Enel Americas
Annual Report 2018

Plain-text annual report

Annual Report Enel Américas 2018 Santiago Stock Exchange ENELAM New York Stock Exchange ENIA Enel Américas was initially established under the name Compañía Chilena Metropolitana de Distribución Eléctrica S.A. On December 1, 2016 the company changed its name to Enel Américas S.A. The Company’s paid- in capital on December 31, 2018 reached $6,763,204,424 and was represented by 57,452,641,516 shares. These shares are traded in the Chilean stock exchanges and in the New York Stock Exchange in the form of American Depositary Receipts (ADR). The main business of the Company is the operation, development, generation, distribution, transmission, transfor- mation and/ or sale of energy in any of its forms or nature, directly of through other companies. The Company can also exercise activities in the telecommunications sector, provide engineering advisory in the country and abroad, and also can invest and manage its investments in its subsidiaries and associate companies. Total assets amounted to $27,396,356 thousand on December 31, 2018. Enel Américas controls and manages a group of companies that operates in the electricity markets in four countries in Latin America (Argentina, Brazil, Colombia and Peru). In 2018, net income attributable to the controlling company reached $1,201,381 thousand and operational income was $2,434,520 thousand. By the end of 2018, the Company employed 18,3931 people through its subsidiaries companies in Latin America. 1 Includes senior executives shared with Enel Chile. Annual Report Enel Américas 2018 2 Annual Report Enel Américas 2018Content > Letter From the Chairman ...................................................................................................... 4 > Enel Américas is Open Power .................................................................................................. 6 > Milestones in 2018 ................................................................................................................... 8 > Main financial indicators ......................................................................................................... 13 > Identification of the company and constituent documents ................................................... 17 > Property and control ............................................................................................................... 21 > Administration ........................................................................................................................ 27 > People and organization ......................................................................................................... 41 > Exchange Transactions ........................................................................................................... 51 > Dividends .............................................................................................................................. 57 > Investment and financing policy for 2018 .............................................................................. 61 > Business of the Company ...................................................................................................... 65 > Investments and financial activities ....................................................................................... 73 > Risk Factors ........................................................................................................................... 83 > Regulatory framework of the electricity industry ..................................................................101 > Description of the electricity business by country ............................................................. 131 > Sustainability ........................................................................................................................ 159 > Direct and Indirect Economic Participations ........................................................................ 165 > Significant Events of the Company ...................................................................................... 171 > Identification of subsidiaries and associate companies ....................................................... 179 > Statement of Responsibility ................................................................................................. 195 Content 3 1. Letter From the Chairman Dear shareholders: You are holding the Annual Report and Financial State- ments of Enel Américas S.A. for to the year 2018, in which you will find the main actions taken by the company. This was a period where important milestones were achieved in accordance with our business strategy. The year 2018 has been determined by events that are transforming the social, political and economic context in the countries where we operate, being sometimes hard to predict, which also brought other long-term change factors and deep long-term consequences, such as technological advances, growing digitalization…. All of the aforemen- tioned circumstances are constantly challenging the ability of the companies to achieve their goals. In any case, our company has been able to achieve excel- lent economic and financial results, thus being capable to meet its commitments, all of which are detailed below. Results of the period Enel Américas showed fairly positive financial results. Ac- tually, the company´s EBITDA grew 13.9% compared to 2017, mainly explained by the accomplishments of our companies in Argentina and the actions carried out in Bra- zil, particularly through the incorporation of Eletropaulo and the good results of Enel Distribución Río and Enel Distribu- ción Goiás. Enel Américas’ net results increased 69.4% compared to the previous year, reaching US$ 1,201 million. Industrial growth 2018 was a positive year in terms of industrial growth, while revenues amounted to US$13,184 million, meaning 26.3% growth in relation to 2017. This result is mainly ex- plained by the revenues obtained in Brazil, country where the year was particularly good, which also resulted in im- portant consolidation of our clients’ base in the country. Enel Brasil Investimentos Sudeste was awarded the ac- quisition of Eletropaulo Metropolitana Eletricidade de Sao Paulo, becoming the largest energy distribution operator in the country, with more than 17 million clients and a mar- ket share of nearly 20% in the distribution business. This acquisition meant the brand name change of Eletropaulo to Enel Distribuição São Paulo. In addition, this transaction proves a fundamental commitment in our growth strate- gy, while the first results show that it will become a great investment. Also the company Celg changed its name to Enel Distribuição Goiás, firm acquired in 2017, which added new 2.9 million clients to our clients’ base. In Argentina, we carried out large investments that im- proved the quality of supply for our clients in different ar- eas of the country. In this country, our works plan for 2018 reached 5,000 million Argentinean pesos. As such, Ede- sur commissioned three Substations: Móvil Puesto Roca, in Temperley, benefiting 90,000 clients; Padre Novak, in Florencio Varela, benefiting 42,000 clients; and finally the Substation in Sarandí, meaning an improvement in service quality for more than 150,000 people. In Peru, we also had a year of strong investments in distri- bution, with the construction of the new Electricity Trans- mission Substation Izaguirre, which will supply energy to large businesses and also improve service to 110,000 cli- ents in North Lima. 4 Annual Report Enel Américas 2018In Colombia, through our subsidiary Codensa, we inaugu- Our company is living a positive development cycle. Our rated a modern service center in Bogotá, located in Re- achievements consolidate our growth and stability. This is, strepo neighborhood, which required and investment of without any doubt, a reason for satisfaction, but at the same 2,900 million Colombian pesos. time means to take great current and future responsibilities, Our future while maintaining high standards of corporate behavior, being capable of combining competition, skills and ethics in the ex- pansion of our business. In 2018 Enel Américas consolidated as one of the largest Finally, I would like to express my gratitude to the Directors, private electricity companies in Latin America, achievement CEO, executives, professionals, technicians and employees based on steady growth both in energy generation and dis- of Enel Américas for their permanent effort and dedication. tribution businesses. Nevertheless, we have the challenge to All of them have been absolutely essential for the develop- keep our long-term position, following the path of looking for ment of the company in 2018. With nothing more to add, I new opportunities in the region which will enable us to con- invite you to continue making positive contributions to the tinue growing. future of Enel Américas as an energy leader in Latin America. These efforts have greatly paid off. We are very proud to in- Thank you. Francisco de Borja Acha Chairman of the Board Enel Américas form you that in 2018 Enel Américas was included in Dow Jones Sustainability Emerging Markets Index and in Dow Jones Sustainability MILA Pacific Alliance INDEX, in addition to the confirmation for the second consecutive year of our presence in Dow Jones Sustainability Chile. The continued safety of our collaborators, with no distinc- tion between own employees and contractors, is other fun- damental pillar of Enel Américas. We need to redouble our efforts to achieve our main priority, which is zero accidents at the workplace, through the consciousness and promotion of the awareness of procedures and safety norms, its systemat- ic application at all times and the detailed analysis of any risk or incident. In conclusion, our strategy is clearly oriented towards mak- ing Enel Américas an active company in building sustainable future through the execution of our values, which are aimed at facilitating access to progress through energy in every community where we are present, in the promotion of new technologies, uses and more efficient ways of managing and using energy, and establishing lasting partnerships with our stakeholders in order to achieve our common objectives. 5 2. Enel Américas is Open Power B e k e e n t o g u a r a n t e e c u s t o m e r C o m m i t t o i n t e g r a t i o n , a c k n o w e d g e l a n d i m p r o v e Q u i c k l y c h a n g e p r i o r i t i e s i f c o n d i t i o n s B e h a v e s a f e l y , p r o m o t e s a f e t y c h a n g e i n d i v i d a n d b e s a t i s u a l d i f f f a e p r o a c c t i o n , r e n c t i v e e t s o P r o p o s e n e w A c k n o w e d g e l t h e s u c c e s s o f p e e r s a n d / o r c o w o r k e r s o l u t i o n s a n d d o n ´ t g i v e u p a n d o f f e r s u g g e s M a k e d e c i s i o n s o n e v e r y K e e p y o u r c o m m i t m S h a r e i n f o r m a t i o n e n t s , a n d c o l l a b o r a t i n g w o r k w i t d a y t a s k s B E H A V I w i t h a n d O R h o d t h e e t r b e a c c e s o r u m i n a n n t d a O b t a i n a t i o r n b e b l e o p f o r u l t n n d t o s p a i m i n g a s s i o n f o r t h e m t h e c o ll a b o e , v e e s a e b e h a ( c u l t i m p u r r o w h v i n e g a n g h e f fi e e , c d i i s a l t e h t i o n s t f a c i n g n t l a b i l i t h o y a b t i m s t a n y , p a d , s a f e t y c l e s p r o v e r a p i d l y o r f a e r s a n o d e x c n a l i t y , e w e l l b e ll e n c e u l t s t c .) e i n g r a ti o n o f o t h e r s t h e i r e f f o r t ovation n In R e s p o n sibility VALUES O p e greate n P o w e r t st c h o o v e alle V I S I O N n g e r c o s f a m e c i n s o g m e t h e o f w t h e o r l d T r u s t y g o l o n h c e t w e n o t y g r e n e n e p O s r e m u s n o c r o f y g r e n e e g a n a P r o a ctivity N SIO MIS y to m erg s e s w u e n n e e p s orator b Open energy to n O Open to new colla n e n erg y to m ore people e p O 2. Enel Américas is Open Power VALUES O p e n P greate o w e r t st c h o o alle V I S I O N v e r c o n g e s f a m e c i n s o g m t h e e o f w t o h e r l d T r u s t y g o l o n h c e t w e n o t y g r e n e n e p O ovation n In C o m m i t t o i n t e g r a t i o n , a c k n o w l e d g e a n d B e k e e n t o g u a r a n t e e c u s t o m e r B e h a v e s a f e l y , p r o m o t e Q u i c k l y c h a n g e p r i o r i t i e s i f c o n d i t i o n s M a k e d e c i s i o n s o n S h a r e i n f o r m a t i o n K e e p y o u r c o m m i t m e n t s , A c k n o w l e d g e t h e s u c c e s s o f P r o p o s e n e w s o l u t i o n s a n d / o r c o w o r k e r i m p r o v e s a f e t y i n d i v i d a n d b e c h a n g e p e e r s a n d d o n ´ t a n d o f f e r g i v e u p s u g g e s s a t i s u a l d i f f f a e p r o a c c t i o n , r e n c t i v e e t s o b e h a ( c u l t i m p u r r o w h v i n e v e r y d a y c o l l a b o r a a n d w o r k w i t t a s k s t i n g w i t h a n d B E H A V I O R h o d t h e e t r b e a c c e s o r u m i n a n n t d a O b t a i n a t i o r n b e b l e o p f o r t i o n s t f a c i n g e g a n n e , v e e s a e n g h d t h e u l t s p m e f fi e e , c d i i s a e h a l t , s n t l b i l i t s t a n y , p a d a i m i n g a s s i o n a f e t y f o r c l e r a e r s a n o d e x c s n t o t h e c o ll a b h o y a b o r a ti o n t i m p r o v e p i d l y a l i t w e l l b y , e t c .) e i n g e ll e n c e o f o t h e r s t h e i r o r f a u l t s e f f o r t R e s p o n sibility P r o a ctivity N SIO MIS n e n erg y to m ore people e p O s e s w u e y to m erg orator n n e e p O b s Open to new colla Open energy to n s r e m u s n o c r o f y g r e n e e g a n a 3. Milestones in 2018 FEBRUARY Codensa inaugurated a modern service center in Restrepo neighborhood in Bogotá T h e S e r v i c e C e n t e r e s t i m a t e s t o s e r v e monthly approximately 12,500 clients. The project required investments of COP$2,900 million and has 18 service modules, being especially designed to be closer to clients. The Service Center was designed with modern i n f r a s t r u c t u r e a n d comfortable facilities, allowing clients to have a better service experience. Moody´s assigns “Baa3” to Enel Américas On February 23, Moody’s credit risk rating agency assigned “Baa3” rating to Enel Américas, and changed the outlook from stable to negative mainly due to the macroeconomic situation in Colombia. MARCH Celg changed its name to Enel Distribución Goiás The brand name change is part of the transformation o f t h e c o m p a n y t h a t s t a r t e d a f t e r i t s acquisition and included greater investments and a restructuring process addressed to improve service quality to satisfy clients’ needs. Codensa and Emgesa were the first companies of the electricity sector in Colombia to gain the Sello de Oro de Equidad Laboral- Equipares This acknowledgement was the first in Colombia. Codensa and Emgesa were certified as companies that have introduced verifiable equity policies, closing g e n d e r g a p r e g a r d i n g salaries, opportunities and inclusion. JANUARY Maintenance works started in Emgesa’s hydroelectric power plant El Quimbo The Colombian company announced the beginning o f s e v e r a l w o r k s i n t h e m a i n d a m o f t h e hydroelectric power plant El Quimbo, as part of the scheduled maintenance programs for the power plant’s main civil works. E d e s u r i n a u g u r a t e d Substation Padre Novak, in the Florencio Varela area Edesur is subsidiary of Enel Américas in Argentina. This substation directly b e n e f i t s 4 2 t h o u s a n d clients in the Florencio V a r e l a a n d A l m i r a n t e Brown areas. Investment reached ARS$102 million, being part of a whole i n v e s t m e n t s p l a n o f ARS$5,000 million in 2018. Works at Florencio Varela included the construction of a new substation with a 40 MVA transformer, a medium voltage room with 8 feeders and 13 kilometers of medium voltage wires. C o d e n s a i n a u g u r a t e d t h e f i r s t g e n e r a t i o n and distribution energy r e n e w a b l e p r o j e c t i n Cundinamarca This small grid benefited 20 families living in sites d i f f i c u l t t o a c c e s s i n the Alto Redondo area, located 230 kilometers from Bogotá, but almost 8 commuting hours. E d e s u r r e c e i v e d t h e “Ring the bell for gender equality” award, due to the integration of women in its board of directors Comisión Nacional de Valores distinguished Edesur for being one of the companies with better g e n d e r e q u a l i t y i n i t s board of directors. Mónica Diskin, Legal Manager, and Alejandra Martínez, Communications Manager, attended the ceremony. A n n o u n c e m e n t o f a n agreement between Enel Argentina and Margarita Barrientos, for health improvement of people living in Los Piletones neighborhood The sustainability area of Enel Argentina hired a health professional in the neighborhood’s Health Center to carry out “non- invasive” checkouts with cutting-edge technology. These controls can identify chronic diseases. The plan is to expand this project to other communities where the company operates. APRIL Successful local bond i s s u e o f C o d e n s a f o r COP$360,000 million The company performed a successful bond issue in the Colombian capital m a r k e t a m o u n t i n g t o COP$360,000 million at 7 and 12-year term. This issuance was registered under the Bond Issuance and Placement program approved by the Financial S u p e r i n t e n d e n c e o f Colombia. E l Q u i m b o b e c a m e a scientific international benchmark regarding the research and restocking of fish Emgesa, in alliance with Universidad Surcolombiana (USCO) and Experimental Station of Hydrobiologic R e s o u r c e s o f S o u t h C o l o m b i a ( E S R H i n its Spanish acronym), p e r f o r m e d t h e “ I International Seminar f o r t h e E c o l o g i c a l Management of Dams”, in which El Quimbo was a scientific reference regarding the restocking and relocation of native f i s h . T h i s a c t i v i t y i s part of the Fishery and Fishing Program of Alto Magdalena, and developed by Emgesa at El Quimbo for six years. This initiative has driven cooperation agreements with different universities and funding r e a c h e d m o r e t h a n COP$15,000 million. 8 Annual Report Enel Américas 2018JUNE E n e l B r a s i l a c q u i r e s Eletropaulo (currently Enel Distribución São Paulo) Enel Brasil Investimentos Sudeste, subsidiary of Enel Américas, accomplished successfully the voluntary offer for the acquisition of the entire social capital of Eletropaulo Metropolitana Eletricidade de São Paulo SA. With this transaction, Enel Américas became the largest electricity distribution operator in the country, with more than 17 million clients and 19.0% market share in energy distribution. Enel Brasil Investimentos Sudeste received confirmation t h a t b e t w e e n J u n e 5 and July 4, 2018, in line w i t h t h e r e g u l a t i o n s o f t h e B r a z i l i a n s t o c k exchange, shareholders of Eletropaulo Metropolitana Eletricidade de São Paulo SA sold additional shares of Eletropaulo to Enel Sudeste equivalent to 19.9% of the social capital of the company. Along with this, Enel Sudeste reached 93.3% share ownership of the distribution company. Codensa and Emgesa, w e r e r e c o g n i z e d a s c o m p a n i e s t h a t h a d advance most in the PAR Ranking of Gender Equality since 2015 These companies were acknowledged as the ones that that had advanced most in the Ranking of Gender Equality of PAR- O r g a n i z a t i o n s - P A R i n Colombia since 2015. This Ranking is developed by the consulting firm Aequales, Women District Secretariat and Colegio de Estudios Superiores de Administración (CESA for the Spanish abbreviation). A total of 209 organizations were assessed in 2018. Emgesa and Codensa were recognized for having the best work environment The award was granted in the context of ANDESCO C o n g r e s s 2 0 1 8 . T h i s acknowledgement was the result of an evaluation of the policies, practices and initiatives implemented by Codensa and Emgesa, with the purpose of promoting gender equality, working development and safety and occupational health of employees. Credit Rating Agencies affirmed Enel Américas’ rating after the acquisition o f E l e t r o p a u l o ( E n e l Distribución São Paulo) After the acquisition of Enel Distribución São Paulo, on June 5 S&P affirmed the international rating of the company at “BBB” and “Stable” outlook. Likewise, Fitch Ratings reviewed and affirmed Enel Américas’ international rating at “BBB+” and “Stable” outlook and “AA (cl)” national scale rating with “Stable” outlook. Later, o n J u n e 7 , M o o d y ’ s assigned Enel Américas at Baa3 rating with negative outlook. Similarly, the following day, Feller Rate assigned national rating to Enel Américas at “AA-” with “Stable” outlook. Enel Américas affirmed i t s p r e s e n c e i n t h e FTSE4GOOD Index Series T h i s i n d e x c l a s s i f i e d t h e t o p c o m p a n i e s globally, assesses its environmental, social, and governance practices ( E S G i n i t s E n g l i s h acronym). Enel Américas was distinguished in the Emerging Markets Index and Latin America Index c a t e g o r i e s , a f t e r t h e revision carried out in the second semester. JULY Enel Américas’ Board of Directors appointed Maurizio Bezzeccheri as Chief Executive Officer A t t h e e x t r a o r d i n a r y meeting, Enel Américas’ B o a r d o f D i r e c t o r s a p p o i n t e d M a u r i z i o Bezzeccheri as the new Chief Executive Officer of the company, as of August 1, 2018. M a u r i z i o B e z z e c c h e r i obtained a Doctor Cum Laude degree in Chemical E n g i n e e r i n g f r o m Università degli Studi di Napoli. His career in the Enel Group started in 1999. Before taking the position of general manager of Enel Américas, he held the position of Country Manager of Enel Argentina. E n e l A m é r i c a s w a s awarded a certificate on Crime Prevention Model E n e l A m é r i c a s w a s a w a r d e d a c e r t i f i c a t e o n C r i m e P r e v e n t i o n M o d e l i n a c c o r d a n c e with Law N° 20,393, of Chilean regulation, which establishes the criminal responsibilities of legal entities concerning asset l a u n d e r i n g , f i n a n c i n g o f t e r r o r i s m , i l l i c i t enrichment and bribery. T h e c e r t i f i c a t i o n w a s granted in July 2018 for two years, the maximum period established by l a w , t h u s c o n f i r m i n g the commitment of the company in maintaining control and compliance systems as mandated b y l o c a l r e g u l a t o r y frameworks. MAY Enel Distribución Perú launches digital energy bill in Lima and Callao This initiative benefits 1,400,000 clients in Lima and Callao, enabling annual savings of up to 40 tons of paper and 250,000 liters of water. C o d e n s a i s t h e f i r s t e l e c t r i c i t y c o m p a n y t o c e r t i f y a s h e a l t h y organization T h e C o l o m b i a n H a r t F o u n d a t i o n g r a n t e d Codensa the certification of Healthy Organization, thanks to the enforcement of policies and practices that promote healthy life routines. This distinction was granted for the first time ever to an electricity company, recognizing Codensa as a pioneer in the implementation of actions to manage its employees’ health, which is based on seven fundamental premises designed to d e c r e a s e w o r k p l a c e absenteeism, provide timely detection of health problems and increase physical and mental well- being of employees. V u e l t a d e O b l i g a d o Combined Cycle Power Plant located in in Santa Fe Province was commissioned Enel Américas Group, Central Puerto and Orazul Energy Argentina are the owners of the combined cycle facilities Vuelta de Obligado power plant. Together with other the authorities, the Minister of Energy in Argentina, Juan José Aranguren, participated in the inauguration ceremony. The plant is located in the city of Timbúes, province of Santa Fe; its installed capacity is 800 MW, being one of the thermal power plants with the most advanced technology in the country. The plant can supply electricity to slightly more than one million homes. Total investments for this project amounted to US$744 million. Milestones in 2018 9 SEPTEMBER Enel Américas announced c h a n g e s i n t h e Administration, Finance and Control Department Enel Américas’ Board of Directors appointed Aurelio Bustilho as new Chief Financial Officer of the company. The new executive has a Degree in Business Administration and an MBA from Coppead / UFRJ, with a major in Competitive Intelligence. He previously held the position of CFO of Enel Brasil. Enel Américas confirms its leadership in sustainability, being included in the Dow Jones Index The company was included for the first time in the Dow Jones Sustainability Emerging Markets Index a n d t h e D o w J o n e s Sustainability MILA Pacific Alliance Index. Additionally, i t w a s c o n f i r m e d i t s presence in the Dow Jones Sustainability Chile Index for the second consecutive year. Fundación Enel Colombia and Uniminuto granted scholarships for higher education Codensa and Emgesa, through Fundación Enel Colombia and Universidad Minuto de Dios, opened a call for 21 people in 7 n e i g h b o r h o o d s o f Cundinamarca district to apply for the scholarship i n s u c h u n i v e r s i t y f o r technical, technological and professional careers. The granted scholarship consisted on 70% of the tuition and transport costs equivalent to 50% of a minimum monthly wage. E d e s u r i n a u g u r a t e d a substation in Sarandí, whose investment reached ARS$154 million E d e s u r i n a u g u r a t e d r e p o w e r i n g w o r k s o f Sarandí Substation, directly benefitting 47 thousand homes and businesses – more than 150 thousand neighbors–in Sarandí, Villa Domínico, Wilde, Monte Chingolo and Gerli. The company’s investment reached ARS$154 million, in the context of a broader plan of more than 5,000 million pesos for this year in the entire concession area. OCTOBER Enel Distribución Perú invested 42 million soles for the improvement of electricity service in the Lima North area Enel Distribución Perú started the construction of the new Electricity Transmission Substation ( S E T f o r t h e S p a n i s h a c r o n y m ) I z a g u i r r e , located in San Martín de Porres district. The latter represents an investment of PEN$42 million and will improve the electricity service of approximately 110 thousand clients, in addition to satisfy the energy demand of large businesses. Enel Generación Perú will install the first energy storage battery in Peru A 1 4 M W c a p a c i t y device will be installed in Ventanilla thermal power p l a n t . T h e e s t i m a t e d i n v e s t m e n t a m o u n t s t o U S D 9 m i l l i o n . T h e beginning of civil works and the lasts licensing are estimated to take place during the first half of 2019, so the new system would start in the second half of the year. Fitch Ratings affirmed Enel Americas’ rating On September 20, Fitch R a t i n g s a f f i r m e d t h e national rating at AA with Stable outlook and the international rating at BBB+ with Stable outlook. Institutional Investor in the Latin America Executive Team 2018 recognized Enel Américas The award was the result o f t h e t o t a l v o t e s o f 924 managers, portfolio managers and investment analysts that cover Latin A m e r i c a n s t o c k . T h e company ranks top three in the Electric & Other Utilities category. E d e s u r i n s t a l l s s m a r t meters to make energy c o n s u m p t i o n m o r e efficient W i t h t h e p u r p o s e o f i m p r o v i n g s e r v i c e quality and digitize the grid, Edesur started the installment of the first smart meters. The pilot p r o j e c t i n c l u d e s t h e installation of 5,000 units in the concession area in Argentina before the end of the year. In Colombia, Enel defines its growth strategy with the evolution of its brands After 20 years operating in Colombia, Codensa and Emgesa incorporate Enel brand in their logos, evolving to Enel - Codensa and Enel -Emgesa. AUGUST E n e l A m é r i c a s w a s acknowledged as one of the best companies in the capital markets in 2018 This award was presented in Capital Markets Awards, p a r t o f t h e f i n a n c i a l markets magazine Latin Finance. The magazine highlights the successful company restructuring s t a r t e d i n 2 0 1 5 , w i t h which its assets in Chile were divided from the rest of the region and the acquisition of Eletropaulo (currently Enel Distribución São Paulo) in June 2018, b e c o m i n g t h e l a r g e s t electricity distribution company of Sao Paulo in Brazil. Codensa was recognized as one the most inspiring companies in the country T h e c o m p a n y w a s recognized as one the most inspiring companies i n t h e c o u n t r y , i n t h e context of ANDI Congress 2 0 1 8 . T h i s a w a r d distinguishes Colombian companies committed to solve the main social challenges in the world and in the country, through strategic activities of their businesses. In the case of Codensa, the company was acknowledged by its program Cundinamarca at 100%, which is focused on supplying energy to families living in hard to reach areas and also due to geographic dispersion, didn’t have access to this service in the past. 10 Annual Report Enel Américas 2018T h e a l l i a n c e b e t w e e n Codensa and Bancóldex promotes electric mobility projects in Colombia O n O c t o b e r 4 , t h e s e c o m p a n i e s s i g n e d a collaboration agreement to foster electric mobility projects in Colombia. This new alliance will create a new joint working group in order to identify and evaluate electricity mobility projects regionally and nation wide, and with the objective of participating in these initiatives as structuring, proponents, funders and/or investors. The companies of Enel Group in Colombia were once again recognized by the stock exchange for their IR performance For the sixth consecutive year, Codensa and Emgesa w e r e a w a r d e d b y t h e Colombian Stock Exchange f o r t h e i r I R ( I n v e s t o r Relations) performance. This recognition considers high standards in terms of disclosure of information, relationships and corporate governance of the Group in the country. NOVEMBER Enel Brasil was awarded with Prêmio Guia Exame de Sustentabilidade Nacional Exame magazine ranks annually the most sustainable companies in Brazil, Enel Brasil and Eletropaulo (currently Enel Distribución São Paulo) were among them. Enel was ranked as the most s u s t a i n a b l e B r a z i l i a n company in every sector and Enel Distribución São Paulo was awarded in the ethics and transparency category. E m g e s a p r e s e n t e d successful results in the pilot plan for the ecological restoration of El Quimbo The successful results of the Pilot Plan for the Ecological Restoration of the Tropical Dry Forest, d e v e l o p e d b e t w e e n 2 0 1 4 a n d 2 0 1 8 , w e r e presented in the context of the Symposium for Ecological Restoration a n d E n v i r o n m e n t a l Sustainability organized b y t h e c o m p a n y . T h e p r o g r a m c o v e r s 1 4 0 hectares, located in the biotic compensation area of El Quimbo hydroelectric power plant. Edesur inaugurated the mobile Substation Puesto Roca to improve its service in Temperley This investment directly b e n e f i t s 9 0 t h o u s a n d inhabitants at Lomas de Zamora and Almirante Brown. Investment carried out by the company in this project reached ARS$26 million, in the context of a broader plan of more than 5,000 million pesos for 2018 with the purpose of improving the distribution network. Edesur installed remote control devices in the medium voltage network I n o r d e r t o r e d u c e t h e a m o u n t o f p o w e r blackouts in the Cañuelas d i s t r i c t – e s p e c i a l l y i n the countryside–Edesur i n s t a l l e d f o u r c o n t r o l d e v i c e s i n s t r a t e g i c locations of the medium voltage network. These d e v i c e s a r e r e m o t e l y controlled and when a shortage emerges, its possible to drift the supply, thus accelerating detection times and the repair of electrical faults. DECEMBER Eletropaulo changes its name to Enel Distribución São Paulo The brand change positions this electricity distribution c o m p a n y a s p a r t o f a multinational energy group, which operates in every segment of the energy sector, and its prepared to offer all sorts of products and services related to the energy market. The brand change also seeks to emphasize the global s c a l e o f E n e l a n d t h e focus of the company on digitization, technology and innovation. Enel Américas is awarded i n t h e B e s t E m e r g i n g M a r k e t s P e r f o r m e r s ranking of Vigeo-Eiris T h e m e a s u r e m e n t comprises companies in emerging markets with the best performance, and is determined by the Equitics© methodology. The selected companies have reached the highest scores in the emerging markets universe. A total of 855 companies were evaluated, from 35 sectors and 31 countries. Enel Américas was awarded in the Electric & Gas Utilities Emerging Market. Edesur was awarded with the Quality prize The National Quality Award for “Management of Board of Directors’” is the most important and renowned award for companies and nonprofit organizations, in exposing their excellence i n o r g a n i z a t i o n a l management. The directors of Edesur received this acknowledgement in Casa Rosada. T h e N a t i o n a l Q u a l i t y A w a r d i s t h e o n l y distinction that Argentina gives to companies that stands out as a model o f e x c e l l e n c e i n t h e i r management, in order to support and incentive their modernization, innovation and competitiveness. The assessment process i s r i g o r o u s a n d h a s three levels, including an individual diagnosis, c o n s e n s u s a m o n g evaluators and the final c h o i c e c a r r i e d o u t b y prestigious judges. Milestones in 2018 11 12 Annual Report Enel Américas 201804 Main financial indicators 13 Letter From the Chairman Total Assets 15,177,664 15,921,322 15,449,154 11,281,556 20,168,991 27,396,356 2013 2014 2015 2016 2017 2018 Total Liabilities 6,670,199 7,642,104 7,259,346 6,006,307 11,890,484 18,564,456 Operating Revenues 6,264,446 7,253,876 5,301,440 5,197,286 10,438,003 13,184,062 2,251,489 2,300,020 1,615,112 1,643,369 2,947,261 3,357,708 658,514 610,158 661,587 383,060 709,043 1,201,381 1.31 0.78 1.23 0.92 1.01 0.65 1.25 1.14 0.92 1.44 0.66 2.10 As of December 31 of each year 2013 2014 2015 2016 2017 2018 628 25 4,522 14,422 16,549 200 13 987 4,992 6,826 563 29 2,925 12,748 16,090 316 27 1,842 8,489 9,497 1,707 94 10,276 40,651 48,962 645 25 4,522 14,390 15,276 208 13 987 5,225 7,108 589 32 3,059 13,559 15,773 324 27 1,949 9,062 9,916 1,766 97 10,517 42,236 48,073 657 25 4,522 15,204 15,770 194 13 987 4,398 6,541 484 36 3,459 13,705 16,886 292 27 1,983 8,801 9,283 1,627 101 10,951 42,108 48,480 632 29 4,419 13,124 13,312 185 13 974 3,665 9,448 551 36 3,457 14,952 18,015 310 27 1,934 8,698 9,800 1,678 105 10,784 40,439 50,575 578 29 4,419 14,825 14,852 146 17 1,354 4.034 12,587 604 36 3,467 14,765 18,156 320 27 1.979 7,430 10,457 1,648 107 11,219 41,053 56,051 581 29 4,419 13,949 13,952 158 17 1,354 3,755 22,236 615 36 3,499 14,052 18,544 325 30 1,985 8,106 10,597 1,679 112 11,257 39,863 65,329 Ebitda Net Income (2) Liquidity Ratio Leverage (3) Generation Business ARGENTINA Number of employees Number of generating units Installed capacity (MW) (4) Electricity generated (GWh) Energy sales (GWh) BRAZIL Number of employees Number of generating units Installed capacity (MW) (4) Electricity generated (GWh) Energy Sales (GWh) COLOMBIA Number of employees Number of generating units Installed capacity (MW) (4) Electricity generated (GWh) Energy Sales (GWh) PERU Number of employees Number of generating units Installed capacity (MW) (4) Electricity generated (GWh) Energy Sales (GWh) TOTAL Number of employees Number of generating units Installed capacity (MW) (4) Electricity generated (GWh) Energy Sales (GWh) 14 Annual Report Enel Américas 2018Distribution Business ARGENTINA Energy sales (GWh)(5) Number of customers (5) Energy Losses Number of employees Clients / employees BRAZIL Energy sales (GWh)(5) Number of customers (5) Energy Losses Number of employees Clients / employees COLOMBIA Energy sales (GWh)(5) Number of customers (5) Energy Losses Number of employees Clients / employees PERU Energy sales (GWh)(5) Number of customers (5) Energy Losses Number of employees Clients / employees Total Energy sales (GWh)(5) Number of customers (5) Energy Losses Number of employees Clients / employees As of December 31 of each year 2013 2014 2015 2016 2017 2018 18,137 17,972 18,492 18,493 17,736 17,548 2,444,013 2,464,117 2,479,559 2,504,558 2,529,307 2,529,953 10.80% 10.75% 12.30% 12.04% 12.04% 14.25% 3,320 736 3,823 645 4,142 596 4,290 584 4,251 595 3,760 673 21,767 22,842 22,776 22,809 34,876 61,310 6,301,582 6,500,500 6,754,327 6,943,600 9,974,471 17,143,979 16.10% 16.42% 17.30% 16.10% 15.22% 14,00% 2,370 2,659 2,415 2,732 2,348 2,877 2,244 3,237 3,336 2,990 10,632 1,612 13,342 13,660 13,946 13,632 13,790 14,024 2,686,919 2,772,376 2,865,159 3,248,447 3,340,457 3,438,620 7.00% 1,036 2,594 7.19% 1,043 2,658 7.30% 947 2,771 7.10% 1,337 2,430 7.84% 1,376 2,428 7,74% 1,529 2,249 7,045 7,338 7,624 7,782 7,934 8,045 1,254,624 1,293,503 1,336,610 1,367,044 1,396,966 1,422,608 7.90% 616 2,037 7.95% 619 2,090 8.30% 570 2,191 7.80% 620 2,216 8.24% 588 2,376 8,09% 590 2,411 60,291 61,812 62,838 62,715 74,337 100,927 12,687,138 13,030,496 13,435,655 14,063,649 17,241,201 24,535,160 10.45% 10.58% 11.30% 10.76% 12.30% 10,96% 7,342 1,728 7,900 1,649 8,007 1,678 8,491 1,656 9,551 1,805 16,511 1,486 (1) Accounting figures are in accordance to the instructions and regulations issued by the CMF. Figures are presented in million Chilean nominal pesos for the years 2012, 2013, 2014, 2015 and 2016, and figures are in million dollars for 2017 and 2018.. The Extraordinary Shareholders Meeting held on April 27, 2017 approved the change of functional currency of the company from Chilean pesos to US dollars. (2) Net Results attributable to the dominant company. (3) Total Liabilities/ Equity plus Minority Interest. (4) In contrast to the previous years, net installed capacity is considered for the years 2016, 2017 and 2018, and the difference with gross installed capacity is the discount for self-consumption. (5) Due to changes in the criteria, non-billable consumptions (CNF) are not included in 2014, 2015, 2016, 2017 and 2018. Main financial indicators 15 16 Annual Report Enel Américas 201805 Identification of the company and constituent documents 17 Letter From the Chairman Identification of the company Name or company name Domicile Type of company Rut Address Postal code Phones P.O. Box Securities Registration number External auditors Subscribed and paid-in capital (USD) Web site Email Investor Relations phone Ticker symbol in Chilean stock exchanges Ticker symbol in New York stock exchange ADR’s Custodian Bank ADR’s Depositary Bank Local credit rating agencies International credit rating agencies Enel Américas S.A. Santiago, Chile, being able to establish agencies or subsidiaries in other parts of the country or abroad Publicly traded company 94,271,000-3 Santa Rosa Nº 76, Santiago, Chile 833-009 SANTIAGO (56-2) 2353 4400 - (56-2) 2 378 4400 1557, Santiago Nº 175 Ernst & Young 6,763,204,424 www.enelamericas.com comunicacion.enelchile@enel.com (56-2) 2353 4682 ENELAM ENIA Banco Santander Chile Citibank N.A. Feller Rate Clasificadora de Riesgo Limitada, Fitch Chile Clasificadora de Riesgo Limitada Fitch Ratings, Moody´s Investor Services y Standard & Poor´s International Rating Services Constituent Documents On August 1, 1988, the company’s name was changed to Enersis S.A. In April 2015 Enersis S.A. started a corporate reorganization process. As part of this process, on December 18, 2015 the Company’s Extraordinary Shareholders Meeting was The company that gave rise to Enel Américas S.A. was held, where shareholders of Enersis S.A. approved the first formed initially under the name Compañía Chilena Metro- stage of the reorganization process called “the Spin-off”. politana de Distribución Eléctrica S.A. by public deed dat- Therefore, the Spin-off of the Company was approved, and ed June 19, 1981, granted by the notary Patricio Zaldívar the entity “Enersis Chile S.A.” was created, which repre- Mackenna in Santiago, and modified by public deed on July sented the unique vehicle for the control of generation and 13 the same year and in the same notary. The company’s distribution assets that the Group owns in Chile and, the incorporation was authorized and its bylaws approved by former Enersis S.A. was named “Enersis Américas S.A.”, Resolution 409-S of July 17, 1981 of the Securities and which controls the businesses in the other countries of the Insurance Commission (SVS). The extract of the incor- region (Argentina, Peru, Brazil and Colombia). The Spin-off poration authorization and approval of the bylaws was was formalized in a public deed of January 8, 2016, granted registered in the Santiago Trade Registry on page 13,099 in the Notary Iván Torrealba Acevedo in Santiago, whose Nº7,269 for the year 1981, and were published in the Offi- excerpt was registered on pages 4013 N° 2441 of the Com- cial Gazette of July 23, 1981. The bylaws of Enel Américas merce Registry in 2016 of the Property Register in Santia- S.A. have undergone a number of modifications ever since. go and was published in the Official Journal on January 22, 2016. A supplementary extract was registered on pages 10.743 N° 6.073 in the same Registry, year and the Prop- erty Register and was published in the Official Journal on February 10, 2016. 18 Annual Report Enel Américas 2018The Extraordinary Shareholders Meetings of Enersis The Company’s purpose is to perform in the country or Américas S.A. and its subsidiaries Endesa Américas S.A. abroad the exploration, development, operation, gener- and Chilectra Américas S.A. were held on September 28, ation, distribution, transmission, transformation and/ or 2016. Among other topics, at these meetings the second sales of energy in any of its forms and nature, or directly stage of the corporate reorganization plan denominated or through intermediate companies, likewise, and also tele- “The Merger” was approved. Therefore, Enersis Améri- communications activities and the provision of engineering cas S.A., the absorbing entity, acquired all the assets and consultancy in the country and abroad. It may also invest liabilities of the subsidiaries Chilectra Américas S.A. and and manage its subsidiaries and associate companies, Endesa Américas S.A., succeeding them in every right and whether generators, transmission companies, distributors obligation and incorporating to Enersis Américas S.A. the or traders of electricity or whose business is any of the entirety of shareholders and equity of Chilectra Américas following: (i) energy, in any of its forms or nature, (ii) the S.A. and Endesa Américas S.A. supply of public utilities or whose main raw material is en- ergy, (iii) telecommunications and information technology, In addition, it was agreed that after the Merger, on Decem- and (iv) trading over internet. In complying with its main ber 1, 2016, Enersis Américas S.A would change its name objects, the company will carry out the following functions: to “Enel Américas S.A.”. Such meeting was formalized in a public deed of October 18, 2016, granted in the Notary a) Promote, organize, build, modify, dissolve or liquidate Iván Torrealba Acevedo, whose excerpt was registered on companies of any nature, which have similar corpo- pages 79,974 N°43,179 of the Commerce Registry in 2016 rate objects to its own. of the Property Register in Santiago and was published in b) Propose investment, financing and business policies the Official Journal on October 29, 2016. to subsidiary companies, as well as accounting crite- ria and systems that these should follow. The functional currency of the company was changed c) Supervise subsidiary management. from pesos to US dollars at the Extraordinary Shareholders d) Provide subsidiary or associate companies with the meeting held on April 27, 2017, thus the fifth permanent necessary financing for their business development article and the first transitory article of the bylaws were and provide management services; financial, techni- modified. Corporate Purpose The corporate purpose of the Company is stated in the stat- utory modification approved by the Extraordinary Share- holders Meeting held on September 28, 2016, formalized in a public deed of October 18, 2016, granted in the Notary Iván Torrealba Acevedo in Santiago, whose excerpt was registered on pages 79,974 N°43,179, of the Commerce Registry in 2016 of the Property Register in Santiago and was published in the Official Journal on October 29, 2016. cal, legal and auditing advice; and in general any type of service that appears necessary for their best per- formance. In addition to its main objects and always acting within the limits established by the Investment and Financing Policy approved by the Shareholders Meeting, the Company may invest in: 1.- The acquisition, operation, construction, rental, ad- ministration, intermediation, trading and disposal of all kinds of movable and immovable assets, either di- rectly or through subsidiaries or associate companies. 2.- All kinds of financial assets, including shares, bonds and debentures, commercial paper and in general all kinds of titles or securities and company contribu- tions, either directly or through subsidiaries or associ- ate companies. Identification of the company and constituent documents 19 20 Annual Report Enel Américas 201806 Property and control 21 Letter From the Chairman Ownership Structure Ownership structure The company’s capital is divided into 57,452,641,516 shares, with no nominal value, all holds the same single series and each share represents one voting right, and there are no state-owned preferred shares. As of December 31, 2018, all shares were subscribed and paid-in, and were distributed as follows: Shareholders Enel S.p.A. Chilean Pension Funds ADR´S (Citibank N.A. according to circular N°1,375 of the CMF) Foreign Investment Funds Custodian banks Stockbrokers, insurance companies, mutual funds Other shareholders Total Shares Number of shares Shareholding 29,762,213,531 7,946,536,863 4,384,417,428 831,284,457 8,190,992,728 4,824,578,112 1,512,618,397 51.80% 13.83% 7.63% 1.45% 14.26% 8.40% 2.63% 57,452,641,516 100.00% Identification of Controllers As defined in Title XV of Law No. 18,045, Enel Américas S.A. is a publicly traded company directly controlled by Enel S.p.A., an Italian joint stock company, and owner of 51.8030% of the shares issued by Enel Américas S.A. Shareholders of Enel S.p.A Ministero dell’Economia e delle Finanze de Italia Other Investors (Institutional and Retail) Total Controller's members don’t have a joint action agreement. Shareholding 23.6% 76.4% 100.0% 22 Annual Report Enel Américas 2018List of the Twelve Main Shareholders of the Company As of December 31, 2018, 23,286 shareholders owned Enel Américas. The twelve main shareholders were: Name or Company Name Rut Number of Shares Shareholding ENEL SPA 59,243,980-8 29,762,213,531 51.80% CITIBANK N.A. SEGUN CIRCULAR 1375 S.V.S. BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES BANCO SANTANDER POR CUENTA DE INV EXTRANJEROS 59,135,290-3 97,004,000-5 97,036,000-K 4,384,417,428 3,210,128,764 2,401,980,484 BANCO ITAU CORPBANCA POR CTA DE INVERSIONISTAS EXTRANJEROS 97,023,000-9 2,344,499,854 AFP PROVIDA S.A. PARA FDO. PENSION C AFP HABITAT S. A. PARA FDO PENSION C AFP CAPITAL S. A. FONDO DE PENSION TIPO C JP MORGAN SECURITIES INC AFP CUPRUM S. A. PARA FDP PENSION C BANCHILE C DE B S A AFP CUPRUM S. A. FONDO TIPO A Subtotal twelve major shareholders OTHER 23,274 SHAREHOLDERS TOTAL 23,286 SHAREHOLDERS 76,265,736-8 98,000,100-8 98,000,000-1 47,009,201-7 76,240,079-0 96,571,220-8 76,240,079-0 1,246,543,955 891,818,720 798,743,379 761,063,736 748,242,585 632,343,103 514,913,078 47,696,908,617 9,755,732,899 57,452,641,516 7.63% 5.59% 4.18% 4.08% 2.17% 1.55% 1.39% 1.32% 1.30% 1.10% 0.90% 83.02% 16.98% 100.00% There are no shareholders representing the founding families of the Company neither related to the government or state entities owning shares exceeding 5% ownership. Property and control 23 24 Annual Report Enel Américas 2018Most Significant Changes in Ownership During 2018, the most important changes in the ownership of Enel Américas are the following: Name or Company Name RUT Dv CITIBANK N.A. SEGUN CIRCULAR 1375 S.V.S. BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES 59,135,290 97,004,000 BANCO ITAU CORPBANCA POR CTA DE INVERSIONISTAS EXTRANJEROS 97,023,000 AFP PROVIDA S.A. AFP CAPITAL S A BANCO SANTANDER POR CUENTA DE INV EXTRANJEROS AFP HABITAT S A AFP CUPRUM S A BANCHILE C DE B S A AFP MODELO S.A. LARRAIN VIAL S A CORREDORA DE BOLSA AFP PLANVITAL S A SANTANDER CORREDORES DE BOLSA LIMITADA BTG PACTUAL CHILE S A C DE B BICE INVERSIONES CORREDORES DE BOLSA S A 76,265,736 98,000,000 97,036,000 98,000,100 76,240,079 96,571,220 76,762,250 80,537,000 98,001,200 96,683,200 84,177,300 79,532,990 BANCO SANTANDER-HSBC BANK PLC LONDON CLIENT ACCOUN 97,036,000 3 5 9 8 1 K 8 0 8 3 9 K 2 4 0 K Number of shares on 12/31/2017 Number of shares on 12/31/2018 Variation in percentage points with respect to subscribed and paid capital Number of shares variation 4,384,417,428 5,064,445,978 1.18363 680,028,550 3,210,128,764 3,895,552,189 1.19302 685,423,425 2,344,499,854 2,523,158,948 0.31097 178,659,094 2,247,892,567 2,278,366,257 0.05304 30,473,690 1,646,207,724 1,995,066,955 0.60721 348,859,231 2,401,980,484 1,883,016,703 -0.90329 -518,963,781 1,671,887,493 1,797,479,247 0.21860 125,591,754 1,633,734,907 1,780,798,933 0.25597 147,064,026 632,343,103 495,159,971 -0.23878 -137,183,132 485,430,607 468,847,590 -0.02886 -16,583,017 510,591,005 290,453,220 -0.38316 -220,137,785 261,383,565 286,008,391 0.04286 24,624,826 228,911,532 216,115,682 -0.02227 -12,795,850 232,602,612 203,106,375 -0.05134 -29,496,237 236,490,136 202,660,202 -0.05888 -33,829,934 178,732,113 198,136,422 0.03377 19,404,309 Exchange Transactions Performed by Related Individuals during 2018 No exchange transactions between related individuals were made during 2018. Summary of Directors' Committee and Shareholders Comments and Proposals Enel Américas S.A. received neither comments nor proposals with regards to the progress of company business between January 1st and December 31st, 2018 from the Directors' Committee or Shareholders who own or represent 10% or more of the shares issued with voting rights as stated in Articles 74 and 136 of Law No. 18,046 of the Regulation to Public Companies. Property and control 25 26 Annual Report Enel Américas 201807 Administration 27 Letter From the Chairman Board of Directors 1 4 2 5 3 6 1. CHAIRMAN Francisco de Borja Acha Besga Attorney at Law Universidad Complutense de Madrid DNI: 05263174-S From 04.28.2016 (1) 2. DIRECTOR José Antonio Vargas Lleras Attorney at Law Universidad Colegio Mayor del Rosario, Colombia DNI: 79.312.642 From 04.28.2016 5. DIRECTOR Hernán Somerville Senn Lawyer Universidad de Chile Master of Comparative Jurisprudence University of New York DNI: 4,132,185-7 From 04.28.2016 (2) 6. DIRECTOR Domingo Cruzat Amunátegui Industrial civil engineer Universidad de Chile MBA The Wharton School de la Universidad of Pennsylvania Rut: 6,989,304-K From 04.28.2016 3. DIRECTOR Enrico Viale Engineer Degree Universidad Politécnica de Turín MBA Escuela de Negocios Universidad de Santa Clara DNI: AU 2580379 From 04.28.2016 7. DIRECTOR Patricio Gómez Sabaini Business Administration Degree George Mason University, Virginia Master of Business Administration George Washington University, Washington DC Passport: 16941675N From 04.28.2016 7 4. DIRECTOR Livio Gallo Electronic Engineer Universidad Politécnica de Milán DNI: AV 0246369 From 04.28.2016 (1) He was originally appointed Director of the former Enersis Américas S.A. on 06.30.2015, currently Enel Américas. (2) He was originally appointed Director of the former Enersis Américas S.A. on 07.29.1999, currently Enel Américas. Enel Américas is managed by a Board of Directors comprised of seven members, who remain in office for a three-year period and may be re-elected. The Board was appointed at the Ordinary Shareholders' Meeting held on April 28, 2016. According to the Corporations Law, if a Director's vacancy occurs, the whole board shall be renewed at the next ordinary shareholders' meeting the corporation shall hold, and, in the meanwhile, the board may name a substitute. The Company doesn’t consider any substitute members. 28 Annual Report Enel Américas 2018Board of Directors’ and Directors’ Committee Compensations Pursuant to Article 33 of Law No. 18,046 Corporations The compensation for the Directors’ Committee consists Law, the Ordinary Shareholders’ Meeting held on April 26, on a fixed monthly compensation, part at any event and 2018 approved the compensations for the Board of Direc- the other part eventual. This compensation consists on 72 tors and Directors’ Committee for the 2018 accounting pe- UF of monthly fixed compensation at any event and 26,4 riod. The compensation for the Board of Directors is a fixed UF of attendance fees per meeting of the Board, up to a monthly payment. It was agreed to pay a fixed monthly maximum of 16 sessions altogether. compensation, part at any event and the other part eventu- al. This compensation consists of 216 UF of monthly fixed Total compensation expenses in 2018 were US$ 642,836 compensation at any event and 79,2 UF of attendance fees and are shown in the following table. The Board of Direc- per meeting of the Board, up to a maximum of 16 sessions tors did not incur in any expenses for external consulting altogether. The compensation of the Chairman of the services. Board will be twice the compensation of a Director. 2018 Figures in US$ Name Francisco de Borja Acha (1) José Antonio Vargas Lleras (1) Livio Gallo (1) Enrico Viale (1) Hernán Somerville Senn Domingo Cruzat Amunátegui Patricio Gómez Sabaini Total Position Chairman Director Director Director Director Director Director Fixed Compensation Ordinary and Extraordinary Board Sessions Committee’s Fixed Compensation Committee’s Ordinary and Extraordinary Sessions Total 2018 103,798 103,798 103,798 311,394 62,032 62,032 59,253 183,318 34,636 34,636 34,636 103,909 14,739 14,739 14,739 44,216 215,205 215,205 212,426 642,836 (1) Messrs. Francisco de Borja A., José Antonio Vargas Ll., Livio Gallo and Enrico Viale, renounced to any compensation payment. Total compensation expenses in 2017 were US$526,856 and are shown in the following table. The Board of Directors did not incur in any expenses for external consulting services. 2017 Figures in US$ Name Francisco de Borja Acha (1) José Antonio Vargas Lleras (1) Livio Gallo (1) Enrico Viale (1) Hernán Somerville Senn Domingo Cruzat Amunátegui Patricio Gómez Sabaini Total Position Presidente Director Director Director Director Director Director Fixed Compensation Ordinary and Extraordinary Board Sessions Committee’s Fixed Compensation Committee’s Ordinary and Extraordinary Sessions Total 2017 93,417 93,417 93,417 280,250 39,968 37,106 39,968 117,042 31,139 31,139 31,139 93,417 12,367 11,413 12,367 36,147 176,891 173,075 176,891 526,856 (1) Messrs. Francisco de Borja A., José Antonio Vargas Ll., Livio Gallo and Enrico Viale, renounced to any compensation payment. 29 Administration Social responsibility and sustainable development Board diversity Number of people by gender: Female Male General Total Number of people by nationality: Chilean Spanish Argentine Colombian Italian General total 0 7 7 2 1 1 1 2 7 Number of people by age range: Between 41 and 50 years old Between 51 and 60 years old Between 61 and 70 years old Over 70 years old General Total Number of people by seniority: Less than 3 years Between 3 and 6 years More than 12 years General total 0 4 2 1 7 5 1 1 7 Board of Directors’ Consulting Expenses During 2018, the Board of Directors did not make any ex- penses in consulting services. Property over Enel Américas As of December 31, 2018, according to the Shareholders' Register, none of the current Directors held ownership of the company. Nevertheless, Director Mr. Hernán Somerville is controlling shareholder in Inversiones Santa Verónica Lim- itada, entity that owns 5,044,782 shares of the company. 30 Annual Report Enel Américas 2018 Directors' Committee Pursuant to Article 50 bis of law No. 18,046 Corporations Law, Enel Américas S.A. has a Directors' Committee com- prised by three members, with faculties and duties enu- merated in said article and those delegated by the Board as established in the Regulation of the Director's Committee. The Company’s Board of Directors created the Audit Com- mittee on June 29, 2005, which is composed of three direc- tors that are also members of the Board, as mandated by Sarbanes-Oxley Law and corporate governance regulations of the NYSE. Later, on April 22, 2010, the Company’s bylaws were amended at Extraordinary Shareholders Meeting, and the Audit Committee merged with the Directors’ Committee. As of January 1, 2018, the Directors’ Committee of Enel Américas S.A. was comprised by Messrs. Hernán Somer- ville (independent), Domingo Cruzat Amunátegui (indepen- dent) and Patricio Gómez Sabaini (independent). The Chair- man and Financial Expert was Mr. Hernán Somerville Senn and the Secretary of the Directors’ Committee was Mr. Do- mingo Valdés Prieto. Directors’ Committee Management Annual Reports The Directors’ Committee held fourteen meetings in 2018. During the sessions held in 2018, the Director's Commit- tee addressed subjects regarding their interests, giving due fulfillment of their obligations dictated by the Article 50 statue number 18,046 about Public Limited Companies and the Sarbanes Oxley Act of the United States of Ameri- ca, as well as the other applicable regulations. 1. Consolidated Financial Statements At the ordinary session held on February 28, 2018, the At the ordinary session of the Board of Directors held on following documents were unanimously declared to have April 29, 2016 were appointed as members of the Directors’ been examined; the Consolidated Financial Statements as Committee Messrs. Hernán Somerville Senn, Patricio Gómez of December 31, 2018, its Notes, Financial Statements and Sabaini and Domingo Cruzat Amunátegui. Mr. Hernán Somer- Significant Events, as well as the External Auditor's and ville Senn was appointed Financial Expert of the Directors’ Account Inspectors opinions. At the ordinary session held Committee. On the other hand, at the ordinary session of on May 3, 2018, the Directors’ Committee unanimously the Directors’ Committee held on April 29, 2016, Mr. Hernán declared examined the Consolidated Financial Statements Somerville Senn was appointed Chairman of the Directors’ of the Company as of March 31, 2018, it’s Notes, Income Committee and Mr. Domingo Valdés Prieto, Legal Counsel Statement and Significant Events. of the Company, was appointed secretary of the committee. At the extraordinary session held on July 27, 2018, the Di- rectors’ Committee unanimously, declared to have exam- ined the Consolidated Financial Statements of the Com- pany as of June 30, 2018, it’s Notes, Financial Statement Analysis, Income Statement and Significant Events, as well as the opinion “without any observation” issued by exter- nal auditors on July 27, 2018, signed by Mr. Gastón Villarro- el Olivares, partner of Ernst & Young. 31 AdministrationAt the ordinary session held on April 26, 2018, the Direc- of the asset Eletropaulo Metropolitana de Eletricidade de tors’ Committee unanimously, declared to have examined Sao Paulo S.A. (Eletropaulo). Also in this session, the Board the Consolidated Financial Statements of the Company un- declared to have reviewed the operation that consisted on der IFRS contained in 20-F form to be presented to the Se- providing a guarantee to the subsidiaries Enel Brasil S.A. curities and Exchange Commission of the United States of and Enel Brasil Investimentos Sudeste S.A., in favor of the America (SEC), with the goal of complying by their norms Brazilian entity Banco BTG Pactual S.A. and/or any other and requirements issued by said public authority. entity, valid for 90 days renewable, and for the total amount needed to guarantee the obligations contracted by Enel At the ordinary session held on October 31, 2018, the Direc- Brasil S.A. and Enel Brasil Investimentos Sudeste S.A. tors’ Committee unanimously, declared to have reviewed with Banco BTG Pactual arising from the “Contrato para the Consolidated Financial Statements of the Company Prestacao de Grantía Firme”, to be subscribed by these as of September 30, 2018; it’s Notes, Income Statement, companies regarding the public offering launched by Enel Significant Events and the letter concerning the operations Brasil Investimentos Sudeste S.A. for the stock purchase between related parties prepared by the external auditors. of Eletropaulo. The guarantee included a compensation for 2. Services provided by External Auditors and the recruitment of former employees of Ernst & Young Review Enel Américas from the respective subsidiary. At the extraordinary session held on May 3, 2018, the Directors’ Committee of Enel Américas S.A., regarding the voluntary public tender offer for the shares (IPO) of Eletropaulo, carried out by the subsidiary Enel Brasil S.A. through its vehicle Enel Brasil Investimentos Sudeste S.A. (100% owned by Enel Brasil S.A.), declared to have exam- ined unanimously by its members, the transactions related to the granting of guarantees and joint co-debt from the At the ordinary sessions held on January 31, February 28, Company in association with the Issuances and the sched- March 28, April 26, May 30, June 27, August 29, Septem- uled repayment agreements, pursuant to Chilean law, in a ber 28, October 31 and at the extraordinary session held of irrevocable, joint, supportive and unconditional manner, as July 27, all during 2018, the services provided by external co-debtor and main beneficiary of the Issuer (Enel Brasil auditors were analyzed, those that were not from exter- S.A. and/or Enel Brasil Investimentos Sudeste S.A.) and nal auditors, and it was agreed to declare that they do not the y el Offeror (Enel Brasil Investimentos Sudeste S.A.), compromise the suitable technique nor the independence the total and timely payment of: (i) every capital payment of judgment of the respective external auditing companies. obligations, interests, interest on arrears, fines and other The latter is in conformity to what is written in Section 202 amounts due in the Commercial Documents and Reim- of the Law Sarbanes Oxley, in article 242, final subsection, bursement Agreements, either on the maturity date nor as of the Law 18.045, of the Value Market and in the Direc- a result of the acceleration of debt, as well as any other tors’ Committee Guidelines. 3. Operations between Related Parties Review At the extraordinary session held on April 15, 2018, the Committee declared unanimously to have examined the operation between related parties consisting on the inter- company loan granted by Enel Américas to its subsidiary Enel Brasil and/or Enel Brasil Investimentos Sudeste S.A. for an amount that would not exceed the acquisition price amount due, as long as they are registered in any other instrument that the Issuer and the Offeror may execute or accept in the future related with the Commercial Doc- uments or the Reimbursement Agreements, as well as the debts or documents that may replace totally or partial- ly these obligations, in any manner, extension, renovation and/or amendment to be agreed in the future regarding the obligations included in the Commercial Documents and Reimbursement Agreements; (ii) any other payment obli- gation assumed by the Issuer and the Offeror in relation to the Commercial Documents and Reimbursement Agree- ments, including the fees, expenses, costs, charges, tax- es, reimbursements and indemnities of lawyers; (iii) reim- 32 Annual Report Enel Américas 2018bursement obligations of every amount that the holders of Commercial Documents and/ or their agents may disburse pursuant to Commercial Documents and/ or resulting from the execution, improvement, maintenance, charge and/or compliance y/o fulfillment of the Corporate Guarantee, or the reimbursement of expenses related to the Reimburse- ment Agreements of the corresponding banks; (iv) every payment obligation owed to the subscribers of the Com- mercial Documents as defined in the Offers, including fees and compensations; y (v) each and every one of the obliga- tions that the Issuer and the Offeror agree in the future, as a replacement to the Commercial Documents or the Re- imbursement Agreements. This operation included com- pensation from Enel Brasil and/ or Enel Sudeste to Enel Américas, for the granting of guarantees and joint co-debt. The Directors’ Committee declared in both situations that the operations between related parties contributed to the social interest and were fair in price, terms and conditions to those prevailing in the market as of the time of their approval. 4. Supervision and Evaluation of External Auditors At the ordinary session held on February 28, 2018, the Committee unanimously graded as reasonable the work performed by the external auditors of the Company, Ernst & Young, carried out during the fiscal year 2017. 5. External Auditors Report on money order and money brokerage 6. Review of the Internal Control Letter Notice Nº422 of the SVS The Directors’ Committee examined this issue during the session held on February 27, 2018. On December 6, 2007, the National Stock Market Commission, issued Notice N° 422, complementing Notice N° 980 of December 24, 1990. This Notice gives specific instructions regarding internal con- trol procedures, so it provides an interim report and extends the period indicated in Notice N° 980 for internal auditors to submit an internal control final report, indicating that the de- livery should be at the latest as of the date when the Board of Directors takes notice of the financial statements for the period ended December 31 of each year. The Chairman of the Directors’ Committee, Mr. Hernán Somerville Senn, said that these regulations were revoked, nevertheless this derogation norm, article 246 of the Securities Market Law, among other subjects, establishes that external audit should indicate the Board and the Directors’ Committee the defi- ciencies detected in the development of the external audit in the adoption and maintenance of standard accounting practices, administrative systems and internal audit, identi- fy discrepancies between accounting principles related to financial statements and relevant criteria generally applied in the industry where the company carries out its business, and compliance with tax obligations of the company and its subsidiaries included in the referred external audit, which accordingly the need to inform internal control situations detected by EY is still required. He also said that the afore- mentioned revocation has not affect the submission terms mandated by NCG N°30 for the Financial Statements and therefore it must be understood that the internal control report is part of the information to be provided by external auditors during the first quarter each year together with the revision and approval of the annual Financial Statements. As At the ordinary session held on February 28, 2018, the Di- such, at the ordinary session held on February 28, 2018, the rectors’ Committee unanimously agreed to record that they Directors’ Committee agreed unanimously that have formal- had received formal and express consent on the report of ly become aware of the compliance with aforementioned money brokerage and money orders prepared by the exter- regulation through the Internal Control Letter of February 28, nal auditors, Ernst & Young, dated February 28, 2018. The 2018. Committee also mentioned that the described regulation was no longer valid, therefore this is the last time that the referred report would be presented by External Auditors. 33 Administration7. Review of the External Auditors of Matters Covered in the NCG Nº385 (i) the audit company presented the most competitive pro- posal according to verified technical and economic evalu- ations of the proposals received; (ii) it has a high qualifica- tion in the quality of available resources and has extensive experience in the electricity sector; (iii) is one of the four most important national and international audit firms, (iv) it is the audit firm with the highest level of synergy for Enel Américas S.A., as the parent and holding companies of At the ordinary session held on February 28, 2018, unani- Enel Américas S.A. , Enel S.p.A. have E&Y as their lead au- mously it was agreed as reviewed by the External Auditors ditor, and . (v) The Directors’ Committee has qualified the the matters referred in paragraph 1 d) of the General Stan- relationship of the company with EY as reasonable. dard Legislation Nº 385 of the SVS, and it was declared that none of the matters mentioned in sub-paragraphs ii, iii and v were referred to, of the previously mentioned item have occurred. 8. External Audit Contract between Enel Américas S.A. and Ernst & Young for the period 2018 10. Private Risk Rating Agencies’ Proposal At the ordinary session held on February 28, 2018, the Directors’ Committee unanimously agreed to propose to the Directors’ Committee that Feller Rate Clasificadora de Riesgo Limitada and Fitch Chile Clasificadora de Riesgo Limitada will be proposed at the respective Shareholder’s Meeting as private risk national rating agencies, and Fitch Ratings, Moody’s Investors Service and Standard & Poor’s International Rating Services will be appointed as the pri- vate international risk rating agencies for the accounting At the ordinary session held on May 3, 2018, the Direc- year 2018. tors’ Committee unanimously declared to have examined and approved the contract to be subscribed between Enel Américas S.A. and the external auditors Ernst & Young. 9. External Auditors’ Proposal At the ordinary session held on March 28, 2018, the Di- rectors’ Committee unanimously resolved to suggest the Board to propose at the Ordinary Shareholder Meeting that the following in priority order would be appointed for the examining of the current external auditing firm of Enel Américas S.A., for the year 2018: 1° E&Y; 2° PKF, 3° RSM and 4° BDO. The main reasons for proposing E&Y as the external auditor for Enel Américas S.A. are the following: 11. Analysis of Complaints to the Ethical Channel At the ordinary session held on January 31 and at the or- dinary session of August 29, both in 2018, the Directors’ Committee issued unanimously its opinion on each of the complaints presented, delivering guidelines to follow up each one of them and confirming what has been resolved by this entity, in the sense that it will be responsibility of the Chairman of the Directors’ Committee to agree upon a special meeting in the event that the complaint deem it appropriate, in the opinion of the Chairman of the Commit- tee itself. 34 Annual Report Enel Américas 201812. Self Assessment on Internal Control At the extraordinary session held on July 27, 2018, the Di- rectors’ Committee unanimously agreed to declare that the Self-Assessment structures and procedures on Internal Control of Enel Américas S.A. have been reviewed. 13. Review of the Compensation System and Compensation Plans for Managers, Senior Executives and Employees of the Company At the ordinary session held on June 27, 2018, the Direc- tors’ Committee unanimously declared to have examined the remuneration systems and compensation plans of the company’s managers, senior executives, and employees. 14. Directors’ Committee budget proposal for 2018 At the ordinary session of February 28, 2018, the Direc- tors’ Committee approved unanimously the Directors’ Committee budget proposal for the accounting year 2018, consisting on 10.000 Unidades de Fomento for expenses related to the operation of the Committee and its advisors. Likewise, the Directors’ Committee decided unanimously to submit the proposal to the next Ordinary Shareholders’ Meeting of Enel Américas S.A. for its approval, to be held on April 2018, which will finally resolve within its sphere of competence. 15. Other At the ordinary session of January 31, 2018, the Directors’ Committee unanimously declared to have examined the payments made to external auditors regarding the com- panies of the Enel Américas Group to different external audit companies during 2017, differentiating the recurring and non-recurring external audit services and the services different from external audit, and the conclusion was that these have nor impacted neither their independence not their suitability. At the ordinary session held on April 26, 2018, the Direc- tors’ Committee was informed by the then General Man- ager, Mr. Luca D’Agnese, of the progress of the IPO for the acquisition of Eletropaulo. As such, and as explained in this report, the Directors’ Committee has fully complied the obligations included in the article 50 bis of the Corporations Law N°18,046. Expenses of Enel Américas S.A. Directors’ Committee The Directors’ Committee did not make use of the expense budget for ordinary functions approved by the Ordinary Shareholders Meeting held on April 26, 2018. 35 Administration Organizational Structure j a A c h a B e s g a r m a n a n c i s c o D e B o r C h a i F r s t n e m e g a n M a c u t e x f E h i e C i v e O f fi c e r O f fi c e r f F i n a n c i a l C h i e C o m m u n i c a t General Counsel And Secretary Planning and Control Officer Of The Board Human Resources and Org Liliana Schnaidt i o n s O f fi c e r Enel X South America Simone Tripepi I n t e r n a l A udit Officer Cutrignelli (*) R a f f a e l e (*) Senior executives a nizatio n O f fi c e r Maurizio Bezzeccheri(*) Aurelio Bustilho de Oliveira (*)Bruno Stella (*) Domingo Valdés Prieto (*) José Miranda Montecinos (*) j a A c h a B e s g a r m a n C h a i a n c i s c o D e B o r F r s t n e m e g a n M a i v e O f fi c e r c u t e x f E h i e C f F i n a n c i a l C h i e C o m m u n i c a t O f fi c e r Planning and Control Officer Of The Board General Counsel And Secretary i o n s O f fi c e r Enel X South America Simone Tripepi I n t e r n a l A udit Officer Cutrignelli (*) R a f f a e l e Human Resources and Org Liliana Schnaidt (*) Senior executives a nizatio n O f fi c e r Senior executives 1 4 2 5 3 6 1. CHIEF EXECUTIVE OFFICER Maurizio Bezzeccheri Doctor Cum Laude degree in Chemical Engineering Università degli Studi di Napoli R+D Development of Steam Generators Official Professional Qualification for engineering practice Rut: 26,490,357-2 From 08.01.2018(1) 2. INTERNAL AUDIT OFFICER Raffaele Cutrignelli (3) International Businesses Degree Nottingham Trent University (United Kingdom) Audit and Internal Control Masters Degree Universitá di Pisa (Italy) Certificate in Strategy, Innovation, Management and Leadership Massachusetts Institute of Technology (MIT) Rut: 25,553,336-3 From 10.01.2016 3. COMMUNICATIONS OFFICER José Miranda Montecinos (3) Audiovisual Communicator Professional Institute DUOC UC Executive Competencies Diploma, Universidad de Chile Corporate Undertaking and Open Innovation Studies, Berkeley University Rut: 15,307,846-7 From 02.29.2016 4. CHIEF FINANCIAL OFFICER Aurelio Bustilho de Oliveira Business Administration Universidad de Brasilia MBA de Universidad Federal Rio Janeiro/ COPPEAD Rut: 26,102,661-9 From 10.01.2018(2) 5. GENERAL COUNSEL AND SECRETARY OF THE BOARD Domingo Valdés Prieto (3) Lawyer Universidad de Chile Master Degree in Law of University of Chicago Rut: 6,973,465-0 From 04.30.1999 6. PLANNING AND CONTROL OFFICER Bruno Stella Economics and Business Degree Universitá degli studi di Messina (Italy) Rut: 25,52,.957-6 From 07.01.2018 (1) Maurizio Bezzeccheri took position on 08.01.2018 replacing Luca D’Agnese. (2) Aurelio Bustilho de Oliveira took position on 10.01.2018 replacing Paolo Pallotti. (3) They also exercise the same positions in Enel Chile. 37 Administration Maurizio Bezzeccheri(*) Aurelio Bustilho de Oliveira (*)Bruno Stella (*) Domingo Valdés Prieto (*) José Miranda Montecinos (*) Officers and senior executives’ compensations During 2018, remunerations and benefits received by the Chief Executive Officer and senior executives of the company amounted to US$2,586 thousand in fixed remunerations and US$21 thousand in benefits. During 2017, remunerations and benefits received by the Chief Executive Officer and senior executives of the Company amounted to US$4,046 thousand in fixed remuneration and US$119 thousand in benefits. This amounts included compensations for senior managers and executives in exercise as of December 31, each year, as well as those that left the company during the respective period. Benefits for managers and senior executives The company provides the benefits of supplementary health insurance and a catastrophic insurance for its main executives and their family group recognized as a dependent charge. In addition, the Company has life insurance for its main executives. These benefits will be granted in conformance to the management level that corresponds to the employee in due time. In 2018, the amount spent in benefits was US$10,128, which is included in the remunerations received by the senior management. Incentive plans for officers and senior executives Enel Américas has an annual bonus plan for complying with objectives and the level of individual contribution to the company results for its executives. This plan includes a definition of the ranges of bonus according to the hierarchical level of the exec- utives. Bonuses are given to the executives is determined by a number of gross monthly wages. Severance paid to managers and senior executives There were no compensations for years of services paid to managers and senior executives during 2018. 38 Annual Report Enel Américas 2018Property over Enel Américas As of December 31, 2018 the shareholders' registry reflected that no main executives had ownership on the Company. There are no requests for the Chief Executive Officer and senior executives to hold securities issued by the Company; however there is an obligation to inform securities’ holdings and their transactions, both in the Securities Market Law and the Company’s Information Management Manual of Market Interest. Administration of main subsidiaries ARGENTINA BRAZIL COLOMBIA PERU Enel Generación Costanera Andrea Biasotto Degree in mechanical - energetic engineering, industrial engineering Università degli Studi di Padova Enel Generación El Chocón Daniel Garrido Electrician Engineer Universidad Tecnológica Nacional Edesur Giuseppe Fanizzi Electrical Engineer Politecnico di Bari Central Dock Sud Juan Jose Marcet Electrician Engineer Universidad Tecnológica Nacional Masters in Business Administration Universidad de Palermo Enel Brasil Nicola Cotugno Mechanic Engineer Università di Roma, La Sapienza Emgesa Bruno Riga Aeroespace Engineer Universidad de Pisa Enel Generación Perú Marco Raco Aeronautical Engineer Universitá di Pisa - Italy Codensa David Felipe Acosta Correa Electrical Engineer Universidad Pontificia Bolivariana Enel Distribución Perú Riccardo Lama Electrician Engineer La Sapienza University of Rome Enel Green Power Cachoeira Dourada Matteo Francucci Electrical Engineer Università di Pisar Enel Generación Fortaleza Raimundo Câmara Lawyer Pontifícia Universidad Católica de Río de Janeiro Enel Cien Guilherme Gomes Lencastre Civil and Production Engineer Pontifícia Universidad Católica de Río de Janeiro Enel Distribución Río Artur Manuel Tavares Resende Computer Engineer Universidad Simón Bolivia/ Venezuela Enel Distribución Ceará Roberto Zanchi Electrician Engineer Universidad de Padova Enel Distribución Goiás Abel Alves Rochinha Mechanic Engineer Pontifícia Universidad Católica de Río de Janeiro Enel Distribución São Paulo Max Xavier Lins Electrician Engineer Universidad Federal de Pernambuco 39 Administration40 Annual Report Enel Américas 201808 People and organization 41 Letter From the Chairman Human resources distribution The employees’ distribution of Enel Américas as of December 31, 2018, including information related to the subsidiaries in the four countries where Enel Group operates in Latin America and the joint control entities, was the following: Company Enel Américas (1) Enel Brasil Cachoeira Dourada Enel Generación Fortaleza Enel Cien Enel Distribución Río (2) Enel Distribución Ceará Enel Distribución Goiás Enel Distribución São Paulo Enel Generación Costanera El Chocón Edesur Enel Trading Argentina Dock Sud CTM y TESA Enel Generación Perú (3) Enel Distribución Perú Emgesa Codensa (2) Total (1) Includes senior executives shared with Enel Chile. (2) Includes Enel X. (3) Includes Enel Generación Piura. Managers and Senior Executives Professionals And Technicians Employees and Others 13 10 1 3 1 8 9 3 21 0 1 18 2 0 0 19 22 14 24 169 44 66 63 39 24 768 626 421 2,832 59 36 1,761 7 47 4 306 568 601 1,503 9,775 3 0 30 22 9 342 500 677 4,425 385 12 1,981 20 41 0 - - - 2 8,449 Total 60 76 94 64 34 1,118 1,135 1,101 7,278 444 49 3,760 29 88 4 325 590 615 1,529 18,393 42 Annual Report Enel Américas 2018 Social responsibility and sustainable development Diversity in senior executives of Enel Américas Number of people by gender: Female Male General Total Number of people by nationality: Chilean Brazilian Italian General Total Number of people by age range: Less than 30 years old Between 30 and 40 years old Between 41 and 50 years old Between 51 and 60 years old Between 61 and 70 years old General Total Number of people by seniority: Less than 3 years Between 3 and 6 years More than 6 and less than 9 years Between 9 and 12 years More than 12 years General Total Diversity in the rest of the organization in Enel Américas Number of people by gender: Female Male General Total Number of people by nationality: Argentine Brazilian Chilean Spanish Italian Peruvian Romanian General Total Number of people by age range: Less than 30 years old Between 30 and 40 years old Between 41 and 50 years old Between 51 and 60 years old Between 61 and 70 years old General Total Number of people by seniority: Less than 3 years Between 3 and 6 years More than 6 and less than 9 years Between 9 and 12 years More than 12 years General Total 1 3 43 1 4 1 1 54 9 22 11 11 1 54 18 6 8 4 18 54 Average fixed salary of women with respect to men according to their professional level 0 6 6 2 1 3 6 - 2 1 3 - 6 5 - - - 1 6 Contents: Senior Management Middle Management - Level 1 Middle Management - Level 2 Middle Management - Level 3 14 40 54 Professionals - Level 1 Professionals - Level 2 Administratives Average 0% 61% 65% 83% 87% 97% 182% 83% 43 People and organization Human Resources Activities Labor Relations During 2018, the Company continued having regular meet- ings program with unions, enabling an open dialogue with the employees’ representatives, therefore improving work conditions and environment at the workplace. Safety and occupational health For Enel Américas safety and occupational health are ob- jectives directly linked to the business, whose nature is subject to critical risks. In terms of occupational health, worth is to highlight the following: Health Dissemination and Promotion The objective of this program is to provide health, educate and train employees through activities related to the pro- motion quality of life, including a massive diffusion through posters, graphic material and information sent by mail. Among the topics that feature every month, we outline the following: > September: Prostate and cervical cancer, an invita- tion to an annual preventive examination. > October: Breast cancer prevention: Invitation to par- ticipate in the prevention of this disease through its early detection and self-examination. > November: Healthy eating campaign: practical rec- ommendations to improve nutrition, for a better life style. > December: Skin care campaign: Advises for skin care from ultraviolet radiation and other agents. Immunization Program The immunization of Enel Américas’ employees is a preven- tive measure whose objective is to foresee the occurrence of diseases with the consequent massive contagion. The company gives every employee the vaccination to prevent seasonal influenza. This is delivered during the first quarter of the year, preventing the outbreak starting in early June. Preventive exams program Its objective is to carry out periodic medical evaluations to employees for the early detection of alterations or pathol- ogies with potential damage for human health. This initia- tive is addressed to every employee of the company and is carried out through a defined protocol according to gender and age. > March: anti-stress campaign: including practical rec- Cardiovascular risk program ommendations to suppress its causes. This project falls within the framework of care of those em- > April: Immunization campaign, a massive invitation to ployees that have cardiovascular risk, according to the pre- vaccination to prevent influenza. ventive exams and its objective is to provide tools for health > May: Anti tobacco campaign, including advises to pre- care, through specific fitness programs and nutrition control. vent its consumption. > June: Colon and gastric cancer campaign: recom- mendations for the timely detection of these diseases through preventive examination. > July: Viral contagion and respiratory diseases preven- tion: Recommendations to prevent infections. > August: Heart care campaign: Practical recommen- dations for its care. 44 Break gym program Work Gym or Active Break, is an exercise program that helps to prevent the main diseases produced in the work- place, such as stress, tendonitis, lumbago, carpal tunnel syndrome, neck and shoulders discomfort, among others. Annual Report Enel Américas 2018People Management Work environment management Work environment and commitment are priorities for Enel América’s strategy. In 2018 the Environment and Safety Survey was carried out, which counted with a participation of 93% of employees in Chile. Work environment manage- ment and commitment are the fundamental cornerstones of the company’s strategy, due to its close relationship with the people that constitutes the human resources of the company. For this reason, the company has continued developing several initiatives that seek to maintain the em- ployees’ motivation, satisfaction and commitment, in the lines of leadership, communication, meritocracy and devel- opment, reconciliation measures and good labor practices. These include, among others, Team building programs, col- laborative work experiences, whose main focus is to devel- op relational skills and cooperation of work teams, in order to strengthen confidence and align for the achievement of common goals. Enel Américas has a program developed to promote and strengthen the role of leaders in the generation of a cor- porate environment that enables satisfaction and develop- ment of its employees. The “Leader to Coach” program has been designed to leverage the exercise of leadership and the role of the Manager in our “Open Power” culture, being an active and strategic role focusing on the mobiliza- tion of their equipment and the ability to promote learning. This is a comprehensive program for skills training, educa- tion and accompaniment that comprises the development of individual itinerary for each manager. The activities in- cluded in this program are: skills training workshop, indi- vidual coaching, guided accompaniment for meetings and the creation of a network of good practices and people management. With the purpose of establishing a permanent and close contact with employees, Enel Américas has implemented a set of communication initiatives under the brand People & Organization, which daily informs and explains various topics of interest focused on people management. To that end, a weekly radio show is developed, a website, good practice manuals for managers and employees, among other actions. The company has developed a professional management development for the programs oriented to meritocracy and development, through promotion actions by merit and through local work opportunities and abroad where the Group operates. 45 People and organizationAt Enel Américas, the chances for feedback of manag- ers with employees are opportunities to generate greater closeness, transparency, align expectations and support for professional development. The promotion of a culture of continuous feedback guides us to the development of employees’ talents and the conformation of high perfor- mance teams. In 2018 the “Recognize” Program continued in a renovat- ed version, which seeks to foster a culture of recognition within the company and to generate formal meetings where employees recognize their colleagues. The “Recog- nize People” Program is target to identify those initiatives that have produced great value for the entity through the “Recognize Contributions” Program. So also massive cer- emonies were performed in the Company to recognize out- standing employees, work trajectory, among others. Another interesting activity that has been developing in 2018, program agent of change comprised of approximate- ly 50 employees in Chile. This team has developed initia- tives for cultural change that help businesses to enforce their projects under the principles of cooperation and inno- vation. Each team had a Manager of the Company as Spon- sor that supports and guides their initiatives, and make a link between the technical project and the initiatives of cul- tural change that the implementation demands. Diversity For Enel Américas, to have diverse team works and to promote an inclusive work environment is fundamental for generating a culture of innovation, enabling the formulation of different points of view that fortify the workplace and constantly add value. Under the Diversity dimension and Inclusion Policy, Enel Américas has developed as part of its strategy a series of practices related to gender, age, nationality and disability. This policy promotes the principles of no discrimination, equality of opportunities, inclusion and balance between personal and work lives, and also fundamental values in the activities of the companies of the Group. The Policy has established three general principles: 1. Reject any form of arbitrary discrimination, ensure and promote diversity, inclusion and equality of opportuni- ties. 2. Promote and maintain a climate of respect for the dig- nity, honor and identity of the individual. 3. Ensure the highest confidentiality standards in rela- tion to any information related to the private lives of employees that they would have access to. 46 Annual Report Enel Américas 2018In the Gender dimension, the Company evaluated the the participation of a group of volunteers that support the population and looks for a balance in the initial stage of cause. the recruitment and selection processes, and to generate relationships with universities and professional institutes to promote the participation and inclusion of women stu- dents, specially in technical areas. In the Age dimension, and in the context of the digital trans- formation of the company, this year the Company imple- ments new On-Boarding platform, where each employee that joins Enel Américas has the chance to anticipate the contact and knowledge of the firm, being better prepared to his/ her labor and cultures adjustment. This personal and professional support to the new employee, shows how will be his/ her work daily routine. In the Nationality dimension, a tutor is assigned to expatri- ate workers for assistance and support during the expatri- ation period in order to acknowledge, respect and manage the contrasts between people from different nationalities and promote their integration. In the Disability dimension, in order to acknowledge, re- spect and manage the different skills of employees with- in the company, this year Enel Américas addressed the issues related with the people with disabilities’ needs, supporting them in the acquisition of the credential estab- lished by Law and accredits them against the State. This also ensured the continuity of structural adjustments (din- ing room, bathrooms, ramps, delineated parking lots, ac- cess to the auditorium, elevators with braille system, etc.) in the company’s facilities. Regarding the series of awareness actions, the Enel Group in Chile had a special participation in the Diversity and Inclusion week, with the performance of the play called “With Open Arms”, in which different issues related with diversity and inclusion were addressed in a playful way. Also the activity “In Your Shoes for One Day” enabled employees to experience on their own the obstacles that disabled people daily face. Reconciliation measures and labor flexibility One of the reconciliation and labor flexibility measures car- ried out during 2018, the telework program method "Smart Working" has consolidated in this period, being one of the most appreciated options in terms of reconciliation in the company, providing more flexibility in the job execution for the employee. Currently in Enel in Chile there are 360 em- ployees that subscribed in the program, 9 of them from Enel Américas, who one day per week chosen by them (between Tuesday and Thursday), work from their homes or wherever they choose, and must comply with the safe- ty and health measures established by current regulations. This initiative contributes to the harmony in the workplace and with their families, together with their quality of life. Additionally, during 2018, and among those measures, the Company carried out the following initiatives oriented to strengthen the quality of live of their employees: Extension Program of Sports and Culture: its a traditional program of sports activities performed in the facilities of the company and through external partnerships, with work- shops and the practice of different sports, such as football, baby football, basketball, volleyball, among others. Also, the Company offers art workshops, exhibitions, tours, family trips and other extension initiatives addresses to the employee and their families. There are several actions addressed to the employees’ children, both recreational and educational, among which summer and winter camps stand out, consisting in recreational days for the employ- ees’ children between 6 and 15 years old, which take place during the first month of the year and during the winter va- cation period. The company also offers training workshops during the summer addressed to the employees’ families. The Company also signed an alliance The Inclusive Com- panies Network of Sofofa, ReIN, where best practices are shared monthly with more than 30 companies. Especially this year, Enel Group participated in Teletón campaign, with During the year, the company also performs also various events to foster the reconciliation of work and family, is the Christmas Party, consisting on a family celebration for employees’ children; “Come to my Birthday”, is a celebra- tion performed each month at the company’s stadium for 47 People and organizationchildren under 12 years old. The following important events also stand out: the End-of-Year Party, a corporate event for all employees, consisting on a dinner and entertain- ment party, contests and dance; and the “Work Trajectory Internships and Young Talent Attraction Program Award”, which is a corporate celebration that each year ac- In this area, an important project in terms of the generation knowledges employees with over twenty years of service of new recruitment sources is the incorporation of young at the company. Recruitment and Selection Recruitment and Selection The main objective of Enel Américas is to incorporate the best professionals, who additionally must have the skills re- lated to the cultural changes we are experiencing with the digital transformation of the Company and Open Power. During 2018, 8 vacant positions emerged in Enel Améri- cas, 12.5% of which was covered internally. Regarding the work force that joined the company in 2018 (62.5% of the total vacants of Enel Américas), 45% were women. future professionals from the best universities of the coun- try as practitioners and thesis students. These students get the opportunity to consolidate theoretical learning in the context of Enel Américas’ business, thus achieving profes- sional training with knowledge of reality and the challenges of the group, being an important source of recruitment. This internship program is carried out on a permanent basis during the year, being the summer is the most active peri- od. In 2018 a total of 3 students were practitioners of thesis in Enel América, 70% of them were women. At a transversal level and considering the different lines of business of Enel Américas, 80% is concentrated in Audit and the remaining 20% in Procurement. 48 Annual Report Enel Américas 2018Diversity and inclusion For Enel Américas, to foster an inclusive work environment is essential for promoting an innovation culture and respect for diversity. Diversity gives the possibility to visualize dif- ferent points of view and opinions that enrich the work environment, adds value to the business, provides new op- portunities and facilitates collaboration and the integration of teams. The Company values the differences and turn them into competitive advantages, so it becomes empowered to improve processes, products and services, through incen- tives to creativity, learning, flexibility and respect. These also strengthen our brand and make us more attractive to the talents available in the market. Finally, and in the field of continuous improvement, this year the On Boarding process was carried out to accom- pany and follow up the new employees through presen- tations to know the company, and the designation of a Tutor to guide them to become part of the company and transmits our Open Power culture, and in summary guide their integration to the Company. The Agile methodology is used for the design and development of the On-Board- ing digital platform, which is oriented to provide a better experience to the new employees, offering them an early welcome with the connection to the platform. Educational Action Training Enel América’s training program for 2018 was built and ex- ecuted on the basis of two main management principles: the first principle is to achieve the right balance between educational activities focused on skills development and essential technical knowledge in order to support the per- formance of our employees. The second principle is the training program financing, regarding the needs detection mechanism that enables the identification, together with the collaborator and the manager, the technical and behav- ioral gaps that needs to be covered, with regards to the individual productivity in the workplace in order to access to possible future development opportunities. The needs detection system is denominated IDP (Professional Devel- opment Itinerary), whose implementation takes two years. In relation to the development of behavioral and manage- ment skills, diverse programs were implemented in 2018. Among them, the internal certificate of Project Manage- ment and Evaluation stands out, which Universidad de Chile offers under a design specially made for our com- pany’s needs. In this same context, the activities related to the development of leadership skills are also relevant, being especially important those addressed to consolidate and strengthen teamwork skills (cooperation, confidence, growth and productivity). Finally, and as declared in every level and segment of em- ployees within the company, risks prevention, health and in general safety of people is a particularly relevant focus and permanent attention. 49 People and organization50 Annual Report Enel Américas 201809 Exchange Transactions 51 Letter From the Chairman Exchange Transactions Below you will find a detail of the quarterly transactions in the last three years made in the stock exchanges where the Enel Américas’ shares are traded: in Chile through the Santiago Stock Exchange, the Electronic Stock Exchange of Chile and the Valparaíso Stock Exchange, and in the United States through the New York Stock Exchange (NYSE). Santiago Stock Exchange During 2018, 14,329 million shares of Enel Américas were traded at the Santiago Stock Exchange, equivalent to CLP$1,716,422 million. The closing price of the share in December was CLP$122.51. Period 1st quarter 2016 2nd quarter 2016 3rd quarter 2016 4th quarter 2016 Total 2016 1st quarter 2017 2nd quarter 2017 3rd quarter 2017 4th quarter 2017 Total 2017 1st quarter 2018 2nd quarter 2018 3rd quarter 2018 4th quarter 2018 Total 2018 Units 1,540,145,250 1,753,142,660 1,232,162,338 2,168,846,180 6,694,296,428 2,229,781,463 2,009,919,858 2,356,887,602 2,796,096,892 9,392,685,815 2,771,570,034 3,290,495,998 3,404,682,608 4,862,216,660 14,328,965,300 Amounts (Chilean Pesos) 266,620,137,076 212,677,167,355 140,048,801,925 239,278,798,879 858,624,905,235 273,721,586,257 261,422,184,124 309,180,255,882 366,879,556,230 1,211,203,582,493 383,425,705,091 427,006,940,711 364,271,802,874 541,717,097,465 1,716,421,546,141 Average Price 172.74 110.85 113.49 110.6 126.92 122.9 130.71 131.24 131.46 129.08 138.45 130.51 107.10 111.99 122.01 Chilean Electronic Stock Exchange At the Electronic Stock Exchange, a total of 923 million shares of Enel Américas were traded during 2018, equivalent CLP$113,974 million. The closing price of the share in December was CLP$119.56. Units 130,742,124 122,026,677 88,217,958 228,583,097 569,569,856 78,056,955 253,547,191 367,188,645 272,011,584 970,804,375 265,640,945 315,617,793 206,898,749 134,618,362 922,775,849 Amounts (Chilean Pesos) 22,440,123,693 14,581,565,262 10,001,108,374 25,262,018,950 72,284,816,279 9,660,465,656 32,973,128,058 48,153,275,546 35,937,385,836 126,724,255,096 37,149,674,644 40,051,124,833 21,982,108,385 14,791,542,973 113,974,450,835 Average Price 172.97 121.46 113.65 111.66 129.94 121.16 130.37 130.87 132.97 128.84 139.09 130.94 106.26 110.56 121.71 Period 1st quarter 2016 2nd quarter 2016 3rd quarter 2016 4th quarter 2016 Total 2016 1st quarter 2017 2nd quarter 2017 3rd quarter 2017 4th quarter 2017 Total 2017 1st quarter 2018 2nd quarter 2018 3rd quarter 2018 4th quarter 2018 Total 2018 52 Annual Report Enel Américas 2018Valparaíso Stock Exchange A total of 207,2 thousand shares were traded during the year at the Valparaíso Stock Exchange, equivalent to CLP$24.1 million. The closing price of the share in 2018 was $103.5. On October 5, 2018, la Financial Market Commission (CMF for the Spanish acronym) issued a resolution revoking the authorization on the existence of the Valparaíso Stock Exchange, due to the non-compliance of the requirement to have at least 10 stockbrokers pursuant to Securities Markets Law Nº 18,045, No. 4 of article 40. Therefore, from October 8, 2018, Valparaíso Stock Exchange ceased to operate. Period 1st quarter 2016 2nd quarter 2016 3rd quarter 2016 4th quarter 2016 Total 2016 1st quarter 2017 2nd quarter 2017 3rd quarter 2017 4th quarter 2017 Total 2017 1st quarter 2018 2nd quarter 2018 3rd quarter 2018 4th quarter 2018 Total 2018 Units 0 0 120,460 0 120,460 5,576 29,273 2,070 126,000 162,919 53,601 2,077 147,880 3,680 207,238 Amounts (Chilean Pesos) 0 0 13,512,912 0 13,512,912 697,388 3,816,345 270,232 15,624,000 20,407,965 7,370,604 268,972 16,079,132 380,880 24,099,588 Average Price 112.46 112.46 125.06 128.68 130.54 124.00 127.07 137.46 129.50 109.29 103.50 119.94 New York Stock Exchange (NYSE) The shares of Enel Américas began to trade in the New York Stock Exchange (NYSE) on October 20, 1993. At that time, the name of the company was Enersis and the ticker symbol was ENI. One ADS (American Depositary Share) of Enel Américas represents 50 shares and its current ticker symbol is ENIA. Citibank N.A. acts as depositary bank and Banco Santander Chile is custodian in Chile. During 2018 272 million ADS were traded in the United States, equivalent to US$2.516 million. The ADS closing price in December was US$8.92. Period 1st quarter 2016 2nd quarter 2016 3rd quarter 2016 4th quarter 2016 Total 2016 1st quarter 2017 2nd quarter 2017 3rd quarter 2017 4th quarter 2017 Total 2017 1st quarter 2018 2nd quarter 2018 3rd quarter 2018 4th quarter 2018 Total 2018 Units 58,523,621 59,311,337 45,809,391 52,176,921 215,821,270 55,867,021 66,972,268 59,641,261 54,800,714 237,281,264 47,259,808 65,764,152 61,238,283 97,296,394 271,558,637 Amounts (US Dollars) 719,235,235 562,497,059 395,562,633 432,967,188 2,110,262,115 532,101,627 653,636,388 603,478,379 564,766,815 2,353,983,209 540,952,152 687,363,196 488,063,068 799,163,804 2,515,542,219 Average Price 12.35 9.68 8.59 8.32 9.73 9.45 9.81 10.14 10.34 9.94 11.44 10.50 8.08 8.12 9.53 53 Exchange Transactions Santiago Stock Exchange In the local market, the performance of Enel Américas’ share during the last two years compared to the Selective Stock Prices Index (S&P/CLX IPSA)(1) is the following: Variation Enel Américas S&P/CLX IPSA 2017 25.9% 34.0% 2018 -10.6% -8.3% (1) In August, 2016, the Santiago Stock Exchange (“the Stock Exchange”) and S&P Dow Jones Indexes (“S&P DJI”) signed an Operation and Licensing Agreement for Indexes. The alliance between the Stock Exchange and S&P DJI, the main global provider of concepts, data and re- search on indexes, includes the implementation of interna- tional methodological standards, as well as the integration Market Information During 2018, the Chilean stock market prices trended downwards, the S&P/CLX IPSA index fell 8% compared to the previous year, being the worst annual yield since 2013 and offsetted the good performance in 2017 (34%). Like- wise, the main global markets also dropped, such as New York (Dow Jones, -5.6%) and London (FTSE 100, -12.5%) and some Latin American markets where Enel Américas operates, such as Colombia (COLCAP, -12.4%) and Peru (IGBVL, -3.1%). This is mainly due to the investors’ concern for the rising tendency of interest rates in the United States and the potential negative effects of a trade war between China and the United States. Meanwhile, in Brazil the IBOVESPA grew 15.0% reflecting the market’s optimism with presidential elections. Argentina was in line compared to the close of the previous year (Merval, 0.8%), despite the poor macroeconomic situation of the country with an inflation reaching 47.6% in the year, being the highest in- crease since 1991, and additionally de Argentinean peso depreciated against the US dollar and the GDP fell 2.6%. The currencies in the countries where Enel Américas op- erates, Brazil, Colombia and Peru, also depreciated against the US dollar in 2018, while the GDP grew in these coun- tries (Brazil, +1.1%; Colombia, +2.7%; Peru, +4.0%). 54 Annual Report Enel Américas 2018of operating processes and business strategies, which has fostered greater visibility, governance and transparency of the existing indexes. The agreement also enables the de- velopment, the granting of licenses, distribution and man- agement of current and future indexes, which will develop as innovating and practical tools at the local and interna- tional investors’ disposal. The Santiago Stock Exchange Indexes, both the new and the existing ones, will use the shared brand “S&P/CLX” and shall be used as underlying indexes for liquid financial products, thus contributing to the expansion and depth of the Chilean capital markets. According to this agreement, S&P DJI took charge of the calculating tasks, production, maintenance, licensing and distribution of indexes as of Monday August 6, 2018. Cur- rently, 30 stocks comprise the S&PCLXIPSA index,, and rebalancing is biannual, in March and September. New York Stock Exchange (NYSE) The performance of Enel Américas’ ADRs listed in the NYSE (ENIA) compared to Dow Jones Industrial Index and the Dow Jones Utilities Index during the last two years is shown below: Variation ENIA Dow Jones Industrial Dow Jones Utilities 2017 36.1% 25.1% 9.7% 2018 -20.1% -5.6% -1.4% 55 Exchange Transactions 56 Annual Report Enel Américas 201810 Dividends 57 Letter From the Chairman According to General Norm N°283, Number 5, the dividends policies of the company for the periods 2019 and 2018 are transcribed below. Dividend Policy for period 2019 General aspects 1. Deposit in current account of the shareholder. 2. Deposit in saving account of the shareholder. 3. Nominative check or bank note to be send by mail to The Board of Directors of the Company, in session held on the residence of the shareholders and February 27, 2019, approved the following Dividend Policy 4. Withdrawal of nominative check or bank note at the and the corresponding Procedure for the dividends pay- ment of Enel Américas S.A. for the period 2019. Dividend policy offices of DCV Registros S.A., as its condition of ad- ministrator of the Enel Américas S.A’ shareholders, or in bank or branch offices established for such pur- pose and that will be informed in notification to be published regarding the payment of dividends. The Board of Directors intends to distribute an interim div- For the above mentioned purposes, current or savings ac- idend, charged to the net income of the 2019 accounting counts can be any branch of the country. The methodology period, of up to 15% of the net income as of September chosen by each shareholder will be used by DCV Registros 30, 2019, according to what is shown in the Enel Américas S.A. for all dividend payment, while the shareholder does not S.A.’s financial statements up to such date, to be paid in express in writing his intention of a new option. The share- January 2020. holders who do not have a payment modality, will be paid according to methodology No. 4 mentioned above. The Board of Directors plans to propose to the Ordinary Shareholders Meeting, to be held during the first four In cases where the checks or on-site drafts are returned by months of 2020, to distribute, as a definite dividend, an mail to DCV Registros S.A., they will remain in their custody amount equal to 50% of the net income for the 2019 ac- until the shareholders pick them up or request them. In case counting period. The final dividend will be the one that will of a deposits in current accounts, Enel Américas S.A. and/or be established by the Ordinary Shareholders’ Meeting, to be DCV Registros S.A. may request, for security reasons, verifi- held during the first four months of 2020. The compliance cations by the corresponding banks. If the accounts indicated of the aforementioned dividend program will be subject the by the shareholders are rejected, whether in a prior verifica- net income effectively recorded, as well as to maintain the tion process or for any other cause, the dividend will be paid according to the methodology No. 4. At the same time, the Company has adopted and will continue to take in the future all necessary security measures required by dividend pay- ment process, in order to safeguard both the shareholders as well as Enel Américas S.A. financial balance of the company. Dividend Payment Procedure For dividend payments, whether interim or definite, and in order to avoid their undue collection, Enel Américas S.A. considers the methodologies indicated below: 58 Annual Report Enel Américas 2018Dividends Policy for 2018 General Aspects At the session held on February 28, 2018, the Board of Di- Distributable Income of 2018 The distributable income of 2018 is shown below: Net Income * Distributable Income * Attributable to the controlling shareholder. Thousand US$ 1,201,381 480,552 rectors of the Company approved the following Dividends Policy and the procedures for payment of Enel Américas Distributed Dividends S.A. dividends for the 2018 accounting period. The following chart shows the dividends per share paid in the last years: N° Dividend Type of dividend Closing Date Payment Date Pesos/ Dollars per share (1) Exercise 86 87 88 89 90 91 92 93 94 95 Interim 01/19/2013 25/01/2013 1.21538 Final 05/04/2013 10/05/2013 3.03489 Interim 01/25/2014 31/01/2014 1.42964 Final 05/10/2014 16/05/2014 5.27719 Interim 01/24/2015 30/01/2015 0.83148 Final 05/18/2015 25/05/2015 5.38285 Interim 01/23/2016 29/01/2016 1.23875 Final 05/17/2016 24/05/2016 3.40599 Interim 01/21/2017 27/01/2017 0.94664 Final 05/20/2017 26/05/2017 2.38705 96 (1) Interim 01/20/2018 26/01/2018 0.001 97 98 Final 05/18/2018 25/05/2018 0.00517 Interim 01/19/2019 25/01/2019 0.00134 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 (1) The Extraordinary Shareholders’ Meeting held on April 27, 2017 approved the change of functional currency of the Company from Chilean Pesos to US Dollars. Then, from the period 2017 onwards, dividends are presented in dollars per share. Dividend policy The Board of Directors intends to distribute an interim div- idend, charged to the net income of the 2018 accounting period, of up to 15% of the net income as of September 30, 2018, according to what is shown in the Enel Américas S.A.’s financial statements up to such date, to be paid in January 2019. The Board of Directors plans to propose to the Ordinary Shareholders Meeting, to be held during the first four months of 2018, to distribute, as a definite dividend, an amount equal to 40% of the net income for the 2018 ac- counting period. The final dividend will be the one that will be established by the Ordinary Shareholders’ Meeting, to be held during the first four months of 2019. The compliance of the aforementioned dividend program will be subject the net income effectively recorded, as well as to the forecast result periodically prepared by the Com- pany or the existence of determined conditions, as rele- vant. Dividends 59 60 Annual Report Enel Américas 201811 Investment and financing policy for 2018 61 Letter From the Chairman The Ordinary Shareholders’ Meeting held on April 26, 2018 approved the Investment and Financing Policy detailed below. Investments Areas of Investment Enel Américas will invest, as authorized by its bylaws, in the following areas: Contributions for investment in, or for the creation of subsidiaries and related companies whose activity is aligned, related or linked to any form or type of energy, the supply of public utilities, or whose main raw material is energy. ii) Investments consistent in the acqui- sition, exploitation, construction, rental, administration, trading and disposal of any class of fixed assets, whether directly or through subsidiaries. iii) Other investments in all kinds of financial assets, titles or securities. Maximum investment limits Participation in controlling investment area In order to control the investment areas and pursuant to Enel Américas S.A.’ corporate purpose, the following pro- cedure will be followed whenever possible: i) At the Ordi- nary Shareholders Meeting will be proposed for subsidiar- ies or related companies the Directors of Enel Américas S.A. in proportion of at least the stake in those companies, and preferably they should be chosen among directors or executives of Enel Amércias S.A. or its subsidiaries, ii) In- vestment, financial and commercial policies as well as ac- counting criteria and systems that they should follow will be proposed to the subsidiaries and related companies, iii) The management of the subsidiaries and related compa- The maximum investment limits for each investment area nies will be supervised, and iv) A permanent control of the shall be the following: debt level will be undertaken. i) Investments in subsidiaries in the electricity sector: amounts required by the subsidiaries to meet their respec- tive corporate purposes, with a maximum amount equal to 50% of the Net Equity in the consolidated balance sheet of Enel Américas S.A. as of December 31, 2017. ii) Invest- ments in other companies outside the electricity sector, as long as at least 50.1% of Enel Américas consolidated assets are part of the electricity sector. 62 Annual Report Enel Américas 2018Financing Maximum Indebtedness Level The maximum indebtedness of Enel Américas S.A. is defined as the relation between the Total Financial Debt (measured as Other current financial liabilities and Other non-current financial liabilities) lower than or equal to 2.2 times total equity, based on the consolidated statements of financial position of Enel Américas S.A. as of December 31, 2017. Management attributions for agreeing Enel Américas’ dividend payment restrictions with lenders Dividend payment restrictions may only be agreed upon with lenders if previously approved by a shareholders’ meeting (ordinary or extraordinary). Management attributions for granting liens to lenders An Extraordinary Shareholders Meeting must approve the granting of liens or warranties to third parties obligations, related to essential assets described below Assets that are essential for the normal operation of the Company An essential asset for the operation of Enel Américas is its direct and/or indirect participation that allows control, by way of holding the majority of shares, agreements or shareholder agreements, of Enel Brasil and Emgesa. Investment and financing policy for 2018 63 64 Annual Report Enel Américas 201812 Business of the Company 65 Letter From the Chairman Business Structure GENERATION DISTRIBUTION ENEL GENERACIÓN COSTANERA EDESUR ENEL GENERACIÓN EL CHOCÓN ENEL DISTRIBUCIÓN RÍO CENTRAL DOCKSUD ENEL DISTRIBUCIÓN CEARÁ ENEL GENERACIÓN FORTALEZA ENEL DISTRIBUCIÓN GOIÁS EGP CACHOEIRA DOURADA ENEL DISTRIBUCIÓN SÃO PAULO EGP VOLTA GRANDE ENEL CODENSA ENEL DISTRIBUCIÓN PERÚ ENEL CIEN* ENEL EMGESA ENEL GENERACIÓN PERÚ ENEL GENERACIÓN PIURA *TRANSMISSION OTHER BUSINESSES ENEL X 66 Annual Report Enel Américas 2018Historical Background The Company went through a corporate restructuring pro- cess that started in April 2015 and was completed in De- cember 2016. This process consisted in the division of the electricity generation and distribution activities developed in Chile, from those performed in the rest of the countries. As such, the former Enersis S.A. was divided and the following companies were born: a) Enel Américas S.A., the continu- On June 19, 1981, the Compañía Chilena de Electricidad ing company of Enersis with activities in Argentina, Brazil, S.A. created a new corporate structure, which gave birth Colombia and Peru, and, b) Enel Chile S.A. which owns the to a parent company and three subsidiaries. One of these assets related to the development of the activities in Chile. was Compañía Chilena Metropolitana de Distribución Eléc- trica S.A. In 1985, under the Chilean government’s privat- Currently Enel Américas S.A. is one of the largest private ization policy, the process of transferring the share capital electricity companies in Latin America, both in terms of con- of Compañía Chilena Metropolitana de Distribución Eléctrica solidated assets and also in terms of operating revenues, S.A. to the private sector begun, and ended on August 10, which has been achieved through steady and balanced 1987. In this process, the pension fund management com- growth in its electricity businesses: generation, transmis- panies (AFPs in its Spanish acronym), company employees, sion and distribution. institutional investors and thousands of small shareholders joined the company. Its organizational structure was based on activities or operative functions whose results were eval- uated functionally and its profitability was limited by a tariff structure as a result of the Company’s exclusive dedication to the electricity distribution business. In 1987, the Company’s Board proposed forming a division for each of the parent company’s activities. Then four sub- sidiaries were created to operate as business units with its own objectives, thus expanding the company’s activities to- wards other non-regulated activities but linked to the main Expansion and development business. This division was approved at the Extraordinary Enel Américas began its international expansion in 1992 Shareholders’ Meeting of November 25, 1987 thus defin- with the participation in different privatization processes in ing its new corporate purpose. With this, Compañía Chilena Latin America, thus developing a significant presence in Metropolitana de Distribución Eléctrica S.A. became an in- the electricity sectors of Argentina, Brazil, Colombia and vestment holding company. On August 1, 1988, as agreed at the Extraordinary Share- Peru. 1992 holders’ Meeting held on April 12, 1988, one of the compa- > On May 15, Enel Americas, Enersis at that time, ac- nies born from the division changed its name to Enersis S.A. quired a 60% shareholding and control of Central At the Extraordinary Shareholders’ Meeting held on April 11, Costanera generation company, currently Enel Gener- 2002, the company’s corporate purpose was modified, in- ación Costanera, located in Buenos Aires, Argentina. troducing telecommunications activities and the investment > On July 30, the Company was awarded 51% of Em- and management of companies whose businesses are in presa Distribuidora Sur S.A., Edesur, a company that telecommunications and information technology, and Inter- distributes electricity in the city of Buenos Aires, Ar- net trading businesses. gentina. 67 Business of the Company1993 > In July, the Company acquired Hidroeléctrica El Chocón, today Enel Generación El Chocón, located in the provinces of Neuquén and Río Negro, Argentina. > On September 15, with a total investment of US$951 mil- lion, the Company acquired a 75% shareholding of Emge- sa, a Colombian generation company, and an additional 5.5% of Empresa Eléctrica de Bogotá S.A. > Endesa, S.A. (Spain) acquired 32% of Enersis (cur- rently Enel Américas). 1994 1998 > In July, Enel Américas acquired for US$176 million the > On April 3, Enersis (currently Enel Américas) again in- 60% share capital of Empresa de Distribución Eléc- vested the Brazilian market, this time being awarded trica de Lima Norte S.A., Edelnor (currently Enel Dis- 89% and control of Companhia Energética de Ceará tribución Perú) in Peru. Also the Company acquired S.A., Coelce (currently Enel Distribución Ceará), com- Edechancay, another electricity distribution company pany that distributes electricity in the northeast region in that country, which was later absorbed by the for- of the country, in the state of Ceará. The transaction mer. 1995 reached US$868 million. 1999 > On December 12, Enel Américas acquired an addi- > Endesa, S.A. (Spain), took control of Enersis (today tional 39% shareholding of Edesur. Enel Américas). Through a Public Share offering, > Additionally, the Company acquired the generation Endesa acquired an additional holding of 32% in Ener- company Edegel in Peru (currently Enel Generación sis, which, together with the 32% already acquired in Perú). 1996 > On December 20, Enel Américas entered the Brazilian market with the acquisition of a large portion of shares in the previously called Companhia de Eletricidade do Río de Janeiro S.A., Cerj, a company that distributes electricity in the city of Río de Janeiro and Niteroi, Bra- zil, whose business name changed to Ampla Energía e Serviços S.A. and currently is Enel Distribución Río. > On December 20, the Company acquired a 99.9% shareholding in Central Hidroeléctrica de Betania S.A. E.S.P, in Colombia. 1997 > On September 5, the Company acquired in Brazil for US$715 million a 78.9% shareholding in Centrais Elétricas Cachoeira Dourada (currently Enel Green Power Cachoeira Dourada). August 1997, resulted in a total holding of 64%. This transaction was completed on April 7, 1999, and in- volved an investment of US$1,450 million. As a result of the capital increase made afterwards by Enersis in 2003, this shareholding decreased to 60.62%. > On May 11, Enersis (currently Enel Américas) acquired 35% of Endesa Chile (today Enel Generación Chile), in addition to the 25% already held, thus reaching 60% shareholding of the generation company. The compa- ny therefore consolidated its position as one of the main private electricity companies in Latin America. 2000 > As part of the Genesis Plan strategy, the subsidiaries Transelec, Esval, Aguas Cordillera and real estate as- sets were sold for US$1,400 million. 2001 > On September 15, Enel Américas (at that time, En- > The Company performed large investments this year: ersis) successfully participated in the capitalization US$364 million for increasing its shareholding in Chi- of Codensa S.A. E.S.P., acquiring a shareholding of lectra (today Enel Distribución Chile), US$150 million 48.5% for US$1,226 million, company that distributes in the acquisition of 10% of the share capital of Ede- electricity in the city of Bogotá and the department sur, in Argentina, a stake that was held by the compa- of Cundinamarca, Colombia. The Company also ac- ny’s employees; US$132 million to increase its share- quired 5.5% of Empresa Eléctrica de Bogotá. 68 Annual Report Enel Américas 2018holding in the Brazilian distribution company Ampla; > On June 25, the agreement between Enel S.p.A. and Ac- US$23 million to increase its shareholding by 15% in ciona, S.A. came into effect whereby Enel became the Río Maipo, in Chile, and US$1.6 million to increase its controller of 92.06% of the share capital of Endesa, S.A. shareholding by 1.7% in Distrilima, in Peru. > On October 9, Endesa Chile (currently Enel Gener- 2002 > In Brazil, Central Termoeléctrica Fortaleza, located in the state of Ceará, was awarded to the company. Ad- ditionally, started the commercial operation of the sec- ond phase of the electricity interconnection between Argentina and Brazil, CIEN, completing a transmission capacity of 2,100 MW between both countries. 2005 > The subsidiary Endesa Brasil S.A. (currently Enel Bra- sil) was formed with all the assets held in Brazil by the Enersis Group and Endesa Internacional (later it was absorbed by Enel Iberoamérica): Cien, Fortaleza, Cachoeira Dourada, Enel Distribución Río, Investluz and Enel Distribución Ceará. ación Chile) acquired 29.3974% of the Peruvian gen- eration subsidiary Edegel (currently Enel Generación Perú). Shares were acquired at market price from Generalima S.A.C., a company which in turn is a sub- sidiary of Endesa Latinoamérica S.A. Endesa Chile thus now holds directly and indirectly 62.46% of the shares of Edegel. > On October 15, Enersis S.A. (currently Enel Améri- cas) acquired 153,255,366 shares, representing 24% of the share capital of its Peruvian subsidiary Enel Generación Perú (formerly Edegel), at a price of 2.72 soles per share. This was purchased from Generalima S.A.C., a Peruvian subsidiary of Enel Latinoamérica S.A., the parent company of Enersis. With this trans- action, the direct and indirect shareholding of Enersis S.A. in Edelnor rose from 33.53% to 57.53%. 2006 2010 > In February, Enersis acquired for approximately > Enersis (currently Enel Américas) accepted the offer US$17 million Termocartagena (142 MW) combined of the company Graña y Montero S.A.A., for the ac- cycle power plant in Colombia, which operates either quisition of its entire direct and indirect shareholding in with fuel oil or gas. its subsidiary Compañía Americana de Multiservicios > In June, Edegel (currently Enel Generación Perú) and Limitada, CAM; and in the same way, accepted the of- Etevensa merged, the latter a subsidiary of Endesa fer presented by Riverwood Capital L.P to acquire the Internacional in Peru. 2007 > In September the merger of Colombian generation companies Emgesa and Betania was completed. > On October 11, Enel S.p.A. and Acciona, S.A. took control of Enersis, through Endesa, S.A., and of Ende- sa Internacional, S.A. (currently absorbed by Enel SpA.). 2009 > The companies Acciona, S.A. and Enel S.p.A. an- nounced an agreement whereby Acciona, S.A. will directly and indirectly transfer to Enel Energy Europe S.L. the 25.01% shareholding in Endesa, S.A. As such, Enel Energy Europe S.L., controlled 100% by Enel S.p.A., will thus hold 92.06% of the share capital of Endesa, S.A. entire direct and indirect shareholding in its subsidiary Synapsis Soluciones y Servicios IT Ltda. The price of- fered for CAM and its subsidiaries in Argentina, Brazil, Colombia and Peru amounted to US$20 million. In the case of Synapsis, the price offered for the company and its subsidiaries in Argentina, Brazil, Colombia and Peru amounted to US$52 million. 2011 > In August, Endesa, S.A. informed through a Signifi- cant Event, the formalization of a purchase agreement for which Endesa Latinoamérica S.A. (100% owned by Endesa, S.A.) acquired 7.70% stake owned by EDP Energias de Portugal S.A. in Endesa’s Brazilian sub- sidiaries Ampla Energia e Serviços S.A. and Ampla Investimentos e Serviços S.A. for Euro 76 million and Euro 9 million, respectively. After these acquisitions, Endesa S.A. controlled 99.64% of the share capital of both companies. 69 Business of the Company2012 > The Extraordinary Shareholders Meeting held on De- cember 20 ruled on the capital increase. A very large majority, almost 86% of all shareholders with vot- ing rights present, equivalent to 81.94% of the total shares with voting rights of the Company, approved the capital increase of the following characteristics: 1) maximum amount of the capital increase: Ch$ 2,844,397,889,381, divided into 16,441,606,297 ordi- nary nominative payment shares of the same series, with no preferences and no par value, 2) value of non- in-kind contributions to be capitalized: The total issued capital of Cono Sur, Company that will concentrate the Generandes Perú S.A., equivalent to a 39.01% stake, whose investment amounted to US$413 million. The transaction ended in September, and as a result Ener- sis (currently Enel Américas) reached 58.60% share- holding of Edegel (today Enel Generación Perú). > On July 31, 2014, Enel Energy Europe S.R.L., current- ly Enel Iberoamérica SRL, controller of Endesa S.A. (92.06% share) proposed the acquisition of 100% of the share capital of Endesa Latinoamérica S.A. The transaction was completed in October 2014, and as a result Enel S.A. reached the direct control of Enersis (today Enel Américas) with 60.62%. 2015 activities that are identified in the reports that have > On November 16, 2015, the commissioning of El been made available to the shareholders and that Quimbo power plant, a 400 MW hydro facility in Co- would be contributed by Endesa (currently Enel Gen- lombia took place, after five years of construction. eración Chile) to Enersis (currently Enel Américas), > On December 18, 2015, at the Extraordinary Share- will amount to Ch$ 1,724,400,000,034 corresponding holders Meeting shareholders of the company ap- to 9,967,630,058 shares of Enersis S.A. (today Enel proved the corporate restructuring of Enersis and its Américas) at a price of Ch$ 173 per share, 3) place- subsidiaries Endesa Chile and Chilectra (currently Enel ment share price: a fixed price of Ch$173 for every Américas). This operation consisted on the division payment share to be issued as a result of the capital of generation and distribution activities in Chile from increase. 2013 > Capital increase: With an historic result for this type of operation in the local market, shareholders of Enersis (today Enel Américas) subscribed a total of approxi- mately $ 6,022 million, a placement of 100% of the shares available for the capital increase. 2014 > Public Tender Offer for the shares acquisition for Coelce. On January 14, Enersis (currently Enel Améri- cas), which until then controlled 58.87% of its sub- sidiary Coelce, launched a voluntary OPA of all series of shares issued by Coelce at a price of R$49 per share. With this, Enersis acquired 3,002,812 common shares, 8,818,006 preferred shares type A and 424 preferred shares type B, equivalent to an investment of approximately US$243 million. After the operation, the company obtained a 74.05% direct and indirect interest in Coelce. > In April, Enersis (currently Enel Américas) closed an acquisition agreement for the purchase all the shares that Inkia Americas Holdings Limited indirectly had of those performed in the rest of the countries in Latin America both for Enersis and also for its subsidiaries Endesa Chile and Chilectra. 2016 > On March 1, the non-material Division of the former Enersis, Endesa and Chilectra was made, as a result of which Enel Chile, Endesa Américas and Chilectra Américas were born. > On April 21, 2016, shares’ Division of Enersis, Ende- sa and Chilectra became effective, and the resulting companies - Enersis Américas, Enersis Chile, Endesa Américas, Endesa Chile, Chilectra Américas and Chi- lectra Chile – began trading at the Santiago Stock Ex- change. Likewise, the ADR’s ENIA, ENIC, EOCA and EOCC began trading on April 27 the same year at the New York Stock Exchange. (NSYE). > On September 28, the Extraordinary Shareholders Meeting took place at the Enersis Stadium, where the Merger of Enersis Américas, Endesa Américas and Chilectra Américas was approved, and comprised the following: on the part of Enersis Américas, it ab- sorbed Endesa Américas and Chilectra Américas. The 70 Annual Report Enel Américas 2018main purposes of The Merger were: 1) align every in- clients and operates in the Brazilian region of Goiás. vestment interests in generation and in distribution in The amount of the operation reached BRL$ 2,187 the scope of Latin America; 2) create a simpler struc- million (approximately US$640 million). The financing ture with greater visibility, and eliminate the cross of this transaction came from the capital increase of participations; 3) greater efficiency and dynamism in Enel Américas (former Enersis) approved by the end the decision making processes, costs reduction and of 2012. remove any potential conflicts of interest. > On October 4, Enel Perú (100% owned by Enel > On December 1, the name change of Enersis Améri- Américas S.A.) acquired 47,686,651 shares issued by cas to Enel Américas happened, after the intangible the subsidiary Enel Distribución Perú. The transaction merger with the companies Endesa Américas and closed at a total price of PEN$ 262,276,580 (equiva- Chilectra Américas. lent to approximately US$ 80 million) and was carried > On November 30, it was announced that the compa- out at the Lima Stock Exchange. ny presented the best offer for the acquisition of the > On September 27, Enel Brasil was awarded the con- electricity distribution company CELG-D, which was cession to operate Volta Grande power plant, whose performed through a bidding process arranged by installed capacity is 380 MW. The amount of the the Brazilian Government through Banco Nacional do transaction reached BRL$1,420 million (US$ 445 mil- Desenvolvimento. The offer presented by our subsid- lion approximately). This term of the concession is 30 iary Enel Brasil amounted to BRL$ 2,187 million. years. > On December 29, Endesa Américas and Chilectra Américas ceased trading at the Santiago Stock Ex- 2018 change and the New York Stock Exchange, in the > On June 4, Enel Américas accomplished successfully ADR form. As such, the company proceeded with the voluntary offer for the acquisition of Eletropaulo the exchange of shares and the Merger is achieved. (currently Enel Distribución São Paulo), the leader dis- tribution company in Sao Paulo, Brazil. The offer was performed the same day that the Company acquired 73.4% of the shares. During the following month, shareholders of Eletropaulo Metropolitana Eletrici- dade de São Paulo SA sold additional shares of Elet- ropaulo to Enel Sudeste equivalent to 19.9% of the social capital of the company. Along with this, Enel Sudeste reached 93.3% share ownership of the distri- bution company. Later, in September, Enel Américas carried out a capital increase in the company, and then the final shareholding reached 95.88%. 2017 > On February 1, in Argentina the National Electrici- ty Regulatory Entity (ENRE by its Spanish acronym) approved the Integral Tariff Review – known as RTI - defining a structural change in energy distribution in the country. This new regulation is the result of an ex- tensive work made between the government and the distribution companies involved in the tariff revision process, consisting on a gradual increase of the tariff with the purpose of softening the impact for the final consumer. > On February 14, Enel Américas completed the acqui- sition of Celg Distribuição S.A. (currently Enel Distri- bución Goiás) through its subsidiary Enel Brasil with the acquisition of nearly 94.8% of its share capital. This distribution company has more than 2.9 million 71 Business of the Company72 Annual Report Enel Américas 201813 Investments and financial activities 73 Letter From the Chairman Material Investments Related to the Company’s Investment Plan The global financing strategy of the group’s subsidiaries The chart below shows the capital expenditures expected and intercompany loans is coordinated in order to optimize to carry out from 2019 to 2021 and the capital expenditures debt management, in addition to the terms and conditions incurred by our subsidiaries in 2018, 2017 and 2016. of our funding. The Group’s subsidiaries develop independent capital in- Investment (1) (million US$) vestment plans that are funded by funds generated inter- nally or by direct funding. One of our goals is to focus on those investments that will yield long-term benefits, such as projects to reduce energy losses. Additionally, focusing on Enel Group and seeking to provide services to every company in the group, our goal is to reduce investment at the individual subsidiary companies in elements such as procurement systems, telecommunications and informa- tion systems. While we have studied how to finance these investments as part of the budget process of the company, no particular financing structure has been committed and our investments will depend on market conditions at the time they need to get the cash flow. Our investment plan is flexible enough to adapt to the 2019-2021 5,330 2018 1,541 2017 1,371 2016 1,230 (1)Capex figures represent the effective payments for each year, with the exception of forecasts. Investments in 2018, 2017 and 2016 changing circumstances by giving different priorities to In the distribution business, investments were the follow- each project according to its profitability and strategic con- ing: (i) expand our distribution service to meet the growing sistency. Investment priorities are currently focused on de- energy demand, (ii) improve the quality of service, (iii) im- veloping the works plan in Brazil, Colombia and Argentina. prove safety, and (iv) reduce energy losses, particularly in Brazil. For the period 2019 - 2021, on a consolidated basis, the firm expects to spend US$5,330 million in investments in subsidiaries directly controlled, in those investments cur- rently under development, the maintenance of distribution networks, maintenance of the existing generation plants, and studies required to develop other potential generation projects. 74 Memoria Anual Enel Américas 2018 Generation Distribution Capital expenditures reached US$295 million in 2018, During 2018, the company’s capex amounted to US$1,429 while in 2017 these expenses totaled US$253 million. million, mainly to meet consumption needs, as a result of the In Peru, total maintenance investments amounted to through investments not only related with them, but also in US$58 million in 2018. The main projects are the recon- capacity increases and strengthening of AT, MT and BT of struction of Callahuanca power plant, the recovery of Calla- the companies. Meanwhile, in 2017, investments reached growth of population and the entrance of new customers, huanca basin, several maintenance activities and the mod- US$1,430 million. ernization of civil works and hydraulic units, acquisition of contingencies pieces for thermal units, major maintenance In 2018, Edesur in Argentina carried out investments for of Ventanilla power plant, overhaul of thermal units, reha- US$149 million in order to meet the growth of demand and bilitation of generator TG7 in Ventanilla, digital projects and improve the quality of service. These investments enabled multiple maintenance activities in thermal units. Expansion the commissioning of SE Padre Novak, the expansion of SE capex was focused on HER Huampaní and E4E projects. Santa Rita, Paseo del Bajo, infrastructural improvements in Red MT, new feeders in SE Móvil Roca, and technological In Colombia, maintenance capex was concentrated on proj- improvements of the RED (digitization). ects related to the improvement of the generation plants’ facilities, among which the environmental improvement Investments reached US$ 143 million in Enel Distribución plan for Termozipa stands out. In relation to expansion Perú. Energy demand is related to new requirements from capex, progresses were made in the works for the closing customers, which has generated investments in distribution of El Quimbo hydroelectric project and investments for the networks of US$ 68 million, US$ 25 million of which were Life Expansion of Termozipa. used for the expansion and reinforcement of networks to meet the requirements of residential, commercial and indus- In Argentina, maintenance investments were focused on trial customers, US$ 3 million for the electrification of human the major of TG9 in Dock Sud, and in Costanera improve- settlements, US$ 3 million in the enlargement of public light- ments in TV 6 and TV 7 were carried out, stoppage of MHI ning and US$ 37 million to ensure quality and safety of the cycle and LTE Siemens cycle, and lastly should be noted supply. With regards to Sub-Transmission, investments in ca- the modernization of Arroyito in El Chocón power plant. pacity expansion and safety of the networks and transmission lines reached US$ 48 million. Additionally US$ 8 million were In Brazil, total investments were US$13 millions. Enel Gen- assigned to Energy Losses Control and US$ 19 million to in- eración Fortaleza carried out investments of US$9 million, formation services and infrastructure. mainly related to the continuous investment of the power plant. In the case of Volta Grande and Cachoeira Doura- In Brazil, total investments reached US$851 million. In partic- da, investments amounted to US$4 millions, mainly for the ular, Enel Distribución Río performed investments for a total generation turbines UG1 and UG2 repair works and the of US$184 million. Of this amount, 35% were for the imple- step-up transformers. mentation of new connections, 32% energy losses reduction projects, improvements in the quality of distribution networks with positive impact in the services offered to clients and re- mote control systems through the use of technology. The re- maining amount was used in the maintenance of distribution networks. Investments of Enel Distribución Ceará totaled US$223 mil- lion, 46% of which was allocated to meet the network de- mand and clients’ connections and support the sustained 75 Investments and financial activities growth of demand in the State of Ceará, 33% was invested in maintenance of distribution networks projects and 21% ser- vices for quality improvement and losses reduction. Enel Distribución Goiás carried out investments for a total of US$207 million. Of this amount, 40% of which was used for energy losses projects and to improve the quality of dis- tribution networks. The company invested 33% of the total in new connections and 28% in maintenance of distribution networks. Financial activities Finance The international macroeconomic scenario was highly in- fluenced by the greater dynamism of the United States, The consolidation of Enel Distribución São Paulo started in whose economic growth was above its growth potential, June 2018, and during these seven months investments the strengthening of the dollar and the rapid increase of the reached US$236 million, 52% of which were allocated to the FED’s monetary policy rate. The trade war between China maintenance of network, 37% quality projects and 11% for and United States lead to uncertainty, thus mainly impact- new connections. ing emerging markets, whose main effects were the de- preciation of local currencies and outflows of capitals. In Colombia, investments of Codensa during 2018 reached US$ 262 million, and were mainly focused on service quality The central banks of main economies have acted cautiously and efficiency (US$ 91 million), with the purpose of continue in withdrawing monetary stimuli and have started to raise with the maintenance of quality indicators; connections and interest rates. The FED decided to expedite its interest public lightning (US$ 83 million) and expansion of capacity rates hikes from 1.5% to 2.25%, generating higher volatili- (US$ 9 million) to meet the new demand; losses control (US$ ty in emerging markets and increasing exchange rates. The 5 million), and the replacement of network (US$ 23 million) strengthening of internal economy supported this decision. and normalization (US$ 16 million) of electricity infrastructure. During 2018, South American countries, and particularly the countries where Enel Américas operates, have expe- rienced a positive development and economic growth, but 76 Memoria Anual Enel Américas 2018still below the expected potential, due to the unequal per- Finally, Peru grew 4% in 2018, economic expansion is formance of some economies in the region. Such is the mainly explained by higher internal demand, where retail case of Peru, country that experienced higher growth with sales is the main growth factor, and also by the expansion respect Latin American average (4.0%). In turn, Colombia y of consumption loans and non-durable consumer goods Brasil grew 2.7% and 1.1% respectively. Finally, Argentina imports. Additionally, the growth of exports of non-tradi- suffered an economic downturn, with a negative growth tional goods, such as grapes, cranberries and avocados, of 2.6%. helped to consolidate the expansion of the domestic econ- omy. On the other hand, the Peruvian Central Bank lower The slowdown of the Argentine economy as opposed to the monetary policy rate in half a percentage point, from the results obtained in 2017, period in which the trade lib- 3.25% to 2.75%, with the objective of stimulate growth eralization and pro-investment policies promoted by the and keep inflation within the target range. government, created the conditions to achieve an econom- ic growth above the average in the region. The economic downturn in 2018 was consequence of the complex do- mestic landscape, triggered by the devaluation of the cur- rency and hyperinflation. In 2018, the Argentine peso was the currency that experienced the highest depreciation in relation to the dollar in the region– with the exception of Venezuela – with a depreciation of more than 50%, which made the Central Bank of Argentina to set the benchmark interest rate in 60%, becoming the highest interest rate in the world. In order to face this situation, the government asked requested aid from the International Monetary Fund. Brazil continued its economic recovery, growing 1.1% in 2018. The increase of private demand is explained by the Central Bank of Brazil historic reduction of monetary policy rate in 6.5%, together with lower inflation and relieved pol- itic uncertainties after the presidential elections, boosting optimism and domestic activity. Moreover, unemployment dropped, thus showing clear signs of greater dynamism and the recovery of the market. Nevertheless, the strength- ening of the dollar globally was the main cause for the cur- rency weakening, so the Real was among the emerging Main completed financial operations Brazil One of the highlights of the year was the acquisition of the electricity distribution company Eletropaulo, currently Enel Distribución São Paulo. After the settlement of the take- over bid, Enel Américas through Enel Sudeste acquired 93.3% holding of the company, thus consolidating Enel Group, through Enel Américas, as the private electricity company leader in terms of number of clients in Brazil and markets currencies that lost most value in relation to the the region. dollar in 2018, with a depreciation of approximate 18%. In Colombia, economic growth in 2018 was 2.7%, mainly explained by the improvement of private consumption– leaded by household expenses – and public spending. Meanwhile, monetary policy remained stable during most of the year in 4.5%, enabling inflation to reach 3.2% by the end of the year, slightly above the 3.0% goal set by the Colombian Central Bank. In terms of politics, the year was marked by presidential elections that took place in the middle of the year and the cases of corruption that shook the country. Enel Brasil (together with its investment vehicle Enel Sud- este) carried out in June the issuance of promissory notes of BRL $9,300 million (equivalent to approximately US$ 2,400 million), which were refinanced in October through an intercompany loan with Enel Finance International (EFI) of BRL $9,400 million (equivalent to US$ 2,426 million ap- proximately), both operations were part of the acquisition of Enel Distribución São Paulo. In March, Enel Distribución Ceará issued promissory notes in the local market of BRL $150 million (US$ 39 million). 77 Investments and financial activities Additionally, the company issued local bonds of BRL $310 million (equivalent to US$ 80 million). Apart from that, the Colombia company contracted financing with Banco de Desenvolvi- mento Econômico e Social (BNDES) of BRL$340 million (equivalent to US$ 88 million). Finally in December, the company closed an intercompany loan with EFI of BRL $300 million (equivalent to US$ 77 million). Enel Codensa performed a local bond issuance of COP $555,000 million (equivalent to US$ 171 million). Peru In 2018, Enel Distribución Goiás closed a bank financing of In March, Enel Distribución Perú performed a local bond BRL $250 million (equivalent to US$ 65 million). Likewise, issuance of PEN $100 million (equivalent to US$ 30 mil- in April issued promissory notes in the local market of BRL lion), likewise the company also received bank financing of $200 million (equivalent to US$ 52 million). Additionally, PEN $75 million (equivalent to US$ 22 million) and signed during the year, the firm contracted financing with BNDES a leasing contract of PEN $96 million (equivalent to US$28 of BRL $100 million (equivalent to US$ 26 million). million). Enel Distribución Río obtained bank financing of BRL $464 Also, Enel Perú obtained bank financing of PEN $87 million million (equivalent to US$ 120 million) during the year. (US$ 26 million). In September, Enel Distribución São Paulo refinanced its debt with a BRL $3.000 million (equivalent to US$ 774 mil- lion) local bonds issuance, thus reducing financial cost and increasing the average life of the debt. Moreover, in De- cember the firm closed an intercompany loan with EFI of BRL $420 million (equivalent to US$ 108 million). 78 Memoria Anual Enel Américas 2018Coverage Policy Exchange Rate Over time, most credit ratings have changed. Currently, they are all “investment grade”, which is based on the di- versified portfolio of assets, liquidity and adequate policies of debt coverage service. In summary, the following main events that took place in The exchange rate hedging policy of the Group is based on 2018 are detailed below: cash flows and seeks to maintain a balance between flows indexed to foreign currency, and the levels of assets and On June 5, 2018, Standard & Poors reviewed and ratified liabilities denominated in that currency. The goal is to min- the corporate rating of Enel Américas, assigning a “BBB” imize the flows' risk exposure from changes in exchange rating and stable outlook. This reaffirmation was granted rates. As part of this policy, the Enel Américas individually after the acquisition of the largest electricity distribution contracted forwards for US$ 366 million to cover the flows company in Brazil, then Eletropaulo, and currently named in different currencies coming from foreign subsidiaries. Enel Distribución São Paulo. Interest rates Interest rates variations change the fair value of those as- sets and liabilities that accrue variable interest rate, as well as the future flows of asset and liabilities referenced to a variable Interest rate. The objective of risk management is to reach a balance of debt structure, in order to mini- mize the cost of debt with reduced volatility in the income statement. Depending on the Group’s estimations and the objectives of debt structure, hedging transactions would be made through derivatives contracts that mitigate those risks. The instruments currently used are interest rate swaps to fixed rates. At year-end 2018, the comparative structure of financial debt of Enel Américas Group in relation to fixed interest rate and/or protected interest rates versus gross total debt, after contracted derivatives was 59% of fixed rate debt. Credit Risk Rating On November 9, 1994, Standard and Poor's and Duff & Phelps rated Enersis (currently Enel Américas) for the first time at BBB+, that is, an investment grade company. Lat- er, in 1996, Moody's rated the company’s foreign currency long-term debt at Baa1. Likewise, on June 8, 2018, Feller Rate rated Enel Américas in local scale rating and assigned “AA-” rating with stable outlook. Conversely, on September 20, 2018, Fitch Ratings reaf- firmed once again the rating and outlook given on June 6, 2018, where Fitch Ratings reviewed and reaffirmed the international scale rating of Enel Américas, assigning “BBB+” with stable outlook, and national scale in “AA (cl)” also with stable outlook. As in the aforementioned cases, the review carried out in June was after the acquisition of Enel Distribución São Paulo. Every rating agency mentioned above, reaffirmed their rat- ings after the capital increase proposal of Enel Américas announced on February 27, 2019. Finally, after the capital increase proposal announcement on March 4, 2019 Moody’s reaffirmed the “Baa3” rating and changed the outlook from negative to stable. Previ- ously, on February 23, 2018, Moody’s rated Enel Américas with “Baa3” rating, and changed the outlook from stable to negative because of the situation in Colombia. And later, on June 7, 2018, the rating agency reaffirmed the afore- mentioned rating and outlook, after the acquisition of Elet- ropaulo, currently Enel Distribución São Paulo. 79 Investments and financial activities Its diversified portfolio of assets, strong credit parameters, adequate debt structure and high liquidity supports the company’s ratings. International Ratings Properties and facilities Enel Américas S&P Moody’s Fitch Corporate BBB / Stable Baa3 / Stable BBB+ / Stable Enel Américas as a “holding” entity, does not directly own properties or facilities to develop its business. Local Ratings Enel Américas Feller Rate Fitch Stocks Bonds 1° class, Level 2 1° class, Level 1 AA- / Stable AA (cl) / Stable Brands The company has registered “Enersis Américas” brand in services, products, industrial and commercial facilities. In July 2016, through a communication addressed to the Board of Enel Américas S.A., Enel S.p.A authorized the free use of “Enel” brand to Enel Américas S.A., being entitled to include it to its business name, its logo and other forms of use. The brand Enel Américas is duly registered. 80 Memoria Anual Enel Américas 2018Suppliers, Customers and Main Competitors Enel Américas S.A. in its capacity of a “holding” company Pass do Brasil Servicos e Comércio, Saneamento de Goias that mainly operates in the field of electricity generation S..A., Vorantim Cimentos N/NE S.A., Secretaria Municipal and distribution in Latin América, considers the following de Infr. e Servicos Publicos- Goiana, State Grid, AES and suppliers, customers and competitors as the most relevant CEMIG. ones for its main subsidiaries. Colombia: Petromil, Carbones San Fernando, Minas y Mi- The Company established that its main suppliers, custom- nerales S.A.-Minminer-, Grupo EPM. ers and competitors are the following: Argentina: IMC Ingeniería y Montajes Industriales S.A., Wheeler Energía, S.L.U., Andritz Hydro Ltda., CAM Colom- Servicios Industriales Otero S.A., Grupo MTR S.A. SADE- bia Multiservicios S.A.S., Quanta Colombia Services Co- Electricaribe, Emcali, Consorcio M&M, Amec Foster SA, PAMPA ENERGÍA, AES Argentina, Argencobra S.A., lombia S.A.S and Deltec S.A. Prysmian Energía Cables y Sistemas, Elsewedy Cables Egypt, GCBA, Municipalidad de Quilmes and Telefónica Peru: Nordex Windpower Perú S.A., GCZ Ingenieros SAC., Argentina S.A. Prodiel Perú Sociedad Anónima Cerrada, Luz del Sur, Min- era Las Bambas, Minera Chinalco Perú, Engie, Electroperú, Brazil: Alstom Energia Termica e Ind. Ltda., Alstom Bra- Kallpa, Generación, Cobra Perú S.A., Consorcio CAM sil Energia e Transporte Ltda., P.Q.A. Productos Químicos Lima, Cabelte-Cabos Eléctricos y Telefónicos, S.A., Grupo Aracruz Ltda., Multiplan, Volskswagen, Ferbasa, Compahia Falabella, Corporación Celima, Compañía Industrial Nuevo Eletrica de Sao Francisco- Chesf, Furnas Centrais Eletricas Mundo S.A., Kallpa. Engie and Termoselva. S.A., Centrais Eletricas do Norte do Brasil S.A. Eletronor- te, Compel Construcoes Montagens e Projetos Eletricos, Chile: Travel Security S.A., Ernst & Young Servicios Pro- Endicon Engenharia Instalacoes e Construcoes, Sodexo fesionales y Asesorías Limitada and Team Work Recursos Humanos Limitada. 81 Investments and financial activities 82 Annual Report Enel Américas 201814 Risk Factors 83 Letter From the Chairman Risk Management Policy The companies of Enel Américas Group are exposed to de- termined risks that are managed through the application of a system to identify, measure, limit the concentration and supervise. Some of the underlying principles defined by the Group in the establishment of their risk management policy are: • Comply with the norms of good corporate gover- nance. • Strictly comply with the normative system of the Group. • Each business and corporate area defines: I. The markets where the Company can operate in relation to the knowledge and sufficient capabili- ties to ensure effective risk management. II. Criteria on counterparts. III. Authorized operators. • The business and corporate areas establishes for each market in which they operate their predisposi- tion to coherent risk with the defined strategy. • Every business operation and corporate areas are per- formed within the approved limits in every case. Interest Rate Risk Interest rate variations modify the fair value of those as- sets and liabilities that bear a fixed interest rate, and also the aforementioned future asset and liabilities flows at a variable interest rate. The objective of risk management of interest rates is to reach a debt structure equilibrium that allows a minimiza- tion of cost of debt with a reduced volatility in the income statement. The Company performs coverage transactions through de- rivatives contracts to mitigate these risks depending on the estimations of the Group and the objectives of the debt structure. The instruments currently used are interest rate swaps that sets variable to fixed rate. The comparative structure of the financial debt that Enel Américas Group has, according to the fixed interest rate and/or protected by the total gross debt, after contracted derivatives, is the following: Gross position 12-31-2018 % 59% 12-31-2017 % 46% • The business, corporate areas, lines of business and Fixed interest rate companies establish risk management policies neces- sary to ensure that the market transactions are com- pleted according to policy, regulations, and the proce- dures of Enel Américas. 84 Annual Report Enel Américas 2018Exchange Rate Risk Commodities Risk Enel Américas Group is exposed to commodities price vari- Exchange rate risks fundamentally correspond to the fol- ation risks, mainly through the following: lowing transactions: • Debt contracted by the Group’s companies denomi- generation. nated in a different currency of which the flows are • Energy purchase-sell operations that take place in the • Fuel purchases in the process of electricity energy indexed. local markets. • Payments to be made related to the acquisition of ma- terials associated to projects and corporate insurance With the purpose of reducing risk in situations of severe policy payments being made in a different currency of drought, the Group has designed a commercial policy de- which the flows are indexed, among others. fining the level of commitment of energy sales according • Revenues of the companies of the Group that are to the generation capacity of power plants in a dry year, in- directly linked with the evolution of currencies not cluding risk mitigation clauses in some contracts with free related to the companies’ flows. clients. In the case of regulated clients, they are subjected • Flows from the subsidiaries abroad to the head offices to a long-term tender process, and indexing polynomials in Chile, which are exposed to exchange rate varia- are determined enabling the reduction of commodities ex- tions. posure. With the objective of mitigating the exchange rate risk, Considering the operational conditions that face electrici- Enel Américas’ hedging policy for exchange rates is based ty generation, hydrology, and commodities price volatility on cash flows and contemplates to maintain a balance be- in the international markets, the Company is permanently tween the flows indexed in dollars and the levels of assets verifying the convenience of taking coverage positions to and liabilities denominated in that currency. The objective reduce the impacts of price variations in results. is to minimize the exposition of the cash flows to variations in the exchange rates. On December 31, 2018, the company signed operations of purchase future energy contacts of 5.28 GWh. These pur- The instruments currently being used to comply with policy chases backed up an energy-selling contract in the whole- are currency swaps and exchange rate forwards. Likewise, sale market. On December 31, 2018, the company settled the policy seeks to refinance debt in the functional curren- selling contracts for 10.92 GWh and 7.2 GWh of purchase cy of each company. future energy contacts. On December 31, 2017, operations of purchase future en- ergy contracts amounted to 5.4 GWh, for the period Jan- uary - March 2017. These purchases backed up an energy purchase contract in the Colombian wholesale market. As of December 31, 2017, the company settled 24.23 GWh of energy-selling contracts and 77.45 GWh of purchase future energy contacts. 85 Risk Factors Liquidity Risk The Group maintains a liquidity policy consistent with the contract of committed long-term credit facilities and tem- porary financial investments, in sufficient amounts to sup- port the projected needs for a period of time related to the context and expectations of the debt and capital markets. The aforementioned projected needs include net financial debt maturities, after financial derivatives. For further de- tails regarding the features and conditions of financial debt and financial derivatives see Notes 21 and 23 of the Finan- cial Statements of Enel Américas. As of December 31, 2018, the liquidity of Enel Américas Group reached US$ 1,904 million in cash and cash equiva- lents, and US$ 1,269 in available non-committed long-term credit facilities. As of December 31, 2017, the liquidity of Enel Américas Group reached US$1,473 million in cash and cash equivalents, and US$225 million in available non-com- mitted long-term credit facilities. 86 Credit Risk Enel Américas performs a detailed monitoring of its credit risk. Receivable Commercial Accounts With regards to credit risk related to the receivable ac- counts coming from commercial activity, this risk is his- torically very limited given the short term client’s recovery time, so they do not individually accumulate a significant amount. This is applicable for both our electricity genera- tion and distribution businesses. In some countries, in our line of business of electricity gener- ation, the company may face a supply disruption due to the lack of payment, and also in almost every contract it’s consid- ered lack of payment as a cause for terminating the contracts. For this end, the credit risk is constantly monitored and its measured in maximum amounts exposed such risk. In the case of our electricity distribution companies, the supply disruption in all cases is our company’s decision facing our client’s lack of payment. This is implemented according to the existing regulation in each country, which facilitates the evaluation process and credit risk control, which is also limited. Financial Assets Cash surplus investments are made by top of the line na- tional and international financial entities, with limits estab- lished by each institution. In the bank selection for investments, the ones considered are those that have an investment grade credit risk rating, considering the three main international rating agencies (Moody’s, S&P and Fitch). Placements can be backed up by treasury bonds of the country where the operation takes place and/or bank secu- rities issued by top of the line banks, privileging the latter because they offer greater returns (always following the existing placement policies). Annual Report Enel Américas 2018Measuring Risk Other Risk Factors Enel Américas Group develops a Value at Risk measurement for its debt positions and financial derivatives, with the objec- Some South American economies have historical- tive of monitoring the risk assumed by the company, limiting ly been characterized by frequent and, occasionally the volatility of the income statement. drastic, interventionist economic measures by their The portfolio includes for the calculation of the Value at Risk which may adversely affect the business and financial composed by: results of Enel Américas. governmental authorities including expropriations, • • Financial debt Government authorities have modified monetary, credit, tar- Derivatives for debt coverage iff, tax and other policies with the purpose of influencing the direction of the economies of Argentina, Brazil, Colombia The calculated Value at Risk represents the possible varia- and Peru. Although Enel Américas has no assets in Chile, tion of the portfolio's value previously described in the du- it’s a company constituted under the laws of the Republic ration of a quarter with 95% confidence. For that purpose of Chile. Therefore it’s subject to changes in tax, labor and there is a volatility study of the risk variables that affect the monetary laws, among others. Other government actions position portfolio’s value, including: carried out in these South American countries have also • • Libor for the US dollar. interventionist measures such as expropriation and nation- included wages, processes and tariffs controls, and other The different currencies in which our company op- alization. erates, the regular local indexes for banking transac- tions. In the distribution business, if a certain service and technical • Exchange rates of the different currencies considered standard is not met, there is a risk of losing concessions. In in the calculations. some concessions, such as Buenos Aires and Rio de Janei- ro, it may be especially difficult to meet some of the mini- The Value at Risk calculations are based on the extrapola- mum standards required. In the event that it is not possible tion of future scenarios (in one quarter) of the market val- to comply with these regulatory standards, the local power ues of the risk variables in terms of the scenarios based regulator might revoke the concession and reallocate it to a on real observations for the same period (quarter) during competitor. five years. It’s expected for 2019 that there would be fiscal reforms and The Value at Risk of a quarter with a 95% of confidence is amendments to the taxation laws in Chile, Colombia, Brazil calculated as a 5% percentile more adverse of the possible and Peru. The changes in governmental and monetary poli- variations in the period. cies in relation to duties, exchange controls, regulations and taxation may reduce the compnay’s profitability. Inflation, Considering the hypothesis described above, the Value at devaluation, social instability, and other political, economic Risk in a quarter of the positions described corresponds to or diplomatic events, including the response to these cir- US$ 630 million. cumstances by the region's governments, may also reduce the company's profitability. This value represents the potential increase in the debt and derivatives portfolio, so this value at risk is directly related, among other factors, to the value of the portfolio at the end of each quarter. 87 Risk Factors Since the Company’s businesses depend to a large ex- Operational costs of thermoelectric plants can be consid- tent on hydrological conditions, drought conditions, erably higher than the costs of hydroelectric plants. Op- flooding and other weather conditions may adversely erational expenses increase considerably during drought affect the operations and profitability periods, when thermoelectric power plants are dispatched more frequently. Also, depending on our commercial com- The struggle against climate change is one of the main mitments, we may have to purchase electricity from the global challenges, which exposes Enel Américas to a se- spot market in order to comply with all our contractual sup- ries of medium and long-term risk factors. These include ply obligations and the cost of these purchases of electric- the risks related with legislative and regulatory changes ity may exceed the price at which we must sell the con- associated with climate change. The company has experi- tracted electricity, thus causing losses for these contracts. enced extreme climate events, such as the severe drought that impacted hydroelectric generation. Droughts also have an effect on the operation of thermo- electric power plants, including facilities that use natural In 2018 approximately 56% of the consolidated installed gas, diesel, or coal as fuels, as follows: generation capacity was hydroelectric. As such, the ex- treme dry hydrological conditions can adversely affect • Thermal plants require water for cooling and droughts the company’s business, the operational results and its fi- not only reduce the availability of water, but also in- nancial condition. The hydrological condition of the region crease the concentration of chemicals such as sul- has been frequently affected by two weather phenomena fates in water. The high concentration of these chem- —“El Niño” and “La Niña”— which had an impact on rains icals in the water used for cooling increases the risk and have resulted in droughts, affecting the Company’s of damage to the equipment of the thermoelectric ability to distribute energy from its hydroelectric facilities. plants, as well as the risk of infringing relevant envi- In Brazil, where 76% of the Company’s installed capacity ronmental regulations. As a result, water may have to is hydroelectric, authorities were forced to make regulatory be purchased from agricultural areas, which are also changes by modifying the maximum price limit, which is experience water shortages. These water purchases reviewed annually and is consequence of the low hydrolog- can increase operational costs and force the negotia- ical contributions registered since 2014; the latter also had tion with local communities. a direct impact in the short-term electricity market result- ing in an increase of thermal dispatch and spot prices. The • Thermal power plants that burn natural gas generate Brazilian regulation considers a relocation mechanism that emissions such as nitrogen oxide (NO), carbon diox- allow hydroelectric generators with energy deficit to buy ide (CO2) and carbon monoxide (CO) gases. When energy at the prices established by other generators with operating with diesel they release NO, sulfur dioxide superavit; nevertheless, due to the existing drought, every (SO2) and particulate matter into the atmosphere. energy generation company had deficits in relation to their Coal fired plants generate emissions of SO2 and NO. supply contracts, therefore these companies were forced Therefore, greater use of thermal plants during pe- to buy energy in the spot market at higher prices. riods of drought generally increases the risk of pro- ducing a higher level of pollutants that could lead to Likewise, the “El Niño” phenomenon has affected hydro- penalties if emissions are above certain levels. logical conditions in Colombia in the past, where 88% of the installed capacity is hydroelectric, leading to a scarcity The recovery from the drought that affected the regions of precipitations and high temperatures during the period, where most of the hydroelectric power plants of the com- and therefore to an increase in energy prices. Each event pany are located can last for a prolonged period of time and of “El Niño” is different and, depending on its intensity and new episodes of drought may occur in the future. A pro- duration, the magnitude of its social and economic effects longed drought may exacerbate the risks described above can be more material. and have an adverse effect on Enel Américas business, operational results and financial condition. 88 Annual Report Enel Américas 2018An economic downturn of Argentina or a sharp depre- Governmental regulations may adversely affect the ciation of the Argentine peso would adversely affect company’s businesses, cause delays, hinder the devel- the company’s businesses. opment of new projects or increase operating costs and capital expenditures. In 2018, the Argentine peso suffered a sharp depreciation against the dollar, with a depreciation of 20% in just one Subsidiaries of Enel Américas are subject to extensive reg- day on August 30, 2018. This devaluation is the result of ulations regarding tariffs for their clients and other aspects the domestic economic downturn, the increase of external of the business, and these rules may negatively impact debt and high inflation. Even though the rate of depreciation profitability. For example, governments in the countries of the Argentine peso against the US dollar has recently ac- where the company operates may implement rationing celerated, the increase of interests paid for time deposits policies during droughts or prolonged failures in rationing has been insufficient to compensate inflation. The interest services, which could adversely affect the Company’s rate established by the Argentinean Central Bank has been business, operating results and financial condition. Opera- already at a maximum of 45%, when the monetary authori- tional subsidiaries are subject to environmental regulations ty raised interest rate to 60%. Despite the fiscal, monetary that force the company to carry out environmental impact and others measures that the government has been taking studies for future projects and obtain constructions and to soften the effect of devaluation, including several agree- operating licenses from local and international regulators. ments with the International Monetary Fund, the devalua- Governmental authorities may retain and delay the approv- tion of the Argentinean peso may continue in 2019 and in al of these environmental impact studies. the years ahead. In the case of existing facilities, current regulation has been The sovereign creditworthiness of Argentina also has se- increasing in the four countries where the company has riously deteriorated, reaching a maximum of 780 basis investments, which resulted in significant non-compliance points over the nominal value of sovereign debt during Au- risk, so it has been necessary to create teams specialized gust 2018. The international credit risk rating of Argentina in compliance regulation and the maintenance of a closer fell from "B +" to "B" by Standard & Poor's in November technical relationship with the authorities in order to better 2018, with stable outlook. Moody's reaffirmed the " B2 " understand the possible implications. rating, which was updated in November 2017 with stable outlook. While Fitch maintained the "B" rating, but change Governmental authorities may also delay the distribution the outlook from “stable” to “negative” in November 2018. tariff revision process, or tariff adjustments determined by the authorities may be insufficient transfer costs to clients, Due to the above, from July 2018, Argentina is consid- such was the case of Codensa, the Colombian distribution ered a hyperinflationary economy according to accounting company, whose tariff revision was scheduled for 2015, standards IFRS. The general prices index was used retro- but will take place in 2019. Similarly, electricity regulations spectively in order to present the amounts related with the issued by governmental authorities in the countries where Argentine subsidiaries in the consolidated financial state- the company operates, may affect the capacity of genera- ments of Enel Américas and therefore be able to reflect tion companies to gain revenues to compensate operating Argentine peso's purchasing power, according to the dis- costs. positions described in the NIC 29, “Financial Information in Hyperinflationary Economies”. Non-monetary assets and The delays or modifications of any proposed project, and liabilities were restated since February 2003, the most re- the laws or rules that can change or be interpreted in a way cent date in which inflation adjustments were applied for that can adversely affect the operations or plans for the accounting effects in the Argentine subsidiaries. companies in which the Company has investments, which can adversely affect its business, operational results and A further deterioration of the Argentine economy may ad- the financial condition. versely affect operating results and the financial condition of the company. For further information, see Note 8 of the Financial Statements of Enel Américas. 89 Risk Factors Regulatory authorities may impose fines on the com- government regulations, strategic and economic consider- pany’s subsidiaries due to operational failures or ations, and credit restrictions. In the future, the likelihood non-compliance of regulations. of being able to rely on cash flows of those entities’ opera- tions for the company’s debt payment is reduced. Electricity businesses may be subject to regulatory fines for any breach of current regulations, including power out- Limits on dividends and other legal restrictions. Some of ages, in the four countries in which the company operates. the subsidiaries are subject to legal reserve requirements and other restrictions on dividends payment. Other legal The generation subsidiaries of the Group are supervised restrictions, such as currency controls, may limit the ability by local regulators and may be affected by these fines in of subsidiaries and associates to pay Enel Américas divi- cases where, in the opinion of the regulator, operational dends, and amortize credits or the company will distribute failures that affect the regular supply of energy to the sys- other distributions. Furthermore, the ability of any of the tem is defined as a responsibility of the company as when, subsidiaries that are not wholly owned by Enel Américas for example, there is no coordination of the agents with the to deliver cash payments may be limited by the fiducia- system operator. In addition, subsidiaries may be required ry duties of the directors of such subsidiaries to minority to pay fines or compensate customers if subsidiaries can’t shareholders. Moreover, some of the subsidiaries may be provide electricity, even if such non-compliance is due to required by local authorities, in accordance with applica- forces beyond the subsidiaries’ control, or if they don’t ble regulations, to reduce or eliminate the payment of divi- comply with environmental or other regulation. dends. As a result of such restrictions, any subsidiary may, under certain circumstances, be prevented from delivering In 2018, ANEEL imposed fines to Enel Distribución São cash to Enel Américas. Paulo for the equivalent to US$ 91 million for five breaches, two of them related to failures or inaccuracies in account- Contractual Obligations. The restrictions for dividends ing record and/or the asset base, and the other two associ- distribution include credit agreements that the subsidiary ate with non-compliance with the supply quality standards. Enel Generation Piura and several subsidiaries in Brazil can REVISAR prevent the payment of dividend and other distributions to shareholders if they are in non-compliance of certain finan- In Argentina, the result of the tariff revision for the period cial ratios. In general, credit agreements ban any type of 2017-2021 imposed fines to Edesur for the technical qual- distribution in the event of non-compliance underway. ity service, the technical product and commercial quality, which are gradually increasing in line with higher tariffs. Subsidiaries’ Operating Results. The subsidiaries and asso- ciate companies capacity to pay dividends, credit amortiza- In order to meet payment obligations, Enel Américas tions or to deliver other distributions that Enel Américas is depends on payments from its subsidiaries and asso- limited by its operational results. As long as the cash needs ciate companies. of any subsidiary overcome their available cash flow, said subsidiary will not dispose of the cash to be delivered to With the aim of paying its obligations, the company de- the company. pends in part on the cash received from dividends, loans, interest payments, capital reductions and other payments Additionally, the currency of any dividend paid by our sub- from its subsidiaries. The ability of subsidiaries to pay divi- sidiaries is subject to depreciation in comparison to our dends, interest and credit payments, and deliver other dis- functional currency, which will have a negative impact on tributions is subject to legal limitations, such as dividend our capacity to pay dividends to shareholders. restrictions, fiduciary duties, contractual restrictions that may be imposed by local authorities. Any situation described above could adversely affect the business, operational results and the financial condition. Historically, the company has not always been able to ac- cess its subsidiaries’ cash flows at all times due to certain 90 Annual Report Enel Américas 2018Enel Américas is involved in litigations. Political developments or financial crisis or any other Enel Américas is currently involved in several litigations impact in the countries where Enel Américas operates that can conclude in unfavorable decisions of financial fines and therefore might negatively affect operations and crisis anywhere in the world may have a substantial for the company. For example, in 2016 three claims against liquidity. Enel Distribución Goiás, recall that the privatization process was illegally executed and demands the nullity of the pro- The four countries where the company operates are vul- cess and also compensation. Plaintiffs include BNDES and nerable to external impacts, including financial and political the IFC. The main risk of this litigation is the loss of conces- events, which may cause important economic problems sion of Enel Distribución Goiás from Enel Brasil. As of the and impact growth. If any of these economies would expe- date of this Report, legal proceedings are pending. There- rience lower economic growth than expected or recession, fore, there is neither an estimation of the potential loss nor it’s likely that clients would demand lower electricity and an associated provision. The resolution of cases can take some of them might face difficulties to pay the electricity up to ten years. Enel Distribución Goiás is also involved in bill, and probably the uncollectible accounts of the Compa- tax litigation for claims originated in a period previous to its ny would increase. Any of these situations may negatively privatization, and this claim can not only have an adverse affect operational results and financial situation. effect in the Group, but also deplete resources and atten- tion for many years. Political or financial developments in other places in the world may also adversely affect the company’s business. Enel Américas controls Emgesa and Codensa in Colom- For example, since 2018, the United States and China have bia through a shareholders agreement with Grupo Energía been involved in a trade conflict that comprises protec- Bogotá S.A. ESP (“GEB” for the Spanish abbreviation). In tionists measures, thus increasing volatility in the global December 2017, the company was informed that GEB sub- financial markets, due to the uncertainties that political de- mitted to arbitration the differences that come up between cisions carries. Instability in the Middle East or in any other the parties in relation to the distribution of new revenues of important region involving oil producers, may also sharply 2016 of these two Colombian subsidiaries. GEB says that increase oil prices globally, so operating costs of thermal Enel Américas breached the requirements of shareholders generation power plants would grow, therefore adversely agreements, in relation to the norms that determine the affecting operating results and financial condition. distribution of income method, forcing parties to vote in favor of distributing 100% of income, with the distribution Lately, the federal government of the United States expe- of only 70% of net income in 2016. Complaints want the rienced temporary shutdowns, such as the most recent distribution of net income obtained in 2016 to reach 100% one involving the SEC among many other federal agencies, for each company. The amounts in dispute are US$ 21 mil- lasting 35 days, and becoming the longest federal shut- lion for Codensa and US$ 27 million for Emgesa. An ad- down in the history of the United States. Even the tem- verse ruling would bring a precedent that might force Enel porary or predicted shutdowns of the government of the Américas to always vote for the distribution of 100% of net United States might have an adverse effect over time, the income every year, which wouldn’t be financially cautious execution and higher expenses related to our main transac- for our subsidiaries and our company. tions that involve the SEC. The financial situation or the operating results might be af- Additionally, an international financial crisis and its negative fected if the defense of this arbitrage is not successful or impact in the financial industry may have a detrimental im- other claims that may be taken against the company. For pact in the company’s capacity to obtain new banks financ- further information regarding lawsuits, see note 36.3 of the ing in the historical terms and conditions. Enel Américas’ Financial Statements. 91 Risk Factors Political or financial developments of other kind may also The construction of power plants may suffer delays, decrease the capacity to access the capital markets in the works stoppages and significant cost over-runs, as well countries where the company operates, as well as the in- as the opposition of stakeholders, which can damage ternational capital markets for other liquidity sources, or the company’s reputation and potentially deteriorate its raises of interest rates offered to the company. In turn, goodwill. reduced liquidity may affect capital expenses, long-term investments and acquisitions, growth perspectives and Power plants projects can be delayed in the process of ob- dividends policy. taining regulatory approvals, or may face the shortage of equipment or workforce, and also can be subject to con- Economic fluctuations in South America may affect struction delays, strikes, adverse weather conditions, nat- the operations and financial condition, and also in the ural disasters, social conflicts, accidents or human errors. value of the securities of the company. Any event of this kind may negatively affect the company’s operating results and financial condition. Every operation of Enel Américas is located in South Amer- ica. Therefore, consolidated revenues may be affected by Existing markets conditions in the initial phase of the proj- the performance of South American economies as a whole. ect’s approval might be totally different to the existing ones If local, regional or global economic trends adversely affect when the project is completed, therefore in some cases the economy in any of the four countries where the com- these projects could be commercially unfeasible. Deviation pany has investments or operations, the financial condition from these assumptions, including the forecast of dead- and operational results may be negatively affected. Enel lines and the estimation of expenses related to these proj- Américas has investments in Argentina, Brazil and Peru, ects, might result in cost overruns and execution periods which are instable economies and in occasions have ex- greater than the estimations, which in turn could have a perienced political instability due to the scandals of corrup- negative effect for the business, operational results and tions involving several high-ranking government officials. financial situation. Insufficient cash flows of subsidiaries located in countries The adequate sites to develop new projects are sometimes with volatile economies have led, in some cases, to their in greatly challenging areas in terms of geographical topog- inability to comply with financial obligations and the need raphy (mainly in Colombia and Peru), and in some cases to request for exemptions for the compliance of certain in mountain slopes or inside jungles with limited access. financial covenants, or at some point, to request collater- Moreover, in some cases the geographic location of some als or other emergency measures from Enel Américas as projects may also represent risks in terms of archaeological shareholder, especially in Brazil and Argentina. heritage. These factors also can provoke significant delays The occurrence of future adverse events in these econ- and excessive costs. omies may hinder the ability to carry out strategic plans, Also de operation of thermal power plants of Enel América, which eventually would affect adversely operational results especially those that use coal for generation, may affect and financial condition. the stakeholders’ goodwill, because of the greenhouse gas Moreover, in South America the financial and securities and the community. Also, communities could have their markets are influenced in different degrees by economic own interests and different perceptions than the compa- and market conditions of other countries, which may ad- ny, being influenced by other interested parties or motiva- versely affect the value of the company’s securities. tions unrelated with the project. Therefore, if the company emissions, which may negatively affect the environment doesn’t commit with its relevant stakeholders, it may face 92 Annual Report Enel Américas 2018opposition that finally might negatively affect its reputa- Additionally, any delay or difficulty related to the acquisition tion, paralyze operations or be sued. The reputation of and integration of multiple transactions could have an adverse Enel Américas is the foundation of its relationships with effect on Enel Américas’ business, financial condition or op- the main stakeholders and other groups of interest. If the erational results. company doesn’t manage effectively the real or perceived problems, those might cause negative consequences for The business and profitability of Enel Américas may the firm, and therefore create a negative effect for the busi- be adversely affected if water rights are rejected, if ness, operational results and financial situation. water concessions are granted for a limited time or if their cost increases. Reputational damage can exert significant pressure on reg- ulators, creditors and other interested parties, and ultimate- The Company owns water rights over river and lakes lo- ly induce to embrace projects and operations that can be cated in the vicinity of its generation facilities, which were withdrawn, which may trigger a drop of stock prices and granted by the authorities of the respective countries. In also hinder our capacity to attract and retain competent Colombia, the water rights or water concessions are grant- collaborators, which could deteriorate our stakeholders’ ed for periods of 50 years and are renewable for the same goodwill. period of time; however, these concessions can be re- voked, for example, when there is a progressive decrease It’s possible that the company may not be able to or depletion of the waters. In Colombia, the access to make the appropriate acquisitions or successfully in- water for human consumption is the first priority before corporate the businesses acquired. any other use. In Peru, water concessions are granted for indefinite periods, and can be revoked due to scarcity or a The company permanently verifies acquisitions prospects for decline in service quality. the purpose of increasing market coverage or complement existing businesses, although it cannot ensure that appropri- Any limitation to current water rights, the need to obtain ate procurement transactions can be identified and specified additional water rights, or the current unlimited water con- in the future. The acquisition and integration of independent cessions could have a material adverse effect over the hy- companies that are not controlled by Enel Américas is gener- droelectric development projects and profitability. ally a complex, time-consuming and expensive process. If an additional acquisition is made, such as the one carried out in Exchange risks could adversely affect the results and Enel Distribución São Paulo in 2018, there might be important the value in dollars of the dividends paid to the ADS debts and have to assume unknown obligations, the potential holders. loss of key employees, depreciation expenses related to tan- gible assets and the distraction of management from other Even though the functional currency is the US dollar, sub- business concerns. Additionally, any delay or difficulty relat- sidiaries generate revenues in Argentine Pesos, Nuevos ed to the acquisition and integration of multiple transactions Soles, Brazilian Reais and Colombian Pesos. Also, the could have an adverse effect on the business, financial con- company pays dividends in Chilean pesos. In general, Enel dition or operational results. In the case of the acquisition car- Américas has been and continue being highly exposed to ried out by Enel Distribución São Paulo, liabilities grew signifi- the variations of local currencies with respect to the dol- cantly, due to the new debt needed for the acquisition and the lar, due to temporary differences and other limitations to consolidation of the own debt of the distribution company. adjust tariffs to the dollar. Because of this exposure, cash generated by the subsidiaries, expressed in dollars, may Moreover, the integration of the acquired businesses may be substantially decrease when local currencies are devalued hard, difficult, and expensive, require plenty of time and could with respect to the dollar. The future volatility of exchange be a burden for the resources and the relationships with col- rates in currencies in which the company receives reve- laborators and clients, and lastly either may not be successful nues or in which incurs costs, can affect the business, fi- or bring the expected benefits. nancial condition, and operating results, especially when expressed in US dollars, the currency that affects ADS holders. 93 Risk Factors Long-term energy sales contracts are subject to fluc- On October 16, 2018, Enel announced its intention to tuations of market prices of certain commodities, en- increase its shareholding in Enel Américas of up to 5% ergy and other factors. through the acquisition of shares according to the stock swap agreements for 2019. If these transactions were Enel Américas is economically exposed to market price completed, minoritary shareholdings would decrease, thus fluctuations of certain commodities due to long-term en- reducing their capacity to exert pressure on controlling ergy contracts. As selling counterparts, subsidiaries have shareholder in the case of disputes. material obligations due to the long-term energy contracts at a fixed payment. The prices of these contracts are in- The electricity business is exposed to risks arising dexed at the value of different commodities, exchange from natural disasters and extreme weather phenom- rates, inflation, and the market electricity prices. Adverse ena in the current climate scenario, catastrophic ac- changes to these rates could reduce the fees that a rea- cidents and acts of terrorism, which could adversely sonably applied to the electricity sales contracts in the long affect the operations, revenues and cash flows. term at a fixed price, which could adversely affect the op- erational results and financial condition. In Argentina, these The Company’s main facilities include power plants, trans- risks would be greater in the future with the liberalization mission and distribution assets. Earthquakes, floods, ex- of the energy market. treme weather phenomena, fires or other catastrophes, may damage the company’s facilities, and other cata- In the countries, where clients can freely choose non-regu- strophic disasters caused by nature or by human action, lated tariffs, including Peru, this choice may be harmful for as well as acts of terrorism, vandalism, and riots. A cata- operating revenues that the company would have received strophic event could lead to extended business disruption, in a regulated regime. In some cases, clients may choose resulting in significant reductions in revenues due to lower an alternative supplier of energy, which would negatively demand or significant additional costs not covered by in- affect the business, operational results and financial situ- surance clauses for business interruptions. There may be ation. delays between the occurrence of a significant accident or a catastrophic event and the definitive reimbursement of The controlling shareholder could have substantial in- Enel Américas insurance policies, which normally contem- fluence over Enel Américas and may have a different plate a deductible and are subject to maximum amounts strategic vision than the minority shareholders when per claim. it comes to the development of the company. Enel SpA (Enel) is the controlling shareholder of Enel non in Peru caused unusually heavy rains that caused the Américas, with 51.8% of its share capital, therefore it can temporary stoppage of several hydroelectric power plants determine the results of almost every important issue that due to the overflowing of rivers, such as Callahuanca (81 For example, in March 2017, “El Niño Costero” phenome- requires a shareholder vote, as is the appointment of the MW) and Moyopampa (69 MW). majority of members in the Board of Directors and, sub- ject to Chilean regulatory framework, legal and contract The distribution business y also affected by the severe restrictions, the dividend policy. Enel can also exert influ- weather, mainly in Argentina. In extreme temperatures sce- ence over the operations and strategy of the business. narios, demand may significantly boost in a short period of Its interests may, in some cases, differ from the minori- time, which could affect the service and cause shortages, ty shareholders interest. For example, Enel carries out its which may also result in fines for the company. Depending commercial operations in a field of renewable energy in on weather conditions, results of the distribution business South America through the company Enel Green Power may fluctuate from one year to the other. S.p.a., in which the company has no capital interest. Cer- tain conflicts of interest that may affect Enel in these mat- Extreme weather events have become more frequent due ters could be solved against Enel Américas or its minoritary to climate change, and are among the emerging risks that shareholders’ interests. have been identified in our planning process. 94 Annual Report Enel Américas 2018The company is subject to financing risks, such as Not being able to finance new projects, capital expendi- those related with the financing of new projects and tures or refinance the company's existing debt, could ad- capital expenditures, and the risks related to the re- versely affect operating results and its financial condition. financing the maturing debt; it’s also subject to the compliance with debt obligations, all of which could Enel Américas depends on the electricity transmis- adversely affect liquidity. sion facilities that are neither their property nor in their control, and also depends on gas pipelines infra- As of December 31, 2018, the Company’s consolidated structure and fuel supply contracts. If these facilities debt amounted to US$ 8,916 million (including US$ 2,652 do not provide a proper transmission service, it can million of debt contracted to Enel Finance International NV). impede the energy delivery sold to final clients. Some of the debt contracts are subject to: (1) financial In order to deliver the electricity sold, the Company de- agreements, (2) affirmative and negative covenants, (3) pends on the transmission system property of other com- events of default, (4) mandatory prepayment events for panies that are not related and are operated independently. breach of contractual conditions, and (5) certain clauses for This dependency exposes the Company to severe risks. If change of control by significant mergers or divestments, the transmission is interrupted or the transmission capaci- among other provisions. A significant portion of the compa- ty is inadequate, it can prevent the sale and the delivery of ny's financial debt is subject to cross-default clauses that electricity. If the energy transmission infrastructure is inade- have varying definitions, criteria, materiality thresholds, quate in a region, the costs recovery and profits might not be and applicability in the subsidiaries in which such cross- sufficient. If restrictive price regulatory transmission norms breach would arise. are imposed, transmission companies that the entity relies on, may not have sufficient incentives to invest in infrastruc- In the event that Enel Américas or its significant subsid- ture transmission expansions, which could adversely affect iaries breach any of these material contractual provisions, operations and financial results. The construction of new debt holders may demand immediate repayment, and a transmission lines may take longer time than in the past, significant portion the debt may be due and payable. It’s mainly due to new social and environmental demands that possible that the company would not be able to achieve are creating uncertainty about the possibility of completing debt refinancing or obtain such refinancing in terms that the projects. Moreover, in some of the countries where the are acceptable to the company. In the absence of such a company operates, the growth of Non-Renewable Conven- refinancing, Enel Américas could be forced to dispose of tional Energy (NRCE for the English abbreviation) projects, is assets in order to make overdue payments of its indebt- congesting the current transmission systems, since these edness under circumstances that could be unfavorable to are projects of fast construction, while the new transmission obtain the best price for such assets. Moreover, it’s possi- processes can take longer to be constructed. For instance, ble that the assets could not be sold fast enough or at high in Argentina, the lack of investments in transmission lines enough amounts to enable such payments to be made. reduces the incentives to develop NCRE projects. Another scenario is that company may not have the capaci- The company also depends on gas pipelines to obtain natu- ty to obtain the required financing to complete the projects ral gas, mainly in Peru, country whose most of the installed under development or under construction. Existing market capacity is thermal. The Peruvian system faced congestions conditions when requiring the funds or other unplanned of gas and energy due to the lack of installed capacity of cost over-runs may compromise the ability to finance these gas pipelines and transmission lines, respectively, resulting projects and investments. in higher spot prices. Thermoelectric generation facilities in As of the date of this report, the company considers that gas, coal, diesel and other fuels to generate electricity, de- Brazil is the country with the highest refinancing risk. As of pending on the technology of the respective power plants. December 31, 2018, third-party debt of the Brazilian sub- Any contractual breach or supply shortage may prevent the sidiaries of Enel Americas amounted to US$ 2,837 million. facilities from producing electricity in a timely manner. the four countries where the Company operates purchase 95 Risk Factors Due to the liberalization of the energy market in Argentina, The business can experience adverse consequences including the fuel market, the company’s Argentine genera- if it does not have the ability to reach satisfactory tion subsidiaries are exposed to fuel prices volatility, mainly agreements in the collective negotiation contracts Natural Liquefied Gas (LNG), which may be scarce especial- with the unionized workers and retain key employees. ly during winter because of the higher seasonal residential demand. In order to face these regulatory changes, these A large percentage of the employees are members of a risks have been undertaken by CAMMESA. union that has collective negotiation contracts that need to be regularly renewed. The business, financial condition, The subsidiary Enel Generación Fortaleza owns and oper- and operational results of Enel Américas could be adverse- ates a gross 327 MW natural gas combined cycle power ly affected in the case that an agreement cannot be found plant, whose capacity supplies one third of the power de- with any of the unions that the employees represent, or mand of 8.8 million people in the State of Ceará in Brazil. by an agreement with the trade union that contains con- In order to generate electricity and fulfill its energy commit- ditions that Enel Américas finds unfavorable. The laws in ments, Fortaleza maintains a contract with Petrobras, the the various countries where the company operates estab- Brazilian company appointed by the federal government to lish legal mechanisms for the judicial authorities to impose supply natural gas in accordance with the Thermoelectric work contracts if the parts are not capable of reaching an Priority Program, whose terms establishes that the gas sup- agreement, which can increase costs. ply to Fortaleza would be guaranteed until 2023 at a price defined contractually. Additionally, some employees have highly specialized abil- ities and certain actions such as strikes, walk-outs or work The main purpose of the contract is to avoid a short-term stoppages by those employees could adversely impact the energy crisis ensuring thermoelectric generation due to the business performance, operational result, and financial, as vulnerable situation of hydroelectric facilities exposed to well as the company’s reputation. weather conditions, as was the case in 2018. In February 2018, Petrobras suspended the gas supply alleging existing The relative lack of liquidity and volatility in the Chilean inequality between the contractual price and the current securities market and its dependence on the economical market conditions. Fortaleza stop operating on July 2018, conditions in Latin America and other parts of the world, after some legal allegations, and as of the date of this report could negatively affect stock prices and the company’s it is still out of service. Operational costs of Fortaleza sharply ADS. increased during 2018, due to higher energy purchases in the spot market as a result of the stoppage of Petrobras, Even though the Company does not own assets in Chile, in order to comply with its contractual obligations with its stocks are listed in the Chilean Stock Market, for which Enel Distribución Ceará. This distribution company signed Enel Américas is regulated under the laws of the Republic a contract with Fortaleza for the acquisition of 100% of its of Chile, as well as being placed in Chile. The Chilean stock generation until 2023, year where the concession finishes. markets are substantially smaller and less liquid that the This situation might negatively affect not only the Brazilian main stock markets in the United States or other devel- business, operational results and financial situation, but also oped countries. The low of liquidity in the Chilean market may impact the company’s consolidated financial situation, can damage the ADS holders to sell ordinary stocks in the due to the risk of default of financial covenants and other Chilean market of the ADS program, in quantity, price, and contracts of most of the Brazilian subsidiaries. moment in which they would like to. At the same time, liquidity and the stock market or ADSs can be affected by a Any stoppage, failure or lack of transmission infrastructure series of factors that include variations in exchange and in- may disrupt our business or affect market prices, which may terest rates, and deterioration and volatility of the markets adversely affect operating results and our financial condition. and any liquidity change, financial condition, results, and the company’s profitability. 96 Annual Report Enel Américas 2018Lawsuits filed against Enel Américas in the other on IT systems to manage information and communication countries of South America or the claims against the between these parties has greatly increased since the de- Company that are based on foreign legal concepts ployment of smart meters and smart grids, such as in Brazil may not be successful. and Colombia, where the company has installed a significant amount of smart meters. All of the company’s assets are located outside of the United States. All the directors and all senior executives Generation, transmission and distribution facilities, It sys- are domiciled outside the United States and most of their tems and other infrastructure, as well as the information assets are also located outside the United States. If any processed in the IT systems of the company (such as cli- investor were to file a lawsuit in the United States against ents’ information, employees, operations, infrastructure and the company directors, senior executives or experts, it may assets) might be affected by cyber attacks, including those be difficult for them to pursue a legal process within the caused by human errors. The industry and the company United States against such persons and may be difficult have started to see an increase on the amount and sophis- for them to enforce, in the courts of the United States or tication of cyber attacks from international activist organiza- Chile, a judgment rendered in the United States based on tions, nations and individuals, and are among the emerging the civil liability provisions of the United States federal se- risks identified by the company in its planning process. curities laws. In addition, there are doubts as to whether a successful action could be waived in Chile with regard to Cyber security incidents may damage Enel Américas’ sub- the liability based solely under the guidance of the United sidiaries limiting their generation, transmission and distribu- States federal securities laws. tion capacity, delay the development and construction of new facilities or projects for capital improvement of existing Interruption or failure of the information technology facilities, interrupt their clients’ operations or be exposed to systems and communications systems or external liabilities. Generation, transmission and distribution systems attacks or breaches of these systems could have an are part of an interconnected system. Therefore, a disruption adverse effect on operations and results. caused by a cyber security incident in the electricity trans- mission grid, the network infrastructure, fuel sources or the Enel América operates in an industry that requires the con- operations of third party suppliers, may also negatively af- tinued operation of sophisticated information, control and fect the company’s business. communications technology systems (“IT” systems) and network infrastructure. Also, the firm uses its IT systems Moreover, the business requires the collection and stor- and infrastructure to create, collect, use, disclose, storage, age of personal identification information from customers, delete and process confidential information, including the employees and shareholders, who expects to be properly company’s and clients’ data, and personal information of protected. Cyber security breaches may expose the com- clients, employees and their dependents, contractors and pany to a risk or loss or misuse of confidential information. shareholders, among others. In the generation business, An important theft, the loss or fraudulent use of information IT systems can monitor the operations of power plants, regarding personal identification may lead to high costs to maintain power generation and network performance, ad- inform and protect the affected people and/or may result on equately generate customer invoices, achieve operational lawsuits, costs, responsibilities, fines or important penalties efficiency, and meet service goals and standards. Distribu- for Enel Américas, which may have a material and adverse tion subsidiaries could also be adversely affected as they impact in the results and operations of the company, and rely heavily on IT systems to monitor smart grids, billing also in the reputation of the group with clients, shareholders processes for millions of customers, and customer service and regulators, among others. Also, it is possible that the platforms. The operation of generation, transmission and company may be required to incur in significant costs related distribution systems, not only depends on the physical in- to governmental actions, as a response to those intrusions terconnection of the facilities with the electricity grid infra- or to strengthen the information and the electronic control structure, but also communications between the different systems. components of the grid are extremely important. Reliance 97 Risk Factors Most of the internal processes depend on IT systems. If Enel Américas has designed security measures to protect its the company’s IT systems or the ones of its suppliers of IT systems, network infrastructure and other assets. Never- external services, were interrupted, failed or breached, it’s theless, these assets and the information they process may possible that critical functions of the business may not be be vulnerable to cyber security incidents, such as the assets completed, including the effective maintenance of certain failure or the non-authorized access to assets or information. internal controls related to financial reports and other com- There is a large exposure to cyber attacks whose objective pliance functions. In this case, compliance policies and pro- is to damage assets through computer networks, cyber es- cedures of the company may not be sufficient to prevent or pionage in the pursuit of strategic information that may be detect every inappropriate practice, frauds o breach of law beneficial to third parties, and cyber theft of private and con- from affiliates, collaborators, directors, employees, partners, fidential information, including information of the company’s agents and service suppliers of the company. Any breach of customers. There has been great exposure to cyber attacks law of anticorruption sanctions, bribery, money laundering in the past, including attacks of service rejection that might and antitrust may have an important adverse effect in the affect the access to the service from users and attacks that business, reputation, operational results and financial condi- could affect the domain name systems, restraining the use tion of the company. of certain web pages and useful applications. 98 Annual Report Enel Américas 201899 Risk Factors 100 Annual Report Enel Américas 201815 Regulatory framework of the electricity industry 101 Letter From the Chairman Description of the industry sector Enel Américas and its subsidiaries and jointly controlled companies participate in the generation, transportation, distribution and sale of electricity in four countries. Each of them has a regulatory framework, energy matrixes, partic- ipating companies, and different growth and consumption patterns. The following is a brief summary of the main legal bodies that regulate the activity, the market structure and the most relevant aspects regarding the agents of each of the countries where the company operates. Argentina The Argentine electricity sector is governed by, among other regulations, by Law N°15,336 of 1960 and Law N°24,065 of 1992. The Wholesale Electricity Market (MEM) there are four local agent categories (generators, transmission companies, distributors and large clients) and foreign agents (generation trading companies and demand trading companies), companies that are authorized to buy and sell electricity and its related products. Originally the generation sector was organized on a com- petitive base (marginalism), with independent generators that sold their energy in the MEM spot market or through private contracts, to clients in the MEM contracts mar- ket, or to the “Administrative Companies in the Whole- sale Electricity Market S.A.” (CAMMESA) through special transactions such as contracts under the Resolution S.E. Nº220/2007 and Resolution S.E. Nº724/2008. Neverthe- less, this regimen changed substantially in March 2013, when the Energy Secretary approved Resolution S.E Nº 95/2013, which established a remuneration system for the generation based on average costs, forcing the delivery all the energy generated to CAMMESA. This new compen- sation scheme became valid in February of 2013 and was updated through the Resolution SE N° 529, N° 482, N° 22 in 2014, 2015, and 2016 respectively. On February 2, 2017 the Energy Secretary published the Resolution SEE 102 Annual Report Enel Américas 2018N°19/2017 replacing Resolution SEE N° 22/2016 and es- electricity. The distribution companies are not allowed to tablishes new guidelines for the remuneration of existing own generation units. generation power plants, focusing on the power availability of the units. Regulated clients are supplied by distribution companies with regards to regulated fees, unless they have a mini- The transmission industry operates in conditions of mo- mum demand capacity of 30kW. In this case, they are nopoly, and is composed by several companies to which considered as “large clients” and can freely negotiate their the Federal Government grants concessions. prices with generation companies. The distribution sector operates under monopoly con- On December 16, 2015, through Decree 134/2015 a na- ditions and is served by companies that have also been tional energy emergency was declared until December granted concessions. Distribution companies have the ex- 31, 2017, where the Ministry of Energy was instructed to clusive responsibility that electricity has to be available for elaborate and apply actions to the Generation, Distribution final clients within a specific concession area, and does not and Transmission industries with the objective of adapting consider if the client has a contract neither with the distrib- the service quality and supply security; and teaching the utor nor with a generator. National Public Administration how to carry out consumer rationalization programs in the respective public bodies. Due to the economic slow down that affected the coun- try in 2002, Law Nº25,561 was enacted with emergency. The Law disrupted the American dollar parity and pushed the conversion from Argentine pesos from obligations and rights assumed by the American currency. This forced nominal conversion from dollars to pesos and had a strong impact in the whole Argentinian electricity industry. Ad- ditionally, the Government approved several regulatory measures that slowly intervened in the development of the industry. The Emergency Law has been subject to succes- sive extensions and with regards to the last one, approved through Law N°26,896, will be valid until December 31, 2015. The pesification and devaluation of the economy forced the renegotiation of all of the concession contracts. In particular, the distribution sector and the company par- ticipated in the “Energy Distributing Companies from the South, S.A.” (Edesur), and in 2006 with the Government when an Act Agreement of Contractual Renegotiation was signed, that subsequently was ratified through Decree PEN N° 1959/2006, which gradually has allowed the adap- tation of tariff revenues as a way to guarantee the business sustainability. The implementation of this agreement was paralyzed since 2008 and until this exercise, as explained below. No generator, distributor, large user, nor any other compa- ny controlled by any of the latter or under its own control, can be the owner or controlling shareholder of a transpor- tation company or its controlling companies. At the same time, transmission companies are forbidden to enter into generation activities, distributing, buying, and/or selling Regulation of generation companies The regulation of generation companies has suffered im- portant variations since the enactment of Law N°24,065 until Resolution S.E.E Nº 22/2017. In accordance with the aforementioned Law, every generation agents from MEM must be connected with SIN (National Interconnected Sys- tem) and are obligated to comply with the dispatch order to generate and deliver electricity, in order to sell in the spot market and in the forward market (MAT). The distribution companies, trading companies and large clients subscribed the private supply contracts with generating companies, paying the contractual price directly to the generator, and in addition paying a fee to the transmission and distribution company for the use of their systems. With the objective of stabilizing generation prices facing tariffs for clients, the market defined a seasonal price be- ing the price of the energy that distributors pay for their energy purchases traded in the spot market. This price is determined every six months by the Energy Secretary, af- ter CAMMESA had carried out their spot price projections in a determined period. In order to adjust to the differences between this price and the real cost of the original generat- ing, the establishing fund was created. If the seasonal price is lower than the cost of generating it, it has to be removed from the fund to compensate the generation; otherwise it 103 Regulatory framework of the electricity industrycontributes to the fund. Since 2002, the Energy Secretary In 2012, the framework of the agreement achieved with in practice has maintained the average stationary price, the Government to enable the development of our subsid- without important variations. This has created an important iaries in Argentina, on October 12, Costanera subscribed deficit in the stabilization fund, which has been covered by an agreement for the implementation of an investment the Argentine state through subsidies increasingly larger. plan for the generation units in Costanera power plant, whose purpose was to optimize reliability and availability The resolutions approved and created from the emergency of the equipment, for a total amount of US$304 million, Law had a significant impact in energy prices. Between the in a 7-year term. The agreement also contemplates the measures carried out it mainly highlights the Resolution SE payment of contract maintenance obligations (Long Term 240/2003, which modified the way to fix spot prices when Service Agreement -LTSA-) of the combined cycle power separating the calculation of marginal operating costs. The plants. main objective of Resolution SE Nº 240/2003 is to avoid the price indexation linked to the dollar, and despite that the Subsequently, Resolution S.E. N° 95/2013 abandoned the generation study is still based on the real fuels used, the marginalizing pricing system, thus entering into a recogni- spot price calculation is based on absolute gas availability tion mechanism of average costs. The Resolution recogniz- to satisfy demand, even in circumstances in which many es fixed costs remuneration, variable costs and additional generators generate with alternative fuels, such as diesel, remuneration. Fixed costs are remunerated (in ARS$/MW- due to the difficulty of supplying natural gas. The value of hrp) in function to technology, scale, and available power. water is not considered if its opportunity cost is higher than It’s also subject to the achievement of goals related to the the generation cost using natural gas. The Resolution also availability established. In terms of variable costs, the oper- establishes the spot price limit is Ar$120/MWh, which is ational costs are remunerated and maintenance in function still valid. The real variable costs of thermal units that burn to the energy generated (in ARS$/MWh), according to the liquid fuels are paid by CAMMESA through the mechanism fuel utilized, and its technology (generators do not have fuel denominated Transitory Dispatch Cost Over-run (TDO). costs since this is provided by CAMMESA). Lastly, the ad- ditional remunerations are calculated in function of the total Also, based on the dispositions included in the Emergency energy generated (in ARS$/MWh), considering the tech- Law, the payment for capacities is reduced from US$10 to nology and generator scale. Part of these remunerations AR$10/ MW-hrp (hrp: remunerated capacity hours). Subse- is accumulated in the fund that will be used to finance the quently, the capacity warranty is slightly raised to AR$ 12, new investments in infrastructure in the electricity sector. approximately ⅓ of the value paid before the 2002 crisis. The Resolution rules generators, cogenerators and auto In December 2004, the Energy Secretary approved the Ad- generators, except the power plants that started opera- herence Act through the Resolution 1427/2004, for the Re- tions as of 2005, the nuclear power plants, and the gener- habilitation of Wholesale Electricity Market. The majority ation of hydroelectric national power plants; reserves and of the generators signed the Act, including the generation centralizes in CAMMESA the commercial management companies owned by Enel Américas (former Enersis). With and the dispatch of fuel and suspends the celebration of regards to this Resolution, the Secretary created a fiducia- bilateral energy contracts between generators and MEM ry fund, named FONINVEMEM, where private generators agents, and the latter should acquire electricity energy de- provided part of the energy sold during 2004 to 2007 for mand with CAMMESA. Resolution SE N° 529/2014 mainly the construction of two new combined cycles. Also in this performs the value actualization for Resolution SE N°95 new capacity, in 2010 the generation companies owned and incorporates the non-recurring maintenance remuner- by Enel Américas (former Enersis), along with other com- ations for thermal power plants. panies, participated in the creation of another trust for the construction of another combined cycle, expecting the Resolution SE N°482 of 2015 updated the remunerations of closing of a combined cycle for October 2016. There was generation companies in force since February 2014. Pursu- part of the energy credits for to the energy sold in the peri- ant to Resolution 529/2014, thus creating a new position, od 20018 to 2011 allocated to this new project. with the objective of financing investments that have not been used and excludes hydroelectric power plant from the 104 Annual Report Enel Américas 2018variable payments for energy transport and determined the CAPACITY REMUNERATION FOR THERMAL POWER PLANTS remunerations for wind energy power plants, photovoltaic Minimum Price (since February 2017) solar energy, biomass/ biogas and internal engine combus- Large Cycles tion. On March 30, 2016, the Secretary of Electric Energy, Large TV depending on the Ministry of Energy and Mining, through Large TG the Resolution N°22/2016, updated all of the remuneration Engines: values of Resolution SE N°482/2015, replaced Annexes I, 3,050 US$/MW-month 4,350 US$/MW- month 3,550 US$/MW- month 5,700 US$/MW- month II, III, IV. V, VI, and VII of the aforementioned Resolution. Base Price for Committed Remunerations Resolution SEE N°19/2017, was enacted on February 1, 2017, defines a minimum remuneration for capacity and scale, additionally for the thermal units establishes the pos- sibility of offering the availability of with a same differential remuneration for every thermal technologies. The thermal generator may declare every summer the value of the firm capacity to commit for each unit during a 3-year period, being able to discriminate between summer and winter periods (adjusts can be made in the same period). As the exception and for the year 2017, the declaration of Commit- ment of Guaranteed Availability is habilitated, along with May 17-Oct 17 Nov 17 onwards 6,000 US$/MW-month 7,000 US$/MW-month Additional Price for Committed Remuneration (Maximum) May 17-Oct 17 Nov 17 onwards 1,000 US$/MW-month 2,000 US$/MW- month The maximum price given the offers that should be award- ed by CAMMESA, with regards to the needs defined for the system to face critical situations. CAPACITY REMUNERATIONS FOR HYDROELECTRIC POWER PLANTS the information required by the Seasonal Winter Program, Minimum Price (since February 2017) Chocón Arroyito Additional Price May 17-Oct 17 Nov 17 onwards 2,000 US$/MW-month 3,000 US$/MW-month 500 US$/MW- month 1,000 US$/MW- month Since November 2017, 50% of the additional remuneration will be subject to the disposal of large events insurance (turbines, etc.) and the progressive modernization of con- in force from May 1 to October 31, 2017. The thermal generator will sign a Commitment of Guar- anteed Availability contract with CAMMESA, but will give to the corresponding demand as determined by Secretary of Electric Energy. The remunerations that the unit will re- ceive with the capacity commitment will be proportional to its performance, and the minimum value will be calculated in relation to the minimum price. With respect to the hydroelectric power plants, a new scheme to evaluate capacity was defined, based on the real capacity available (implying a greater value of capaci- ty with respect to the previous regulation). Likewise, they introduce a base capacity value, and another additional discriminated from May to October 2017, and starting in November 2017. The Resolution establishes the following remuneration val- ues, which are defined in dollars (conversion considers the trol systems. REMUNERATION BY ENERGY Energy Generated Cycles and TV Gas Liquid Engines Gas Liquid exchange rate published by the Central Bank of the Repub- Hydroelectric lic of Argentina of the last business day) and the maturity dates are established by CAMMESA’s Procedures: Energy Operated (associated to Rotant Capacity) Thermal Hydroelectric 5 US$/MWh 8 US$/MWh 7 US$/MWh 10 US$/MWh 3.5 US$/MWh 2 US$/MWh 1.4 US$/MWh 105 Regulatory framework of the electricity industry Energy values are defined at the Node. Later CAMMESA performed a second call for the acqui- For the cases in which generators have requested a loan 2019 through MEGSA. Maximum prices were determined for maintenance, US$1/MWh will be discounted for energy for summer and winter periods. The result was prices 15% sition of natural gas interruptible for generators supply for generated by the power plant until paying the balance for lower than the maximum prices. financing. Later the SEE established that the conversion to pesos would be carried out the day previous to the maturi- After the enactment of Resolution SGE N° 70 of November ty date since November 2017. 2018, commercial management of fuels was no longer an The Resolution SEE N° 1085/17 modifies as of December This resolution also enables Generation, Cogeneration and 1, 2017, the agents’ payment method for the transportation Self generation agents of the MEM, to purchase fuel sup- issue determined by the Office Responsible for Dispatch. system (the remuneration for the transport agent doesn’t ply for electricity generation. change because it was determined in its respective RTI). It established the following: Initially, the norm will operate for the purchase of natu- ral gas and allows generators to obtain additional margin • Costs associated to transportation remuneration will when purchasing fuel, only if the purchase price of gas y be distributed proportionately in relation to demand. lower than the price recognized by CAMMESA. • Generation Agents will pay direct connection costs only. With this resolution, generators charge Production Variable • Mandates CAMMESA to propose the modifications Cost (CVP by its Spanish acronym) in relation to the price required for the proceedings within 90 days (regula- recognized, and CAMMESA is responsible for the supply tion of the MEM). of fuel of those generators that decide not to purchase fuel on their own account. Out of a total of 60 companies au- Resolution N° 97/18 of the Energy Sub Secretary, article thorized to declare, 22 of them registered a declaration, 6 5, determined the Maximum Spot Price at 480 $/MWh for of which correspond with Generation under 100% of Res- the penalty imposed to market prices of the Wholesale En- olution 19. ergy Market. On Wednesday August 1, 2018, Resolution ME N° 46 was published, which informed of the decision to reduce from 5.20 to 4.20 dollars per MMBTU (in average) the price of gas for electricity generation. Likewise, the SSEE is man- dated to enforce a competitive mechanism, for the provi- sion of gas for generation at a maximum defined price. The SSEE instructed CAMMESA to perform the acquisitions of natural gas under firm and interruptible conditions through the Electronic Gas Market (MEGSA for the Spanish abbre- viation) for thermal generation supply. Finally, the tender offer determined interruptible contracts Regulation of distribution companies Companies that obtain concessions carry out the distri- bution activity. Distribution companies must supply all of the electricity demands in their concession areas exclusive to prices (tariffs) and conditions established in the regu- lation. The concession agreements include penalties for the failure to provide electricity service. The concessions were given for distribution sales and retail sales. The con- cession periods are divided in “management periods” that allow concessions abandon the concession every certain mode for the period September-December this year. Av- erage price of the offers was US$ 3.69 per MMBTU, 13% amount of time. lower than the price established in Resolution ME N° 46. 106 Annual Report Enel Américas 2018 Since 2011, there are two electricity distribution areas On January 28, 2016, after the seasonal price changes, subject to federal concessions. These concessionaires are the Emergency Resolution No. 7/2016 was issued by the Edesur and Edenor, both located in the city of Buenos Aires Ministry of Energy and Mining. The resolution introduced and Gran Buenos Aires. Until 2011 Edelap was also under by the ENRE to adjust Edenor and Edesur fees through a federal jurisdiction. transitory tariff until the RTI is applied, expected for De- cember 31, 2016. Also, Resolution No. 7/2016 suspended Most of the distribution companies renegotiated their con- the PUREE and required the application of a subsidy rate tracts during 2005 and 2006, although fees were partially for the more vulnerable clients. and temporarily increased, the Integral Tariff Review (RTI) were distribution companies pending under national juris- On January 29, 2016, the ENRE issued Resolution No. diction. This tariff revision process wasn’t accomplished, 1/2016 with a new transitory tariff valid from February 1, and the term for contracts renegotiation was postponed 2016. Its application is included in Resolution MEM No. several times through laws enacted by Congress, thus 7/2016, which changed the supply procedures and defined postponed the duration of the Economic Emergency. a monthly billing. The new National Administration made a change of par- Also, ENRE issued Resolution No 2/2016, which ended the adigm on December 16, 2015, when the National Execu- FOCEDE and established a new procedure for funds from tive Power issued the Decree N° 134/2015 declaring the Resolution ENRE 347/12, in substitution for Edesur and emergency for the National Electricity Sector until Decem- Edenor confidence for a commercial account. ber 31, 2017. Also mandated the recently created Ministry of Energy and Mining to develop, release and implement On April 5, 2016, the National Electricity Regulating Entity the national program of activities needed for the energy enacted Resolutions N° 54 and 55. The first resolution ap- generation, transport and distribution sectors. The purpose proves the Bases and Conditions for Private Companies, of these measures was to adjust the quality and safety of for the hiring of a Consultant for the RTI of EDESUR and electricity supply and ensure the energy utilities services in EDENOR, and the second resolution approves the time- suitable technical and economic conditions. table and issues guidelines for the same, indicating that ENRE defines the Parameters of Quality and Rate. 107 Regulatory framework of the electricity industryContinuing with the tariff renegotiation process, on August Regarding the application of new structures and tariff 8 ENRE issued Resolution 463/16, which provide details of charges, the Ministry of Energy and Mining considered as the parameters of the technical service and quality, and the timely and convenient to instruct ENRE to limit the VAD cost and values of unsupplied energy required for the mod- increases that emerged as an RTI process results to be ap- ification of the RTI. Similarly, on August 29 through Resolu- plied starting February 1, 2017, to a maximum of 42% with tion ENRE 492/16, the Quality of Commercial Service and respect to the valid VAD at that date, having to complete Technical Product Parameters were defined. This resolu- the resulting value application of the new VAD, in two stag- tion contains economic signals towards the fulfillment of es: the first in November 2017, and the second in February deadlines and times of supply replenishment reductions. 2018. On the other hand, on August 30, the regulation entity pro- Also, it mandates that ENRE must recognize Edenor S.A. ceeded to inform the value of the Rate of Profitability. This and Edesur S.A. the VAD difference that is produced by was established on Resolution ENRE 494/16 at 12.46% the application of gradual fee increases recognized by RTI, before taxes and 8.1% after taxes. in 48 (forty-eight) installments starting from February 1°, 2018, which added to the VAD value as of that date. On September 1, Edesur proceeded to the final presenta- tion of the investment plan requested by Resolution ENRE The regulation also sets revenues updates mechanism for 55/16 and then receiving from the Secretary of Electric the distribution companies as a result of price variations in Energy the note NO-2016-01193698-APN-EDESUR RTI the economy and all of the other issued related with the which established that credit and debit from the disregard quality of the service delivered and supply regulation. of the Agreement Act would be treated separately from the income required from the RTI and proceeded to complete Once this regulatory framework is established with regards on September 6, the related reports with Fundamentals to the distribution tariffs regime including the instructions and the criteria of the proposal: exploitation costs, reve- enacted by Ministry of Energy and Mining, and the resolu- nues requires and calculation of fees, tariff structure and tions contained in Resolution SEE N° 20/2017 on seasonal wholesale transfer costs, and the updating mechanisms prices valid from the corresponding invoice of February 1, of the Company’s distribution costs, results and economic 2017, it was declared that the transition tariff phase of Ede- financial model. This method concluded with the delivery sur was met, and the Agreement Act that the company of formal final reports required for the aforementioned res- adheres as established in its concession contract. olution. On September 28, through Resolution ENRE 0522/2016, of Resolution ENRE N° 64/17 (Physical monitoring of the the regulating organism decided to call for a Public Hear- works plan) on March 20 Edesur sent a note ratifying the ing with the objective of acknowledging and listening to Investments Plan duly informed for the RTI (in physical In accordance with the request made by Article N° 29 opinions with regards to Tariff Proposals presented by the terms). distributing companies for the next five-year period; this is part of the Integral Tariff Revision Process (RTI) and with In accordance with Law of Administrative Procedures, on previous character to define the tariffs to apply by the re- March 20, 2017 Edesur S.A. formally filed an appeal to the ferred Subsidiaries in said five year period. On Wednesday ENRE questioning resolution ENRE N° 64/17 which basi- February 1, 2017, the ENRE published Resolution N° 0064 cally focuses on the treatment of easements, some opti- which closed the RTI process and as a result, establish- mization criteria in the definition of the capital base, the es the annual remuneration recognized by Edesur S.A. treatment for the recognition of certain taxes and objec- amounting to ARS$14,539,836,941. tions to the quality regime. We highlight the fact that the observations and the explanatory orders presented, either accepted or rejected by the regulator, will not significantly affect the result of the RTI. 108 Annual Report Enel Américas 2018On July 26, 2017 ENRE issued Resolution N° 329/2017, In an unprecedented fact performed on October 27, 2017, defining the procedure for the billing of deferred revenue the ENRE, complying with resolution N° 403 of October established by Resolution ENRE N° 64/2017 (Article 4°) 26, 2017, the Ministry of Energy and Mining, through res- states that “…receivables corresponding to each tariff cat- olutions 526 and 527 convened a Public Hearing for No- egory, will be the sum of the monthly accrued revenues, vember 17, 2017 in the Palace of Waters. The topics to be recognized by tariff category …”; establishing the certainty discussed are in the first place the new reference prices of payment by recalculating each year the revenues not re- for capacity and energy, and the reference prices for ca- covered deducting the payments from initial credits, and pacity and stabilized for energy reference for distribution recalculating the remaining installments to cover the bal- companies at node, equivalent to each of them and for the ance; and the mechanism to update the latter “…These seasonal period of summer 2017-2018; the energy savings charges will be adjusted, being components of the CPD, stimulus plan; social tariff and the distribution methodology according to the “trigger clause” and in the “Adjustment between the demand of MEM and the cost of remunera- Mechanism” …”. tion of energy transport in extra high tension and between the demand of a region and the corresponding demand On May 17, 2017 Law 27,351 of Electro dependents was for transport for mainline distribution. And in the second enacted, establishing the gratuity and continuity of elec- place, informs the impact that would have the measures to tricity supply, together with the priority of service to those be carried out by the Ministry of Energy and Mining in the clients that for health reasons require constant electricity bills of users of distribution companies, as a result of the supply and with adequate tension levels in order to feed the Public Hearing that this Ministry has convened for Resolu- equipment prescribed by a licensed physician and needed tion MEyM 403/2017. This is in relation to the Wholesale to avoid health or life risks. In this context, on July 26, 2017 Electricity Market, the withdrawal of subsidies for energy through Resolution ENRE 292, this entity established the transport and the criteria of distribution among users of gratuity of service and the connection cost for this users transport of the transporters remuneration that this entity category of the companies Edenor y Edesur. In this line, On solved with the Integral Tariff Review of Transport of Elec- September 25, the Ministry of Health through Resolution trical Energy. 1538-E created the “Registry of Electro dependents due to Health Reasons”. To this date, are still pending the rules As a result of this, on December 1 through Resolution 602, for operational issues to ensure the continuity of supply, for ENRE approved the new values of Distribution Own Cost the compensation of distribution companies (Law 27,351 of Edesur, through the application of the mechanisms con- Article 11). The Executive Authority will appoint the author- sidered in the RTI. Concurrently, issued the tariff scheme ity to enact this law and will assign the budget allocations that reflects seasonal prices (generation and transport) in- needed to fulfill their objectives) and the limits of responsi- cluded in the resolution of the Secretary of Electric Energy bility of each of the parties involved. 1091 of 2017. It also approved the new schemes for subsi- dy for Social Tariff and the bonus system for consumption On November 1, 2017, ENRE enacted Resolution 525 savings for residential users. partially establishing the Reconsideration Resource inter- posed by EDESUR against Resolution ENRE 64/2017, ac- Finally, the return to normal conditions in relation to eco- cepting its measures regarding easements treatments and nomic emergency situations and energy emergency, was requesting the company that within 60 days should submit materialized through the decision of the Argentine Nation- an annual plan for the regularization of easements to be al Government of not to extend the effect of the Electric developed in the period 2017/2021. Also requested the Emergency Law (in effect until December 31, 2017) and recognition of expenses of CAMMESA, rates and others the Economic Emergency Law (in effect until January 6, that should be available in future adjustments and minor 2018). modifications to the quality regime and other recognitions. 109 Regulatory framework of the electricity industryAs a result of the above, on December 1, through Resolu- 2018-February 2019). Both resolutions meant an increase tion 602 the ENRE approved the new values for the Own of quality requirements, and taken into account in the Inte- Distribution Cost of Edesur, considering the application gral Tariff Review. of the mechanisms included in RTI. Jointly, new Tariff Schemes were issued, which capture the new Seasonal On July 30, 2018, in the context of the intention of the Prices for generation and transport, and were included in Ministry of Energy to provide greater gradualness to tariff the Resolution 1091, 2017 of the Secretary of Electric En- increases, an agreement was signed between MINE and ergy. As such, new subsidy schemes for Social Tariffs and Edesur through which Edesur will receive 50% of the in- allowances for consumption savings for residential cus- crease of the adjustment mechanism of the tariff from Au- tomers are also considered. gust 1, and will receive the remaining 50% in 6 installments from February 1, 2018 while maintaining the Investment At the same time, on January 31 2018, ENRE approved the Plan agreed in the RTI. Edenor signed the same commit- new values effective from February 1, 2018. These charts ment simultaneously. include a new reduction of subsidies of wholesale prices, down to 90% of the seasonal price operated in 2017. More- As agreed, on August 1, 2018 the 50% growth (7.925%) over, subsidies of social tariffs remained unchanged and an of the corresponding increase to the enforcement of MMC allowance of the stimulus plans for electricity consumption of August 2018 the Value Added in Distribution. Together reduction. with this increase, the subsidies to wholesale energy pric- es removal were restarted. This was postponed due to the Regarding the Distribution Added Value, it was also incor- devaluation of the Argentine peso, of nearly 50%. porated in this tariff chart, the third installment of the Own Distribution Cost corresponding to the RTI, the proportion- In turn, MINE also have the chance to modify the CAPS al share of deferred revenue generated by the tranches, of the Social Tariffs (maximum % of billing in relation to a the Cost Monitoring Mechanism of the period and the ap- regular residential client), therefore decreasing the subsi- plication of the Efficiency Factor. The latter shows the ful- dies to this tariff and the distortions caused by this item to fillment from Edesur of the Investment Plan committed in those distribution companies that are still pending a solu- the RTI, while reaching the scheduled value. tion and analysis from ENRE. Apart from that, the resolu- tion was enacted on August 13. In this way, the tariff of Edesur reaches 2.2828 $/kWh without taxes as of February 1, 2018. On November 1, the National Executive Power enacted the Decree 986/2018, aiming to build capacity for a total On May 31, 2018, the supervisory agency issued Resolu- of 1,000 MW within a 12-year period. In order to obtain tion ENRE 0170, approving the sanctioning regime for the the authorization for the connection, the user must comply separation of the Investment Plan presented by distribution with sever requirements established by the Authority of companies in the RTI. Application, which also will determine the standards for the technical and safety assessment for the distribution com- On July 19, 2018 the supervisory agency issued Resolution pany. ENRE 0199, increasing the quality control of the current Commune/Party to the MT Feeder. Also penalizes devia- On December 10, ENRE enacted Resolution 318/2018 tions of 2, 3 or more times above the theorical indicators approving the methodology and updated the remuner- that every feeder should have to comply with the target ation values for the sub-transmission service (PAFTT by quality level of the RTI. This applies when affects more its Spanish acronym) between the distribution companies than 100 clients, and values are 300 kWh and 600 kWh per Edesur, Edenor and Edelap, effective on March 6, 2017. user, and become effective from semester 45 (September The latter has been left pending in the Integral Tariff Re- 110 Annual Report Enel Américas 2018view. This mechanism enables the remuneration of oper- ational and maintenance costs, as well as the recognition of losses due to the transfer of the tariff, from the costs accrued by Edesur for this issue. On December 4, 2018, Budget Law 27,467 for 2019 was approved. In the article N° 124, as part of the negotiations for its approval, included the administrative transfer of the control and regulations regarding subsidies of Social Tariff from the National State to the City of Buenos Aires, effec- tive on January 1, 2019. This transfer is part of the commit- ment taken by the Argentine Republic to reach a balanced budget before debt interests in 2019. To that effect, several meetings took place during Decem- ber to transfer the jurisdiction, and all the interested parties participated: Secretary of Energy, Edenor, Edesur, CABA and the Province of Buenos Aires. Likewise, the company received from the authorities a first draft for the transfer. The final document needs to have the approval of all the parties, being a condition for making the transfer effective. In this sense, from January 1, 2019, the authorities of the Province of Buenos Aires and of Ciudad Autónoma de Bue- nos Aires, accepted to maintain the current conditions for the allowances related with the Social Tariff. Regulation of Transmission Transmission was designed on the basis of general concep- tion and the principles established by Law 24,065, adapt- ing the activities to the general criteria contained in the concession given by Transener S.A., in Decree 2,473/92. For technological reasons the transmission business is re- lated to economies of scale that do not allow competition, therefore it is a monopoly and is subject to considerable regulation. Similarly as the distribution industry, during 2016 ENRE carried out Integral Tariff Review for national transport companies (Transener S.A., Distrocuyo S.A., Transco S.A., el Ente Provincial de Energía de Neuquén, Transba S.A., Transnea S.A., Transnoa S.A., Transpa S.A.) for the period between 2017 and December 31, 2021. They came into force during the year 2017. During 2018, ENRE performed the following tariff revi- sions: Remuneration of independent transporter: The Resolution of the Secretary of Energy N° 366, enacted • On July 3, 2018 ENRE requested YACYLEC to provide on December 27, 2018, informed a new supply cost. The future Seasonal Prices will be transferred to tariffs of final the information related with its facilities, in order to perform the Integral Tariff Review (RTI). Later, an ex- users, which is part of the changes promoted by the au- tension was granted until mid October. thorities to be carried out to reduce subsidies, decreasing • In line with the last tariff revision carried out for the from 30% of subsidy in February to 15% in August 2019. Transport sector Nevertheless, these prices when converted to local cur- > The technical bodies of the regulator will develop rency mean an initial increase of 26% in February and 6% the tasks growths in May and August 2019. As of the date of the current financial statements, and as a consequence of the changes contained in Law 27,467 > Cash flow will be the methodology to be used. > > > The real profitability rate after taxes is 7.7%. Tariff period is from 02/01/2017 to 01/31/2021. The monetary values proposal as of 12/31/2016. (administrative transfer of jurisdiction) and the Energy Sec- • The presentation has to be introduced with the opin- retary of the Government, the resolution of Regulatory As- ion of National Transporter. sets and Liabilities and the definition of the new regulator are still pending. 111 Regulatory framework of the electricity industryRemuneration of international transporter: establish the non application of specific tributes, national royalties, regional and municipal until December 31, 2025. The clients categorized as Large Users (>300 Kw) should • Through NOTA of August 24, 2018, the Subsecretary individually fulfill the participation of the renewables, estab- of Electric Energy instructed CAMMESA to acknowl- lishing that the price of these contracts cannot be superi- edge the concept of Capacity of Transport of its facili- or to 113 US$/ MWh, and setting penalties to those who ties (Operation and Maintenance), considering the Eco- do not fulfill these objectives. The law regulations are still nomic Transactions of August TRANSITIONAL of 70% pending. of the corresponding TRANSENER, • Beginning of RTI – Procedure for the Definition of the Remuneration of International Transporter. Through NOTA of August 22, 2018, ENRE requested the infor- mation needed to determine the remuneration, starting Brazil from January 1, 2019. Industry Structure Environmental Regulation The electricity installations are subject to environmen- tal laws and regulations, federal and local, including Law Nº24,051, or Dangerous Waste Law, and its annexed reg- ulations. The Brazilian electricity industry is organized in a large in- terconnected system, the SIN (National Interconnected System), which comprises most of the regions of Brazil, and several other smaller isolated systems. The genera- tion, transmission, distribution and commercialization are legally separated activities in Brazil. In the electricity sector, certain obligations to inform and monitor impose on emission standards. The non-compli- ance of these requirements forces the government to es- tablish penalties, such as suspension of operations that, in the case of public service, can result in the cancellation of concessions. Law Nº26,190, enacted in 2007, defined the use of renew- able sources for the generation of electricity as national in- terest and set as a goal 8% of the market participation for renewable energy in 10-year term. On October 21, 2015, the Official Bulletin published the new Law 27,191, of Renewable Energy in Argentina, mod- ifying the Law N°26,190. The new regulation postpones to December 31, 2017, with the objective of reaching 8% participation in the national demand with the generation of renewable sources and establishing as a second stage objective to reach 20% of participation by the year 2025, and setting mid goals of 12%, 16%, and 18% for the end of the years 2019, 2021, and 2023. The sanctioned Law cre- ates a Fiduciary Fund (FODER) that could finance projects, give tax benefits to the renewable energy projects, and The industry is regulated by the Federal Government through the Ministry of Mines and Energy (MME) and also by the National Electric Energy Agency (ANEEL). The regulated price is based on the average bid prices, with independent bidding processes for existing energy and "new" energy. The latter include long-term contracts in which the new generation projects must cover the growth of demand foreseen by the distributors. The "old" energy tenders consider shorter contracting periods and seek to meet the contracting needs of the distributors that arise from the expiration of previous contracts. Each bidding pro- cess is centrally coordinated, the authority defines maxi- mum prices and, as a result, contracts are signed where all distributors participating in the process buy at fair ap- pointment from each of the generator providers. The price at which spot market transactions are settled is called the Settlement Price of Differences (PLD), which takes into ac- count the risk aversion curve of the agents. Transmission works under monopoly conditions. The Brazilian government sets tariffs for transmission for the companies. The charge for transmission is fixed and the transmission revenue does not depend on the amount of electricity transmitted. 112 Annual Report Enel Américas 2018Distribution is a public service that also works under mo- in Law 9,427/96, unregulated consumers in Brazil are those nopoly conditions and is provided by companies that in turn that: (i) demand a capacity of at least 3,000 kW and choose have received concessions. Distribution companies in the to contract the supply of energy directly with generators or Brazilian system are not entitled to: (i) develop activities energy traders; or (ii) demand a capacity of at least 500 kW related to the generation or transmission of electricity; (ii) and choose to contract the power supply directly with gen- sell electricity to unregulated customers, except to those erators or renewable sources of up to 50MW of installed within its concession area and under the same conditions capacity. and tariffs applicable to its captive clients of the Regulated Market; (iii) maintain, directly or indirectly, equity interest Portaría nº514/2018 enacted by the Ministry of Mines and in any other company, corporation or partnership; or (iv) Energy, the limit for energy purchases from conventional develop activities that are not related to their respective sources will change to 2,500 kW as of July 1, 2019, and concessions, except those permitted by law or in the rele- 2,000 kW as of January 1, 2020. vant concession agreement. Generation companies are not authorized to have equity interest in distribution companies The Brazilian system is coordinated by the Brazilian Elec- in surplus of 10 percent. trical System Operator (ONS) and is divided into four sub-systems: Southeast/Center-West, South, Northeast The unregulated market includes the sale of electricity be- and North. In addition to the Brazilian system there are also tween generation concessionaires, independent produc- some isolated systems; in other words, those systems that ers, self-producers, electricity traders, electricity import- are not part of the Brazilian system and are generally locat- ers, unregulated consumers and special customers. It also ed in the northern and northeastern regions of Brazil, and includes contracts between generators and distributors ex- have coal or oil fired thermal power plants as their unique isting under the old regulatory framework, until its expira- source of energy. tion. New contracts must be adjusted to the new regulato- ry framework. According to the specifications established 113 Regulatory framework of the electricity industryRegulation in Generation Companies prices, being independent tender processes for “new” and “existing” energy, and are carried out wit the purpose of supplying demand of distribution companies. There are also specific tender offers for “reserve energy”, which Generation Agents, who can be public generation con- don’t consider the average energy price in the ACR, be- cessionaires, IPPs or auto producers, as well as Market- cause their purpose is to increase reliability of energy sup- ing Agents, can sell electricity in two contracting envi- ply in the SIN, and their costs are transferred to every con- ronments. First, the Regulated Contracting Environment sumer, from ACR and ACL. (ACR), where distribution companies operate, in which the purchase of energy must be done within the framework of Additionally, in 2015 and 2017, new tender offers for the the bidding process coordinated by ANEEL; and the other hydroelectric power plants that have not increased their denominated as the Free Contracting Environment (ACL) concession contracts took place, according to Law nº in which energy purchases are made directly between sup- 12,783/2013. These tenders allow part of sell energy pliers and their customers. Regardless of the ACR or ACL, through the installments regime (with a minimum percent- the sales contracts of the generators are registered in the age of 70%) and the other in the market. In the 2015 tender Câmara de Comercialização de Energia Elétrica (CCEE) and offer, the winner was the company that offered the lowest form part of the basis for quantifying and determining ad- remuneration tariff for the operation of the power plant, justments for differences in the short-term market. In this meanwhile in the 2017 tender offer, the winner was the manner, generation companies are allowed to sell energy company that paid the highest allowance for the conces- through regulated contracts or in the free market and trade sion. their surpluses/ deficits in the spot market, values at the Liquidation Price of Differences (PLD for the Spanish ab- “New” energy tender offers consider long-term contracts breviation). (20-25 years for thermal power plants, 30 years for hydro- electric power plants and 20 years for solar and wind), the ANEEL annually validates, by resolution, the minimum and new generation projects are required to cover the growth maximum values of the PLD, so that the maximum and of demand expected by distribution companies. “Existing” minimum PLD for 2019 are set at BRL$513.89/ MWh and energy tender offers consider the lowest terms for con- BRL$42.35/ MWh, respectively. The calculation of the tracts and are defined to cover the contracts requirements maximum PLD considers the variable costs of operation of of distribution companies that come up at the maturity of the thermoelectric plants. For the minimum PLD is consid- previous contracts, therefore energy may have lower pric- ered the costs of operation and maintenance of hydroelec- es, depending on market conditions. Each tender offer pro- tric power plants. cess in coordinated centrally, the MME define maximum prices and as a result, contracts are signed with all the par- In relation to market regulation, 100% of the energy de- ticipating distribution companies, which purchase energy manded by distribution companies should be covered on a pro-rata basis to each offeror generation company. through regulated contracts. This coverage may be con- stituted by physical guarantees of their own generation Regarding regulated energy tender offers, in order to re- power plants or any other, through an energy or capacity compose the energy supply, in 2018 three tender offers purchase contract. Among other issues, current regulation were carried out in Brazil with the energy assigned: specifies when this limits are not met, agents are subject to financial penalties. • 01 bidding A-4: 356.19 MW-medium, assigned to Hy- droelectric (6.6%), Biomass (9.7%), Wind (16.2%) and The definition of tariffs to final users consider regulated Solar (67.5%) at an average price of R$124.75 MWh. purchase prices, but in turn, is based on tenders average 114 Annual Report Enel Américas 2018• 01 bidding A-6: 1.228,59 MW- medium, assigned to The previous government designed an agreement (includ- Gas (26.6%), Hydroelectric (18.9%), Biomass (0.9%) ing a draft bill which currently is in the House of Represen- and Wind (53.6%) at an average price of R$140.87 tatives), according to which generators would recognize in MWh. their balance sheets a Regulatory Asset through the extent • 01 bidding A-1 and A-2, on 12/07/2018, the A-1 ten- of their current concession contracts. The Regulatory As- der offered 4 MW of average energy commercialized set should equal the effects related to the risks transferred at an average price of R $142.99/ MWh, and the A-2 to the MRE from 2013 to 2018. As a counterpart, the res- were 359 MW of energy at an average price of R $ ignation to legal proceedings and debt payment in the mar- 161.35/ MWh. ket in the short-term. Its worth mentioning that the previous Government pre- This agreement is fundamental for the development of the sented in 2017 a plan for the reform and modernization Brazilian energy sector, mainly because liquidity would re- of the sector, through the liberalization of the market, and turn to the spot market. Also, it will be important to discuss a proposal for the reduction of limits to access the free structural solutions for the “MRE” in 2019, thus ensuring market, in the Public Consultation 33 (“CP 33” by its Por- its sustainability in the future. To this end, its crucial to en- tuguese acronym), which is currently in draft legislation sure that the risks that the mechanism includes are strictly stage. The other proposals are: (i) finish the subsidies to related with hydrology, preserving its initial target. consumers of renewable energies and development of the carbon market; (ii) improvement of short-term prices mechanism, instead of a simple mathematical model; (iii) costs allocation for the expansion of the system to every consumer, free and captive; other. The new government, in turn, is analyzing each measure of the CP 33, with the purpose of verifying the amendments and supplements to be done. Depending on the results of this analysis, its strategy will be to continue with the Project in Congress, with due amendments, or otherwise develop a new Law on the subject. Its worth to highlight that for the success of the reform of the sector, it’s essential to recover the liquidity of the spot market, which has been damaged due to legal disputes, and engaging the hydrological risk. Over the years, an important mechanism for managing hydrological risk (“MRE”) was distorted due to several governmental measures, which carried inadequate risks to generation companies. Due to the lack of a regulatory solu- tion, generators were forced to judicialise this issue, thus avoiding large payments in the market in the short-term. In 2015, ANEEL designed a solution to generators with con- tracts in the captive market. Nevertheless, the proposed solution wasn’t viable for generators with contracts in the free market, so the dispute continued in court, which dam- aged the liquidity of the spot market, in approximately R$ 7 billion. Regulation in Distribution Companies In the regulated market, distribution companies buy elec- tricity through biddings that are regulated by ANEEL and organized by CCEE. Distributors must purchase electricity in public biddings. The Government also has the right to call for special biddings for renewable electricity (biomass, mini hydro, solar and wind power plants). ANEEL and CCEE hold annual bids. The recruitment system is multilateral, with generating companies that sign contracts with all the distributors that convene the biddings. The Concessions Law establishes three types of tariff re- views or adjustments to final consumers: The Tariff Repo- sitioning Index (IRT), which implies an annual adjustment of the rate for inflation; The Ordinary Tariff Review (RTO) to be carried out every four or five years according to each concession contract, and the Extraordinary Tariff Review (RTE), which are carried out when a relevant event occurs in the sector that significantly affects the value of the tariff. In this way, the Law guarantees an economic and financial balance for a company in case that there is a substantial change in its operating costs. In the event that the cost of components for Parcel A, such as energy purchases or 115 Regulatory framework of the electricity industry taxes, increase significantly within the period of two annual ed by tariff adjustments based on the necessary rates to tariff adjustments, the concessionaire may submit a formal compensate for the deficits from the previous year. request to ANEEL for these costs to be Transferred to the final clients. In December 2014 the distributors in Brazil, including the Enel Group, signed an addendum to the concession con- Every tariff revisions and repositioning are approved by tract that allows these regulatory assets (CVA's and others) ANEEL. to be part of the indemnifying assets at the end of the con- cession, in the event that it is not be possible to compen- In tariff revisions (RTO and RTE), ANEEL reviews the rates sate through tariffs at that time. Thus, in accordance with in response to changes in energy costs and market condi- the IFRS rules, the accounting of these regulatory assets/ tions. When adjusting distribution rates, ANEEL divides the liabilities is allowed. Annual Reference Value, that is, the costs of the distribu- tion companies in: (i) costs unmanageable by the distribu- To cover the energy surcharge caused by the drought tor, also called "Parcel A", and (ii) manageable costs by the in 2014, the Government has created the ACR account distributor or "Parcel B", the latter corresponding to what through bank loans to be paid within two years for the tar- we know as Value Added Distribution (VAD). iff. In 2014 the distributors used an approximate amount of BRL$ 18 billion of the ACR account, however, it was not The ordinary tariff review takes into account the entire tar- enough to cover the entire deficit. A new loan to the ACR iff setting structure of the company, including the costs of account was approved in March 2015 to cover the deficits providing services, the costs of buying energy as well as of November and December of 2014. An extension of the the return for the investor. Under its concession contracts, repayment term for all loans was approved, which should Enel Distribución Ceará and Enel Distribución Río are sub- now be paid in 54 months starting from November 2015. ject to tariff revisions every four and five years, respective- ly. The basis of the assets to calculate the return allowed to Due to the mismatches between the costs recognized in the investor is the replacement market value, depreciated tariff and the real costs outside the management of the over its useful life from an accounting standpoint, and the distributor, and intensified by the implicit costs of the rate of return on the distribution asset is based on the Av- drought, ANEEL, in January 2015, began to implement a erage Capital Cost Weighted, or WACC for a model compa- system (known as Tariff Flags) of additional monthly charge ny. The WACC is reviewed in each rate cycle. The value of on the consumer rate provided that the marginal cost of the WACC for distribution is currently in effect at 12.26% the system reaches levels above the regulatory standard. real pre-tax rate. The objective of the regulator is to give the consumer an economic signal of the cost of the generation already in the The regulatory mechanisms ensure the creation of regula- subsequent month, moving forward an amount (of right) tory assets or liabilities, whose tariff rebuilding occurs in that the Distributor would only collect it in next tariff event. subsequent tariff adjustments (March 15 for Enel Distri- bución Río and April 22 for Enel Distribución Ceará). This This mechanism, as described below, consists of four lev- mechanism has existed since 2001, and is called the Parcel els of flags: green, yellow, red level 1 and red level 2. A Securities Compensation Account (CVA). Its objective is to keep constant operating margins for the concessionaire Values Applied for Tariff in 2018. in order not to allow tariff gains/losses due to the variation of Parcel A costs. Since November 2017, the value of the banners is: The Securities Compensation Account ("CVA” for the Bra- > Green tariff (Favorable conditions for energy genera- zilian abbreviation) helps to maintain market stability and tion): Without tariff surcharge. allows the creation of deferred costs, which is compensat- > Yellow tariff (Less favorable generation conditions): BRL$1.00 per 100 (kWh) 116 Annual Report Enel Américas 2018> Red Tariff - level 1 (More expensive generation condi- tions): BRL$3.00 per 100 (kWh) > Red Tariff - level 2 (More expensive generation condi- tions): BRL$5.00 per100 (kWh) In summary, with this mechanism the cost of generation that is currently transferred to the customer only once a year (when the annual rate adjustment is made) will have a monthly variation, therefore the customer will be able to have a better management of the electricity consumption. In other words, consumers will be aware of a lower tariff readjustment, since they are already paying a higher value during the month. On December 27, 2018 the Decree 9,642 was enacted, which defines the discounts granted to consumers from rural areas, as well as the subclasses Cooperativa de Elec- trificación Rural, Servicio Público de Agua Saneamiento and Servicio Público de Riego, to be reduced from January 2019, at an annual rate of 20% over the initial value, un- til the installment is zero. Additionally, the Decree forbids the cumulative application of the discounts included by the CDE, and prevails the one that offers the greater benefit for the consumer. For the Enel Group the impact of Decree 9,642/18 tends to be neutral. Therefore, the elimination of the aforemen- tioned discounts granted to consumers, will compensate the perception of higher tariffs each year until the end of the discount periods. Additionally, the CDE, will be collected and transferred to final consumers, and also will be reduced each year due to the reduction of subsidies. This is a positive issue for the sector, because the weight of tariffs in final consum- ers will fall. Worth is mentioning that the enactment of the decree will not impact the subsidies granted to renewable sources. Finally, in December 2018 ANEEL opened a public audi- ence to discuss the application of the binomial tariff for ev- ery low voltage client. This is a disruptive regulatory deci- sion, because it may change the Brazilian tariff framework for low voltage clients. This tariff modality would impact the generation of distribution businesses, but protects the revenues of the distribution business. The public audience will be open until March 18, 2019. Regulation in Transmission Any electricity market agent that produces or consumes energy is authorized to use the Basic Network. Free mar- ket consumers also have this right, subject to compliance with certain technical and legal requirements. Free access is guaranteed by law and supervised by ANEEL. The operation and administration of the Basic Network is the responsibility of the ONS, which also has the responsi- bility of managing the dispatch of energy from the plants in optimum conditions, involving the use of the interconnect- ed system, reservoirs and thermal plants. As of April 5, 2011, it was published in the Official Ga- zette, the Ministerial Docks 210/2011 and 211/2011, which equate the two interconnection lines of the Energy Inter- connection Company, S.A. to concessions of public ser- vice, with payment according to a regulated toll. The Annu- al Permitted Remuneration (hereinafter "RAP") is adjusted annually in June, by the National Broad Consumer Price Index ("IPCA") with tariff revisions every four years. It was defined a Gross Remuneration Base of BRL$ $1,760 mil- lion (US $885 million) and a Net Base of BRL$ 1,160 million (US$ 585 million). In 2012 ANEEL authorized the imple- mentation of reinforcements in the transmission facilities, recognizing an additional investment of BRL$47 million (US$ 23 million), in the Remuneration Base. The applicable remuneration rate was defined in agreement with the cur- rent regulation at 7.24% (real after tax). The authorization period is until June 2020, for Line 1, and until July 2022, for Line 2, with a welfare compensation for unamortized investments. 2018 Adjustments Enel Distribución Río On March 13, 2018, ANEEL standardized the provisional result of the Fourth Regular Tariff Revision for Enel Distri- bución Río, from March 15, 2018, consolidated after the assessment of the contributions brought in the Public Au- dience nº 078/2017. 117 Regulatory framework of the electricity industryThe result led to a medium effect perceived by consumers The result led to a medium effect perceived by consumers of 21.04%, 19.94% for consumers connected with High of 15.84 %, 17.67% for consumers connected with High Voltage - AT and 21.46% for those connected with Low Voltage - AT and 15.14% for those connected with Low Voltage– BT. The component T of the Factor X was fixed Voltage– BT. in 0,00% and technical losses in 9.1%. In the process, the base of remuneration had its provisional result and will be finally approved in the tariff readjustment process of 2019. Enel Distribución Ceará On April 17, 2018, ANEEL standardized the tariff adjust- Enel Distribución Goiás On October 16, 2018, ANEEL standardized the result of the Fourth Regular Tariff Revision for Enel Distribución Goiás, valid from October 22, 2018. ment of Enel Distribución Ceará, valid from April 22, 2018. The result led to a medium effect perceived by consumers The result led to a medium effect perceived by consum- Voltage - AT and 15.31% for those connected with Low of 18.54%, 26.52% for consumers connected with High ers of 4.96%, 7.96% for consumers connected with High Voltage– BT. Voltage - AT and 3.8% for those connected with Low Volt- age– BT. Enel CIEN Enel Distribución São Paulo (ex Eletropaulo) The Resolution nº 2408 enacted on June 26, 2018, estab- lished that annual revenues allowed (RAP) for public ser- vice concessionaires of electricity transmission, in relation to the availability of transmission facilities under their re- On July 4, ANEEL standardized the result of the tariff ad- sponsibility. justment of Enel Distribución São Paulo, in place from the same date. 118 The values of Cien are: Garabi I (RAP: 172,667,795.35 and PA adjusted: R$ - 6,579,727.76) and Garabi II (RAP: R$ 179,367,079.58 y PA adjusted: R$ - 6,834,803.35). Annual Report Enel Américas 2018Colombia Structure of the Industry Mining Planning Unit (UPME), which is responsible for the planning and expansion of the network and the Superinten- dence of Industry and Commerce (SIC) which is the nation- al authority for competition protection issues. The CREG is empowered to issue regulations governing Law 142 of the Home Public Services, and the 143, Elec- technical and commercial operations as well as tariffs for tricity Law, structurally reformed the Colombian electric- regulated activities. The main functions of CREG are to ity sector both enacted in 1994. According to Law 143 establish the conditions for the progressive liberalization of 1994, the different economic agents, private, public or of the electricity sector towards an open and competitive mixed, can participate in the activities of the sector, and market, to approve charges for networks and transmission have the liberty to develop their functions in the context and distribution costs for the supply of regulated custom- of free competition in the market. To operate or start proj- ers, to establish the methodology to calculate and set ects, it must be obtained, from the competent authorities, maximum tariffs for the supply of the regulated market, the authorization for the different environmental, sanitary establish standards for the planning and coordination of the and water rights, and those where municipal sanction is operations of the System, establish technical requirements required. for quality, reliability and security of supply, and protect the The Ministry of Mines and Energy (MME) defines the Gov- rights of customers. ernment’s policies for the energy sector. Other govern- The Wholesale Energy Market in Colombia is based on a ment entities that play an important role in the electricity competitive market model and operates under open ac- industry include: Superintendence of Home Public Ser- cess principles. The operation and administration of the vices (SSPD), entity that monitors and audits all the public MEM is centralized in a Market Operator made up of the service companies; the Energy and Gas Regulation Com- Administrator of the Trade Exchange System (ASIC) and mission (CREG), which regulates electricity, natural gas, the National Dispatch Center (CND). liquefied petroleum gas (LPG), and liquid fuels; the Energy 119 Regulatory framework of the electricity industryThe generation sector is organized on a competitive basis. The electricity transactions in the WEM are carried out un- der the modalities of the spot market of energy (Short term or daily market); Bilateral Contracts (Long Term Market) Regulation in Generation Companies and Reliability Charge. Generation companies must par- The Colombian State can participate in the execution and ticipate in the central office in a mandatory manner, with exploitation of the generation projects as well as the pri- all of their generation plants or units connected to the Co- vate sector. The Law 142 of 1994, established that the lombian system whose capacities are equal to 20 MW or legal regime of public services and the Law 143 of 1994 higher (plants with capacities between 10 and 20 MW can focused, particularly, in the service of electric power ser- optionally participate). The generation companies that par- vice, determined the types of entities authorized to provide ticipate in the central office must declare the commercial residential public service, in this sense it was created the availability of their generation resources and offer the price “Public Service Company” as the fundamental for this pro- at which they wish to sell it. The National Dispatch Center vision. (CND) with economic optimization criteria and respecting the electrical and operational restrictions of the system In the short-term energy market, the CND receives, each centrally dispatches this energy. day, the offers of prices and the declaration of commer- cial availability for each hour of the following day, of all the Commercialization consists on the intermediation between generators participating in the wholesale market. Based the actors that provide electricity generation, transmission on this information, the CND performs an economic dis- and distribution services, and the users of these services. patch through an optimized procedure for the next 24-hour The commercialization can be carried out along with or period of the following day, taking into account the elec- without other activities of the electricity sector. trical and operation restrictions of the system, as well as Transmission operates under monopoly conditions with a gy demand for the next day in safe, reliable and economic guaranteed annual fixed income, which is determined by manner from the cost point of view. Unlike the rest of the the new replacement value of networks and equipment countries where the office is centralized based on variable and by the value resulting from the bidding processes that costs of production, in Colombia, the office is based on other conditions necessary to satisfy the expected ener- add new projects for the expansion of the National Trans- prices offered by agents. mission System (STN). This value is distributed among all the retailers in the market in proportion to their energy de- The energy market is a market of adjustments, where the mands. The National Interconnected System (SIN) supplies excess energy is sold or bought against the real energy 98% of the national demand. Non-interconnected systems demand of generators and retailers. The power exchange serve isolated areas of the country. the determined spot price is established by the ASIC af- ter the day of operation is established by means of an op- Distribution is defined as the operation of local distribution timized procedure for the 24-hour period called the ideal networks and regional transmission. Any customer can dispatch, which implies an infinite transmission capacity in have access to a distribution network in which he pays a the network and takes into account the initial conditions connection fee. Distribution companies, or network oper- of operation, thus establishing which generators had to be ators, are responsible for the planning, investment, oper- dispatched to satisfy the actual demand. The price paid to ation and maintenance of electricity grids with voltages all generators that are dispatched for merit of price is the below 220 KV. price of the most expensive generator dispatched every hour under the ideal dispatch. 120 Annual Report Enel Américas 2018Cost differences between the 'planned dispatch' and the If market parameters for monitoring capture any alert and 'optimal dispatch' are called 'restriction costs'. The cost of risk conditions, we proceed to declare a risk of shortage each restriction is allocated to start with to the agent re- period, basically consisting of a scheme of sale and em- sponsible for the restriction and when it is not possible to balming of energy, which guarantees that the system will identify an agent it is distributed proportionally to all Colom- have the necessary reserves to fulfill the demand. If water bian system traders according to their demanded energy, containment is achieved through the intervention of supply and these costs are transferred to final customers. prices of hydraulic agents with capacity in their reservoirs, thus allowing the use of the thermal resources necessary Generators connected to the Colombian system can also to ensure the reliability of the system. participate in the "Reliability payment", which is a mecha- nism that aims to encourage investment in the generating In 2018, regulatory management related to the electrici- park to ensure that the country's demand is met in the long ty market was affected by some institutional and market term. The Charge consists of the assignment of Firm Ener- facts, such as the delay of the start of operations of Hi- gy Obligations (OEF) through a descending auction for new droituango project, the evolution of Electricaribe process, agents interested in developing generation projects, who the legislative agenda and even the change of Government, must guarantee the System that amount of energy for a all of which made the regulator, the Ministry of Mines and given period. The allocation for existing generators is made Energy and other institutions, developing the measures in annually and for new projects for up to 20 years. The OEF order to address these issues, and in general to move for- is a commitment on the part of the generating company, ward with the agendas proposed in early 2018, therefore backed by its physical resources, which provide support below we highlight the progresses made in the following to that firm in the production of energy. The generator that topics. In this respect, worth is highlighting the advances acquires an OEF will receive fixed compensation during the made in the following topics. commitment period, whether or not the fulfillment of its obligation is required. With the enactment of resolutions CREG 083 and 084 in July 2018, the Commission for the Regulation of Energy The price for each KWh hour of OEF corresponds to the and Gas established the opportunity to assign the Obliga- closing value in the auction for the firm energy or Reliability tions for Firm Energy of Reliability Charge for the periods charge. When this firm energy is required, what happens 2019-2020, 2020-2021 and 2021-2022, and convened a bid when the spot price overpasses the shortage prices, an for the reconfiguration of energy sales for the period 2018- agent fulfillment balance, where they verify the ideal dis- 2019. These regulatory measures are aimed at ensuring patch if the agent covered its OEF with their own resourc- the availability of an efficient energy offer for the country in es and delivered surplus or another agent covered the OEF, the medium to long-term, whose need was revealed after in which case the differences valued at the spot price are the analysis of the system’s Firm Energy, with the impact balanced. of the delay of Hidroituango project in the reliability of the In 2014, the CREG issued the Statute of Risk of Shortage, system. which is a mechanism of last resort that acts when un- Similarly, through Resolutions CREG 103, 104 and 142 of der conditions of critical hydrology, the market fundamen- 2018, the Commission amended some aspects of the Reli- tals do not behave as expected. In general, the scheme ability Charge scheme and defined the conditions for a call consists in the implementation of market monitoring indi- for tender offers for the expansion of Reliability Charge for cators, which helps to identify if the price signals (energy the allocation of energy generation projects, to be commis- market) is coherent with future energy estimates and cur- sioned as early as December 1, 2022. rent hydrological conditions of the system. 121 Regulatory framework of the electricity industryRegarding the incorporation of Non-Conventional Renew- By year-end 2018, in coordination with CREG, several advi- able Energy Sources (FRNCE for its Spanish acronym), sors presented studies contracted by the regulator, orient- during 2018 the Ministry of Mines and Energy through De- ed to modify the market architecture, taking into account cree 0570 of March, 2018, defined the public policy guide- the imminent entry of FRNCE to the generation matrix. In lines for contracting Long-Term Energy. The objectives of particular, the following topics were analyzed: i) the imple- the decree are: strengthen the resilience of the generation mentation of a binding dispatch and intraday markets, ii) matrix through risk diversification, promote competition the implementation of complementary services and the and efficiency in price formation through new and exist- introduction of new technologies (storage systems) and iii) ing products, mitigate the effects of variability and climate updating the Networks Code. These studies are still under change, by using available renewable resources, reinforce analysis from the Commission and more concrete propos- the national power security and reduce GEI emissions, as als are expected for 2019. agreed in the commitments undertaken in COP 21 . Aiming to provide continuity to the aforementioned De- cree, the Ministry of Mines and Energy enacted Resolu- tions 40791 and 40795 in August 2018, upon completion of the construction cycle of public policy that will enable the fulfillment of the goals related to reinforce, complement and diversify the energy matrix of the country and marking an historic milestone such as the call for the first long-term energy tender offer in the country. A key issue of these resolutions is the creation of long-term energy bid, thus enabling the greater incorporation of renewable energies to national energy system. Through resolutions 41307 and 41314 of December 2018, the Ministry of Mines and Energy defined all the details of the adjudication mechanism and officially called the first long-term energy tender offer, which will take place on February 26, 2019. This process will award contracts of 1,183,000 MWh/ year, through long-term annual medium energy contracts, with a maturity of 12 years. The starting date of the obligations of awarded generation projects is December 1, 2021. Regarding other supplementary regulatory aspects, rules were defined for energy generation of users in the country and its sale to the National Interconnected System. This is Resolution CREG 030 of 2018 of small-scale self genera- tion (up to one megawatt) and distributed energy, defin- ing an easy and simple mechanism for residential users of every strata, and also for small commercial and industrial users, to produce energy mainly to satisfy their own needs and sell their surpluses to the interconnected system. Regulation in Distribution Companies In Colombia, distribution companies are free to purchase their supplies, being able to define the conditions of the public bidding processes to acquire the energy required for the regulated market and may also go to the spot market to buy energy. The price paid by the end user reflects an average of the purchase price. The Ministry of Mining and Energy enacted Resolutions 41307 and 41314, which established a mechanism that promoted long-term contracts for energy generation proj- ects, complementary to the existing mechanisms already existing in the MEM. Correspondingly, Resolution 40795 was enacted, which called the first tender for long-term contracts. The fist tender offer will take place on February 26, 2019 and its purpose y to diversify, complement and boost the competitiveness of the energy matrix, making it more resilient to climate fluctuations, and contributing with carbon emissions reduction and providing energy security to the country. Distribution charges are set by the CREG based on the new replacement value of existing distribution assets, cost of capital, non-electric assets; as well as operational and maintenance costs for each company. These are defined for four different voltage levels, as follows: level 1, less than 1 kV; level 2, greater than or equal to 1 kV and less than 30kV; level 3, greater than or equal to 30 kV and less than 57.5 kV and level 4, greater than or equal to 57.5 kV 122 Annual Report Enel Américas 2018and less than 220 kV. Voltage levels 1, 2 and 3 are called Finally, after four resolutions subject to consultation, on Local Distribution Systems (SDL) and Level 4 is called the February 2, 2018 the final resolution CREG 015 was issued. Regional Transmission System (STR in its Spanish acro- This norm defines the beginning of a new regulatory peri- nym). od where the regulator introduced replacement incentives, including depreciation as part of the tariff formula, incen- In 2009, after auditing the information reported by the tives to the quality of service that should improve at least companies, CREG determined the applicable distribution 8% per year and defined the management of regulatory charges, which are set for a period of five years, and up- adjustments to remunerate through tariffs the investments dated monthly according to the producer price index. The and the operations related to Infrastructure of advanced methodology for calculating distribution charges includes measurement. an incentive scheme for administration, operation and maintenance costs based on the quality of service. For en- Furthermore, on February 5, 2018 the Regulation Com- ergy losses, the regulation establishes a path of recognized mission enacted resolution 016 of 2018, which defines the loss indexes to be included in the tariff. return rate (WACC) for the electricity distribution activity in the national interconnected system and the scheme of The review of distribution charges began in 2013 with the maximum revenue for the new tariff process. The rate val- publication of the remuneration methodology proposed by ue is the result of the application of the methodology ap- resolution CREG no. 043/2013. The review of distribution proved in Resolution CREG 095 of 2015. charges began in 2013 with the publication of the remu- neration methodology proposed by resolution CREG no. The value of the WACC for 2019 onwards was defined in 043/2013. These articles were complemented by CREG 11.8% real before taxes. Resolution No. 079/ 2014, which contains the purposes and guidelines for remuneration of distribution and Resolu- Its expected that in 2019 the process will conclude with tion CREG No. 179 of 2014, 024 and 176 of 2016 and 019 of the approval of new charges regulated from the CREG and 2017, which contain the methodology proposals. will be determined for a five year period. 123 Regulatory framework of the electricity industryRegulation in Transmission trical supply directly from generator or distributor acting as traders, or from a pure trader. The market for non-regu- lated customers consists of customers with a maximum demand of more than 0.1 MW or a minimum monthly con- Transmission networks operating at 220 kV or above con- sumption of 55 MWh. stitute the National Transmission System (STN). The trans- mission fee includes a charge that covers the operating Generators, distributors or independent agents that meet costs of the facilities, and a charge for use that applies only certain requirements can perform the commercialization or to the merchants who transfer it directly to the final users. trading. The parties freely agree on transaction prices for unregulated customers. The CREG guarantees transmission companies a fixed an- nual income. This income is determined by the reposition The trader of energy is responsible for billing electricity value of the network and equipment, and by the resulting costs to final consumers and transferring payments to dif- value of the bidding process that have awarded new proj- ferent agents in the industry. Regulated customers trading ects for the expansion of STN. This value is attributed the is subject to the "Regulated Freedom Regime" in which tar- retailers the STN in proportion to the energy demanded. iffs are set by each seller using a combination of the gener- al cost formulas determined by the CREG and the individu- The construction, operation and maintenance of the new al trading costs approved by the CREG for each seller. The projects is assigned to the company that offers the lowest rates include, but are not limited to, costs of energy supply, present value of cash flows necessary to carry it out. transmission charges, distribution charges and a margin of commercialization. In addition, the final costs of the service The revision of regulated transmission charges began in are affected by subsidies or contributions that are applied 2013 with the publication of the pay rate methodology pro- according to the socioeconomic level of each user. posed by resolution CREG no. 042/2013. These pay rate is complemented by the development of the purposes and Trading charges for regulated customers are established in guidelines for the remuneration of transmission for the pe- accordance with CREG Resolution no. 180/2014. The main riod 2015-2019, which was presented in resolution CREG changes in this formula were the creation of a monthly No. 078/2014 and draft resolutions that have been sub- fixed charge that covers operating expenses plus a variable mitted for consultation, Resolution CREG No. 178/2014, of income for traders covering credit risk, working capital Resolution CREG Nº 023/2016 and Resolution CREG Nº subsidies and other selling costs. 177/2016 that define a proposal of remuneration methodol- ogy. This resolution was defined by the MME and aims to In January 2017, the Regulation Commission -CREG ap- guarantee adequate assets and timely extensions. It’s ex- proved the merger of Codensa and EEC markets. This is pected that the new methodology of remuneration of the why a unique regulated tariff is applied from that date for transmission and the new charges of transmission will be users of the market currently served by Codensa. published during 2019. Regulation in Commercialization The commercialization market is divided into regulated customers and unregulated customers. Customers in the free or unregulated market can freely contract their elec- Environmental Regulation The regulatory framework for environmental regulation in Colombia was established in Law 99/1993, which also cre- ated the Ministry of Environment as the authority for the definition of environmental policies. The Ministry defines, issues and executes policies and regulations focused on the recovery, conservation, protection, organization, ad- ministration and use of renewable resources. 124 Annual Report Enel Américas 2018 Any entity contemplating the development of projects or tal Licensing Authority as the entity responsible for grant- activities related to the generation, interconnection, trans- ing and monitoring environmental licenses, permits and mission or distribution of electricity, which may cause an procedures of the Ministry of Environment and Sustainable impact, deterioration and/or introduce significant or notori- Development. ous changes to the environmental landscape, must apply for an environmental license prior to the start of activities. In 2015, due to a recommendation of the OCDE, the en- vironmental sector regulation was consolidated in the De- Law No. 99 established that generation power plants al- cree 1076 of 2015. ready operating, that have a total installed capacity of more than 10 MW, should contribute to the conservation of the During the COP21 in Paris in 2015, Colombia committed to environment, transferring to municipalities and environ- reduce 20% emissions as of 2030 with respect the refer- mental corporations in the area where the power plants ence baseline. In 2018, Law 1931 was enacted, which es- are located, a percentage associated with the generation tablishes the guidelines for Climate Change management of energy (transfers of the electricity sector). Hydroelectric in Colombia. power plants and thermal power plants should pay 6% and In general and as of today, the environmental regulation 4 % respectively, of their gross energy sales by their own for the electricity sector has been focused on regulating generation, and according to tariffs set for blocks of energy aspects related to: i) emissions from thermal plants; (ii) for- sales and determined by the Energy Regulation Commis- mulation, issuance and implementation of the National Pol- sion. icy for Integral Management of Water Resources, updat- ing the regulations associated with landfills, regulation the In 2011, Decree 3,570 established the new structure of methodology for the calculation of the environmental flow, the environmental sector thus creating the Ministry of En- and structuring and management of watersheds); (iii) en- vironment and Sustainable Development (previously, the vironmental licensing and compensations, for subtraction functions of the Ministry of Environment were established of forest reserves and exploitation, for loss of biodiversity along with the functions of the Ministry of Housing). In the for projects bound to environmental licensing; (iv) updating same year, Decree 3,573 created the National Environmen- the regulatory framework for environmental licensing and regulating the environmental sanctioning regime. 125 Regulatory framework of the electricity industryPeru Industry Structure The general regulatory framework applicable to the Peruvi- an electricity industry is primarily comprised by the Electric Concessions Law (Decree Law Nº 25,844 from 1992) and its regulatory norms. The Ministry of Energy and Mining (MINEM) defines en- ergy politics applicable on a national level, jointly regulates with the Ministry of the Environment, the environmental aspects applicable to the energy sector and is the com- petent authority for the granting and expiration of autho- rizations and concessions for the activities related to the generation, transmission and distribution of energy. The Supervising Organism of the investment in Energy and Mining (Osinergmin) is the regulatory entity that con- trols and oversees the enforcement of legal and technical norms related to the electricity, hydrocarbon, and mining activities, and enforces the obligations established in con- cession contracts. On its part, the Regulating Osinergmin Tariffs Agency (GRT) is the competent authority for the de- termination of regulated tariffs. Osinergmin also controls and supervises the bidding processes required by distribut- ing companies for the purchase of energy from generation companies. Meanwhile, the Environmental Evaluation and Enforce- ment Organism (OEFA), which depends on the Ministry of the Environment, is responsible for the supervision and enforcement of the environmental obligations contained in the approved environmental instruments. The Economic Operation System Committee (COES) is the National Electric Interconnected System Operator (SEIN), coordinates the dispatch of generation units in function of the minimum cost, and prepares diverse studies that serve as a base to annually calculate the bar prices, manages the short term market, and elaborates the Guaranteed System Transmission Plan. In the COES generating, transmitting, and distributing companies are represented, as are Big Us- ers (free clients whose consumption is higher than 10MW). In rural areas there are small isolated electric systems that supply electricity in specific areas, which represent approx- imately 6% of the total national production. The main characteristics of the electric industry in Peru are: (i) the separation of the three activities: generation, trans- 126 Annual Report Enel Américas 2018mission, and distribution; (ii) open market for the supply of With regards to the transactions in the wholesale market, energy to unregulated clients; (iii) a regulated price system, the Regulation of the Electricity Wholesale Market (Regu- primarily based on a long and short term bidding regimen. lation MME) was approved through Supreme Decree Nº Regulation in Generation Companies Generation companies that own or operate a generation plant with an installed capacity larger that 500 KW require a definitive concessions given by the MINEM. The dispatch coordination of electricity operations, the determination of the spot prices and the management of economic transactions that occur in the SEIN are managed by the COES. Generation companies can sell their energy directly to dis- tribution companies and free clients and liquidate their dif- ferences in the spot market at marginal costs. The sales to non-regulated clients are carried out in prices and con- ditions mutually agreed, which includes fees and compen- sations by the use of transmission systems, and if it is the case, fees for the use of the distribution networks. The Electric Concessions Law allows the subscription of bilateral contracts of a price no greater than the Bar Rates, in the case of regulated clients, or at a price agreed by all parts in the case of unregulated clients. As well as this bilateral method, Law 28,832 from 2006, denominated the Law to Ensure Efficient Development of Electric Gen- erating, also established the possibility that distributors can satisfy regulated and unregulated client demands by concluded agreements after a power bidding process and energy supervised by Osinergmin. The approval of this mechanism is important for the generators because it al- lows them to dispose of a stable price during the contract life, which is not set by the regulator and can have duration of up to 20 years. Due to the introduction of bidding mechanisms, a large portion of the contracts to sell energy to distributing com- panies to get the client's attention, comes from these bids. Just a small portion of the electricity bought by distribu- tion companies, is maintained under the bilateral contract scheme. 026-2016-EM. The main aspects are the following: The “MME” is comprised by the short-term market (“MCP” by its Spanish acronym) and the allocation mechanisms of complementary services, operational inflexibilities and the allocation of congestion revenues. The authorized par- ticipants to buy in the MCP are: generators to serve their supply contracts, distribution companies to serve free cus- tomers for up to 10% of its maximum demand; and large users to serve up to 10% of its maximum demand. COES will calculate the energy marginal costs and the congestion marginal costs. Participants will need payment guarantees of their obligations in the MME. In addition, action from COES are incorporated in the event of a payment default of a participant. Legislative Decree 1,002 and its norm (Supreme Decree 050-2008-EM) creates a scheme to promote non-conven- tional renewable energy sources (ERNC by its Spanish ac- ronym), trough tender offers for specific technologies with a mechanisms of guaranteed income paid by the demand through a tariff charge included in the connection toll. This decree establishes a target of 5% of electricity demand of the Interconnected System to be supplied with NCRE to be awarded through this scheme. The corresponding author- ities regarding the National Plan for Renewable Energies may review this 5% target. Technologies considered as renewable sources are the following: biomass, wind, tid- al, geothermal, solar and mini-hydro (hydroelectric power plants with capacity below 20 MW are not considered in the 5%). In 2017, the percentage of NCRE was 2.8% of the demand at the SEIN. The result of the fourth bidding of 2016, the percentage increased to 4.7% in 2018. In Peru, capacity payment is defined by the amount that remunerates the development of a gas turbine, being the marginal unit that contributes to the demand of the sys- tem. Similar to Chile, capacity payment is independent from its dispatch and pays for the availability among the efficient target margin, which has been defined by the cor- responding authorities. 127 Regulatory framework of the electricity industryRegulation in Distribution Companies The electricity tariff for regulated clients includes charges for energy and power, for the generation and transmission, and the Distribution Added Value (VAD) that considers a regulated return for investments, fixed operating charges and maintenance, and a standard percentage for energy losses in distribution. In September 2015 the Decree N° 1,221 was published, through which the fixed VAD (Distribution Added Value) establishes that it will be carried out every four years and will be calculated for each company (before this decree the VAD was calculated for a company that was representative of the group and typical sector, and this VAD is applied to all of the companies that made up the respective group). Also, an additional charge for fees in technologically in- novative projects and efficient energy projects previously approved by the Osinergmin. Incentives were offered to improve the quality of service and the possibility to expand the concession areas for distribution companies in rural ar- eas next to their concession zones. The real return on the investment of a distribution company depends on its performance with respect to the standards set by Osinergmin for a theoretical model company. The tariff system allows a greater return to the distribution com- panies that are more efficient than the model company. The preliminary tariffs are determined by taking as a base the results of a study hired the company, corrected accord- ing to the Osinergmin. Preliminary tariffs are checked to ensure that the internal return rates are 12% with a +/- 4% variation. Also, the tariffs are indexed to the exchange rate, the price index to the greatest (IPM), and the commodities price as is copper and aluminum, with which Peru has no exchange risks. During 2018 the process of setting process of Value Added for Distribution was carried out for the period 2018-2022 for Enel Distribución. This process ended on December 28, 2018. Regulation in Transmission Transmission activities are defined under different re- gimes. The facilities built before 2006 are divided in the Main System, that is for common used and allows the flow of energy through the national net, and the Secondary Sys- 128 Annual Report Enel Américas 2018tem is mostly unidirectional and are useful for evacuating energy from one generation power plant or to take energy to the final consumer. For its part, the facilities built after 2006 are divided in: Guaranteed System formed by lines for common use, part of the Transmission Plan developed by the COES and whose toll y paid by the whole demand of the network, and the Complementary System whose lines are connected to a power plant or to a user of the system and are paid by the beneficiary. The Transmission Plan, elaborated by the COES and ap- proved by the MINEM, determines the development of the Guaranteed System lines, which are bid through a BOOT framework with a maximum duration of 30 years. The transmission concessions of the Guaranteed System re- ceive an annual fixed income from said bids. The Complementary System lines are developed through investment plans presented by the agents and approved by the Osinergmin, an entity that calculates the average annual cost to remunerate for each installation, consider- ing the standard investment, operating, and maintenance costs, with an updated rate of 12% before tax and a useful life of 30 years. Environmental Regulation The environmental legal framework applicable to the ac- tivities related to energy in Peru is established in the En- vironmental General Law (Law N° 28,611) and in the Envi- ronmental Protection Rules for Electric Activities (Supreme Decree 029-94-EM). Following the aforementioned principles and regulations and the ones contained in Law 28,245, Framework Law for the National System of Environmental Administration, the National Policy of the Environment and the United Nations Framework Convention on Climate Change, in April 2018 Law N° 30754 was enacted, being the Framework Law on Climate Change, which will enable the State through transversal and jointed regulation to issue regulations re- lated with the development of the RER generation, electric vehicles and sustainable investments consisted with Paris Memorandum of Understanding. 129 130 Annual Report Enel Américas 201816 Description of the electricity business by country 131 Letter From the Chairman Electricity Generation Electricity Distribution In this segment, Enel Américas owns operating subsidiaries The distribution business is conducted through Edesur in in Argentina, Brazil, Colombia and Peru. Argentina, Enel Distribución Río, Enel Distribución Ceará, As a whole, the gross installed capacity of Enel Américas tribución São Paulo (former Eletropaulo) owned by Enel Group reached 11,174 MW in December 2018 and the con- Brasil in Brazil, Codensa in Colombia and Enel Distribución solidated electricity generation amounted to 39,869 GWh, Perú in Peru. During 2018, our main distribution subsidiar- while energy sales totaled 65,332 GWh. ies sold 100,927 GWh. Enel Distribución Goiás and the recently acquired Enel Dis- In the electricity industry, business segmentation between Currently, Edesur, Enel Distribución Río, Enel Distribución hydro and thermal generation is natural, since the variable Ceará, Enel Distribución Goiás, Codensa and Enel Distribu- costs of generation are different for each method of electric- ción Perú serve the main cities in Latin America, providing ity production. Thermal generation requires the purchase of electricity service to more than 24.5 million clients. fossil fuels and hydroelectric generation requires the water that comes from dams and rivers. Additionally, during 2018 the company launched a new business line: Enel X, a global business that leads the 56% of Enel Américas’ consolidated generation capacity transformation of power sector. Enel X seeks to change comes from hydroelectric sources and 44% from thermal paradigms, helping clients to use technology to transform sources. energy in new opportunities, to thrive and lead progress worldwide. Enel X is a global company with strong roots in Hence, the definition of the generation company’s commer- the energy field and an open strategy oriented towards dig- cial policy is relevant for the proper management of the busi- itization, sustainability and innovation. Enel X uses smart ness. The Group carries out its generation business through technologies, simple and fast to help clients to discover Enel Generación Costanera, Enel Generación el Chocón new ways to use energy globally. and Central Docksud in Argentina, EGP Cachoeira Dourada, Enel Generación Fortaleza and EGP Volta Grande en Brasil, The mission of Enel X is to provide innovative technology Emgesa in Colombia and Enel Generación Perú and Enel solutions and provide value added services, to create New Generación Piura. Value for residential clients (B2C), companies (B2B) and cit- ies (B2G). Electricity Transmission The electricity transmission business for Enel Américas is mainly performed through the interconnection line be- tween Argentina and Brazil, Enel Cien, subsidiary of Enel Brasil, whose transport capacity is 2,100 MW. 132 Annual Report Enel Américas 2018Generation Transmission Distribution Córdoba Costanera Buenos Aires Dock Sud Arroyito Mendoza Edesur El Chocón Neuquén Motogeneradores *Non-billable consumptions are not included in distribution business. 133 Description of the electricity business by country TypeHydroNet Installed Capacity 128 MWTypeHydroNet Installed Capacity 1,200 MWTypeThermoNet Installed Capacity 2,210 MWEnergy sales17,548 GWhEnergy losses14.2%Clients2,529,953TypeThermoNet Installed Capacity 34 MWTypeThermoNet Installed Capacity 847 MWParticipations in installed capacity and in business Groups for 2018 are distributed as follows: Participation in installed capacity and in Business Groups in 2018 Enel SADESA AES Regional Governments Pampa Energía Foninvemem National Government Others 11.8% 10.3% 8.9% 6.7% 10.1% 8.3% 17.5% 26.4% Among the most relevant news of the year, worth is men- tioning the biddings carried out by the new Government for the creation of new generation offer. In November 2018, a new tender offer was released of 400 MW of mini renew- ables (round 3) for medium voltage and to be adjudicated during 2019. It should be remembered that during 2017, 1,810 MW of new thermal generation were awarded, the technology involved was: a) closing of combined cycle or b) cogenera- tion, with the commitment to be available to satisfy the de- mand in the MEM, and the biddings performed under the Program RenovAr Round 2, in order to create new gener- ation capacity from Renewable Energies. In this program, the total capacity awarded is: through Round 2 of Program RenovAr 88 projects for 2,043 MW in 18 provinces. The Program RenovAr is included in Law 27,191, which estab- lishes a route of participation in these types of energies in the market, which in 2025 are expected to reach 25%. Enel Generación Costanera S.A. Costanera is located in the city of Buenos Aires and has six steam turbine units totaling 1,131 MW, which are enabled to generate either with natural gas or fuel oil. Costanera also operates two combined cycles of 851 MW and 322 MW respectively. Its gross installed capacity is 2,304 MW. During 2018, CAMMESA performed the dispatch of the Interconnected Argentine System (SADI for the Spanish abbreviation), according to the resolutions established by Secretary of Energy. In this context, the dispatch priori- tized natural gas, taking into account the performance of Argentina Electricity Generation Enel Américas S.A. participates indirectly in electricity generation through Enel Argentina S.A.’s subsidiaries Enel Generación Costanera S.A. (Costanera), Enel Generación El Chocón S.A. (Chocón) and Central Dock Sud S.A. (CDS). Costanera, Chocón and CDS own together 4,537 MW gross installed capacity. This capacity represented by the end of 2018, 11.8% of the total capacity in the Argentine SIN (National Interconnected System). Electricity genera- tion of these companies reached 13,949 GWh on Decem- ber 31, 2018, equivalent to 10.1% of the total generation of Argentina. Worth is to mention that some of the most important busi- ness groups that participates in the Argentine Electricity Market in generation are: AES, SADESA and Pampa En- ergía - company that in 2016 acquired Petrobras Argenti- na. Other companies with participation in the generation business are YPF Energía, CAPEX and Pluspetrol Energía, acquired by YPF. 134 Annual Report Enel Américas 2018the units and the use of liquid fuels (gas oil and fuel oil) in accordance to the restrictions imposed for power plants during the season of greater residential demand. As a result of the performed operations, net generation of Costanera’s Convectional Units reached 1,155 GWh, and net generation of Combined Cycles reached 5,946 GWh. In January 2017, the Secretary of Electric Energy depend- ing on the Ministry of Energy and Mining updated through Resolution N° 19/2017 the remuneration values of Reso- lution SE N° 22/2016 to be applied from February 2017. During 2018 this regulation remain in force. The implementation of Resolution SEE N° 19/2017 trig- gered an increase of remuneration of around 50% in re- lation to the previous regulation. Basically the remunera- tion concepts were simplified. There is a capacity charge, which varies in relation to technology and size of the unit, and a variable charge. Values are defined in dollars. Since the sanction of Resolution SEE N°19/2017, it was giv- en for thermal units the possibility to offer commitments of guaranteed availability, and additional guaranteed availabili- ty (DIGO and DIGO Additional respectively) with the same differential remuneration for every technology. In this sense, in 2018 Costanera participated in the Sum- mer Seasonal Programming (from November 1 to April 30), in the Winter Seasonal Programming (form May 1 through October 31) and the 2019 Summer Seasonal Programming (from November 1 to April 30) of the commitments of guar- anteed availability. In November 2018, Resolution 2018-70-APN-SGE was published, through which Generation Agents, Cogen- Enel Generación El Chocón S.A. Hidroeléctrica El Chocón SA is an hydroelectric generation company, operating El Chocón and Arroyito power plants, located on River Limay. It’s located in the provinces of Neuquén and Río Negro. The total gross installed capacity of this hydroelectric complex is 1,328 MW and includes El Chocón plant, with 1,200MW installed capacity (artificial reservoir's hydroelectric power plant) and Arroyito plant, with 128 MW installed capacity, both plants use the waters of Rivers Limay and Collón Curá for generation. The gross hydro installed capacity of the Company is 1,328 MW; thermal gross capacity is 35.6 MW and corresponds to motogenerators. Its participation in the SADI is 3.6% in relation to the total installed capacity. El Chocón is located in the Comahue region, consisting of the Argentinean provinces Río Negro, Neuquén and the southern areas of Buenos Aires provinces, over the Limay River, 80 km upstream from the confluence with Neuquén River. Arroyito is the compensator dam of El Chocón and is located in the same river, 25 km downstream. The hydrological year starts on April 1, and 2018 has been characterized as dry accordingly the contribution of the hy- drological basins of the Rivers Limay and Collón Cura. Net generation recorded for these power plants during the year was 2,898 GWh. This generation comes from 2,282 GWh in Chocón (79%), 577 GWh in Arroyito (20%) and 39 GWh by motogenerators (1%). The company started 2018 with a level of the reservoir of 377.71 m.s.n.m. The reserve El Chocón dam was 2,159 GWh and in the Comahue was 5,919 GWh. Both amounts were measured in relation the minimum height condition erators and Self-generators of the MEM are allowed to of FOE. supply their own fuel for energy generation. Following the enactment of this Resolution, CAMMESA has authorized the declaration of Variable Production Costs (CVP by its Spanish acronym). The declared CVP will enable Costanera to carry out a commercial strategy, in order to optimize its costs and the declared CVP. At the end of year 2018, the level of the reservoir reached 377.55 m.s.n.m. The energy reserves of the Comahue dams were 6,083 GWh, 2,168 GWh of which were re- serves of El Chocón. 135 Description of the electricity business by country In January 2017, the Secretary of Electric Energy, which is In January 2017, the Secretary of Electric Energy, which is subordinated to the Ministry of Energy and Mining, through subordinated to the Ministry of Energy and Mining, through Resolution N° 19/2017 updated the remuneration values Resolution N° 19E/2017 updated the remuneration values of of Resolution SE N° 22/2016 to be applied from February Resolution SE N° 22/2016 to be applied from February 2017. 2017. During 2018 this regulation remained in force. The implementation of Resolution SEE N°19/2017 prompted The implementation of Resolution SEE N°19/2017 prompt- a change in the remuneration of thermal and hydro gener- ed a change in the remuneration of thermal and hydro gen- ators in relation to the previous regulation. The remunera- erators in relation to the previous regulation. The remuner- tion concepts were simplified, thus considering a capacity ation concepts were simplified, thus considering a capacity charge, which varies in relation to technology and size of the charge, which varies in relation to technology and size of unit, and a variable charge. The values are defined in dollars. the unit, and a variable charge. The values are defined in dollars. Since Resolution SEE N°19/2017, it was established for ther- mal units the possibility to offer commitments of guaran- Additionally, since the enactment of Resolution SEE teed availability, and additional guaranteed availability (DIGO N°19/2017, it was established for thermal units the possi- and DIGO Additional respectively) with the same differential bility to offer commitments of guaranteed availability, and remuneration for every technology. additional guaranteed availability (DIGO and DIGO Addi- tional respectively) with the same differential remuneration Later, through resolution N°70/2018, from the second half of for every technology. November, generation agents were allowed to se to supply Starting from motogenerators, in 2018 Chocón participated their own fuel for energy generation. Generation costs will in the Summer Seasonal Programming (from November 1 be valorized according to the mechanism of recognition of to April 30), the Winter Seasonal Programming (from May Production Variable costs recognized by CAMMESA. Cen- 1 to October 31) and the Summer Seasonal Programming tral Dock Sud was part of this scheme since the first half of (from November 1 to April 30), of the commitments of December, 2018. guaranteed availability. Central Dock Sud Dock Sud power plants located in Avellaneda district, Bue- nos Aires. Dock Sud owns and operates a single generation power plant with two units, with a total capacity of 870 MW. Dock Sud power plant (CDS in Spanish acronym) has four gas turbines and one steam turbine. Two of the gas turbines and the steam turbine comprises once combined cycle pow- er plant. The energy generated by Dock Sud in 2018 reached 3,950 GWh, participating in 4.5% of thermal generation and cover- ing 2.9% of the SADI demand. On December 31, 2018, installed capacity of Central Dock Sud S.A. represented 2.3% of the total installed capacity of the SIN. Since 2015, there is a loan obtained from CAMMESA, whose purpose was to finance the costs related to the com- bined cycle major maintenance. Pursuant to Article N°7 of Annex 2 of Resolution SEE 19/2017, in December 2017 the Company singed and Addenda to the existing mutual con- tract, where the payment method of the aforementioned loan was adjusted in relation to the remuneration estab- lished in the previous regulation and the use of credits of the Additional Remuneration of Trust (RAF in Spanish acronym). In this sense, the compensation between the updated debt and the RAF credits was performed, thus the new capital balance was ARS$224.9 million to be paid in 24 installments plus interests (at CAMMESA interest rates). The first install- ment was paid in December 2017. The company estimates to pay the debt with the transaction of November 2019, and maturity is in January 2020. 136 Annual Report Enel Américas 2018 Activities and projects in generation Aires’ area and twelve districts of Buenos Aires province, covering 3,309 km2, for a period of 95 years starting from August 31, 1992. Expression of interest for the development of infrastructure projects This period includes an initial term of 15 years and eight additional periods of 10 years each. On February 5, 2007, the National Electricity Regulatory Entity (ENRE) resolved to extend the initial period for five additional years, from In the context of the changes in regulation that the Argen- the completion of the Integral Tariff Review (RTI) process. tine government has been performing and the variety of biddings that have been done, and the new ones that the Later, on January 27, 2016, the Resolution MINEM N° government plans to carry out new investments in energy, 7/2016 was enacted, which instructed ENRE, among other the company is analyzing the potential installation of a new things, to: perform an adjustment to the VAD in the tariff combined cycle in Costanera. charts of the Company, on behalf of the RTI (Integral Fees Renegotiation) and the framework of the Transitory Tariff The intention is to compete for electricity energy contracts Regime established in the Agreement Act and to carry our in those biddings that the Ministry of Energy and Mining every act needed to proceed the RTI, which should come offers. into force before December 31, 2016. The process and schedule for the RTI was established through Resolution The project consists on the installation of a combined cy- ENRE 55 as of April 5, 2016. cle unit, with an installed capacity of 450 MW, connected to the voltage bars of 220 kV and 132 kV of the existing Within the framework of the RTI process, on October 28, Costanera substation. The operation would work with two 2016 the public hearing was held to inform and hear the types of fuel (natural gas or diesel). Both the environmental opinions with regards to the tariffs proposals that the dis- permit and the prior authorization for connection (Stage 1) tribution companies Edesur and Edenor presented to the were granted in 2017. ENRE according to Resolution ENRE N° 55/2016. The construction period is estimated in 30 months, de- On December 30, 2016, the ENRE enacted Resolution N° pending on technical specifications. 626, approving the document denominated Final Public Land Reserved for Future Projects In Argentina, Enel Américas doesn’t have any land reserved for future projects. Electricity Distribution Edesur The main objective of Edesur is the distribution and com- mercialization of electricity in the southern area of Buenos Aires. This includes two-thirds parts of the city of Buenos Hearing Resolution with the purpose to inform and answer the opinions made in relation to the Tariffs Proposal pre- sented previously by the companies with regards to the definition of tariffs to be applied, and to transfer the consid- erations of the Subsecretary of Tariffs Policy Coordination of the Ministry of Energy and Mining of the Nation, those subjects planned that are not under the responsibility of such entity. On February 1, 2017 the Integral Tariff Review came into force, thus ending the process of renegotiation of the con- cession contract, and reestablishing the full validity of the Concession Contract, the Tariff Regime and the Quality of Service, which were renegotiated base don the principles established by Law 24,065. 137 Description of the electricity business by country This milestone is critical for the company, because it means On December 4, 2018 Law 27,469 was enacted, which the complete restoration of conditions of certainty and sus- approves the Fiscal Consensus signed on September 13, tainability of the business, and also defines conditions and 2018 between the Nation and the majority of the Provinc- basic criteria (formation of capital base and calculation of es. This agreement mandates “electricity distribution com- WACC) for future tariff revisions throughout the conces- panies Empresa Distribuidora Norte SA (Edenor) and Em- sion period. presa Distribuidora Sur SA (Edesur) to become part of the jurisdiction of the Province of Buenos Aires and the Ciudad Its worth mentioning that along the tariff cycle of the RTI Autónoma de Buenos Aires (CABA), in line with the elec- term, established between February 1, 2017 and January tricity distribution companies in the other jurisdictions”. 31, 2022, the quality of service regime will increase its re- quirements according to the expectation of the develop- In the same vein, Law 27,467 of General Budget for Ex- ment of investments and operational improvements that penses and Resources of National Administration for 2019, EDESUR proposed in the context of RTI. Therefore, the published also on December 4, 2018, established on article quality guidelines will be more demanding and the cost of 124, to instruct the National Executive Power to “foster energy not delivered will increase throughout the period, those acts needed for the transfer of jurisdiction of energy reaching the values established recently in the last semes- distribution companies Empresa Distribuidora Norte S.A. ter of the cycle. (Edenor) and Empresa Distribuidora Sur S.A. (Edesur) from Province of Buenos Aires to Ciudad Autónoma de Buenos It should be noted that SAIDI (one of the indexes of service Aires” from January 1, 2019, and “once this becomes ef- quality) has improved in 2018 in relation to 2017, with a fective, the National Entity for Electricity Regulation (ENRE reduction of 4.5 hours, reaching 25.18 hours –according to in its Spanish acronym) created through article 54 of Law Enel criteria-. 24,065 will keep its functions and faculties in all matters not related to energy distribution public service”. The concession contract establishes for Edesur the obli- gation to supply energy according to the demand of the At the time of this report, the transfer of jurisdiction (which owners or inhabitants of the properties within its conces- requires the approval of both companies) has not yet ma- sion area, it also demands the company to comply with terialized. According to the conversations held with the au- certain quality standards related to the electricity supplied, thorities in the three jurisdictions, this transfer would be to comply with operational requirements concerning the made without any changes in the Concession Contract, maintenance of distribution assets and to bill clients on the and after solving important pending topics for both com- basis of effective measurements. panies (regulatory assets and liabilities, Framework Agree- ment and social tariff cap). In December 2017 the Ministry of Energy and Mining (MI- NEM) presented its proposal and criteria for the treatment In 2018, Edesur delivered energy service to 2,529,953 of regulatory liabilities. The first measure was, through the clients. Of the total, 88% are residential customers, 11% Note issued on December 30, 2017, that the Ministry in- commercial, 1% industrial and others 0.04%. Energy sales formed that CAMMESA took possession of the debt reg- reached to 17,548 GWh, including distribution services istered by EDESUR with this company for the purchase of (tolls) to large users, at similar levels than the previous year. energy, for a period of 90 days pending to formalize the Sales distribution was: 48% for the residential sector, 8% aforementioned agreement. EDESUR is working on the for the commercial sector, 24% for the industrial sector and latter to comply with the agreed deadlines. During 2018, 20% others. the company continued working in the agreement, and the final resolution regarding these matters was subject to the During 2018, the annual mobile loss rate (technical and change of jurisdiction. 138 non technical) reached 14.25%, meaning deterioration in relation to 2017 (12.04%). This result was achieved in a scenario of stable demand (+0.2% 2018 vs. 2017) and an important growth of thefts related to higher tariffs. Annual Report Enel Américas 2018Activities and projects in distribution Replacement of T.111/112/113 Puerto Nuevo-Azopardo With regards to the Investment Plan for 2018, worth is mentioning that the investment amount in the year reached ARS$ 5,405 million. The most important projects devel- oped in 2018 are described bellow: Commissioning of SE Padre Novak and expansion of its MT network SE Padre Novak is a new substation, comprises 1x40 MVA with 8 cells of 13.2 KV. It’s located in Av. Padre Novak 2115, Florencio Varela. It’s feed in 132KV through lines 553/554. This work consisted in the installation of four new feeders from the SE Padre Novak. Also 13 km of medium tension network new wiring was installed, benefitting users main- ly from the villages of San Juan, Villa Vatteone, Goberna- dor Costa and Santa Rosa (Florencio Varela). The costs of This is a 5.3 km underground power line of 132 KV, 1200 mm² with XLPE insulation between Puerto Nuevo and SE Azopardo. This work improved the operation of the system and solved charging transfer between north and south Bue- nos Aires and was commissioned on December 31, 2018. Cámaras Pozo This project consists on the installation of underground Transformation Centers MT/BT in areas with critical points and where the use of conventional equipment is difficult. In 2018, 40 new cameras were installed in Ciudad Autónoma de Buenos Aires (CABA for its Spanish acronym) in the fol- lowing neighborhoods: Caballito, Villa Santa Rita, Villa Gral Mitre, Villa Crespo, Villa Devoto, Flores, Floresta, Matader- os, Villa Luro, Barracas, La Boca, Nueva Pompeya, Parque Avellaneda and Villa Soldati. Paseo del Bajo these works were around ARS$ 25 million. Paseo del Bajo project consists on the construction of un- derground trails for heavy transit, connecting north and Even though other works were completed in December south Buenos Aires. Its construction interferes longitudinal 2017, ENRE has considered them "in service" during 2018, and cross-sectional with Medium and High voltage net- in the point of providing energy to the MT network. works of Edesur. Expansion of SE Santa Rita from 2x40 MVA to 2x80 MVA Consists on the adjustment and expansion of the current Substation Santa Rita, from 2x40MVA to 2x80 MVA, and 16 cells of 13.2 KV were added. Finally 32 MT exits be- came available. The main activities are: 1- Execution of new MT lines for the transitory charging transfer to the adjacent SSEE. 2- Withdrawal of the affected facilities. 3- Reversal of current facilities of the 27.5KV network. 4- Conversion of SE Balcarce and Tres Sargentos a 132KV/13.2. During 2018, ENRE considered finished the expansion works, with the installation of the bank of capacitors that 5- The MT networks are connected again to SSEE Bal- carce and Tres Sargentos, with capacity for new feed- completed the project. ers. New connection 132 KV SSEE Dock Sud – Escalada This is a 10 km underground power line of 132 KV, 1.200 mm² with XLPE insulation, from SE Dock Sud to SE Esca- lada. This connection improved the service quality in south Buenos Aires. Even though in 2017 the medium tension underground net- work reached 16.4 km, and according to the plan to comply with items 1, 2 and 3; the installation of additional new MT lines of 7.5 km during 2018 almost completes the plan. 139 Description of the electricity business by country Infrastructure improvement of MT network With the objective of improving service quality, in 2018 Edesur has expanded and renewed its network. In terms of quantity, it means 412.3 km medium voltage and 341 km low voltage networks. Likewise, considering the trans- formation centers, these grew in 311 CT intervened, repre- senting 1,437 transformers (new and/or renewed). In order to improve the situation to face severe climate events, during 2018 the "mitigation" plan in transformers Digitization of the network In order to improve the quality of service, during 2018 Ede- sur completed the installation of the first smart meters to digitize its network. The pilot project consisted on the installation of 20,000 equipments in the concession area. The new smart meters include technology that Enel is us- ing worldwide, which has many advantages: the consump- tion reading is done remotely and more precisely; network failures are identified in real time, therefore repair times would be much shorter; and allows the user to read con- sumption data constantly, while leading to a more efficient and distribution chambers continued, with the purpose of energy consumption. prevent water entry, and completing the improvements in 31 underground chambers. Regarding MT and BT networks, changes of PIMT net- works were made and the system STM was incorporated, Likewise, the distribution company continues working in for a centralized operation. mechanical reinforcements in the medium voltage trans- mission grid in the province of Buenos Aires, in order to prevent the fall of pylons during severe storms, and re- placed 299 wooden pylons for concrete pylons. Land for future substations In the context of the investment plan for 2017-2021, the company needs to install 3 AT/MT Substations, 2 in Bue- nos Aires and 1 in Quilmes (Solano). During 2018 advances were made in finding slots for these substations, working with municipalities for this purpose. Currently, there are some proposals under technical analy- sis and negotiations are under way. New clients for high voltage supply During 2018, the company started projects for new AT cli- ents according to their requests. Examples of these are: “growth of demand at Ezeiza Airport” (the AT energy sup- ply requirement will start towards 2021) and "Parque de la Ciudad" project (for which there are negotiations regarding the use of land with the government of Buenos Aires). Additionally, the supply project with the company AySA Bernal continues. The integration point to point of the SCADA-STM-SCADA systems has finished, which will enable a better operation of the network and the actualization of CERTA system, for claims management and the incorporation of new manage- ment tools for the BT network, which is guided by service quality indicators. The company started the implementation of the e-order system of Enel Group, and the new work programming system (PDL by its Spanish acronym), which manages BT claims service and maintenance orders, thus improving employees management and records of the works. Network maintenance management During 2018 started a project for the comprehensive main- tenance management of AT/MT and BT through actions intertwined, which enables the reduction of failures in the network. The most outstanding actions are the failure analysis, the implementation of operational risk analysis, improvement of IT system CERTA, monitoring and analysis of maintenance plans. A very important tool implement- ed is relieving AT/MT aerial networks with an helicopter equipped with state-of-the-art technology that takes pic- tures/ videos, thermographs and images detection with laser (LIDAR), and in BT networks it makes a Mobile Map- ping (gets data such as thermography’s and photos/ vid- eos). 140 Annual Report Enel Américas 2018In the High Voltage system, worth is mentioning that during 2018 started a new comprehensive preventive maintenance plan of the facilities (SSEE) and High Voltage Electricity-dependent users support transmission lines, thus increasing 74% the maintenance During 2018, the new regulatory framework demanded dis- works in relation to the previous year. It’s important to tribution companies to provide alternative energy sources recognize families of equipment that widely exceed 100% (FAE by its Spanish acronym) for every electricity-depen- growth of their maintenance (AT and MT Switches, power dent user, so in the case of lack of supply, power service and instrument transformers, Bars in AT). will not be interrupted for this type of users. With this pur- pose, the company developed a prototype for alternative The implementation of this preventive maintenance pro- energy source and the implementation of technical require- gram in the High Voltage system is very important, be- ments. The initial acquisition was 150 units. Additionally, in cause any failure of the system produces power outages order to expand this energy source for a larger number of electricity-dependent users, the firm started a bidding pro- cess for the acquisition of up to 1,500 units FAE, including their supply, installation and maintenance. to more than 100,000 clients. Technological improvements to the network During 2018, the company continued working in the im- provement of SAIDI, with the installation of 555 additional remote control equipment in different points of the medi- um voltage network, reaching 900 operational points, with the purpose of improving the efficiency of the MT network. The firm also installed 1,210 mini UTR (remote supervision units) and 150 line supervisors that allow access to infor- mation in real time of relevant variables of the network. Additionally, other works carried out during the year were the modernization of the design of MT/BT and AT networks and the implementation of new technologies in relation to best practices of different distribution companies and the standards defined by Enel Group. 141 Description of the electricity business by country Generation Transmission Distribution Enel Distribución Ceará Fortaleza Cachoeira Dourada Volta Grande ENEL CIEN *Non-billable consumptions are not included in distribution business. 1. Energy sales since June 2018, date of consolidation of the company. 142 Enel Distribución Goiás Enel Distribución Rio Enel Distribución São Paulo Annual Report Enel Américas 2018Río de JaneiroBelénManausSao PauloGoianaBrasiliaTypeHydroNet Installed Capacity 655 MWTypeHydroNet Installed Capacity 380 MWTransmission lines2,100 MWEnergy sales11,843 GWhClientsEnergy losses3,933,28113.9%TypeThermoNet Installed Capacity 319 MWEnergy sales11,019 GWhClientsEnergy losses2,959,22021.0%Energy sales13,755 GWhClientsEnergy losses3,026,99111.6%Energy sales124,693 GWhClientsEnergy losses7,224,4879.5%Brazil Electricity Generation Enel Américas participates in electricity generation through Enel Brasil and its subsidiaries Cachoeira Dourada, Volta Grande and Enel Generación Fortaleza. These three power plants, two hydroelectric and the other thermal, add up 1,365 MW total net capacity, and repre- sent 0.8% of the capacity of Brazilian SIN. The electricity generation of the Group in Brazil reached 3,755 GWh, reaching 0.8% of the total generation in the country (thermal and hydro), where hydroelectric produc- tion represented 86% of the total generation of the Enel Américas group in Brazil. of the asset began on November 11, 2017. The acquisition of this concession was financed 60% with debt and 40% with equity. Initially a two-year bridge loan (2018-2019) was considered, under the guarantee of Enel. During the bridge loan term, a long-term financing would structure. For further details regarding this operation, see Note 10 of the Consolidated Financial Statements of Enel Américas as of December 2018. Net generation in 2018 was 1,148 GWh and sales reached 1,376 GWh. With this acquisition, Enel Brasil increased in 40% its hy- droelectric capacity in Brazil, adding 380 MW to its port- folio. Enel Generación Fortaleza Fortaleza is located in Caucaia municipality, 50 km from the capital of Ceará state. Fortaleza is a 327 MW gross com- Other generators connected to the Brazilian SIN are: bined cycle thermal power plant that uses natural gas; and CHESF, Furnas, Cemig, Electronorte, Cesp, Copel and is able generate one third of the electricity needs of Ceará, Eletrobras. state that has a population of nearly 9 million inhabitants. Cachoeira Dourada Cachoeira is located in the State of Goias, 240 km south of Goiânia. The power plant owns ten units with 658 MW of net installed capacity. It’s a run-of-the-river power plant and uses the waters of River Paranaiba. Net generation in 2018 reached 2018 reached 2,071 GWh and sales amounted to 18,098 GWh. Fortaleza was built in a 70 thousand square meters area, and is part of the infrastructure of the Industrial and Port Complex of Pecém, in Caucaia municipality, and is part of the Thermoelectricity Priority Program (PPT) of the Federal Government. Fortaleza has a strategic location to boost re- gional growth and to facilitate the setup of other industries. Its main customer is the distribution company Enel Distri- bución Ceará and its most important supplier is Petrobras. Volta Grande Electricity generation in 2018 was 537 GWh, while sales reached 2,763 GWh. Enel Américas through its subsidiary Enel Brasil acquired the rights to operate for a 30-year period Volta Grande hy- droelectric power plant, which is located in the Rio Grande, between the Brazilian states São Paulo and Minas Gerais. The total cost of the concession was BRL$1,420 million (approximately US$436 million). Enel Brasil won the auc- tion for hydroelectric concessions performed by the Brazil- Land reserved for future projects Enel Brasil owns an area of 75 hectares in the city of Ma- caé, State of Rio de Janeiro, reserved for a new thermo- ian government on September 27, 2017, in an open public electric project. session at the São Paulo Stock Exchange. The operation 143 Description of the electricity business by country Electricity Transmission Enel Américas Group also participates in the transmission and sale of electricity in Brazil through the interconnection line between Argentina and Brazil, through the Enel Cien, holding 99.3% ownership. Enel Cien Enel Cien is an energy transmission company in Brazil. The complex consists of two frequency conversion sta- tions, Garabi I and II Garabi II, converting both ways the frequencies of Brazil (60 Hertz) and Argentina (50 Hertz) and transmission lines. On the Argentinean side, they are managed by two subsidiaries: Compañía de Transmission del Mercosur S.A. (CTM) and Transportadora de Energía S.A. (TESA). Enel Cien has control of 100.0% of the capital in both companies. The interconnection system consists of two transmission lines with a total length of 1,006 km, and the Garabi Con- version Station, SE STA (Santo Angelo/RS) and SE YTA (Itá/SC). 1 and 2 lines) to concessionaires of public service trans- mission. Total annual RAP is adjusted annually and the tar- iff review processes will be conducted every four years. Starting from April 2011, therefore, Enel Cien was officially authorized to receive payments under this new business approach. Electricity Distribution in Brazil Enel Américas participates in distribution through Enel Bra- sil and its subsidiaries Enel Distribución Río, Enel Distribu- ción Ceará, Enel Distribución Goiás and Enel Distribución São Paulo. Enel Américas owns directly and indirectly economic own- ership of 99.7%, 74.1%, 99.9% and 95.88% of these com- panies ownership, respectively. In Brazil, the main distribution companies in the electricity system are: CPFL, Cemig, Light, Coelba y Copel. Enel Distribución Río Enel Distribución Río (former Ampla) is an energy distribu- tion company with operations in 73% of the territory of the On April 5, 2011 the decrees were published in the Official State of Río de Janeiro, which is equivalent to a 32,188- Gazette defining the annual value of the Allowed Annual km2 area. The population is approximately 8 million inhabi- Remuneration (RAP) for Enel Cien. With this, the regulator tants, distributed in 66 municipalities, and the following are equates Enel Cien (the assets of which consist of Garabi the most important ones: Niteroi, São Gonçalo, Petrópolis, Campos and Cabo Frío. 144 Annual Report Enel Américas 2018During 2018, Enel Distribución Río Enel Distribución Río supplied electricity to 2,959,220-billed customers. Out of the total, 92% are residential clients, 5% are commercial clients and 3% other users. Energy sales in 2018 reached 11,019 GWh, representing a slight decrease in relation to 2017. In this figure its import- ant to acknowledge the participation of residential clients, representing 43% of physical sales, followed by commer- cial clients with 18% of sales, industrial clients with 4% and other clients and tolls representing 36% of sales. Enel Distribución Río greatly emphasizes energy theft fight, developing projects for the use of technology and social activities. Nevertheless, currently energy losses still represent one of the main challenges of Enel Distribución Río. The year 2018 ended with 20.99% of energy losses, and compared with 2017, means a growth of 0.60%, mainly due to the increase of risky areas and the economic downturn in the State of Río de Janeiro. Enel Distribución Goiás Enel Américas, through its subsidiary Enel Brasil, acquired 94.8% of Enel Distribución Goiás (former Celg) share cap- ital, a distribution company that operates in the Brazilian State of Goiás. The investment reached BRL$ 2,187 million (approximately US$ 640 million). Enel Brasil was awarded with the public tender for the privatization of Celg, which carried out by the Brazilian government in November 2016 through Banco Nacional de Desarrollo BNDES, and started operating the asset on February 14, 2017. In May 2017, Enel Brasil acquired an additional 5% of Celg capital (currently Enel Distribución Goiás) for BRL$ 81.7 million. Additionally, Enel Brasil per- formed a capital increase in Enel Distribución Goiás for a total amount of BRL$1,600 million. By the end of 2017, the participation of Enel Brasil in the share capital of Enel Distri- bución Goiás reached 99.93%. For further information of this operation, see Note 7.1. of the Consolidated Financial Statements Enel Américas as of December 2018. Additionally, in 2018 Enel Distribución Río also took actions to improve quality indicators, reducing the SAIDI (period of time without energy supply) in 23% in relation to 2017 The acquisition of Enel Distribución Goiás was complete- ly financed with funds from the capital increase of Enel Américas, which was approved by the end of 2012. (14.10h vs. 18.21h). Enel Distribución Ceará Enel Distribución Ceará is the electricity distribution com- pany that operates the State of Ceará, in northeastern Brazil, which covers a 148,921-km2 concession area. The company serves a population of over 9 million inhabitants. The company is located in the central-west area of Bra- zil, its concession area amounts to 337 thousand km2 and serves a population of more than 6 million inhabitants. Energy sales were 13,755 GWh in 2018, increasing 12.2% over 2017 (taking into account the consolidation of this dis- tribution company since February 2017). The distribution is the following: 34% residential clients, 18% commercial clients and, 26% of industrial clients and 22% tolls and oth- During 2018, Enel Distribución Ceará (former Coelce) sup- ers. plied energy to 3,933,281-billed customers. Of of the total, 81% are residential clients, 4% commercial customers and 15% other users. During 2018, Enel Distribución Goiás supplied energy ser- vice to 3,026,991-billed customers. The classification by type of clients shows that 86% are residential, 7% are Energy sales in 2018 were 11,843 GWh, increasing 2.8% commercial, and other clients represent el 10%. over 2017. Out of these sales, residential clients represent- ed 37%, commercial clients were 19%, industrial clients 12%, followed by tolls and other clients with 32%. Additionally, Enel Distribución Goiás also took actions to improve quality indicators and in 2018 reduced SAIDI (period of time without energy supply) in 19% over 2017 (26.19h vs. 32.29h). 145 Description of the electricity business by country Enel Distribución São Paulo Enel Américas through its subsidiary Enel Brasil Investi- mentos Sudeste acquired 73.4% of Enel Distribución São Paulo (former Eletropaulo) share capital, a distribution com- pany that operates in the Brazilian State of São Paulo. The amount of the investment was BRL$ 5,553 million (approx- imately US$ 1,445 million), through a public tender offer Activities and projects in distribution Energy Efficiency held on June 4, and on June 7, 2018 the financial liquidation Energy efficiency projects comprise actions to promote the and transfer of shares were completed. In July 2018, Enel conscious energy consumption and changes of equipment Sudeste acquired more than 19,9% of Enel Distribución (refrigerators, freezers, lamps) and electrical wiring, with São Paulo share capital for de BRL$ 1,516 million (approxi- an important impact on energy consumption and home mately US$ 395 million). energy efficiency improvement. In 2018, 81,793 people in Enel Distribución Río, Enel Distribución Ceará, Enel Dis- Additionally, Enel Sudeste performed a capital increase for tribución Goiás, and recently, Enel Distribución São Paulo, a total of BRL$ 1,500 million (approximately US$395 mil- benefited with the change of equipment initiatives. Also, lion). Therefore the ownership of Enel Brasil in Enel Distri- 164,115 consumers were benefited from the educational bución São Paulo reached 94.4%. For further information projects for conscious consumption (125,615 in confer- of this operation see Note 7.2. of the Consolidated Finan- ences and workshops, 11,020 by community agents and cial Statements Enel Américas of December 2018. 27,480 by the school program). Projects are supported by touring trucks equipped with explanatory model of energy Enel Distribución São Paulo is the largest energy distribu- generation, transmission and distribution processes, simu- tion company in Brazil, in terms of energy sales, it operates lators of consumption and interactive totems with fun units in 24 cities in the Metropolitan Region of São Paulo includ- for all ages. The displacement of the project guarantees ing the capital, the main economic and financial center in the access to information for residents and students in Brazil. zones far from metropolitan areas. Its concession area amounts to 4,526km2, concentrates In 2018 the energy efficiency program of Enel Brasil the largest domestic GDP and the highest demographic concentrated its initiatives in the regions with greater density of the country, 1,596 consumer units per km2 with impact in commercial losses (electricity theft), thus 18 million people, equivalent to 32.6% of the total energy promoting responsible energy consumption initiatives in consumed in the State of São Paulo and 9.1% of the coun- the population, especially among low-income consumers. try. The resources invested by distribution companies are regulated and are equivalent to 0.4% of the companies’ net During 2018, Enel Distribución São Paulo supplied energy operational revenues. service to 7,224,487-billed customers. Out of the total, 94% are residential clients, 6% are commercial clients, and 1% other users. Considering that this distribution compa- ny was consolidated since June 2018, sales amounted to 24,693 GWh. 146 Annual Report Enel Américas 2018 Generation Transmission Distribution Codensa Barranquilla Medellín Bogotá Cali Neiva Laguneta Termozipa Cartagena El Paraíso Limonar Tequendama El Salto II Darío Valencia Charquito La Guaca Betania El Quimbo El Guavio *Non-billable consumptions are not included in distribution business. 147 Description of the electricity business by country TypeThermoNet Installed Capacity 224 MWTypeHydroNet Installed Capacity 18 MWTypeThermoNet Installed Capacity 184 MWTypeHydroNet Installed Capacity 276 MWTypeHydroNet Installed Capacity 150 MWTypeHydroNet Installed Capacity18 MWTypeHydroNet Installed Capacity 55 MWTypeHydroPotencia Instalada neta35 MWTypeHydroNet Installed Capacity 19 MWTypeHydroNet Installed Capacity 324 MWTypeHydroNet Installed Capacity 540 MWTypeHydroNet Installed Capacity 1,260 MWEnergy sales14,024 GWhClientsEnergy losses3,438,6207.7%TypeHydroNet Installed Capacity 396 MWColombia Electricity Generation Enel Américas participates in electricity generation through its subsidiary Emgesa, where it controls, directly and in- directly, 48.5% of its property (economic participation) and 56.7% of political participation. Electricity generation of Enel Américas in Colombia reached 22% of the total generation in this market in 2017. Other generators con- nected to the Colombian electricity system are: Empresa Pública de Medellín, Isagen, Gecelca, Celsia and Chivor. Emgesa On September 1st, 2007, the Colombian companies Emge- sa S.A. E.S.P. and Central Hidroeléctrica de Betania S.A. E.S.P. completed a merger process, leaving the latter as the absorbing company, which changed its name to Emge- sa S.A. E.S.P. Emgesa is the largest electricity generation company in Colombia, and is located near the city of Bogotá. The com- pany is comprised by 17 power plants with 3,499 MW of total installed capacity, among which El Guavio is signifi- cant, with 1,250 MW of installed capacity, being the larg- est hydroelectric power plant in the country. Out of the 17 existing plants, 15 are hydroelectric and 2 are thermal. Net generation was 14,052 GWh in 2018. Hydro genera- tion reached 13,763 GWh and thermal generation was 289 GWh. Sales through the energy exchange reached 2,827 GWh. Hydrologic Context for Emgesa in 2018 During the first three quarters of 2018 at a national lev- el (SIN) the contribution meant surpluses and in the last quarter turned to deficit, and even below historical aver- age. The deficit was consequence of the rainfalls during the second rain season in the country, due to the impact of atmospheric phenomena, which inhibits rainfalls such as the subsident phase of the intra-seasonal wave MJO (Oscillation Madden Julian, by its English acronym) and the slow displacement of the Intertropical Convergence Zone (ZCIT by its Spanish acronym) that regulates rainfalls. Hydrological contributions accumulated during 2018 in the basins of Bogotá and Guavio rivers were above historical average, Quimbo basin was normal and Betania river basin shown deficit in hydro contribution. Effective maintenance management of generation power plants and production management milestones in 2018 In 2018 net energy generation of Emgesa reached 14,052 GWh, showing a 4.8% decrease over 2017, mainly due to a lower hydro generation considering the lower hydrologic contribution in relation to historical average and also due to differences in the context of the market. The availability of Emgesa’s generation park in 2018 was 91.2%, meaning 1.3% fall in relation to 2017, due to the maintenance of unit 3 of Cartagena and Termozipa power plants required by the Life Extension project and the envi- ronmental improvement. A total of 185,451 hours of service of generation units were accounted in 2018, 6,482 additional hours in relation to 2017. The offer of electric energy in Colombia in 2018, present- A major overhaul of El Guavio power plant took place ed ENSO conditions (Oscillation of El Niño South, for its during the year; the last one was carried out in 2007. This English abbreviation) relatively neutral, without any inci- maintenance was scheduled 18 months in advance, and dence in the hydrologic contributions of the main rivers consisted on the works related to the overhaul of the ball in Colombia. Then again, by the end of 2018, there was valves of the five units, civil works inspection activities, the an alert of a probability for the presentation of ENSO/EL maintenance of charging and discharging tunnels and the Niño conditions for 2018-2019, according to the releases of annual maintenance of the associated systems. This main- the Institute of Hydrology, Meteorology and Environmental tenance was completed according to plan. Studies – (IDEAM by its Spanish acronym) and internation- al agencies, which means a rainfall shortage in Colombia. 148 Annual Report Enel Américas 2018Gas commercialization In 2018 the company continued its process of consolidation of the natural gas market in Colombia, with the achieve- ment of 23% margin growth over 2017 (COP$ 3,421 mil- lion), due to the 312% increase of SPOT sales from COP$ 470 million to COP$ 1,937 million. The company supplied gas to 14 industrials non-regulates clients located in Bo- gotá, Manizales and Cartagena and 3 clients at the well head (secondary market). New sale contracts were signed with final customers for 2019, whose duration are 1, 3 and 5 years. Activities and projects in generation Improvements in Termozipa Thermal Power Plant Termozipa is a thermal power plant owned by Emgesa lo- cated 40 km from Bogotá. This power plant has four units and its total installed capacity amounts to 236 MW and the coal supply comes from coalmines located in the nearby ar- eas. Among other things, the improvements project com- generators and water outlets. This will allow the increase of the useful life in additional 15 years or 100,000 hours of operations. In addition, the specific heat rates will im- prove (a measure of the energy power plant efficiency) and will reduce the unavailability of energy. These improve- ments seeks to achieve high environmental standards with regards to gas emissions of thermal coal power plants in Latin America, mainly focused on: Nitrogen Oxide (NOx) emissions below 330 mg/Nm3; Sulfur Dioxide (SO2) below 400 mg/Nm3 and particulate matter emissions below 35 mg/Nm3. The interventions began by the end of 2016 and are expected to be completed in 2022, including the en- vironmental improvements whose objective is to reach a new emissions regime in every generation unit. Batteries energy storage system in Termozipa The project consists in the installation of batteries ener- gy storage system (BESS, for its English acronym ingles), with 14 MW of installed capacity and 7 MWh of energy storage connected to the 13,8 kV bars of the four turbines of the power plant, whose purpose is to bring primary ser- vices of frequency regulation, through units located in the power plant. As such, the processes of this power plant are optimized, and it can sell additional 7 MW, thus improving prises, among others, interventions in boilers, turbines, the general income of the plant. 149 Description of the electricity business by country Land reserved for future projects The results described above, show the vision of Codensa for the network administration in order to achieve world- class standards in terms of quality of service, under sce- narios of higher investments and operations, also imple- Enel Américas doesn’t own any land reserved for future menting Telecontrol to our network thus reaching very projects in Colombia, satisfactory quality of service indicators for our clients. Electricity Distribution Codensa Codensa is the electricity distribution and commercializa- tion company of Enel Américas in Colombia, serving the complete market of Bogotá and Cundinamarca, as well as the thirteen districts of the neighboring departments of Meta, Tolima and Boyacá. By the end of 2018, the Company served more than 3.4 million clients, and obtained important achievements and developments in activities addressed to improve the qual- ity of service, whose result was the improvement in the average frequency of interruptions of our clients’ service (9.0 times of SAIFI -System Average Interruption Frequen- cy Index-) and in the duration of interruptions (710 Min of SAIDI -System Average Interruption Duration Index-). Activities and projects in distribution The work fronts were focused on: • • • Projects for the improvement of service quality. Telecontrol Project of the Network Reposition and Normalization of high and medium voltage infrastructure (substations and lines) • Expansion of installed capacity in substations regard- ing capacity and MT networks • • Expansion of coverage for rural areas Improvement of energy losses control • Massive connection of clients and generators • • Smart measurement Digitization of the network Additionally, and continuing with the program of market discipline, worth is mentioning the implementation of plans focused on the control of electricity theft, thus achieving energy losses index of 7.74% in 2018. Energy demand in the area that Codensa serves showed a TAM growth of 1.17%. During 2018 energy sales were 14,024 GWh, 36% of which are residential clients, 18% are commercial clients, 35% tolls and 12% are industrial clients and others. As of December 31, 2018 Codensa has installed 73,013 smart meters and 1,652 macro meters in the framework of the Smart Measure Project. Likewise, in relation to public lighting, the modernization project for the Public Lighting of Bogotá continued, which until 2018 included the installation of more than 50,000 lights using LED technology over a total of 70,000 LED lights in the city, out of the total 350,187 lights of the public lighting system in Bogotá. Moreover, by the end of 2018, the Company modernized 164,295 lights using Electronic Ballast technology (Sodium and Metal Halide) in different areas of the city. Worth is mentioning that during 2018, Codensa continued with the implementation of the Smart City Project regard- ing the infrastructure AMI and Telecontrol equipments. Likewise, Codensa as a public utilities company, continued supporting the District in the development of the first Elec- tric Subway in Bogotá, with the definition of the electric networks transfers through the layout and the connection points where energy supply with be made. The company contributed with this project to the development of Bogotá. 150 Annual Report Enel Américas 2018Generation Transmission Distribution Malacas Moyopampa Callahuanca Huinco Matucana Huampani Santa Rosa Ventanilla Yanango Chimay Chiclayo Trujillo Lima Enel Distribución Perú Edelnor Cuzco Arequipa *Non-billable consumptions are not included in distribution business. 151 Description of the electricity business by country Energy sales8,045 GWhClientsEnergy losses1,422,6088.1%TypeHydroPotencia Instalada neta69 MWTypeThermoPotencia Instalada neta337 MWTypeHydroPotencia Instalada neta83 MWTypeHydroPotencia Instalada neta276 MWTypeHydroPotencia Instalada neta133 MWTypeHydroPotencia Instalada neta32 MWTypeThermoPotencia Instalada neta389 MWTypeThermoPotencia Instalada neta467 MWTypeHydroPotencia Instalada neta42 MWTypeHydroPotencia Instalada neta157 MWPeru Electricity Generation Enel Generación Perú S.A.A. Enel Generación Perú commercializes capacity and electric energy in the Peruvian market, complying with all the spec- ifications of the Technical Norm for the Quality of Electric Services, being tension levels, frequency and the periods Enel Américas S.A., through Enel Perú S.A.C. controls two of unavailability of the service the most important ones. generation companies in Peru: 83.60% of Enel Generación Perú share capital and 96.50% of Enel Generación Piura. The gross installed capacity of the company is 1,590 MW, The company is the sole shareholder of Enel Perú. (of the total capacity of the National Electric Interconnected System– henceforth “SEIN”), where 44% was hydro gen- In Peru, the others generators connected to the electrici- eration and 56% thermal generation, considering Yanango ty system are: Electroperú, Engie Energía Perú and Kallpa (43 MW) and Chimay (155 MW) power plants, which since Generación. Enel Perú S.A.C. Enel Perú S.A.C. is a company constituted in Peru. Its so- cial purpose is to perform investments in other companies, mainly in those dedicated to the exploitation of natural resources, and specially those related to generation, op- eration and commercialization of electric energy; develop engineering for the construction of energy power plants; carry out activities for the supply, assembly and commis- sioning of equipment, facilities and/ or services for the gen- eration of electrical energy. Additionally, the company may perform any other activity related to the energy sector and May 31, 2009 split off and became part of Chinango S.A.C. Enel Generación Perú equity participation as on December 31, 2018 was the following: 83.6% is owned by to Enel Perú S.A.C. (of which Enel Américas owns 100% share- holding), Prima AFP S.A. holds 5.96% shareholding and other shareholders the remaining 10.44%. The company owns seven hydroelectric power plants; five are located in Lima and two in Junín. Worth is mentioning that Callahuanca hydro power plant is under reconstruction and out of commercial operation since June 15, 2017, due to the damages caused by the flooding that happened in March caused by “El Niño Costero” phenomena. waters. 152 Annual Report Enel Américas 2018The hydroelectric power plants in Lima are located in the sales totaled 9,997 GWh as of December 2018, represent- Rímac River basin. Huinco Power Plant is located in Santa ing 1.8% increase over 2017. Eulalia River basin, a tributary of Rímac River. Its installed capacity amounts to 278 MW and Matucana Power Plant is located in Rímac River basin, whose installed capacity is 137 MW. These rivers are diverted through tunnels and channels to the town of Barba Blanca, where Callahuanca Power Plant is located, whose installed capacity is 84 MW. The power plants Moyopampa (69 MW) and Huampaní (31 MW) are located downstream. The total capacity of these five power plants is 515 MW (without considering Calla- huanca). The company also owns 21 lagoons with installed capacity of 282,35 hm3, which allows the regulation of the flow for energy generation and for the water supply to the city of Lima. The two hydroelectric Yanango power plants are located in the department of Junín. Installed capacity of Yanango is 43 MW, which uses the flows of Tarma River; and Chimay, with 158 MW installed capacity, which uses the flows of Tulumayo River. Their total installed capacity amounts to 201 MW. These two power plants became part of the sub- sidiary Chinango, as a consequence or a simple corporate reorganization process. Likewise, Enel Generación Perú owns two thermal power plants, Santa Rosa and Ventanilla, whose installed capacity is 403 MW and 472 MW, respectively. The first is located in the Cercado de Lima, and is comprised by UTI units with 94MW, TG7 of 122 MW and TG8 of 187 MW. The second power plant is located in the Callao province, and compris- es three generation units: two gas turbines and one steam turbine that constitute a combined cycle. Ventanilla Ther- mal power plant was the first combined cycle installed in the SEIN and currently is one of the four combined cycles of the system. Thermal power plants use natural gas from Camisea as their main fuel, and the alternative fuel is diesel 2. Total generation of Enel Generación Perú reached 7,510 GWh in 2018, 9,1% higher than the previous year. Energy Enel Generación Piura S.A. The main objective of Enel Generación Piura is to perform activities related to generation and commercialization of electrical energy and to have presence in the natural gas business. The power plant is located in the city of Talara, in the northeast of Peru, and the administrative area operates in Lima. Its operations are carried out within the concession area, and according to the current legislation that allows the development of every civil, industrial, commercial and any other and operations related or unrelated to the main purpose. As of December 31, 2018, the equity participation of Enel Generación Piura is the following: 96.50% is controlled by Enel Perú S.A.C. (company wholly owned by Enel Améri- cas) and other shareholders own the remaining 3.5% shareholding. Generation plants are: > Malacas 1 Power Plant: Comprises one Siemens unit, model SGT-800, named TG6, its gross installed ca- pacity is 51 MW and operates with natural gas. This unit began commercial operations on February 25, 2017. > Malacas 2 Power Plant: Comprises one ABB unit, named TGN-4, its gross installed capacity is 106 MW and operates with natural gas. > Malacas 3 Power Plant: Comprises one singe Sie- mens unit, named TG-5, operates with diesel B5 fuel in open cycle in condition of Cold Reserve. On July 4, 2018 a gross new installed capacity of 187 MW in diesel mode was approved. Worth is mentioning that, since August 6, 2017, the Coes Sinac approved its gross commercial operation with 128 MW “natu- ral gas mode” additionally to its operation with diesel fuel. 153 Description of the electricity business by country Production Centers Power Plant Unit Manufacturer Declared Fuel Malacas 1 Malacas 2 TG-6 TGN4 SIEMENS Natural Gas ABB Natural Gas Malacas 3 TG-5 RF SIEMENS Diesel B5 Total Effective Installed Capacity (MW) 51* 106 ** 187*** 344 * Effective from May 7, 2017. ** Effective from July 20, 2017. Since 10.07.2017 operates in water injection mode to reduce NOx emissions. *** Since 10.07.2017 operates in water injection mode to reduce NOx emissions. The generation of Enel Generación Piura reached 603 GWh in 2018, representing a 10.1% growth over 2017. Energy sales totaled 603 GWh in December 2018, a 5.8% reduc- tion in relation to the same period in the previous year. Activities and projects in generation Activities and projects in hydroelectric power plants Rehabilitation of hydroelectric power plants after the “El Niño Costero” phenomenon in March, 2017 Project for the expansion of Huampani power plant Huampani hydroelectric power plant is located in Lurigan- cho Chosica, district of Lima, Peru. The Huampani project consists on the recovery of hydroelectric energy through the expansion of installed (currently 31 MW) and the in- stallation of two new turbines (a total of 0.7 MW) inside the discharge chute of the existing Huampani power plant, using a generator and ancillary equipment. It will connect with Huampani SE through a 10kV, 140 meters long line. The arqueological and environmental authorizations for the project, or Certificate of Absence of Archaeological Re- mains (CIRA for the Spanish acronym) and Pre-Operability Study (EPO for the Spanish acronym) respectively, were granted in 2016. The construction started in August 2017, and as of December 31, 2018, the project was substan- tially completed; nevertheless as of the date of this report, works are being carried out to improve its efficiency. Capacity increase of C.H. Huinco in 10 MW In November 2017, the changes of the 4 new Pelton were completed, which have a more efficient design. Invest- ment was US$3.2 million and its main advantage is the increase of installed capacity in 10MW. On January 3, 2018 Coes approved the trial of effective capacity In 2018, rehabilitation works of the power plants affected by the “El Niño Costero” phenomenon continued, and the hydro power plants Callahuanca and Huinco registered im- portant damages in their electromececanical equipments Huinco and Matucana participate in the electricity secondary frequency regulation market and infrastructure. Scheduled rehabilitation works were The hydro power plants Huinco and Matucana started par- completed, where security and safety measures were ticipating in the Secondary Frequency Regulation market ( taken during the rainy season. The Operation and Main- “RSF” by its Spanish acronym) since late 2017 and Febru- tenance unit completed more than 70 activities in the ren- ary 2018, respectively. For this purpose the communica- ovation timeline of the power plants, such as repairs and tion and control equipments of these power plants were inspections to channels and minor civil works, and finally adapted according to the Procedure N°22 of COES. It’s the rehabilitation of Callahuanca power plant, whose main estimated that Chimay hydro power plant will participate in contractor is Andriz. In February, a fire occurred in the this market during 2019. Load Chamber of Callahuanca power plant, cleaning and rehabilitation works started soon with the purpose of not affecting the rest of the schedule for the recovery of the power plant. This work finished in November. 154 Annual Report Enel Américas 2018Major maintenance of Group 2 of Huinco Activities and projects in thermal power plants In the period August to December the works carried out in generator G2 of Huinco was the rewinding of the stator, maintenance of the rotor and changes of half shafts, with the purpose of increasing the reliability and efficiency of Repair of generation in TG7 – Thermal power plant (C.T.) Santa Rosa the unit in order to comply with the new quality standards. In the beginning of the second semester, the emergency Investment reached US$2.7 million and was performed by repair of the strator of the generator of TG7 was performed. Andriz. Rehabilitation took 18 weeks. It was produced by a ground fault in the derivation of the Civil works: roofing of Huampaní Channel and Marcapomacocha elbow ring of phase R. Following a thorough analysis, to- gether with E&C global, the company decided to repair the failure removing the rotor from the generator. This emer- gency work that restored the operability of the generator was completed on July 4. In the period May to June, 59 meters of Huampaní Chan- nel were roofed (investment was approximately US$ 600 thousand). The purpose of these works was to prevent the risks for people living in houses located in adjacent areas Rewinding of Generator TG4 Strator Project of the channel of falling, and in the gorges area in order In June 2017, due to a bad maneuver of the company to avoid blockage of the channel in the case of possible General Electric during the major overhaul of unit TG4, landslides. Estimations are to finish these works in 2021. when introducing the rotor inside the generator, the later fell causing damages in the generator’s strator. A prompt Between October and December, 450 meters of Mar- emergency repair was carried out immediately. Engineer- capomacocha Channel were roofed. This is a very import- ing and management works of major supplies have been ant work, because the roofing prevents the access and/ or carried our during 2017, with the purpose of performing a falling stones, thus avoiding obstructions of waters run- complete repair of the strator, and together with the com- off. Investment was approximately US$ 180 thousand. pany General Electric, it was agreed to carry out the com- plete rewinding of the generator’s strator. The project con- 155 Description of the electricity business by country cluded successfully in July, 2018, achieving the objective is to provide primary frequency regulation required by the of extending its useful life, ensuring capacity and efficiency power plant, in order to optimize its operations and reduce of the generator of unit TG4. potential sanctions related to primary frequency regulation Batteries energy storage system in Termozipa The project consists in the installation of batteries energy storage system (BESS, for its English acronym), with 14 MW of installed capacity and 7 MWh of energy storage connected to the 13,8 kV bars of the four turbines of the power plant, whose purpose is to bring primary services of frequency regulation, through units located in the power plant. As such, the processes of this power plant are opti- mized, and it can sell additional 7 MW, thus improving the general income of the plant. Batteries energy storage system in Ventanilla Ventanilla is a 479 MW thermal power plant located in the province of Callao. It comprises three units, two gas tur- bines and one steam turbine, and generates in combined cycle. The project involves the installation of a batteries en- ergy storage system (BESS, by its English acronym) in Ven- tanilla power plant, with 14 MW of installed capacity and 7 MWh of energy storage, connected to a 16 kV bar of one of the existing turbines of the power plant, whose purpose 156 costs and secondary frequency regulation. The environmental authorization was granted in 2017, meanwhile the previous authorization for the connection of the system operator was issued during the first quarter of 2018. The construction period is estimated in nearly 12 months and it’s expected to be completed in 2019. Land reserved for future projects Enel Generación Perú owns two lots with the purpose of being used for thermal generation projects, the first is lo- cated in the south coast of Peru and its total area is 203 hectares and the second is located in the central coast with a total area of 10 hectares. Electricity Distribution Enel Américas S.A., through Enel Perú S.A.C., owns 83.18% of Enel Distribución Perú share capital. In Peru, other distribution companies that participate in the electricity system are: Luz del Sur, Electrosur and Grupo Distriluz. Annual Report Enel Américas 2018 Enel Distribución Perú S.A.A. Enel Distribución Perú is the concessionary company for electric utility that covers the north area of Metropolitan Lima, in the Callao province and in Huaura, Huaral, Barran- ca and Oyón provinces. The concession area covers a total of 1,550 km2, serves exclusively 52 districts and shares five additional districts with the distribution company in the south area of Lima. The distribution company distributes energy to 1,422,608 clients, and benefits more than half of the inhabitants of Metropolitan Lima. Currently, Enel Distribución Perú is the holder of two defin- itive concessions of electricity distribution, two definitive concessions of electricity transmission and one authoriza- tion to develop generation activities, granted by the Peruvi- an State, all of them for an indefinite period. During 2018, our clients’ base grew 1.84% over 2017. The energy distributed for consumption, including tolls, was 8,045 GWh, representing 1.4% growth in relation to the previous year. In monetary terms, sales reached PEN$ 2,874 million; representing 6.07%, increase during the year. Activities and projects in distribution In 2018, the company made investments for a total of PEN$ 468.8 million. Main investments were: • Capacity expansion of the transformation substations (SET) and transmission lines including works for the SET Comas, Medio Mundo and Bayobar (PEN$ 118.7 million). • Expansion and reinforcement of medium and low volt- age networks (PEN$ 56.4 million). • Capacity expansion of medium and low-tension feed- ers (PEN$ 11.7 million). • Attention/ electrification of new projects for the ex- pansion of the grid in human settlements (PEN$ 8.6 million). • • • Provision of greater safety in the facilities (PEN$ 28.1 million). Improvements in public lighting facilities (PEN$ 8.6 million). Investments in commercial losses reduction. (PEN$ 25.3 million). 157 158 Annual Report Enel Américas 201817 Sustainability 159 Letter From the Chairman Sustainable Business Model The energy industry is a very dynamic market, which is going through a transition process influenced also by pro- found social and demographic changes and the digital age. In this context, there are new opportunities which are be- ing incorporated in the business model of Enel Américas, with the integration of the environmental, social and gover- nance objectives of the company with the goals set in the industrial plan with the in such a way to generate long-term value. The sustainability plan of Enel Américas for 2018 is fo- cused on five pillars that represent the cornerstones of sustainable integrated development: occupational health and safety, solid corporate governance, environmental sus- tainability, sustainable suppliers chain and the generation of economic and financial value. These pillars support the strategic priorities of the company: the optimization of as- sets and innovation, growth through services and low-car- bon technologies, develop strong relationships with the community and involvement with the people they work with. These pillars as well as strategic priorities have as enabling tools the focus on the client and the digitization. With regards to its strategic plan, Enel Américas has identi- fied the following most important emerging risks: Cyber attacks ("cyber risk "): the digitization and tech- nological innovation age, means an increasing exposure to cyber attacks, which are becoming ever more numerous and sophisticated, also in relation to the changes in their frame of reference. Currently, the Group is performing an important digitization process, which is expected to boost in the following years, therefore the company would be even more exposed to these risks. The complex organi- zational structure of the Group and its different contexts (data, people and the industrial world) creates an environ- ment of greater exposure of its assets to the risk of attacks, representing severe threats not only for data, but also for the continuity of Service and for automatic systems of gen- eration power plants and distribution networks. The Enel Group has adopted a risk management model based on a “systemic” view for the traditional information technology sector as well as the industrial sector (operational technol- ogy), taking into account the network connection of smart “objects”. Extreme climate events and natural disasters: the frequency and intensity of these events are expected to strongly increase, according to the analysis and forecasts of the scientific community. This means an increase of this risk in the medium to long-term for the Group. The increas- ing trend towards renewable technologies also means a greater impact for generation power plants, whose level of vulnerability would also rise. The impact of these risks in the business is related to the risk of damage to assets and facilities, and the resulting unavailability of these assets for an extended period of time. In order to mitigate these risks, the Group uses the best prevention and protection strategies, which is done also with the purpose of reducing the potential impacts in the communities and surrounding areas to the assets, performing constant monitoring and prediction in those areas where the assets are more ex- posed. In addition, the Group carries out several actions to increase the resilience of these assets, which are more exposed to extreme climate or natural disasters. Every area of the Group is subject to the ISO 14,001 certification and through the application of the Environmental Administra- tion Systems (SGA in the Spanish abbreviation), both rec- ognized worldwide, the potential sources of risk are moni- tored in order to promptly identify any critical situation. 160 Annual Report Enel Américas 2018Optimization of assets and innovation During 2018, the strategic priority was focused on the digitization of its assets. In the generation business, the company carried out important investments in digitization its processes and activities related to operations and main- tenance. This is especially important in the implementation of systems for predictive maintenance through artificial intelligence algorithms, in line with the principle of being a “data-driven company”. Apart from that, understanding the main phenomena of energy transition, the Group has worked in increasing the efficiency of its thermal plants and environmental improvements. Meanwhile, in the dis- tribution business, the company worked to improve ser- vice quality and response times in distribution, progressing in the installation of smart meters, totaling 107 thousand units installed, and also moving forward in the omnichannel in order to enable the customer approach and improve the coverage and opportunity of our services. Without a doubt, an important milestone to move forward in our consolidation in the energy distribution industry, was the incorporation of Enel Distribución São Paulo, with the incorporation of more than 7 million clients with a market share of 19% in terms of energy sales. Growth through services and low-carbon technologies During 2018 the Group launched a new line of business, Enel X, with the objective of introducing new products, services and solutions with value added and to face the challenges of the new cities, where electrical energy satis- fies more functions of daily life. Enel X offers four portfolios of solutions; e-industries, e-city, e-home and e-mobility, all of which address different needs with innovative technol- ogies. Through e-industries, the company offers energy efficiency solutions, advisory and energy distribution ser- vices for commercial and industrial clients, all leveraged through digital platforms. Enel X has installed 1.1 MWp of photovoltaic systems in the year. Through e-home, Enel X seeks to offer products and services that empower clients and allow energy efficiency and clean solutions. The e-city portfolio is comprised by solutions for the development of infrastructure and energy for cities and communities, totaling 421 thousand smart lighting points by the end of 2018. E-mobility is the line focused on the development transport electrification through the expansion of public and private infrastructure, in addition to provide a fleet of electric vehicles. Enel X has positioned as the main refer- ent in electric mobility, through the incorporation of taxis and electric buses to the public transportation system, thus contributing with more than 66 charging points in the coun- tries where the company operates. 161 Sustainability Involving local communities Open Power Vision In the social context in Latin America, in some economies Enel Américas established the “Openness” concept in the poverty has been reduced, with the rising of a middle class center of its business, being the cornerstone of its strategic and more stable economies. This dynamics have improved and operational approach: open energy to a larger number social and economic structures, but there is still the need of people; open energy to new technologies; provide new of greater social inclusion, support a growing middle class energy management methods for the consumer; open de and generate developments in low productivity sectors. possibility of new uses of energy; and open to a greater These changes have challenged sustainable development, number of collaborators. and provided guidelines for sustainability administration, where inclusion, transparent cooperation and the creation of shared value with stakeholders are fundamental. Enel Américas works incorporating the criteria and princi- ples for fair relationships, where stakeholders are involved in from the design of the project, thus ensuring symmetry when dialogue takes place and enabling access to the in- formation required for the decision-making process. This is carried out through the identification of the most important stakeholders involved in each operation and assessing the possible areas of impact and possible opportunities work- ing together. Local needs are directly related with the goals of the com- pany through the development of materiality matrices spe- cific for each territory, with the objective of creating ade- quate projects and initiatives to meet the goals and shared priorities. The strong geographical presence enables us to have a constant view of stakeholders’ instances, in order to align solutions on a consensual basis, thus generating value for both parties. Some of the most important projects are related with ac- cess to energy, promotion of entrepreneurship for the eco- nomic development and education. The business culture of Enel Américas is focused on the Open Power vision, on its commitment with the fulfillment of the United Nations Sustainable Development Objec- tives, the Creation of Shared Value and compliance with its Human Rights Policy. 162 Objectives of sustainable development As of 2015 the United Nations adopted the new Sustain- able Development Goals (ODS), through them these orga- nization called companies to promote the use of creativity and innovation to address the 17 great challenges of sus- tainable development, such as poverty, gender equality, access to water and clean energies and climatic change, among others. In this occasion, Enel SpA (“Enel”) announced the Group’s commitment to contribute the achievement of four out of the seventeen objectives. Particularly, Enel and its com- panies worldwide have been focused on the following ob- jectives: 1. Quality Education (ODS 4): support educational ac- tivities for 800,000 people by 2020, through similar projects to the ones in execution, such as the schol- arship programs in Latin America. During 2018, Enel Américas reached 66 thousand beneficiaries. 2. Affordable Energy (ODS 7): commit to the promotion of affordable, sustainable and modern energy. During Annual Report Enel Américas 20182018, Enel Américas reached 1.4 million beneficiaries. 3. Decent work and economic growth (ODS 8): foster job creation and sustained economic growth, inclu- sive and sustainable. During 2018, Enel Américas covered 29 thousand people. 4. Action for Climate (ODS 13): Take initiatives to combat climate change, with the objective of achieving car- Human Rights Policy bon neutrality in 2050. During 2018, Enel Américas Enel Américas has developed a Human Rights Policy as a registered specific emissions of CO2 of 170-grams/ demonstration of its commitment and responsibility in this kWhe. key area for social and corporate sustainability. The docu- ment gathers the commitment and responsibilities of the By the end 2018, the Group committed to advance on new Company in relation to every human right, and especially to ODS: Industry, innovation and infrastructure (ODS 9) and the ones that impact the business activity and operations sustainable cities and communities (ODS 11), being a way developed by the company’s employees in the countries to underline the contribution of Enel X to the goals of sus- where it operates tainable growth. During 2018, Enel Américas worked to solve the identified gaps of the due diligence process that started in 2017, em- phasizing the actions defined to move forward in the issues related with diversity, relationships with suppliers, among others, which will continue in 2019. Likewise, its important to highlight the greater promotion and communicational campaigns addressed to spread the Human rights Policy. 163 Sustainability164 Annual Report Enel Américas 201818 Direct and Indirect Economic Participations 165 Letter From the Chairman 166 Annual Report Enel Américas 2018Direct and Indirect Economic Participations Argentina Enel Generación Costanera S.A. Enel Generación El Chocón S.A Central Dock Sud, S.A. Edesur S.A. Compañía de Transmisión del Mercosur S.A. Transportadora de Energía S.A. Enel Trading Argentina S.R.L. Yacylec Termoeléctrica José de San Martin Termoeléctrica Manuel Belgrano Central de Vuelta Obligado S.A. Brazil Enel Brasil S.A. Enel Generación Fortaleza S.A. EGP Cachoeira Dourada S.A. Enel Distribución Río S.A. Enel Distribución Ceará S.A. Enel Distribución Goiás S.A. Enel Distribución São Paulo S.A. Enel Cien S.A. EGP Volta Grande Colombia Emgesa S.A. E.S.P. Codensa S.A. Peru Enel Generación Perú Enel Distribución Perú S.A Compañía Energética Veracruz Enel Generación Piura Chinango S.A.C Gx: Generation Dx: Distribution Tx: Transmission / Commercialization Ox: Gas pipelines, others Business Ownership Gx Gx Gx Dx Tx Tx Tx Tx Gx Gx Gx Business Gx, Dx, Tx Gx Gx Dx Dx Dx Dx Tx Gx 75.62% 65.35% 40.25% 72.09% 100.00% 100.00% 99.96% 22.22% 16.92% 16.92% 25.26% Ownership 100.00% 100.00% 99.75% 99.73% 74.05% 99.93% 95.88% 100.00% 100.00% Business Ownership Gx Dx 48.48% 48.30% Business Ownership Gx Dx Gx Gx Gx 83.60% 83.15% 100.00% 96.50% 66.88% 167 Direct and Indirect Economic Participations Perimeter of Enel Américas’ Corporate Shareholdings ENEL AMÉRICAS S.A. 48.481619% Emgesa S.A 94.95% Sociedad Portuaria Central Cartagena S.A. 4.90% Inversora Codensa S.A.S. 100% 48.3026% Codensa S.A. ENEL X Colombia S.A.S. 100% Central Dock Sud S.A. 0.2509% 69.9925% ENEL Generación Costanera S.A. 75.6813% 57.1417% Inversora Dock Sud S.A. 22.22% Yacilec S.A. 1.42% Termoeléctrica Manuel Belgrano S.A. 5.326% 1.42% Termoeléctrica José de San Martín S.A. 6.40% Central Vuelta de Obligado S.A. 5.326% 1.3% 18.85% 18.85% 33.2% 8.6741% ENEL Generación El Chocón S.A. 59.00% 41.9411% Hidroinvest S.A 54.7571% Chile Argentina Brazil Peru Colombia Uruguay 168 GasAtacama Chile S.A. 0.079318% ENEL Argentina S.A. 99.920682% 45% ENEL Trading 55% Argentina S.R.L. Distrilec Inversora S.A. 51.50% 0.001% TESA S.A. 99.999% CTM S.A. 99.999993% 100% ENEL Perú S.A.C. ENEL Generación Perú S.A. 80% Chinango S.A.C. 2.32856% ENEL Brasil S.A. ENEL Distribución Ceará S.A. 83.151796% 83.59701% 96.50% ENEL Distribución Perú S.A. ENEL Generación Piura S.A. 100% Compañía Energética Veracruz S.A.C. 99.9265% Enel Distribución Goiás S.A. ENEL Distribución Río S.A. ENEL Generación Fortaleza S.A. 0.0001% ENEL X Brasil S.A. 100% Central Geradora Fotovoltaica Sao Francisco Ltda. ENEL Brasil Investimentos Sudeste S.A. 100% 95.880948% ENEL Distribución Sao Paulo S.A. 99.9999% ENEL CIEN S.A. 100% 100% EGP Projetos I (Volta Grande) Nuxer Trading S.A. 100% 56.3577% 99.999998% 74.051061% 99.734188% 43.0971% Edesur S.A. 1.00% INGENDESA DO BRASIL LTDA. EGP Cachoeira Dourada S.A. 99.754055% 100% 50% SACME S.A. Annual Report Enel Américas 2018 Perimeter of Enel Américas’ Corporate Shareholdings ENEL AMÉRICAS S.A. GasAtacama Chile S.A. 0.079318% ENEL Argentina S.A. 99.920682% 45% ENEL Trading Argentina S.R.L. 55% Distrilec Inversora S.A. 51.50% 56.3577% 99.999998% 43.0971% Edesur S.A. 1.00% 100% ENEL Perú S.A.C. ENEL Generación Perú S.A. 80% Chinango S.A.C. 2.32856% ENEL Brasil S.A. ENEL Distribución Ceará S.A. 48.481619% Emgesa S.A 94.95% Sociedad Portuaria 4.90% Central Cartagena S.A. Inversora Codensa S.A.S. 100% 48.3026% Codensa S.A. ENEL X Colombia S.A.S. 100% Central Dock Sud S.A. 0.2509% 69.9925% ENEL Generación Costanera S.A. 75.6813% 57.1417% Inversora Dock Sud S.A. 22.22% Yacilec S.A. 1.42% Termoeléctrica Manuel Belgrano S.A. 5.326% 1.42% Termoeléctrica José de San Martín S.A. 5.326% 1.3% 6.40% Central Vuelta de Obligado S.A. 18.85% 18.85% 33.2% ENEL 8.6741% Generación El Chocón S.A. 59.00% 41.9411% Hidroinvest S.A 54.7571% Chile Argentina Brazil Peru Colombia Uruguay INGENDESA DO BRASIL LTDA. EGP Cachoeira Dourada S.A. 99.754055% 100% 50% SACME S.A. 0.001% TESA S.A. 99.999% CTM S.A. 99.999993% ENEL Brasil Investimentos Sudeste S.A. 100% 95.880948% ENEL Distribución Sao Paulo S.A. 99.9999% 74.051061% 99.734188% 83.151796% 83.59701% 96.50% ENEL Distribución Perú S.A. ENEL Generación Piura S.A. 100% Compañía Energética Veracruz S.A.C. 99.9265% Enel Distribución Goiás S.A. ENEL Distribución Río S.A. ENEL Generación Fortaleza S.A. 0.0001% ENEL X Brasil S.A. 100% Central Geradora Fotovoltaica Sao Francisco Ltda. ENEL CIEN S.A. 100% 100% EGP Projetos I (Volta Grande) Nuxer Trading S.A. 100% 169 Direct and Indirect Economic Participations 170 Annual Report Enel Américas 201819 Significant Events of the Company 171 Letter From the Chairman 2018 Significant Events In accordance with articles 9 and 10, paragraph 2, under Securities Market Law N°18,045, and as established under General Norm No. 30 of the Superintendence of Securities and Insurance (“SVS” by its Spanish acronym), currently the Financial Market Commission (“CMF” by its Spanish acronym), the following significant events were informed: • On February 15, 2018 the following significant event was informed: On February 14, 2018, the company signed commit- ted credit facility contract with a group of Banks for USD 500 million. This is a general-purpose funding. • On March 23, 2018 the following significant event was informed: Enel Américas’ subsidiary, Enel Brasil S.A., has sent a proposal to Eletropaulo Metropolitana Eletricidade de São Paulo S.A., (Eletropaulo), related to a poten- tial participation in an eventual capital increase that is being analyzed by Eletropaulo. As of this date, the ne- gotiations are preliminary and we will provide relevant information to the market according to its progress. Paulo S.A. (Eletropaulo), subject to the acquisition of more than 50% of such shares, in order to be the con- troller of this company. The price per share that Enel Sudeste has agreed to pay is BRL 28. The total value of the Public Tender Offer amounts to approximately BRL 4,700 million, equivalent of approximately US$ 1,400 million. Enel Américas will support the funding of this operation. The exercise of voting rights over the shares acquired by Enel Sudeste as a result of this Public Tender Offer is subject to the approval of the Brazilian anti- trust authority (“Conselho Administrativo de Defesa Econômica”); moreover, the exercise of control of Enel Sudeste over Eletropaulo is subject to the ap- proval of the Brazilian government Agency for electric energy (ANEEL). • On April 19, 2018 the following significant event was informed: Enel Sudeste modified the terms of the Tender Offer reinforcing its commitment by supporting and promot- ing a capital increase in Eletropaulo of at least BRL 1.5 billion, equivalent to approximately US$ 440 million, at the current exchange rate, which will be subject to the success of the Tender Offer. Therefore, Enel Sudeste is offering both the certainty of financial support for Eletropaulo as well as the most attractive conditions to the shareholders who wish to participate in the Tender Offer. This Significant Event is being issued in relation to the “Fato Relevante” that Eletropaulo sent yesterday to the market in Brazil. • On April 23, 2018 the following significant event was informed: • On April 17, 2018 the following significant event was informed: The company’s subsidiary Enel Brasil S.A., through its investment vehicle and wholly-owned subsidiary Enel Investimentos Sudeste S.A. (Enel Sudeste), has launched today a voluntary Public Tender Offer for all shares issued by the Brazilian electricity distribu- tor Eletropaulo Metropolitana de Eletricidade de São Enel Sudeste modified the terms of the Tender Offer reinforcing its commitment by supporting and promot- ing a capital increase in Eletropaulo of at least BRL 1.5 billion), equivalent to approximately US$ 440 million, at the current exchange rate, which will be subject to the success of the Tender Offer. Therefore, Enel Sud- este is offering both the certainty of financial support for Eletropaulo as well as the most attractive condi- tions to the shareholders who wish to participate in the Tender Offer. 172 Annual Report Enel Américas 2018 This terms modification is complementary to the total crease in Eletropaulo of at least the same amount as amount of the Tender Offer carried out on April 17, the current capital increase, should the Public Tender 2018 (see the paragraph described above). Offer be successful or should neither the referred to Public Tender Offer nor any of the other competitive Worth is mentioning that the price per share offered offers be successful, as was already informed in the by Enel Sudeste in the Public Tender Offer is BRL 28. Significant Events dated April 19 and 23, 2018. The Tender Offer is aimed at acquiring Eletropaulo’s total equity and subject to the acquisition of a suffi- On April 25, 2018, Eletropaulo announced that its cient number of shares that would represent more Board of Directors had decided to cancel the capital than 50% of Eletropaulo’s share capital, and to the increase in progress. This decision fulfills one of the postponement of Eletropaulo’s capital increase. conditions that Enel Sudeste’s Tender Offer was sub- ject to and permits it to continue in the competition for • On April 25, 2018 the following significant event was Eletropaulo’s control along with the current bidders. informed: • On April 26, the following significant event was in- Enel Sudeste has announced today that it has im- formed: proved the terms of the referred Tender Offer for the acquisition of all the capital of Eletropaulo, launched Enel Sudeste has once again improved the terms of on April 17, 2018, increasing the share price from 28 its Tender Offer, increasing the share price from BRL to BRL 32. 32 to BRL 32.2, which does not vary significantly, un- der the terms of this improved Tender Offer, the total The Tender Offer remains subject, among others, to estimated investment of BRL 5,400 million, equiva- the acquisition of a total number of shares that would lent to approximately US$1,500 million at the current represent more than 50% of Eletropaulo’s share capi- exchange rate. tal and to leave without effect the capital increase cur- rently in progress by Eletropaulo, of at least BRL 1.5 • On April 26, 2018 the following significant event was billion. informed: The price increase confirms the Enel Sudeste’s will- The Ordinary Shareholders’ Meeting of Enel Américas ingness to continue participating in a competitive, S.A. held on April 26, 2018, has agreed to distribute transparent and fair public tender offer process, to the minimum mandatory dividend (from which the acquire the control of Eletropaulo. However, Enel interim dividend paid in January 2018 has been de- Sudeste estimates that, in the current context of the ducted) as well an additional dividend that amounts competitive offers, the capital increase currently in to US$ 354,521,675 equivalent to US$ 0.00617 per progress distorts the competition, provides an un- share. fair advantage to one of all bidders and goes against the best interest of Eletropaulo and its shareholders. Given that the above-mentioned interim dividend has Therefore, Enel Sudeste has also stated that it will not already been paid, the distribution and payment of the continue with the process unless the referred capital remnant of the final dividend No. 97 shall be for a total increase is nullified. of US$ 296,939,208, or US$ 0.00517 per share. To facilitate Eletropaulo’s decision on this issue and The aforementioned dividend will be paid in Chilean considering its preoccupation with the ability of Elet- pesos, the legal currency, converted according to the ropaulo to raise funding in a later stage, Enel Sudeste Observed Dollar exchange rate published in the Offi- committed to subscribe, subsequently, a capital in- cial Gazette on May 18, 2018. 173 Significant Events of the Company • On May 30, 2018 the following significant event was As a result of the Offer, Enel Sudeste’s investment informed: reaches at least to approximately BRL 5,553 million, equivalent to approximately US$ 1,484 million, at the Enel Sudeste has improved the terms of the referred current exchange rate. To this amount, the investment to Public Tender Offer launched on April 17, 2018, for required to acquire the corresponding shares issued the acquisition of all the share capital of Eletropaulo, by Eletropaulo must be added, until July 4, 2018, as increasing the share price from BRL 32.20 to BRL described in the preceding paragraph. 45.22. This price is the highest among those presented in short-term bank financing managed and guaranteed the competitive offer process for Eletropaulo. by its controlling shareholder, Enel Américas S.A. Enel Sudeste will finance the acquisition through According to Brazilian regulations that regulate the Of- Enel Sudeste has received the approval from the Bra- fer, this price is the final price at which Enel Sudeste zilian Antitrust Authority or “Conselho Administrativo will acquire the shares offered in this process, at an de Defesa Econômica” ("CADE"), while the approval auction in which will participate Eletropaulo’s share- from the Brazilian National Electric Agency or “Agên- holders who decide to do so. The auction will take cia Nacional de Energia Elétrica” ("ANEEL") is expect- place on June 4, 2018, in São Paulo, Brazil. ed to be granted within the next few days. The Offer is still subject, amongst other matters, to In relation with the above, Enel Américas S.A. is in- the acquisition by Enel Sudeste of a total number of viting all interested parties to a conference call that shares that would represent more than 50% of Eletro- will take place tomorrow, June 5, 2018, at 10:00 a.m. paulo’s share capital. São Paulo, time corresponding to 9:00 a.m. Santiago, • On June 4, 2018 the following significant event was Chile time. informed: • On June 26, 2018 the following significant event was Enel Sudeste has received the confirmation of the informed: successful conclusion of its Public Tender Offer for all As of this date, June 26, 2018, the Brazilian National the shareholding capital issued by Eletropaulo, given Electric Energy (Agência Nacional de Energia Eléc- that the holders of 122,799,289 shares, equivalent to trica - ANEEL) approved the takeover of Eletropaulo, 73.4% of Electropaulo’s shareholding capital, have ac- through the acquisition of 122,799,289 shares issued cepted the referred Offer. According to Brazilian reg- by the above-mentioned company, all of the same ulations on the subject, the acquisition will be carried class and corresponding to 73.4% of the share capital out through the payment of the price and the transfer of said company. Given that Eletropaulo shareholders of the shares to Enel Sudeste, which will take place can sell the remaining shares to Enel Sudeste until on June 7, 2018. July 4, 2018, at the same price offered in the Pub- lic Tender Offer (BRL 45.22 per share), the number Eletropaulo’s shareholders will have until July 4, 2018 of shares and the percentage shareholding might in- to sell the remaining shares to Enel Sudeste, at the crease. same price offered in the Public Tender Offer (BRL 45.22 per share). 174 Annual Report Enel Américas 2018 Consequently, Eletropaulo becomes, as of that date, Consequently, once the above-mentioned period was an indirect subsidiary of Enel Américas S.A and, there- finalized, Enel Sudeste has increased its shareholding fore, shall be consolidated by the latter. in Eletropaulo from 122,799,289 shares issued by the above-mentioned company, all of the same class and • On July 6, 2018 the following significant event was corresponding to 73.4% of the share capital of said informed: company, to 156,158,581 shares issued by Eletropau- lo, corresponding to 93.3% of its share capital. On July 5, 2018 the Chief Executive Officer of the Company, Mr. Luca D’Agnese, has submitted his res- Therefore, the total investment of Enel Sudeste at the end ignation. He will remain in his position until July 31, of the acquisition period aforementioned, as a conse- 2018. quence of the Tender Offer, reached a total of BRL 7,069 million, equivalent to approximately US$ 1,829 In addition, it is reported that in the next session of Enel million at the exchange rate as of July 13. Américas’ Board of Directors, the new Chief Execu- tive Officer of the Company will be appointed. According to the above, Enel Sudeste will subscribe a new capital increase of Eletropaulo for the minimum • On July 10, 2018 the following significant event was amount of BRL 1,500 million, equivalent to approxi- informed: mately US$ 388 million at the current exchange rate, of which BRL 900 million, equivalent to approximately In the extraordinary session of the Board of Directors US$ 233 million at the current exchange rate, were held on July 9, 2018, Mr. Maurizio Bezzeccheri was already deposited in Eletropaulo’s cash corporate ac- appointed as Chief Executive Officer of the Company. count with a charge to the aforementioned capital in- He will assume mentioned position as of August 1, crease. 2018. • On October 16, 2018 the following significant event • On July 13, 2018 the following significant event was was informed: informed: Our parent company Enel SpA. issued “Comunicato The 30-day period established for Eletropaulo’s share- Stampa”, that it has signed two agreements with a holders to sell the remaining shares issued by said financial institution, aiming to increase its current company to Enel Sudeste concluded on July 4, 2018, shareholding in Enel Américas S.A. by up to a max- after an auction dated June 4, 2018, at the same price imum of 5%. Further details can be found in the at- as the one offered in said auction as part of the Public tached “Comunicato Stampa”. Tender Offer, BRL 45.22 per share, pursuant to Brazil- ian regulation. 175 Significant Events of the Company 176 Annual Report Enel Américas 2018• On November 26, 2018 the following significant event was informed: In its ordinary session held on November 26, 2018, the Board of Directors of the company has approved the Strategic Plan of Enel Américas S.A. for the period of 2019-2021. A copy of the aforementioned Strategic Plan of Enel Américas S.A. for the period of 2019-2021 can be ob- tained from the company’s website at the following link www.enelamericas.com. Taking into consideration that the contents of the re- ferred to Strategic Plan follow and are based on pro- jections and hypotheses that might or might not come true in the future, its effects cannot be established at this date. • On November 26, 2018 the following significant event was informed: In its session held on November 26, 2018, the Board of Directors of Enel Américas, unanimous- ly agreed to distribute an interim dividend of US$ 0.00133849910936791 per share on January 25, 2019, attributable to the 2018 fiscal period, corre- sponding to 15% of net income as of September 30, 2018, determined based on the Financial Statements of the company as of said date. The aforementioned dividend will be paid in Chilean pesos, the legal currency, converted according to the Observed Dollar exchange rate published in the Offi- cial Gazette on January 18, 2019. 177 178 Annual Report Enel Américas 201820 Identification of subsidiaries and associate companies 179 Letter From the Chairman CENTRAL DOCK SUD S.A. Company Name Central Dock Sud S.A. Type of Company Limited Liability Company Address Avenida Debenedetti 1636 Dock Sud Avellaneda Phone 4229-1000 Subscribed and paid-in capital (US$ thousand) 356,221 Corporate purpose The corporate purpose of the company is the generation of electricity and its block sale. The company may carry out any supplementary and subsidiary activities linked to its corporate purpose, having to that effect full legal capacity to acquire rights and commit obligations and execute all acts not forbidden by law, by these By-laws, the Document of the International Public Tender for the Sale of Central Dock Sud S.A's Shares, or by any applicable regulation. Core business Electricity generation Regular Directors Héctor Martin Mandarano Chairman Santiago Matías Sajaroff Vice chairman Juan Carlos Blanco Paolo Pescarmona Michele Siciliano Jorge Esteban Ravlich Alejandro Aníbal Avayu Rodolfo Eduardo Berisso Paula María Garcia Kedinger Deputy Directors Andrea Biasotto Mónica Diskin Nicola Melchiotti Patricio Javier Cipollone Sebastián Torres Gabriel Eduardo Abalos Julio Omar Francisco Temen Rodolfo Heriberto Freyre María Elizabeth Tchouldjian Senior Management Juan José Marcet General Manager Alejandro Serantes Finance Manager Leonardo Limoli Commercial Manager Fabian Mario Cabana Operations Manager Graciela Babini Planning and Control Manager Sebastián Ortiz Acquisitions and Stores Manager 180 Business Relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 70.24% CHINANGO S.A.C. Company Name Chinango S.A.C. Type of Company Limited Liability Company CENTRAL VUELTA OBLIGADO S.A. Company Name Central Vuelta Obligado S.A. Type of Company Limited Liability Company Address Av. Thomas Edison 2701 Buenos Aires, Argentina Phone (5411) 5533 0200 Subscribed and paid-in capital (Thousand USD) 13 Corporate purpose G e n e r a t i o n o f e l e c t r i c i t y a n d i t s commercialization by blocks and particularly, e q u i p m e n t p u r c h a s i n g m a n a g e m e n t , construction, operation and maintenance of a thermal power plant named Vuelta Obligado complying with "Management and Operation of Projects, Increase of Thermal Generation Availability and Generation Compensation Adaptation 2008-2011 Agreement” agreed upon November 25, 2010 by the National State and the signing generation companies. Core business Construction of a thermal power plant called Central Vuelta de Obligado. Regular Directors Leonardo Pablo Katz Chairman Adrián Gustavo Salvatore Vice Chairman Michele Siciliano Mónica Diskin Deputy Directors Leonardo Marinaro Ignacio Villamil Andrea Biasotto Juan Carlos Blanco Senior management Leonardo Pablo Katz General Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 40.90% Address Calle César López Rojas N° 201, Urb. Maranga, San Miguel Lima, Peru Subscribed and paid-in capital (Thousand USD) 78,833 Corporate purpose Electricity generation, trading and transmission, being able to perform all acts and also engage all contracts that the Peruvian law allows for such purposes. Core business Electricity generation. Senior Executives Marco Raco (representative of Enel Generación Perú S.A.A.) General Manager Business relations The company has no commercial relation with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 80.00% CODENSA S.A. E.S.P. Company Name CODENSA S.A. E.S.P. NIT: 830.037.248-0 Type of Company Limited Liability Company– Public residential utility company. Address Carrera 13 A No. 93-66 Bogotá D.C, Colombia Phone (57 1) 601 6060 Subscribed and paid-in capital (Thousand USD) 4,153 Corporate purpose T h e c o m p a n y ' s m a i n p u r p o s e i s t h e distribution and sale of electricity, as well as all similar, connected, complementary and related activities with respect to electricity distribution and sale; the execution of electrical engineering works, design and consultancy, and sale of products for the benefit of its customers. The society may also perform other activities related to the provision of public Annual Report Enel Américas 2018services in general, manage and operate other utility companies, sign and execute special management agreements with other utility companies and sell or loan goods or services to other economic agents related with utilities, in or out of the country. The society may also participate as partner or shareholder in other utility companies, directly, or joining into partnerships with other persons, or in joint venture with them. Core business Energy distribution and commercialization. Regular Directors David Felipe Acosta Correa José Antonio Vargas Lleras Lucio Rubio Diaz Gloria Astrid Álvarez Hernández Felipe Castilla Canales Open position since may 2018 Andrés López Valderrama Deputy Directors Carlos Mario Restrepo Leonardo López Vergara Juan Manuel Pardo Gómez Ernesto Moreno Restrepo Alejandro Botero Valencia Daniel Ríos Rodríguez Mario Cajiao Pedraza Senior Management David Felipe Acosta Correa General Manager David Felipe Acosta Infrastructure & Networks Manager Andrés Caldas Rico Legal and Corporate Affairs Manager Carlos Mario Restrepo Market Manager Michele Di Murro Administration, Finance and Control Manager María Celina Restrepo Santamaría Communications Manager Rafael Carbonell Blanco Human Resources and Organization Manager Diana Marcela Jiménez Regulation and Institutional Relations Manager Eugenio Belinchon Audit Manager Raúl Fernando Vacca Ramírez Procurement Manager Ana Patricia Delgado Meza Digital Solutions Manager Ana Lucia Moreno Moreno General Services and Safety Manager Carlo Ferrara Sustainability Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 48.30% Share of the investment in Enel Américas’ assets. 5.14% COMPAÑÍA ENERGÉTICA VERACRUZ S.A.C. Company Name Compañía Energética Veracruz S.A.C. Type of Company Limited Liability Company Address Calle César López Rojas N° 201, Urb. Maranga, San Miguel Lima, Peru Subscribed and paid-in capital (Thousand USD) 854 Corporate purpose Develop and operate hydroelectric projects located in any river basin in Peru. Core business Owner of Veracruz hydroelectric project. General Manager Jean Philippe Salvatore Bellavia Business relations The company has no commercial relations with Enel Américas S.A. Paolo Giovanni Pescarmona Vice Chairman Mónica Diskin Deputy Directors Jorge Lemos Gaetano Salierno Roberto de Antoni Senior Management Sandro Ariel Rollan General Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 99.99% DISTRILEC INVERSORA S.A. Company Name Distrilec Inversora S.A. Type of Company Limited Liability Company Address San José 140 Buenos Aires, Argentina Shareholding of Enel Américas S.A. (direct and indirect) 100.00% Phone (54 11) 4370 3700 CTM Compañía de Transmisión del Mercosur S.A. Company Name Compañía de Transmisión del Mercosur S.A. Type of Company Publicly traded company constituted in Buenos Aires, Argentina Address Bartolomé Mitre 797, 11th floor, Buenos Aires, Argentina Subscribed and paid-in capital (Thousand USD) 1,425 Corporate purpose The provision of high tension electricity transmission services, in the case of linking both national and international electrical systems, according to current laws, to the purpose of which it may participate in national or international tenders, become a high tension electricity transmission concessionaire, locally or abroad, and perform those activities deemed necessary to carry out its purposes. Core business International interconnected electricity transmission. Regular Directors Juan Carlos Blanco Chairman Subscribed and paid-in-capital (Thousand USD) 322,819 Corporate purpose Exclusively to invest in companies constituted or to be constituted whose main activity is the distribution of electricity or that directly or indirectly participate in companies with that principal business through all kind of financial and investment activities, except those in the laws of financial entities, the purchase and sale of public and private debt paper, bonds, shares, negotiable instruments and the granting of loans, and the placement of its funds in bank deposits of any kind. Core business Investment Company. Regular Directors Guillermo Pablo Reca Chairman Paolo Giovanni Pescarmona Vice Chairman Gaetano Salierno Mónica Diskin Juan Carlos Blanco Jorge Lemos Andrés L. Vittone Rubén Vázquez Víctor J. Díaz Bobillo Rubén López Deputy Directors María Inés Justo Alain Rosolino 181 Identification of subsidiaries and associate companies Nicola Melchiotti Roberto de Antoni M. Victoria Ramírez Gonzalo Peres Moore Pablo Javier Viboud José Manuel Pazos Patricio J. Richards Enrique Terraneo Senior Management Guiseppe Fanizzi General Manager Business relations The company has no commercial relations with Enel Américas S.A. Business Relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 99.45% Shareholding of Enel Américas S.A. (direct and indirect) 51.50% Share of the investment in Enel Américas’ assets. 2.30% Share of the investment in Enel Américas’ assets. 0.09% EDESUR Empresa Distribuidora Sur S.A. Emgesa S.A. E.S.P. Company Name Emgesa S.A. E.S.P. NIT 860.063.875-8 Company Name Empresa Distribuidora Sur S.A. Type of Company Private Commercial Corporation. Public Utility Company Type of Company Publicly Traded Company Address San José 140 (1076) Capital Federal, Argentina Phone (54 11) 4370 3700 Subscribed and paid-in capital (Thousand USD) 563,803 Corporate purpose Distribution and commercialization of electricity and related activities. Core business Electricity distribution. Regular Directors Juan Carlos Blanco Chairman Paolo Giovanni Pescarmona Vice Chairman Monica Hodor Gonzalo Peres Moore Víctor José Díaz Bobillo Alain Rosolino Ernesto Pablo Badaraco Gerardo Marcelo Silva Iribarne Mónica Diskin Deputy Directors Gaetano Salierno María Victoria Ramirez Jorge Lemos Andrés L. Vittone Ruben Omar López Roberto Alfredo De Antoni María Alejandra Martinez Nicola Melchiotti María Inés Justo 182 Address Carrera 11 N°82-76, piso 4 Bogotá, D.C. Colombia Subscribed and paid-in capital (Thousand USD) 201,762 Corporate purpose The corporate purpose of the company is generation and sale of electricity and sale of fuel gas, as well as all activities similar, connected, supplementary and related to its main purpose, including oil derivatives liquid fuels for energy generation, and also de import of natural gas for energy generation and/or its commercialization and (ii) the participation in financial derivatives markets of energy commodities. Core business Electricity and fuel gas generation and commercialization. Regular Directors Andrés Caldas Lucio Rubio Díaz José Antonio Vargas Lleras Gloria Astrid Álvarez Hernández Remained vacant since December 2018 Luis Fernando Alarcón Mantilla Luisa Fernanda Lafaurie Rivera Deputy Directors Diana Marcela Jiménez Rodríguez Fernando Javier Gutiérrez Medina Michele Di Murro Álvaro Villasante Camila Merizalde Arico Rodrigo Hernán Galarza Naranjo Maria Paula Camacho Senior Management Bruno Riga General Manager and Renewables Energies Manager Marcelo Falcucci Thermal Generation Manager Andrés Caldas Rico Legal and Corporate Affairs Manager Fernando Javier Gutiérrez Medina Energy Trading Manager Michele Di Murro Administration, Finance and Control Manager María Celina Restrepo Santamaría Communications Manager Rafael Carbonell Blanco Human Resources and Organization Manager Diana Marcela Jiménez Rodríguez Regulation and Institutional Relations Manager Eugenio Belinchon Audit Manager Raúl Fernando Vacca Ramírez Procurement Manager Ana Patricia Delgado Meza General Services and Safety Manager Ana Lucia Moreno Moreno General Services and Safety Manager Carlo Ferrara Sustainability Manager Commercial Relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 48.48% Share of the investment in Enel Américas’ assets. 7.93% ENEL ARGENTINA S.A. Company Name Enel Argentina S.A. Type of Company Publicly Traded Company Address Av. España 3301 Buenos Aires, Argentina Phone (5411) 4307 3040 Subscribed and paid-in capital (Thousand USD) 60,999 Corporate purpose Carry out investments in companies dedicated to the production, transmission and distribution of electricity and its commercialization, as well as financial activities except those limited by the law to banks. Core business Investment Company. Regular Directors Juan Carlos Blanco Annual Report Enel Américas 2018Chairman Paolo Giovanni Pescarmona Vice Chairman Mónica Diskin ENEL BRASIL S.A. ENEL CIEN S.A. Company Name Enel Brasil S.A. Company Name ENEL CIEN S.A. Deputy Directors Nicola Melchiotti Jorge Lemos María Victoria Ramírez Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 99.92% Share of the investment in Enel Américas’ assets. 9.67% ENEL BRASIL INVESTIMENTOS SUDESTE S.A. Company Name Enel Brasil Investimentos Sudeste S.A. Type of Company Limited Liability Company Address Praça Leoni Ramos, nº 1, 7º andar, bloco 2, São Domingos. Niterói, Rio de Janeiro. Phone (21) 2716-1138 Subscribed and paid-in capital (Thousand USD) 1,030,354 Company purpose Its purpose is the planning, development and execution of generation, distribution, transmission and/ or commercialization activities of electric energy. Likewise, the participation in the equity capital of other companies and entities that operate or constitute to act in the generation, distribution, transmission and/ or commercialization of electric energy segments as partners, consortia or shareholder. Core business Electricity generation. T h e c o m p a n y t h a t d o e s n ’ t h a v e a management board (Board of Directors) Senior management Antonio Basilio Pires de Carvalho e Albuquerque Raffaele Grandi Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100.00% Type of Company Limited Liability Company Type of Company Limited Liability Company Address Praça Leoni Ramos, N°1, 7° andar, bloco 2 Parte, Niterói, Río de Janeiro, Brazil Address Praça Leoni Ramos, N° 1, piso 6, Bloco 2, São Domingos, Niterói Río de Janeiro, Brazil Phone (5521) 3607 9500 Subscribed and paid-in capital (Thousand USD) 1,750,617 Company purpose Participate in the capital of other companies in any segment of the electricity sector, including companies that provide services to companies in that sector, in Brazil or abroad; transmission, distribution, generation or commercialization of electricity and related activities and participation, individually or through joint ventures, consortia or other similar forms of association, in tenders, projects and enterprises for the supply of services and activities previously mentioned. Core business Investment Company. Board of Directors Mario Fernando de Melo Santos Chairman Maurizio Bezzeccheri Vice Chairman Antonio Basilio Pires de Carvalho e Albuquerque Senior Management Raffaele Grandi Antonio Basilio Pires de Carvalho e Albuquerque Carlos Ewandro Naegele Moreira Anna Paula Hiotte Pacheco José Nunes de Almeida Neto Janaina Savino Vilella Carro Flávia da Silva Baraúna Margot Frota Cohn Pires Márcia Massotti de Carvalho Luis Alonso Campos Rivas Guilherme Gomes Lencastre Matteo de Zan Cristine de Magalhães Marcondes Carlos Omar Arriagada Retamal Roberto Zanchi André Osvaldo dos Santos Bruno Cecchetti Giovanni de Vita Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 99.99% Share of the investment in Enel Américas’ assets. 45.14% Phone: (55 21) 3607 9500 Subscribed and paid-in capital (Thousand USD) 73,545 Corporate purpose T h e p u r p o s e o f t h e c o m p a n y i s t h e production, industrialization, distribution and commercialization of electricity, including the import and export activities. In view of achieving the purposes mentioned above, the company will promote the study, planning and construction of facilities for production systems, transmission, conversion and distribution of electricity by capturing the necessary investment to develop the activities and by providing services. Beyond the purposes referred to, the company may promote the implementation of associated products, as well as inherent, ancillary or complementary activities to services and jobs that come to provide. To carry out the activities necessary to achieve its goals, the company may participate in other societies. Core business Electricity transmission. Board of Directors Antonio Basilio Pires de Carvalho e Albuquerque Chairman Julia Freitas de Alcantara Nunes Vice Chairman Victor Hugo Balbontin Artus Senior Management Guilherme Lencastre General Manager Raffaele Grandi Anna Paula Hiotte Pacheco Déborah Meirelles Rosa Brasil Carlos Ewandro Naegele Moreira José Nunes de Almeida Neto Janaina Savino Vilella Carro Margot Frota Cohn Pires Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100.00% 183 Identification of subsidiaries and associate companies ENEL DISTRIBUCIÓN CEARÁ S.A. COELCE (Companhia Energética do Ceará S.A.) Nelson Ribas Visconti Dilma Maria Toledo Company Name Companhia Energética do Ceará S.A. Type of Company Publicly Traded Company Address Rua Padre Valdevino, 150 - Centro Fortaleza, Ceará, Brasil Phone (55 85) 3453-4082 Senior Management Roberto Zanchi General Manager José Távora Batista Raffaele Grandi Carlos Ewandro Naegele Moreira José Nunes de Almeida Neto Janaina Savino Vilella Carro Luiz Gazulha Margot Frota Cohn Pires Déborah Meirelles Rosa Brasil Fernando Andrade Márcia Sandra Roque Vieira Silva Subscribed and paid-in capital (Thousand USD) 191,199 Business Relations The company has no commercial relations with Enel Américas S.A. Corporate purpose Generation, transmission, distribution and commercialization of electricity, performing awarded or authorized correlated services, and the development of activities associated with the services, as well as celebrating trading acts related to those activities. Likewise, the company may carry out studies, planning, projects, construction and operation of production, transformation, transportation and storage, distribution and sale of energy systems, of any origin, in the form of concessions, authorizations or permits it may be awarded, with jurisdiction in the territory of the State of Ceará, and others defined in the Grantor. The Society may also carry out studies, projects and planning and research and development programs of new energy sources, especially renewable, and the study, making and execution, in the energy sector, of plans and programs for economic and social development, in places of interest for the community and for the company. Core business Distribution and sale of electricity and related services in the State of Ceará, Brazil. Regular Directors Mario Fernando de Melo Santos Chairman José Nunes de Almeida Neto Vice Chairman Monica Hodor Ramón Francisco Castañeda Ponce Francesco Amadei Cristine de Magalhães Marcondes Francisco Honório Pinheiro Alves Fernando Antonio de Moura Avelino Fernando Augusto Macedo de Melo Aurelio Ricardo Bustilho de Oliveira Deputy Directors Márcia Sandra Roque Vieira Silva Maria Eduarda Fischer Alcure Deborah Meirelles Rosa Brasil Teobaldo José Cavalcante Leal José Tavora Batista Carlos Ewandro Naegle Moreira Marcia Massotti de Carvalho Cesario Macedo de Melo Neto 184 Shareholding of Enel Américas S.A. (direct and indirect) 74.05% ENEL DISTRIBUCIÓN GOIÁS S.A. CELG DISTRIBUIÇÃO S.A. - CELG-D Company Name CELG DISTRIBUIÇÃO S.A. - CELG-D Type of Company Limited Liability Company Address Rua 2, Quadra A-37, nº 505, Jardim Goiás, Goiânia, Goiás. Phone (62) 3243 1771 Subscribed and paid-in capital (Thousand USD) 1,309,589 Corporate purpose The corporate purpose is the technical and commercial exploration of electricity distribution. Core business Electricity Distribution Board of Directors Mario Fernando de Melo Santos Chairman Antonio Basilio Pires de Carvalho e Albuquerque Francesco Bertoli Maria Eduarda Fischer Alcure Senior Management Abel Alves Rochinha General Manager Marcia Sandra Raffaele Grandi Déborah Meirelles Rosa Brasil Carlos Ewandro Naegele Moreira Flavia Baraúna Angela Magalhães Margot Cohn Carlos Omar Arriagada Retamal Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 99.93% ENEL DISTRIBUCIÓN PERÚ S.A.A. Company Name Enel Distribución Perú S.A.A. Type of Company Publicly Traded Company Address Calle César López Rojas 201 Urb, Maranga, San Miguel Lima, Peru Phone (51 1) 561 2001 Subscribed and paid-in capital (Thousand USD) 157,383 Corporate purpose E n g a g e t h e a c t i v i t i e s o f d i s t r i b u t i o n , transmission and generation of electricity in accordance with the provisions of current legislation. Additionally, the company may engage in the sale of goods in any form, as well as providing consulting and financial services, among others, except those services, which require specific authorization in accordance with current law. Core business Distribution of electricity Board of Directors José Manuel Revuelta Mediavilla Chairman Guillermo Lozada Pozo Vice Chairman Riccardo Lama Carlos Solis Pino Francesco Bertoli Patricia Teullet Pipoli Martín Pérez Monteverde Rafael Llosa Barrios Senior Management Ricardo Lama General Manager Guillermo Martin Lozada Pozo Administration, Finance & Control Manager Carlos Alberto Solis Pino Commercial Manager Soraya Ahomed Legal Counsel Milagritos Tatiana Lozada Gobea Regulation Manager Rocío Pachas Soto Organization and Human Resources Manager María Alicia Martínez Venero Communications Manager Business relations The company has no commercial relations with Annual Report Enel Américas 2018Enel Américas S.A. Fernando Andrade Marcia Sandra Roque Vieira Silva Shareholding of Enel Américas S.A. (direct and indirect) 83.15% Business Relations The company has no commercial relations with Enel Américas S.A. ENEL DISTRIBUCIÓN RÍO S.A. AMPLA ENERGÍA (Ampla Energía e Serviços S.A.) Shareholding of Enel Américas S.A. (direct and indirect) 99.73% Nicola Cotugno Vice Chairman Ana Marta Horta Veloso Antonio Basilio Pires de Carvalho e Albuquerque Aurelio Ricardo Bustilho de Oliveira Bernardino Jesus de Brito Guilherme Gomes Lencastre Helio Lima Magalhães Marcia Sandra Roque Vieira Silva Company Name Ampla Energia e Serviços S.A. Type of Company Publicly Traded Company Address Praça Leoni Ramos, N° 01, São Domingos, Niteroi Río de Janeiro, Brazil Phone (55 21) 2613 7000 Subscribed and paid-in capital (Thousand USD) 644,575 Corporate purpose Study, plan, project, build and explore electricity production, transmission, transformation, distribution and sale systems, and provide related services that have been or may be conceded; carry out research in the energy sector, participate in regional, national or international organizations dedicated to the planning, operation, technical Exchange and business development related to the electricity industry and participate as a shareholder in other companies in the energy sector, even within the framework of Brazil´s privatization program. Core business Electricity distribution. Regular Directors Mario Fernando de Melo Santos Monica Hodor Roberto Zanchi Deborah Meirelles Rosa Brasil Luiz Carlos Franco Campos Otacilio de Souza Junior Alternate Directors Flávia da Silva Baraúna Márcia Massoti de Carvalho Gabriel Maluly Claudio César Weyne da Cunha Carlos Ewandro Naegele Moreira Senior Management Artur Manuel Tavares Resende Raffaele Grandi Carlos Ewandro Naegele Moreira José Nunes de Almeida Neto Janaina Savino Vilella Carro Anna Paula Hiotte Pacheco Déborah Meirelles Rosa Brasil Margot Frota Cohn Pires Artur Manuel Tavares Resende ENEL DISTRIBUCIÓN SÃO PAULO S.A. ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Company Name Eletropaulo Metropolitana Eletricidade de São Paulo S.A. Type of Company Publicly Traded Company Address Avenida Dr. Marcos Penteado de Ulhôa Rodrigues, nº 939, lojas 1 e 2 (térreo) e 1º ao 7º andar, Bairro Sítio Tamboré, Torre II do Condomínio Castelo Branco Office Park, Barueri, São Paulo Phone (21) 2716-1113 Subscribed and paid-in capital (Thousand USD) 728,495 Corporate purpose Exploit energy services, mainly electricity, in the areas defined in the Concession Contract and in others that, according to the existing regulation, it is authorized to act, study, design, execute, explore o transfer research and development plans and programs to analyze any type of form of energy; participate in those endeavors whose purpose is the distribution and commercialization of energy; provision of technical services for the operation, maintenance and planning of electricity facilities of third- parties; provision of services for the optimization of energy processes and electricity facilities of consumers; transfer of rights of slots of lines and areas of exploitable land of plants and deposits; IV) provide other public or private services, including IT services through the exploitation of its infrastructure, with the purpose of generating supplementary alternative revenues; contribute with the preservation of the environment, and participate in social programs for the interest of the community; participate in endeavors that foster a better use of its real-estate assets; and participate in other societies as partner, quota holder or shareholder. Core business Distribution of electricity. Board of Directors Britaldo Pedrosa Soares Chairman Senior Management Max Xavier Lins Monica Hodor Deborah Meirelles Rosa Brasil Carlos Ewandro Naegele Moreira Sidney Simonaggio Rosario Zaccaria Business Relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 95.88% ENEL GENERACIÓN COSTANERA S.A. Company Name Enel Generación Costanera S.A. Type of Company Publicly Traded Company Address Av. España 3301, Buenos Aires, Argentina Phone (5411) 4307 3040 Subscribed and paid-in capital (Thousand USD) 131,230 Corporate purpose Electricity generation and trading in blocks of energy. Core business Electricity generation Regular Directors Juan Carlos Blanco (Chairman) Paolo Pescarmona (Vice Chairman) Michele Siciliano Alain Rosolino Antonino Asione Mónica Diskin César Fernando Amuchástegui Matías Maria Brea Marcelo Luis Diez Alternate Directors Gaetano Salierno Jorge Lemos Fernando Boggini Rodrigo Quesada Mariano Pessagno Nicola Melchiotti María Victoria Ramirez 185 Identification of subsidiaries and associate companies María Alejandra Martinez María Laura Posadas Senior Management Andrea Biasotto General Manager ENEL GENERACIÓN FORTALEZA S.A. C G T F - C E N T R A L G E R A D O R A TERMELÉCTRICA FORTALEZA S.A. ENEL GENERACIÓN PERÚ S.A.A. Company Name Enel Generación Perú S.A.A. Company Name CGTF - Central Geradora Termeléctrica Fortaleza S.A. Type of Company Publicly Traded Company Business relations The company has no commercial relations with Enel Américas S.A. Type of Company Limited Liability Company Shareholding of Enel Américas S.A. (direct and indirect) 75.68% Address Rodovia 422, Km 1 s/n, Complexo Industrial e Portuário de Pecém Caucaia, Ceará, Brazil ENEL GENERACIÓN EL CHOCÓN S.A Phone (55 85) 3464-4100 Subscribed and paid-in capital (Thousand USD) 39,201 Corporate purpose Study, project, construct and explore electricity production, transmission, distribution and trading systems, awarded, permitted or authorized by any rights title, as well as any other activity related to the aforementioned activities; acquisition, obtaining and exploration of any right, concession or privilege related to the aforementioned activities, as well as the practice of all other acts and businesses necessary to reach its purpose; and participation in other companies or societies corporate capital, as shareholder, partner or on account of participation, whichever its purposes are. Core business Electricity generation. Board of Directors Marcelo Falcucci Chairman Anna Paula Pacheco Senior Management Raimundo Câmara Interim General Manager Raffaele Grandi Pedro Werbest Alves Silva Claudia Maria Suanno Janaina Savino Vilella Carro Ana Claudia Gonçalves Rebello José Nunes de Almeida Neto Anna Paula Hiotte Pacheco Margot Frota Cohn Pires Commercial relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100.00% Company Name Enel Generación El Chocón S.A. Type of Company Publicly Traded Company Address Av. España 3301 Ciudad Autónoma de Buenos Aires, Argentina Subscribed and paid-in capital (Thousand USD) 227,243 Corporate purpose E l e c t r i c i t y G e n e r a t i o n a n d i t s b l o c k commercialization Core business Electricity generation. Regular Directors Juan Carlos Blanco Chairman Paolo Giovanni Pescarmona Vice Chairman Mónica Diskin María Victoria Ramírez Daniel Garrido Alex Daniel Horacio Valdez Néstor Hugo Martín Alberto Eduardo Mousist Alternate Directors Jorge Lemos Alain Rosolino Fernando Boggini Rodrigo Quesada Nicola Melchiotti Sebastián Eduardo Guasco Oscar Horacio Carvalho Senior Management Daniel Garrido General Manager Business Relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 67.67% 186 Address Calle César Lopez Rojas N° 201, Urb. Maranga, San Miguel Lima, Peru (address change according to memo 2015) Subscribed and paid-in capital (Thousand USD) 809,478 Corporate purpose In general, electricity generation activities, also the civil, industrial, commercial and any other act or operation related or leading to its main corporate purpose. Core business Electricity generation. Regular Directors José Manuel Revuelta Mediavilla Chairman Marco Raco Eugenio Calderón López Guillermo Martín Lozada Pozo Rocío Pachas Soto Francisco García Calderón Portugal Carlos Rojas Perla Alternate Directors Claudio Helfmann Soto Rigoberto Novoa Velásquez Daniel Abramovich Ackerman Carlos Sedano Tarancón Úrsula De La Mata Torres Milagritos Tatiana Lozada Gobea Bartolomé Enrique Ríos Hamann Senior Management Marco Raco General Manager Pedro Cruz Vine Energy Management and Trading Manager Daniel Abramovich Ackerman Legal Counsel Guillermo Marín Lozada Pozo Administration, Finance and Control Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 83.60% Annual Report Enel Américas 2018ENEL GREEN POWER CACHOEIRA DOURADA S.A. E N E L G R E E N P O W E R V O L T A GRANDE S.A (former ENEL GREEN POWER PROJETOS I S.A) Company Name ENEL GREEN POWER CACHOEIRA DOURADA S.A. Company Name Enel Green Power Volta Grande S.A Type of Company Limited Liability Company Type of Company Limited Liability Company Address Rodovia GO 206, Km 0, Cachoeira Dourada Goiânia Goiás, Brazil Address Praça Leoni Ramos, nº 1, 5º andar - parte, bloco 1, São Domingos. Niterói, Rio de Janeiro. Phone (55 62) 3434 9000 Phone (21) 2716-1100 Subscribed and paid-in capital (Thousand USD) 16,600 Subscribed and paid-in-capital (Thousand USD) 145,972 ENEL GENERACIÓN PIURA S.A. Company Name Enel Generación Piura S.A. Type of Company Publicly traded company Address Calle César López Rojas 201, Urb. Maranga, San Miguel Lima, Peru Subscribed and paid-in capital (Thousand USD) 24,131 Corporate purpose The main purpose of the company is the generation, sale and transmission of electricity, performing all acts and signing all agreements allowed by current legislation. Core business Electricity generation and sale of natural gas. Directors José Manuel Revuelta (Chairman) Marco Raco (Vice Chairman) Guillermo Martin Lozada Pozo Corporate purpose The corporate purpose of the Company is the carrying out of studies, planning, construction, installation, operation and exploitation of electricity generation plants, and the trade related to these activities. Likewise, the company may foster or participate in other societies formed for the production of electricity, in or out of the Sate of Goiás. Senior Management Marco Raco (representing Enel Generación Perú S.A.A.) General Manager Core business Electricity Generation Commercial relations The company has no commercial relations with Enel Américas S.A. Directors (regular) Antonio Basilio Pires de Carvalho e Albuquerque Andre Bruno Santos Brandão Gordon Afonso Anna Paula Pacheco Shareholding of Enel Américas S.A. (direct and indirect) 96.50% Senior Management Matteo Francucci Deputy Manager Raffaele Grandi Matteo de Zan Janaína Savino Villela Carro Carlos Ewandro Naegele Moreira Ana Claudia Gonçalves Rebello José Nunes de Almeida Neto Anna Paula Hiotte Pacheco Margot Frota Cohn Pires Commercial relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 99.75% Corporate purpose Its main activity is the generation of electricity, pursuant to the current regulation. Likewise, the company is enabled to commercialize energy by any means and in any market. Core business Electricity generation. The company does not have a Board of Directors. Senior Management Matteo Francucci Carlos Ewandro Naegele Moreira Raffaele Grandi Commercial relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100.00% 187 Identification of subsidiaries and associate companies ENEL PERÚ S.A.C. Company Name Enel Perú S.A.C. Type of Company Limited Liability Company Address Calle César López Rojas 201, Urb. Maranga, San Miguel Lima, Perú Subscribed and paid-in capital (Thousand USD) 1.587.916 Corporate purpose Perform investments in other companies, most preferably in those involved in the exploitation of natural resources, and especially those related to the distribution, transmission and generation of electricity. Develop engineering services for the construction of power plants; perform activities related to the supply, assembly and commissioning of equipment and/ or services for electricity generation. Additionally, the company may carry out any other activity related to the electricity and water sectors. The company may also make equity investments in any kind of property including stocks, bonds and any other class of transferable securities, as well as the administration of such investments within the limits set by the board and ordinary shareholders meeting. The activities that are considered within the purpose of the company may be carried out in Peru and abroad. Core business Investment Company Senior Management José Manuel Revuelta Soldevilla General Manager ENEL X BRASIL S.A (former ENEL SOLUÇÕES S.A.) ENEL TRADING ARGENTINA S.R.L. Company Name ENEL X BRASIL S.A. Type of society Limited Liability Company constituted pursuant to the Brazilian law. Address Praça Leoni Ramos nº 01 Parte, São Domingos, Niterói, Rio de Janeiro, Brazil. Company Name Enel Trading Argentina S.R.L. Type of Company Limited Liability Company Address San José 140, piso 6, CABA Buenos Aires, Argentina Phone (5411) 4124-1600 Phone (55 21) 2613 7000 Subscribed and paid-in capital (Thousand USD) 23,302 Corporate purpose The company’ objective is to participate in the capital of other companies in Brazil or abroad, trade in general, even imports and exports, through retail or wholesale transactions of various products, and to provide general services for the energy electricity sector and others. Core business Provision of services in general to the electricity industry and others. T h e c o m p a n y d o e s n o t h a v e a n administration council (Board of Directors) Senior Executives Nestor Jesus Benito Saenz General Manager Tennessee Williams Pearce Maia Rafael Felipe Coelho da Silva Commercial relations The company has no commercial relations with Enel Américas S.A. Subscribed and paid-in capital (Thousand USD) 2,483 Corporate purpose The purpose of the company is the wholesale purchase and sale of electricity capacity and energy produced and/or consumed by third parties, including the import and export of electricity power and energy and the marketing of royalties, and the supply and/or performing of services related to the above activity, both in the country as well as abroad of information technology services and/or of control of the operation and/or of telecommunications. Likewise, the Company shall be entitled to execute buy/sell operations or to purchase and sell natural gas, and/or its transportation, including the importation and/or exportation of natural gas and/or the marketing of regalia/ privileges, as well as to provide and/or execute services related to the abovementioned activity. Also, the Company shall be entitled to execute buy/sell operations or to purchase and sell crude petroleum, and/or lubricants and/or to transport such elements, including the importation and/or exportation of liquid fuels and the marketing of regalia/privileges, as well as to provide and/or execute services related to the aforementioned activity. Commercial relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100.00% Core business Trading of electricity, gas and derivatives. IT services and/or operation control and/or telecommunications. Shareholding of Enel Américas S.A. (direct and indirect) 20.33% 188 Regular Managers Livio Filipo Colasanto Paolo Giovanni Pescarmona Alternate Managers Mónica Diskin Fernando Boggini Commercial relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100.00% Proportion of Enel Américas S.A. assets 0.02% Annual Report Enel Américas 2018HIDROINVEST S.A. Company Name Hidroinvest S.A. Type of Company Publicly Traded Company Address Av. España 3301 Buenos Aires, Argentina Phone (5411) 4307 3040 Subscribed and paid-in capital (Thousand USD) 1,468 Corporate purpose Acquire and maintain a majority shareholding in Hidroeléctrica Alicura S.A. and/or Hidroeléctrica El Chocón S.A. and/or Hidroeléctrica Cerros Colorados S.A. ("the concessionaire companies") created by National Executive Power decree 287/93 and manage such investments. Core business Investment Company Regular Directors Juan Carlos Blanco Chairman Paolo Giovanni Pescarmona Vice Chairman Mónica Diskin Alternate Directors Jorge Lemos María Victoria Ramírez INGENDESA DO BRASIL Ltda. (company under liquidation) INVERSORA CODENSA S.A.S. Company Name Ingendesa do Brasil Ltda. Type of Company Limited Liability Company Address Praça Leoni Ramos, Nº 1 Parte, São Domingos Niterói - RJ, Brazil Company Name Inversora Codensa S.A.S. NIT 900.351.013-6 Type of Company Simplified joint stock company Address Carrera 13 No. 93-66 Bogotá, Colombia Subscribed and paid-in capital (Thousand USD) 129,006 Phone (571) 601 6060 Corporate purpose Offer services in engineering, studies, projects, technical consulting, management, inspection and supervision of works supply, inspection and reception of materials and equipment for laboratories, appraisals, commercial representation of local and foreign engineering companies, as well as other services that the legal powers permit in the practice of the professions of engineering, architecture, agronomy, geology and meteorology in all their specialties. Subscribed and paid-in capital (Thousand USD) 2.0 Corporate purpose Investment in residential public electric utility services, especially the acquisition of shares in any public electric utility or in any other company that also invests in utilities whose main purpose is residential electricity service according to the definition in Law 142 of 1994, or in any other company that also invests in utilities whose main purpose is residential public electric utility services. Core business Engineering services. Representative Bruno César Vasconcelos Business relations The company has no commercial relations with Enel Américas S.A. Commercial relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 1.00% Shareholding of Enel Américas S.A. (direct and indirect) 96.70% Core business Investment Company Senior Management David Felipe Acosta Correa Manager Leonardo Lopez Vergara First Deputy Manager Juan Manuel Pardo Gómez Second Deputy Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100,00% 189 Identification of subsidiaries and associate companies INVERSORA DOCK SUD S.A. SACME S.A. Company Name Inversora Dock Sud S.A. Type of Company Limited Liability Company Company Name Sacme S.A. Type of Company Limited Liability Company Address A v e n i d a D e b e n e d e t t i 1 6 3 6 D o c k S u d Avellaneda Address Av. España 3251 Ciudad Autónoma de Buenos Aires, Argentina Phone 4229-1000 Phone (5411) 4361 5107 SOCIEDAD PORTUARIA CENTRAL CARTAGENA S.A. Company Name Sociedad Portuaria Central Cartagena S.A. Type of Company Publicly Traded Company NIT 900.325.249-7 Address Carrera 13 A No. 93-,66, piso 2 Bogotá, D.C. Colombia Subscribed and paid-in capital (Thousand USD) 21,215 Subscribed and paid-in capital (Argentinean Pesos) 42 Subscribed and paid-in capital (Thousand USD) 28 Corporate purpose The company’s main purpose is the following: investment, construction and maintenance of docks and private and public ports, their management and operations and the development and operation of a multipurpose port, in accordance with the law, among others. Regular Directors Marcelo Falcucci Leonardo Lopez Vergara Juan Manuel Pardo Alternate Directors Fernando Javier Gutierrez Medina Alba Lucia Salcedo Luis Fernando Salamanca Senior Management Fernando Gutierrez Medina General Manager Marcelo Falcucci First Deputy General Manager Oswaldo Rafael Novoa Arroyo Second Deputy General Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100.00% Corporate purpose The corporate purpose of the company is the participation in companies of any nature, by means of creating shareholding companies, transitory company ventures, collaboration groups, joint ventures, consortiums and any other kind of association, and in general, the purchase, sale and negotiation of titles, shares and all other kind of securities and credit papers in any of the systems or modes created or to be created. Core business Investment Company Regular Directors Juan Carlos Blanco Chairman Paolo Giovanni Pescarmona Vice Chairman Michele Siciliano Héctor Martín Mandarano Santiago Matías Sajaroff Jorge Esteban Ravlich Alternate Directors Andrea Biasotto Nicola Melchiotti Mónica Diskin Patricio Javier Cipollone Sebastián Torres Gabriel Eduardo Abalos Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 57.14% Proportion of Enel Américas S.A. assets 1.43% Corporate purpose Conduct, supervise and control the operation of the electricity generation, transmission and sub transmission system of Capital Federal and Gran Buenos Aires, and the interconnections with the Argentine Interconnection System (SADI in its Spanish acronym). Represent the companies Distribuidora Edenor S.A. and Edesur S.A. in terms of operations, before the wholesale market administrator, Compañía Administradora del Mercado Mayorista Eléctrico (CAMMESA in its Spanish acronym. In general, adopt all actions necessary to allow it to carry out the administration of the business correctly, as being constituted for this purpose by the concessionaire companies of the electricity distribution and trading in Capital Federal and Gran Buenos Aires, all in accordance with the international public tender for the sale of Class A shares in Edenor S.A. and Edesur S.A. and applicable regulations. Core business Lead, supervise and control of operations from the Argentine electricity system. Regular Directors Roberto De Antoni Giuseppe Fanizzi Daniel Flaks Eduardo Maggi Alternate Directors Fabio Canosa Vincenzo Ruotolo Miguel Patricio Farrell José Luis Marinelli Senior Management Francisco Cerar General Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 50.00% 190 Annual Report Enel Américas 2018ENEL X COLOMBIA S.A.S. Company Name Enel X Colombia S.A.S. Type of Company Simplified stock company NIT 901.176.579-6 Address Carrera 13 A No. 93-,66, piso 2 Bogotá, D.C. Colombia Subscribed and paid-in capital (Thousand USD) 1,540 Corporate purpose Develop any commercial or civil lawful activity. In particular, it may: a) execute public lighting projects for the development of modernizations, administrations, operation and maintenance, expansions, teleprocessing, collection of inventories, photometric designs, auditing, among others; under the different contract modalities with the state such as concessions, individually or jointly building strategic alliances; b) develop electricity engineering projects of low, medium and high voltage, special lighting projects, architectural illumination and Christmas lighting, energy storage projects and renewable energies through the participation in tender offers of public and private biddings, celebrate contracts with governmental entities or companies, of mixed economies or private; c) design, develop, maintain, build and all types of electric installations in industrial and/or commercial areas and/or free zones. d) commercialize electric materials, provide conceptual engineering services, basic and detailed, such as advisories, studies, auditing and projects’ supervision; develop and sale of renewable energy projects, software of energy intelligence, operation and maintenance of public services systems; e) develop and implement new products and services related with the needs of the public and private sectors, through the following: 1) use of existing public lighting infrastructure for leveraging innovation and technology projects (smart cities); 2) urban development projects such as the installation and maintenance of traffic lights, traffic signals, bus stops, advertising and parks among other urban spaces. 3) implementation of Energy as a Service models, response to the demand, increase reliability of industrial users in the country; f) carry out every legal acts and operations required for the development of its social purpose; g) acquire and development goods of any nature, either movable or immovable properties, corporeal or incorporeal, required for the development of social businesses; h) sell, lease, tax and manage social goods; i) issue, withdraw, accept, endorse, insure, discount, and negotiate in general, securities or any kind of individual or collective loans; j) celebrate any kind of state contracts and of private law; k) become part, according to law and by-laws, of other societies, with the purpose of easing or broadening or supplement the social company, either subscribing or acquiring quotas or shares with the intention of permanence or merger with them; l) celebrate contracts for the participation, either actively or inactively, consortiums, temporary companies’ joint ventures and any other lawful way of business collaboration; m) celebrate or execute, in general, every act or contracts needed for the development of the social purpose of the company. TERMOELÉCTRICA JOSÉ DE SAN MARTÍN S.A. Company Name Termoeléctrica José de San Martín S.A. Type of Company Publicly Traded Company Address Maipú 757, Piso 9° Ciudad Autónoma de Buenos Aires, Argentina Regular Directors Lucio Rubio Díaz Carlos Mario Restrepo Molina Michele Di Murro Alternate Directors Andrés Caldas Rico Juan Manuel Pardo Gómez Alejandro Barragán Osorio Senior Management Carlos Mario Molina General Manager Alejandro Barragán Osorio First Deputy Manager Diego Rolando Valderrama Acevedo Second Deputy Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 100.00% Phone (54 11) 4117-1011/1041 Subscribed and paid-in capital (Thousand USD) 13 Corporate purpose The generation of electricity and its block trading, and particularly the management of the equipment, construction, operation and maintenance of a thermal plant in accordance with the “Definitive agreement for the management and operation of the projects for the re-adaptation of the MEM in the terms of Resolution SE N° 1427/2004”, approved by Resolution SE N° 1193/2005. Core business Electricity generation. Management services (acquisition of equipment, construction, operation and maintenance of a thermal power plant). Regular Directors: Ricardo Araraki Chairman Adrián Salvatore Michele Siciliano Mónica Diskin Guillermo Giraudo Julián Mc Loughlin José Manuel Tierno Gerardo Carlos Paz Rubén Turienzo Alternate Directors: Leonardo Katz Leonardo Marinaro Juan Carlos Blanco Andrea Biasotto Luciano Palombella Juan Castellanos Mon Sergio Raúl Sánchez Luis Agustín León Longombardo Rodrigo Leonardo Garcia Senior Management Fernando Fabián Rabita General Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 25.60% 191 Identification of subsidiaries and associate companies T E R M O E L É C T R I C A M A N U E L BELGRANO S.A. TESA Company Name Transportadora de Energía S.A. YACYLEC S.A. Company Name Yacylec S.A. Company Name Termoeléctrica Manuel Belgrano S.A. Type of Company Publicly Traded Company Address Azopardo 1487, Ciudad Autónoma de Buenos Aires, Argentina Phone 011 3221-7950 Subscribed and paid-in capital (Thousand USD) 13.0 Corporate purpose The company’s purpose is the generation of electricity and its block trading, and particularly the management of the equipment, construction, operation and maintenance of a thermal plant in accordance with the “Definitive agreement for the management and operation of the projects for the re-adaptation of the MEM in the terms of Resolution SE N° 1427/2004”, approved by Resolution SE N° 1193/2005. Core business Electricity generation. Management services (acquisition of equipment, construction, operation and maintenance of a thermal power plant). Regular Directors Andrea Biasotto Mónica Diskin Julián Mc Loughlin Guillermo Giraudo Adrián Gustavo Salvatore José Manuel Pazos Gerardo Carlos Paz Rubén Turienzo José Manuel Tierno Alternate Directors Juan Carlos Blanco Michele Sicialiano Luciano Palombella Juan I Castellanos Mon Leonardo Marinaro Leonardo Katz Luis Agustín León Longombardo Rodrigo Leonardo García Sergio Raúl Sánchez Senior Management Francisco Monteleone General Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 25.60% 192 Type of Company Publicly Traded Company Type of Company Limited Liability Company Address Bartolomé Mitre 797, piso 11 Buenos Aires, República de Argentina Address Bartolomé Mitre 797, piso 11º; Ciudad Autónoma de Buenos Aires, Argentina Phone (5411) 4394 1161 Phone (5411) 4587 4322/4585 Subscribed and paid-in capital (Thousand USD) 11,715 Subscribed and paid-in capital (Thousand USD) 531 Corporate purpose High tension electricity transmission services' provision, linked to both national and international electrical systems, for which purpose it may participate in national and international tenders, become a high tension electricity transmission utilities concessionaire, locally or abroad, and carry out all activities deemed necessary to fulfill its purpose. Core business Electricity transmission. Regular Directors Juan Carlos Blanco Chairman Paolo Giovanni Pescarmona Vice Chairman Mónica Diskin Alternate Directors Jorge Lemos Gaetano Salierno Roberto de Antoni Senior Management Sandro Ariel Rollan General Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 99.99% Corporate purpose Construction, operation and maintenance of the first electrical link between Yacyretá Hydroelectric Plant and the Resistance's Transformation Station, and provision of electricity transmission services, including the exploitation under concession as independent transporter. Core business Electricity transmission. Regular Directors Guillermo Osvaldo Díaz Eduardo Martín Albaracín Open position Juan M. Pereyra Juan Carlos Blanco Sandro Ariel Rollan Raffaele Sardella Luis Juan Bautista Piatti Osvaldo Antenor Acosta Mónica Diskin Maurizio Bellomo Gerardo Luis Ferreyra Alternate Directors Carlos Fernando Bergoglio Juan José Arena Paolo Giovanni Pescarmona Jorge Alberto Lemos Gianfranco Catrini Massimo Villa Roberto Leonardo Maffiolli Dario Ballaré Sergio Alejandro Vestfrid Nicola Melchiotti Robert Ortega Alberto Esteban Verra Senior Management Sandro Ariel Rollan General Manager Business relations The company has no commercial relations with Enel Américas S.A. Shareholding of Enel Américas S.A. (direct and indirect) 22.22% Proportion of Enel Américas S.A. assets 0.01% Annual Report Enel Américas 2018Notes: 1. There are no acts or agreements signed by Enel Américas with its subsidiaries or associated companies that could significantly influence its operations and results. 2. Regarding business relations, future relations planned with subsidiaries or associated companies fall within the company's corporate purpose, especially continuing to provide its subsidiaries and associated companies with the necessary financial resources for their businesses' development and, additionally, to provide its subsidiaries with management, financial advisory, business, technical, legal, audit services and, in general, services of any kind deemed necessary for their best performance, notwithstanding which, it is not foreseen that any of these connections would significantly influence the company’s operations and results. 193 Identification of subsidiaries and associate companies 194 Annual Report Enel Américas 201823 Statement of Responsibility 195 Letter From the Chairman 196 Annual Report Enel Américas 2018Statement of Responsibility The Directors of Enel Américas S.A. and the Chief Executive Officer, signatories of this statement, are responsible under oath of the veracity of the information provided in this Annual Report, in compliance with the General Norm N°30, issued by the Financial Market Commission. CHAIRMAN Borja Acha Besga DNI: 05263174-S DIRECTOR José Antonio Vargas Lleras CI: 79.312.642 DIRECTOR Hernán Somerville Senn Rut: 4.132.185-7 DIRECTOR Patricio Gómez Sabaini Pasaporte: 16941675N DIRECTOR Livio Gallo DNI: AV 0246369 DIRECTOR Domingo Cruzat Amunátegui Rut: 6.989.304-K DIRECTOR Enrico Viale DNI: AU 2580379 CHIEF EXECUTIVE OFFICER Maurizio Bezzeccheri Rut: 26.490.357-2 Statement of Responsibility 197 198 Annual Report Enel Américas 2018Management and Senior Executives CHAIRMAN Francisco de Borja Acha Besga Phone (56) 2 2263 4631 DIRECTOR José Antonio Vargas Lleras Phone (56) 2 2353 4631 DIRECTOR Enrico Viale Phone (56) 2 2353 4631 DIRECTOR Livio Gallo Phone (56) 2 2353 4631 DIRECTOR Hernán Somerville Senn Phone (56) 2 2353 4631 DIRECTOR Domingo Cruzat Amunátegui Phone (56) 2 2353 4631 DIRECTOR Patricio Gómez Sabaini Phone (56) 2 2353 4631 CHIEF EXECUTIVE OFFICER Maurizio Bezzeccheri Phone (56) 2 2263 9130 COMUNICATIONS OFFICER José Miranda Montecinos Phone (56) 2 2675 2746 INTERNAL AUDIT OFFICER Raffaele Cutrignelli Phone (56) 2 2353 4647 CHIEF FINANCIAL OFFICER Aurelio Bustilho de Oliveira Phone (56) 2 22353 4510 PLANNING AND CONTROL OFFICER Bruno Stella Phone (56) 2 2353 4510 GENERAL COUNSEL AND CORPORATE GOVERNANCE Domingo Valdés Prieto Phone (56) 2 2630 9227 Investors and Shareholders Relations INVESTORS RELATIONS MANAGER Rafael De La Haza Casarrubio Phone (56) 2 2353 4682 CITIBANK NY Teresa Loureiro-Stein Phone (1-212) 816 6814 www.leaders.cl enelamericas.com 

Continue reading text version or see original annual report in PDF format above