.

e. Debenture capitalization in Cerj

On July 11, 2002, the company Luz de Río Ltda. and Endesa Internacional Energía Ltda., holders of convertible bonds

issued by Companhía de Electricidade do Río de Janeiro, exercised the option to capitalize their investment. To that effect,

420,705,127,532 no par value shares were issued.

f. Recoverability of investment

Enersis and its local subsidiaries have carried out an analysis of the book values of their property, plant and equipment and of

the companies in which it has invested abroad. This analysis is motivated by the appearance of negative circumstances in the

economies of the region’s countries and by the fact that the property, plant and equipment in these countries are measured in

US dollars. The analysis consisted of evaluating both the recoverability of property, plant and equipment of these companies’,

and the recorded goodwill and negative goodwill, in accordance with accounting principles generally accepted in Chile.

The property, plant and equipment recoverability analysis in these companies, as explained in Note 2j, was carried out

considering that when there is evidence that the company’s operations do not permanently have sufficient earnings to cover

all costs, including the depreciation of property, plant and equipment taken as a whole, and when the book value of said

assets exceeds their realization value, these values must be written down to recoverable amounts by charging non operating

income.

The results of this analysis determined that no adjustments affecting the Company and its Subsidiaries’ book values of property,

plant and equipment are required.

g. Situation in Argentina

In Argentina, at the end of 2001, as a result of the serious economic crisis, a change in the economic model and in the law

of convertibility was implemented with the promulgation of new National Government regulations. This situation gave rise to,

among other consequences: devaluation of the Argentinean peso with respect to the US dollar and the pesification of certain

assets and liabilities recorded in foreign currency in said country, pesification of public service tariffs, introduction of deposit

withdrawal limitations in financial institutions, limitations to make certain transfers abroad for capital services and financial

loan interest without prior authorization of the Central Bank of the Republic of Argentina.

ENERSIS 20 02 ANNUAL REPORT

249

248

Considering the above mentioned unstable environment, the company performed an evaluation of the recoverability of its

investments in Argentinean companies. Management believes that the evolution of the aforementioned measures will not

result in significant adjustments other than those recognized in these financial statements.

At December 31, 2002 the investment in these companies represents 5.2% of total assets of the company and equity in income

of investees was recognized for M$2,258,300.

GOODWILL AND NEGATIVE GOODWILL

a. In accordance with current standards, recognition has been given to the excess of purchase price over the equity in net assets

acquired (goodwill) in the purchase of shares as of December 31, 2001 and 2002, as follows:

Sociedad

As of December 31,

2001

2002

Amortization
ThCh$

Net balance
ThCh$

Amortization
ThCh$

Net balance
ThCh$

Empresa Nacional de Electricidad S.A.

(42.958.281)

710.600.834

(42.958.280)

667.642.554

Distrilec Inversora S.A.

Chilectra S.A.

Inversiones Distrilima S.A.

Compañía Eléctrica del Río Maipo S.A.

Empresa Distribuidora Sur S.A.

Companhia de Eletricidade do Río de Janeiro (1)

Investluz S.A. (2)

Luz de Bogotá S.A.

Total

(1) Recorded after Empresa Eléctrica de Panamá S.A. dissolution
(2) Recorded after Interocean Development Inc. dissolution

(257.087)

(6.178.814)

(1.408)

(566.455)

(278.825)

4.298.745

112.424.542

18.301

10.802.028

3.880.324

(230.126)

3.643.657

(4.580.318)

(6.210.655)

(1.500)

(574.414)

(4.134.489)

(48.540.702)

(626.637)

(261.730)

106.213.887

18.000

10.227.614

3.620.593

(50.470.996)

845.668.431

(107.888.725)

787.722.648

b. In accordance with current standards, recognition has been given to the excess of purchase price over the equity in net assets

acquired (negative goodwill) in the purchase of shares as of December 31, 2001 and 2002, as follows:

Company

As of December 31,

2001

2002

Amortization
ThCh$

Net balance
ThCh$

Amortization
ThCh$

Net balance
ThCh$

Inversiones Distrilima S.A.

Synapsis, Soluciones y Servicios IT Ltda.

Companhia de Eletricidade do Río de Janeiro

15.316

49.858

(156.983)

(947.312)

18.366

15.315

1.009.362

(611.346)

(141.668)

Total

65.174

(1.104.295)

1.043.043

(753.014)

ENERSIS 2002 ANNUA L REPORT

249

248
248

c. Recoverability of goodwill

To carry out the analysis of the recoverability of goodwill and negative goodwill on investments abroad, as explained in Note

2 k, the Company used International Accounting Standard (IAS) N°36.

The analysis determined that the impairment of goodwill and negative goodwill in the companies, related to investments in

Argentina and Brazil, is 100%, as, when comparing cash flows generated by the companies in said countries, such flows do

not cover the recorded goodwill and negative goodwill. Thus, these balances have been fully amortized, resulting in a higher

net charge to income for the period of ThCh$53,116,770, which is included in goodwill and negative goodwill amortization in

the income statement.

10.

DUE TO BANKS AND FINANCIAL INSTITUTIONS

a. Current portion of long-term debt due to banks and financial institutions:

US$

Other foreign

Ch$

Currency

Total

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
ThCh$

2001
ThCh$

2002
M$

Financial Institution

Bank of América

Citibank

Dresdner Bank

ABN Amor

Banco Santander Central
Hispano

HSBC

BBVA

5,392,383

29,494,243

406,445

235,839

82,932,830

514,881

461,208

1,088,041

104,195,014

21,590

10,824,955

586,366

1,447,394

Bank of Tokio Mitsubishi

33,733,394

36,012,111

JP Morgan - Chase (swap)

Santander Central Hispano
(swap)

Banco Bilbao Viscaya
Argentaria (swap)

Deutsche Bank (swap)

250,615

248,738

249,806

453,632

Total

41,978,939

266,570,546

Percentage of debt in foreign currency:

Percentage of debt in local currency:

Total

2001
%

100.00

5,392,383

29,494,243

406,445

235,839

82,932,830

514,881

461,208

1,088,041

104,195,014

21,590

10,824,955

586,366

1,447,394

33,733,394

36,012,111

250,615

248,738

249,806

453,632

41,978,939

266,570,546

As of December 31,

2002
%

100.00

ENERSIS 20 02 ANNUAL REPORT

251

250

11.

OTHER CURRENT LIABILITIES

Other current liabilities at each year-end are as follows::

Swap Enersis bonds-rate and currency (*)

Unrealized gain on fair value of forward contract

Account payable swap-contract

Forward contract obligations

Swap collar rate contract ( ** )

Swap collar rate-currency contract (***)

As of December 31,

2001
ThCh$

113,160,188

1,403,204

(209,875)

2002
ThCh$

2,270,807

4,556

349,531

1,434,077

Total

114,353,517

4,058,971

(*) Net effect of the contracts for hedging Series B1 Bonds that relate to a ThCh$85,988 decrease in financial expenses

and a ThCh$2,356,795 negative exchange difference, the detail of which contracts is shown in note 19.

(**) The effects in results are in Interest expense
(***) The effects in results are in Other non-operating expenses

12.

LONG-TERM PORTION OF DEBT DUE TO BANKS AND FINANCIAL INSTITUTIONS

Financial Institution

Currency

Bank of América

ABN Amro

Citibank

Dresdner Bank

Banco Santander Central
Hispano

HSBC

BBVA

US$

After 1 year
but within
2 years
ThCh$

71,861,000

287,444,000

107,791,500

359,305,000

Totales

826,401,500

Years to maturity

After 2 year
but within
3 years
ThCh$

After 3 year
but within
5 years
ThCh$

After 5 year
but within
10 years
ThCh$

After 10 years

years

ThCh$

Total
long-term
portion
ThCh$

71,861,000

287,444,000

107,791,500

359,305,000

Average
annual
interest
rate
%

0.00

2.81

0.00

2.64

0.00

2.76

2.56

Total
long-term
portion-2001
ThCh$

27,587,424

67,443,370

36,311,511

77,624,232

366,386,108

10,116,506

406,852,130

826,401,500

992,321,281

Percentage of debt in foreign currency:

Percentage of debt in local currency:

As of December 31,

2001
%

100.00

2002
%

100.00

Total

100.00

ENERSIS 2002 ANNUA L REPORT

251

250
250

13.

BONDS PAYABLE

a. Details of the current portion of bonds payable is as follows at each year-end:

Instrument

Series

269

Yankee Bonds

Total

B-1

B-2

Face value
outstanding
ThCh$

445,863,21

Currency

U.F.

US$

Interest
Rate
%

5.50

5.75

6.90

7.40

6.60

Maturity
Date

Jun-09

Jun-22

Dec-06

Dec-16

Dec-26

b. Details of the long-term portion of bonds payable is as follows at each year-end:

Instrument

Series

269

Yankee Bonds

Total

B-1

B-2

Face value
outstanding
ThCh$

2,928,543,94

2,500,000

300,000,000

350,000,000

150,000,000

Currency

U.F.

US$

Interest
Rate
%

5.50

5.75

6.90

7.40

6.60

Maturity
Date

Jun-09

Jun-22

Dec-06

Dec-16

Dec-26

Par Value

2001
M$

7,232,494

105,520

1,124,617

1,407,131

537,861

2002
M$

7,601,852

105,480

1,198,281

1,499,298

573,091

10,407,623

10,978,002

Par Value

2001
M$

56,523,126

41,876,350

202,330,110

236,051,795

101,165,055

2002
M$

49,035,877

41,860,300

215,583,000

251,513,500

107,791,500

637,946,436

665,784,177

c. Bonds payable are comprised of the following:

i. Enersis S.A. Series B1-B2

On September 11, 2001, Enersis S.A. registered two series of bearer bonds as of June 14, 2001, as follows:

Series

Total amount
In UF

1,000,000

3,000,000

1,000,000

1,500,000

N° of bonds
per series

1,000

300

1,000

150

Face Value
In UF

1,000

10,000

1,000

10,000

The scheduled maturity of the Series B-1 bonds is 8 years, interest and principal payable semi-annually. Annual interest is

5.50%, compounded semi-annually.

The scheduled maturity of the Series B-2 bonds is 21 years, principal payments beginning after 5 years, interest and principal

payable semi-annually. Annual interest is 5.75%, compounded semi-annually.

ENERSIS 20 02 ANNUAL REPORT

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252

ii. Enersis S.A. (Yankee Bonds)

On November 21, 1996, the Company, acting through its agency in the Cayman Islands, issued corporate notes (Yankee

Bonds) for US$800 million in three series, as follows:

Series

Total amount

In US$

300,000,000

350,000,000

150,000,000

Years to
Maturity

Stated annual
Interest rate

6.9%

7.4%

6.6%

Interest is payable on a semi-annual basis and principal is due upon maturity. The Series 3 bond holders have an option to

require the Company to redeem all or any US$1,000 portion thereof on December 31, 2003 at a redemption price equal to

face value.

iii. Discount on bonds placed

The discounts on Enersis S.A. bonds placed have been deferred over the same periods as the periods of the related bonds

issues. The balance at December 31, 2002 amounts to ThCh$9,714,009 (ThCh$12,343,837 in 2001), of which ThCh$965,677

(ThCh$1,009,179 in 2001) are included in “Other current assets”; and ThCh$8,748,332 (ThCh$11,334,659 in 2001), in “Other

assets”.

14.

ACCRUED EXPENSES

a. Short-term accruals:

Accrued expenses included in current liabilities as of each year-end are as follows:

Profit sharing and other employee benefits

Notes receivable provision

As of December 31,

2001
ThCh$

1,749,590

830,726

2002
ThCh$

2,278,402

3,219,925

Total

2,580,316

5,498,327

During 2002 there were no debt write-offs.

ENERSIS 2002 ANNUA L REPORT

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252
252

b. Long-term accruals:

Long-term accruals include employee severance indemnities, calculated in accordance with the policy described in Note 2n,

post-retirement benefits and others. An analysis of the changes in the accruals in each year is as follows:

Opening balance as of January 1

Increase in accrual

Payments during the year

As of December 31,

2001
ThCh$

1,047,955

1,055,075

(823,950)

2002
ThCh$

1,241,825

653,260

(456,748)

Sub-total

1,279,080

1,438,337

Post-retirement benefits

541,328

555,872

Total

1,820,408

1,994,209

15.

SHAREHOLDERS’ EQUITY

a. Dividends

There are no restrictions on the payment of dividends. The following dividends were paid as of each year-end:

Dividend
Number

Payment
date

Historical
Value
Ch$ per share

April/2001

1.806391

Type of
dividend

Final

Related to

2000

b. Number of shares

Series

First

As of December 31, 2002

Number of shares

Subscribed

8,291,020,100

Paid

8,291,020,100

With vote

8,291,020,100

c. Subscribed and paid capital is as follows as of the year-end:

Series

First

As of December 31, 2002

Capital subscribed

ThCh $

751,208,197

Capital paid

ThCh$

751,208,197

ENERSIS 20 02 ANNUAL REPORT

255

254

d. Accumulated net income (losses) of development-stage subsidiaries are as follows:

Company

Central Geradora Termeléctrica Fortaleza S.A.

Aguas Santiago Poniente S.A.

Compañía Eléctrica Tal Tal Ltda.

Infraestructura 2000 S.A.

Nopel Ltda.

Ingendesa (Ingendesa do Brasil)

Enigesa (Ingendesa do Brasil)

As of December 31, 2002

Net income (losses)

Of the period
ThCh$

(939,553)

(111,586)

1,451

Accumulated
ThCh$

(1,302,505)

(111,586)

146,371

347,252

811,149

(46,306)

(642)

Compañía Eléctrica Cono Sur S.A. (CIEN)

(4,780,843)

Total

(5,830,512)

(4,937,110)

e. Other information

Detail of other reserves is as follows:

Reserve for equity fluctuations

Reserve for accumulated conversion differences

Total

ThCh$

1,177,508

45,702,079

46,879,587

Detail of changes in the reserve for accumulated conversion differences are as follows for the year ended December 31,

2002:

Initial
Balance
ThCh$

Reserve
for Assets
ThCh$

Reserve for
Liabilities
ThCh$

Final
Balance
ThCh$

Cumulative translation adjustment

25,105,169

96,536,552

(75,939,638)

45,702,079

ENERSIS 2002 ANNUA L REPORT

255

254
254

The detail of the accumulated conversion difference reserve at December 31, 2002 is as follows:

Enersis Energía de Colombia S.A.

Distrilec Inversora S.A.

Inversiones Distrilima S.A.

Cía. Peruana de Electricidad S.A.

Edesur S.A.

Cía. de Electricidade do Río de Janeiro

Luz de Bogotá

Investluz

Endesa Market Place

Central Geradora Termelétrica Fortaleza S.A.

Total

ThCh$

19,753

2,494,214

3,034,207

5,027,002

13,222,829

10,996,981

2,370,986

7,012,529

280,302

1,243,276

45,702,079

16.

OTHER INCOME AND EXPENSES

a. The detail of other non-operating income in each year is as follows:

Gain on forward contracts

Gain on swap contracts

Gain on repurchase of bonds

Adjustments to investments in related companies

Project administration,maintenance and construction

Other

Total

Years ended December 31,

2001
ThCh$

2002
ThCh$

8,171,752

1,493,044

5,531,051

1,211

13,407,217

894,021

4,815,297

9,133,760

7,642,591

786,967

29,498,296

22,378,615

ENERSIS 20 02 ANNUAL REPORT

257

256

b. Other non-operating expenses in each year are as follows:

Adjustments to investments in related companies

Loss for non-participation in Cerj capital increase (*)

Usufruct contract

Provisions

Other

Total

(*) See Note 8d.

Years ended December 31,

2001
ThCh$

212,536

15,483,679

586,244

2002
ThCh$

233,326

17,020,030

359,305

455,797

16,282,459

18,068,458

17.

PRICE-LEVEL RESTATEMENT

The (charge) credit to income for price-level restatement as of each year-end is as follows:

As of December 31,

Assets

Accounts receivable from subsidiaries short-term

Accounts receivable from subsidiaries long-term

Property, plant and equipment

Investment in subsidiaries

Investment in other companies

Amortization of goodwill

Other current assets

Other assets

Credit for cost and expense accounts

2001
ThCh$

(43,106)

16,134,682

436,065

53,963,202

10,739,202

26,919,672

307

648,361

3,192,735

2002
ThCh$

8,361,377

14,086,764

428,905

50,820,537

15,529,085

25,929,210

19,891

1,054,443

3,193,805

Net credit - assets

111,991,120

119,424,017

Liabilities and Shareholders’ equity

Accounts payable to subsidiaries short-term

Accounts payable to subsidiaries long-term

Due to banks and financial institutions long-term

Bonds payable long-term

Shareholders’ equity

Non-monetary liabilities

Charge to income accounts

(724,227)

(32,486,852)

(23,008,735)

(14,653,316)

(34,756,513)

(3,578,371)

(1,199,998)

(606,331)

(30,424,108)

(31,288,235)

(15,714,960)

(35,375,590)

(3,012,063)

(1,422,031)

Net charge-liabilities and shareholders’ equity

(110,408,012)

(117,843,318)

Net credits to income

1,583,108

1,580,699

ENERSIS 2002 ANNUA L REPORT

257

256
256

18.

EXCHANGE DIFFERENCES

The (charge) credit to income for foreign currency translation as of each year-end is as follows

Assets

Current assets

Currency

US$

Cash

Time deposits

Other accounts receivable, net

Amounts due from related companies

Other current assets

Non-current assets

Amounts due from related companies

Other assets

Total gain

Liabilities

Current liabilities

Currency

Amount payable to related companies

Due to banks and financial institutions

Bonds payable

Other liabilities

Long-term liabilities

Amount payable to related companies

Due to banks and financial institutions

Bonds payable

Total loss

US$

As of December 31,

2001
ThCh$

127,983

161,722

2,297,453

51,605

53,406,731

68,117

2002
ThCh$

(221,604)

321,042

(570,924)

16,363,992

(61,042)

29,789,291

56,113,611

45,620,755

As of December 31,

2001
ThCh$

(6,511,091)

(311,974)

(1,124,563)

(423,674)

(5,532,444)

(55,923,754)

(23,588,977)

2002
ThCh$

(43,018)

(318,147)

421,931

25,800

(44,144,658)

(19,704,440)

(93,416,477)

(63,762,532)

Exchange difference-net loss

(37,302,866)

(18,141,777)

ENERSIS 20 02 ANNUAL REPORT

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258

19.

FINANCIAL DERIVATIVES

As of December 31, 2002 the Company and its subsidiaries held the following financial derivative contracts with financial

institutions with the object of decreasing exposure to interest rate and foreign currency risk, as follows:

Type

COLLAR

Nominal
Amount
US$

47,000,000

81,905,702

100,000,000

50,000,000

275,000,000

50,000,000

150,000,000

600,000,000

(1) Fr = Forward, S = Swap

Date of
Maturity

II - 2003

II -2009

I- 2003

I- 2004

III- 2004

II -2004

III- 2004

III- 2005

I- 2006

II- 2006

Item

Sales/
Purchase

Exchange rate

Interest rate

P/S

Hedged
Item

Bank obligations

Bonds

Bank obligations

As of December 31, 2002

Initial
hedge
amount
ThCh$

33,774,670

56,637,729

71,861,000

35,930,500

197,617,750

35,930,500

107,791,500

431,166,000

Closing
hedge
amount
ThCh$

11,782

6,290,474

(848,083)

(2,166,192)

(2,276,833)

(1,609,146)

(6,604,400)

(1,693,181)

(3,509,708)

(13,738,659)

20.

COMMITMENTS AND CONTINGENCIES

a. Litigation and other legal actions:

i. Arbitration award (Case ICC N° 11046/KGA) substantiated before the Court of Arbitration of the International Chamber of

Commerce with headquarters in Paris, France, started with occasion of the claim lodged by Pérez Companc S.A. and PCI

Power Edesur Holding Limited. The claim requests that the Arbitration Court declare a sought after right of PCI Power Edesur

Holding Limited to designate a Regular Director and an Alternate Director in the Argentinean company Distrilec Inversora

S.A., a company holding Class “A” shares of Empresa Distribuidora Sur S.A. (Edesur S.A.), and on a subsidiary basis, for

the event that said Court estimates that PCI Power Edesur Holding Limited lacks such right, declare that Grupo Enersis and

Grupo Pecom, former Pérez Companc, have the same number of directors in Distrilec Inversora S.A.

The claim was answered opportunely by the Company on August 4, 2000. Together with the answer to the aforementioned

claim, Enersis S.A. presented a reconventional claim against the claimants, that is, against Pecom S.A. and PCI Power Edesur

Holding Limited, in order to request the annulment of various agreements entered into by the parties. This reconvention was

answered by the reconventional defendants on October 13, 2000. On December 4, 2000, Grupo Enersis filed its arguments

expansion writ and the answer to the reply of the reconventional defendants.

On December 6, 2000, the reconventional defendants, in an “Additional Statements” writ, request, among other things that, in

case the reconventional claim lodged by Grupo Enersis is accepted, that a damages indemnity be declared in its favor. The

reconventional defendants have provisionally estimated this possible and required indemnity in an amount between US$180

and US$200 million.

ENERSIS 2002 ANNUA L REPORT

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258
258

On April 8, 2001 a Minutes of Mission was signed establishing the unquestionable facts, the controversial facts, the parties’

aims and the matters on which the Court will pronounce a judgment. On June 14, 2001 the parties submitted their evidence

presentation writs.

On August 27 2001 presentation of the offered witnesses’ affidavits ceased. The testimonial audience was carried out on

November 12, 2001, in the city of Montevideo. On December 14, 2001 the parties presented their closing allegations and on

December 20 the Court officially closed the Arbitration proceeding.

On September 6, 2002 the Final award dated September 2, 2002 the parties were notified, substantively establishing that

Grupo Pecom and Grupo Enersis maintain the right to designate the same number of directors in the Distrilec Inversora S.A.

Board and rejecting the contravention claim of Grupo Enersis. It also rejects the indemnity amounting between US$180 and

200 million claimed by Grupo Pecom against Grupo Enersis.

The Final Award has been impugned opportunely through an annulment appeal filed before Uruguayan Justice on September

18, 2002, based on that it has gross procedural vices that invalidate it. The filing of said appeal suspends compliance with

the verdict. On December 12, 2002 Pecom Energía answered said impugnation.

ii. Court : Honorable resolutive commission

Process number : 577-99

Cause : Requirements of the “Fiscal Nacional Económico” against Enersis S.A. for the increase of ownership in Endesa-

Chile S.A., asserting the transaction has considerably increased the vertical integration in the electric sector, affecting free

competition.

Process status: The discussion stage has ended and the corresponding complaints have been made. The case is now in the

sentencing stage. It is important to note the Commission decided not to receive the case in trial. Additionally, the petitions

of the Fiscalía Nacional Económica have changed since the beginning of the case, limiting the request to the inability of

Enersis S.A. and Endesa Chile to have common directors and the necessity for these companies to hire different external

auditors.

Amounts involved: Undetermined.

On October 30, 2002 the Resolutive Commission pronounced sentence on the case, and which is summarized as follows:

“The position of principal or alternate director of Enersis S.A., Empresa Nacional de Electricidad S.A., or of some of them

with Chilectra S.A. and Compañía Eléctrica del Río Maipo S.A., shall be held by different and independent individuals. A

director will be regarded as independent when holding positions or carrying out employment or activities in a position of

dependence of any of these companies or of any of its directors; and

“The external audit of Enersis S.A., Empresa Nacional de Electricidad S.A., and Chilectra S.A. or Compañía Eléctrica

del Río Maipo S.A., which, pursuant to current open stock company legislation, will be performed by different external

auditing firms, having any relationship or tie of any nature between them. The same stipulation will be applied should the

bylaws of said companies contemplate the appointment of account inspectors;”

“By the exercise of its official faculties, the following measures will be adopted and in effect until the issue by the Resolutive

Commission of a resolution to the contrary:

ENERSIS 20 02 ANNUAL REPORT

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260

“Enersis S.A., Elesur S.A., Empresa Nacional de Electricidad S.A., Chilectra S.A. and Compañía Eléctrica del Río Maipo S.A.,

may not enter into or execute any operation the objective of which would be the merger of the companies controlled by the

Enersis group, whose activity would be the generation and distribution of electricity, with Enersis S.A. having to maintain

the development of both segments separately, through different companies representing independent business units;

and”

“Enersis S.A., Empresa Nacional de Electricidad S.A., Chilectra S.A. and Compañía Eléctrica del Río Maipo S.A., shall

continue to be subject to supervision of the Superintendency of Securities and Insurance and comply with provisions

applicable to open stock companies, even if they have ceased to have the staus of open stock companies;”

“In exercising the powers established in Decree Law Nº 211 article 17, letter b), this Resolutive Commission issues the

following general instructions which any individual who, by application of Ministry of Mining Electric Code article 240,

Decree Nº 317, of 1998, must publicly open to bid the supply and load in the terms of said norm:

e) All those companies, associations, or company consortiums with existing or potential supply capacity will be able to

participate in the supply bidding processes;

f) The bidding conditions shall allow the applicants to present bids for the total amount of the supply intended to be contracted

or for a part of the energy blocks and load open to bidding, and will include in their entirety the contracts which will be

signed by the parties to execute the delivery of the supply bid; and,

g) The receipt and opening of bids will be public. The bidding conditions to be established, as well as the result of the awarding,

shall be reported to the Economic National Legal Department simultaneously upon the execution of said acts.

h) Any other measure of a cautionary or precautionary nature taken in these cases are invalidated in particular, that ordered in

Resolution N° 542 numeral 1, dated May 10, 1999, as evidenced on page 132 of the precautionary measures record.”

On November 6, 2002, Messrs. Briones and Bosselin filed an appeal as a complaint against the aforementioned sentence,

which is currently in the procedural phase. Together with filing the appeal, the petitioners requested that an injunction

order be decreed, which was issued on November 14, 2002, thus suspending the sentence’s effects.

Amount: Not determined.

iii. Accusation filed by Empresa Nacional de Telecomunicaciones S.A. (ENTEL) before the Resolutive Commission against Enersis

S.A., started by presentment dated May 13, 2002. The aim was to inform the Commission about the data transmission services

provided through the electric networks by Compañía Americana de Multiservicios Limitada, Enersis S.A.’s subsidiary, so as

it took the necessary protection measures to guarantee free competition.

The Commission requested the Telecommunications Under-department some information, which was provided in a report

dated May 31, 2002.

On June 5, 2002, Enersis S.A. answered ENTEL’s presentations, requesting that the precautionary measures requested by

ENTEL be rejected as they are contrary to law and unnecessary and, also, because if they were accepted they would establish

an entry barrier to the industry and postpone the investments necessary for rendering the aforementioned services.

ENERSIS 2002 ANNUA L REPORT

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260
260

The issuance of a report by the Economic National Legal Department is pending, as well as the resolution of the precautionary

measures requested by ENTEL.

On July 19 of 2002, the Resolutive Commission acknowledged the Economic Legal National Department report, resolving to

thoroughly investigate the matter and rejecting the precautionary measured requested.

On last September 25, the case was heard and the trial turned into judicial decision stage.

iv. Court : 2nd Labor Court of Santiago

Process number : 6061-2001

Cause : Complaint filed for severance pay for years of service on December 19, 2001 by Mr. Guillermo Calderón Ortega

against Enersis S.A.

Process status : First petition sentencing stage

Amounts involved: ThCh$52,858

v. The Ordinary Labor Trial, titled “Acevedo Bravo, Efraín and Others with Enersis S.A.”, case list N°4.175-2002, heard before

the 4th Labor Court for Santiago, arising from the claim for the payment of 2% monthly contribution made to finance the

claimants’ conventional severance indemnity. The claim was notified on 11/06/2002, against which dilatory exceptions were

opposed on 12/09/2002 and the claim was answered on a subsidiary basis. The case is currently in the proof stage.

vi. Court : 25th Civil Court of Santiago

Process number : 3151-00

Cause : Complaint filed for compensation of damages by Mrs. Odette Legrand Halcartegaray against Enersis S.A..

Process status : First petition sentencing stage

Amounts involved: ThCh$50,000

vii. Economic protection appeal, filed before the Court of Appeals for Santiago, List N°4591-2002, for Compañía de Teléfonos

Complejo Manufacturero de Equipos Telefónicos S.A.C.I., CMET, against Enersis S.A.. The appeal was filed on 08/27/02 by

CMET against Enersis S.A., which seemed to be based on the fact that Enersis S.A., through various acts, facts or omissions,

would have breached article 19 N°21 of the Political Constitution of the Republic, preventing CMET from developing its

commercial activities.

On 09.17.02, Enersis S.A. informed to Court, as requested, carrying out all the discharges it deemed reasonable in accordance

to law, expressly rejected CMET’s accusations because of their unfounded nature.

To date, the appeal is pending for its hearing and judgment, which is estimated to take place during March.

viii. Chilean Internal Revenue Service review of taxable income for the 2000, 2001 and 2002 tax years, and the tax trial in first

petition for the difference of First Category Income Tax and Reintegration of Monthly Tax Prepayments for absorbed net income

in the amount of ThCh$62,400, corresponding to the 1998 tax year.

ix. First instance tax suit, that is, before the Internal Revenue Service, for a tax difference in First Category Income Tax and

Repayment of Monthly Provisional Payments for absorbed earnings, in the amount of Th$1,461,000 corresponding to the

1999 tax This proceeding is in the discussion stage.

ENERSIS 20 02 ANNUAL REPORT

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262

b. There are no documents and loans in legal collection.

c. Direct guarantees

Guarantee
creditor

Debtor

Type
Guarantee

Assets Committed

Outstanding balances on
finacial statement closing date

Assets type

Enersis S.A.

Pledge

Note-UF

Book
Value

1,675

2002

2001

1,675

Compañia de
Telecomunicaciones
de Chile

d. Restrictions:

• The Company’s loan agreements establish an obligation to comply with the following financial ratios, on a consolidated

level:

• The ratio between debt and debt plus equity, not exceeding 0.7;

• The ratio between operational cash flow and payment of debt interest, not less than 2.4;

• Net tangible equity not less than UF45 million;

• Assets corresponding to companies whose business is regulated, not less than 50% of total consolidated assets.

As of December 31, 2001 and 2002 all these obligations have been met.

• As a common and habitual practice for some bank loan debts and also in capital markets, a substantial portion of Enersis

S.A.’s financial indebtedness is subject to cross-failure provisions. Some failures of Endesa-Chile or of its subsidiaries, if

not corrected in time (as to those specific provisions allowing a period of time to correct the problem), might result in the

cross-failure at Endesa-Chile and Enersis S.A. level., and, in this case, some sixty percent of Enersis S.A.’s consolidated

liabilities might eventually become on demand. On the other hand, certain failures of a distribution subsidiary, if not corrected

in time, would not affect Endesa-Chile, and the amount at risk of Enersis S.A.’s consolidated liabilities would decrease by

thirty percent.

• Some loan agreements include clauses should the risk category of the debt expressed in US dollars fall below the “investment

grade” level, according to the risk classification agency determining the applicable margin of the interest rate (which, for practical

purposes hereof, is S & P). Should the long-term US dollar unsecured debt fall into a “non-investment grade” category, or

below BBB – according to the nomenclature used by S & P, then, the obligation to prepay all the outstanding principal existing

under these loans within the following sixty days, unless agreed upon otherwise by the parties, arises. At December 31, 2002,

US$1,464 million of the company’s borrowings and US$718 million of Endesa-Chile’s loan agreements, include compulsory

prepayment clauses for the mentioned circumstances.

There are no clauses in the loan agreements penalizing the Company if it is ranked below the “Investment Grade” level.

Because of the above, no provisions have been recorded for said item.

• At December 31, 2002 these obligations and restrictions have been fully met.

ENERSIS 2002 ANNUA L REPORT

263

262
262

21.

SURETIES OBTAINED FROM THIRD PARTIES

As of December 31, 2001, the Company has received sureties as follows:

Operation

Contractor

Relation

Support contract

Propuesta internacional

Seriousness of supply

Proposal GA/003/2001

International proposal

Cía. de Telecomunicaciones de Chile

Metropolis Intercom

Asea Brown Boveri

Indequipos S.A.

Skaiteeks Internacional S.A.C.

Disico S.A.

Public licitation GA /003/2001

Industrias de Aparellaje Eléctrico S.A.

Proposal GA/003/2001

International proposal

Lamparas y Equipos

Progos Ltda.

Seriousness of supply 3266

Proveedora Industrial Minera Andina S.A.

International proposal

Proposal GA/003/2001

Siemens S.A.

Sural S.A.

Tyco Electronics Chile Ltda.

Guarantee support contract

Enpresa Nacional de Telcomunicaciones

Support contract

Guarantee support contract

International proposal

Licitation GA/004/2001

International proposal

Proposal GA/001/2001

Private proposal GA/002/2001

Licitation GA/004/2001

Proposal GA/002/2001

International proposal

Seriousness of supply

International proposal

Proposal GA/002/2001

Proposal GA/002/2002

Private proposal GA/004/2001

Proposal GA/002/2001

Licitation GA/004/2001

VTR Global Com S.A.

GTD Teleductos

Celsa S.A.

Comercializadora Multinacional

Cooper Industries Inc.

Delixi Group Co., Ltd.

Distribuidora de Productos Eléctricos Ltda.

Eléctricas de Medellin Ltda.

Electroporcelana Gamma

Electrovidro

GE Lighting Peru S.A.

General Electric de Chile

H. Briones Comercial S.A.

Industria Electrónica Balestro Ltda.

Industria Electrónica Linsa Ltda.

Inpronet Ingeniería

Internacional Luminarias

Isoladores Santana S.A.

Isolux Ltda.

Josfel Comercial S.A.C.

K-Line

Private proposal GA/004/2001

Masol Distribución Iluminación S.A.

International proposal

Proposal GA/003/2001

Proposal GA/002/2001

Proposal GA/004/2001

Private proposal GA/002/2001

International proposal

Contract CD-295/99

Others

Total

Medex S.A.

Metálicas y Eléctricas -Melec

Philips Peruana

Prospective Enterprise

Pyung-Il Ind.Co.Ltd.

Roy Alpha S.A.

S & Electric Company

Schneider Electric Chile S.A.

Xerox De Chile

Third

Amount
ThCh$

58,627

54,071

47,507

40,553

27,035

16,081

15,746

14,992

13,518

12,965

58,340

972,286

ENERSIS 20 02 ANNUAL REPORT

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264

• As of December 31, 2002, the Company has received sureties as follows:

Operation

Contractor

Relation

Fulfillment of supply contract

Cía. de Telecomunicaciones de Chile

Supply contract

Seriousness of supply

Supply contract

Fulfillment of supply contract

Guarantee supply contract

Guarantee fulfillment contract

Supply contract

Metropolis Intercom S.A.

Holley Group Co Ltd.

VTR Global Com

GTD Teleductos

Empresa Nacional de Telcomunicaciones

Manquehue Net

Aguas Andina

Guarantee fulfillment contract

Bellsouth Comunicaciones

Supply contract

Guarantee supply contract

Fulfillment of contract

Others

Total

Gtd Telesat

Alfredo Ruiz Cornejo

Zerox De Chile S.A.

Resguardo

Aguas Cordillera

Third

Amount
ThCh$

58,604

28,495

25,116

18,251

16,074

15,070

8,372

5,023

1,674

1,641

1,005

787

255,462

ENERSIS 2002 ANNUA L REPORT

265

264
264

22.

FOREIGN CURRENCIES

As of December 31, 2001 and 2002, foreign currency denominated assets and liabilities are as follows:

a. Current assets

Account

Currency

Cash

Time deposits

Other receivables

Notes receivable

Amounts due from related companies

Income taxes recoverable

Prepaid expenses

Deferred income taxes

Other current assets

CH$

US$

CH$

U.F.

CH$

US$

CH$

US$

As of December 31,

2001
ThCh$

554,859

3,339,638

9,653,095

759

1,069,428

72,900,473

2002
ThCh$

278,009

141,962

4,599,104

4,723,505

737

548,981

38,372,273

4,718,903

149,017,956

11,993,039

23,545

2,890,033

2,820,000

110,607,127

9,252,460

23,946

13,703,886

4,991,257

11,782

Total current assets

220,570,899

225,665,858

b. Property, plant and equipment

Account

Currency

Buildings and infrastructure

Machinery and equipment

Other fixed assets

Technical appraisal

Depreciation

Ch$

As of December 31,

2001
ThCh$

20,592,396

1,547,428

1,351,831

32,871

2002
ThCh$

20,592,331

2,237,900

778,024

32,853

(9,832,948)

(10,674,829)

Total property, plant and equipment

13,691,578

12,966,279

ENERSIS 20 02 ANNUAL REPORT

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266

c. Other assets

Account

Currency

Investment in related companies

Goodwill, net

Negative goodwill, net

Other receivables

Amounts due from related companies

Intangibles

Less: Accumulated amortization

Other assets

Ch$

Euros

US$

Ch$

US$

Ch$

US$

Ch$

US$

Ch$

CH$

As of December 31,

2001
ThCh$

2002
ThCh$

2,001,934,027

1,714,489,338

602,376

420,391,127

833,827,404

11,841,027

(156,983)

(947,312)

489,642

479,992

578,399,897

784,084,055

3,638,593

(141,668)

(611,346)

475,380

663,834,927

500,634,149

1,423,691

(276,786)

14,444,523

1,423,691

(348,105)

52,615,157

Total other assets

3,947,407,663

3,635,139,133

d. Current liabilities

Within 90 days

91 days to 1 year

As of December 31, 2001

As of December 31, 2002

As of December 31, 2001

As of December 31, 2002

Account

Currency

Due to banks and financial
institutions

Bonds payable

Dividends payable

Accounts payable

Miscellaneous payables

Amounts payable to related
companies

Accrued expenses

Withholdings

Income tax payable

Deferred income

Other current liabilities

US$

U.F.

Ch$

US$

Ch$

U.F.

Ch$

US$

Ch$

US$

Ch$

Amount
ThCh$

8,257,254

388,968

487,375

1,103,337

17,382,835

87,887,700

87,800

2,580,316

919,521

17,175

423,677

1,193,328

113,160,189

Avg
Rate
%

Amount
ThCh$

4,813,564

210,095

696

350,316

225,262

11,594,646

22,026,963

104,637

2,982,587

201,903

16,675

198,493

4,058,871

Avg
Rate
%

5.04

1.85

Amount
ThCh$

33,721,685

3,069,608

7,338,015

284,074

Avg
Rate
%

Amount
ThCh$

261,756,982

3,270,670

7,707,332

Avg
Rate
%

2.69

7.06

5.50

1,613,846

2,515,740

Total current liabilities

233,889,475

46,784,708

44,413,382

276,864,570

ENERSIS 2002 ANNUA L REPORT

267

266
266

e. Long-term liabilities, December 31, 2002

Account

Currency

Due to banks and financial
institutions

Amounts payable to related
companies

Bonds payable

Accrued expenses

Deferred income taxes

Other liabilities

US$

U.F.

US$

U.F.

Ch$

US$

1 to 3 years

3 to 5 years

5 to 10 years

More than 10 years

Amount
ThCh$

Avg
Rate
%

826,401,500

2.64

1,008,142,313

3.33

Amount
ThCh$

230,863,000

16,185,590

5.50

20,547,091

4,198,442

38,021,057

Avg
Rate
%

6.90

5.53

Amount
ThCh$

Avg
Rate
%

Amount
ThCh$

344,025,000

24,987,254

5.60

29,176,242

555,872

1,438,337

Avg
Rate
%

7.16

5.75

Total current liabilities

1,892,948,902

251,410,091

25,543,126

374,639,579

f. Long-term liabilities, December 31, 2001

Account

Currency

Due to banks and financial
institutions

Amounts payable to
related companies

Bonds payable

Accrued expenses

Deferred income taxes

US$

U.F.

US$

U.F.

CH$

1 to 3 years

3 to 5 years

5 to 10 years

More than 10 years

Amount
ThCh$

992,321,281

1,039,153,679

13,497,434

Avg
Rate
%

3.85

4.90

5.38

Amount
ThCh$

Avg
Rate
%

Amount
ThCh$

202,330,110

15,347,667

5.50

17,903,179

5.51

33,696,740

4,066,066

541,328

Avg
Rate
%

6.90

5.57

Amount
ThCh$

337,216,850

31,451,890

1,279,080

Avg
Rate
%

7.16

5.75

Total long-term liabilities

2,064,386,127

17,903,179

236,568,178

369,947,820

ENERSIS 20 02 ANNUAL REPORT

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268

23.

SANCTIONS

As of December 31, 2002, neither the Company nor its Board of Directors has been fined by the Superintendency of Securities

and Insurance or any other administrative authority.

24.

SUBSEQUENT EVENTS

• On December 10, 2002, a Special General Shareholders’ Meeting of Cerj, an Enersis S.A. subsidiary, was held, where a

capital increase was approved for Cerj, in an amount of ThUS$105,000, approximately.

This increase took place on January 10, 2003, through the issuance and subscription of 770,833,333,333 new ordinary shares,

at a value of R$0.48 in one thousand-share batches, totaling the ThUS$100,000 approved at the Meeting, with the Company’s

capital amounting to ThUS$259,085.

With this operation, the percentage of direct participation held by Enersis S.A., through its agency, will increase from 20.38%

to 40.03%.

• As a relevant event on January 15, 2003, it was reported that Enersis S.A.’s Board of Directors, at a special meeting held on

that day, agreed to take note that the Company will make accounting adjustments and special charges in its balance sheet

for its investments in its Chilean and foreign subsidiaries for a total of US$387 million, in its equivalence in Chilean pesos,

these special adjustments being reflected in 2002 income.

Such special adjustments and charges have no impact on the Company’s cash flow and will be reflected in Enersis’ 2002

financial statements. The special adjustments and charges made as well as the provisions made at November 30, 2002, are

detailed as follows: (the figures shown correspond to the impact on Enersis S.A.’s financial statements):

Generation:

Brazil

Argentina

US$ 60 million

US$ 23 million

Total Generation

US$ 83 million

Distribution:

Brazil

Argentina

US$ 255 million

US$ 26 million

Total distribution

US$ 281 million

Services:

Chile

US$ 23 million

Total services:

US$ 23 million

Total adjustment

US$ 387 million

ENERSIS 2002 ANNUA L REPORT

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268
268

It should be noted that, of the US$387 million, US$329 million will be from the acceleration of the amortization of the net

balance of negative goodwill and goodwill of investments made in Brazil and Argentina in generation and distribution.

Subtracted from the figure above are the provisions made at November 30, 2002, as shown below:

Brazil

Argentina

US$ 81 million

US$ l6 million

Total Provisions

US$ 97 million

In view of the above, and having considered these provisions, the effect of the adjustments and special charges on the

company’s income will amount to the equivalent in Chilean pesos of US$290 million, approximately.

In the period between January 1, 2003 and the date of presentation of these financial statements, no other significant event

that might affect their presentation has occurred.

25.

ENVIRONMENT

As of December 31, 2002, the Company has not incurred in environmental expenses.

JUAN CARLO WIECZOREK

General Account

ENRIQUE GARCIA

Chief Executive Officer

ENERSIS 20 02 ANNUAL REPORT

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270

Enersis S.A. Relevant Facts

Provisional Dividends

The Board of Directors of Enersis S.A., as of January 31, 2002 agreed, upon unanimous vote of its members, not to distribute

in February 2002, a provisional dividend charged to the results of December 2001, due to not satisfying the requirements

provided for such action in the Dividend Policy of the Company.

In the Ordinary Meeting of the month of May, the Board of Directors of Enersis S.A. agreed, upon unanimous vote of its present

members, not to distribute in May 2002, a provisional dividend charged to the results of March 2002, according to the policy in

force on this subject, due to not satisfying the requirements provided for such action in the above mentioned Dividend Policy

of the Company.

In the Extraordinary Meeting held on July 31, 2002, the Board of Directors of Enersis S.A. agreed, upon unanimous vote of

its present members, not to distribute in August 2002, a provisional dividend charged to the results of June 2002, according

to the policy in force on this subject, due to not satisfying the requirements provided for such action in the above mentioned

Dividend Policy of the Company.

In the Ordinary Meeting held on October 28, 2002, the Board of Directors of Enersis S.A. agreed, upon unanimous vote of

its present members, not to distribute in November 2002, a provisional dividend charged to the results of September 2002,

according to the policy in force on this subject, due to not satisfying the requirements provided for such action in the above

mentioned Dividend Policy of the Company.

Changes to the Board of Directors

In the Extraordinary Meeting held on July 25, 2002, the resignation of Director Mr. Luis Rivera to the Board of Directors of

the Company was accepted. Likewise, in the Ordinary Meeting held on July 26, 2002, the resignation of Mr. Alfredo Llorente

to the positions held by him as Chairman of the Board, Director, President of the Committee of Directors and member of this

Committee, was accepted.

In the same Ordinary Meeting held on July 26, 2002, the following was agreed upon:

- To appoint Mr. Pablo Yrarrázaval as Director and Chairman of the Board of Enersis S.A.

- To appoint Mr. Pablo Yrarrázaval, Mr. Hernán Somerville and Mr. Ernesto Silva as members of the Committee of

Directors.

- Finally, Mr. José Luis Palomo was appointed Director.

Relevant aspects on the businesses of Endesa España

As of September 20, 2002, our parent company, Endesa S.A. (Spain) has presented to the Comisión Nacional de Mercado de

Valores de Madrid (Madrid Stock Exchange National Commission), the Superintendence of Securities and Insurance and the

S.E.C., a report on the relevant aspects of its businesses. This report and how the situation of its businesses in Latin America

affects Endesa España, states the following:

ENERSIS 2002 ANNUA L REPORT

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270
270