Enel Chile S.A.
Annual Report 2016

Plain-text annual report

Annual Report Enel Chile2016Annual Report Enel Chile 2016Santiago Stock Exchange ENELCHILE Nueva York Stock Exchange ENIC Enel Chile S.A. was initially incorporated as Enersis Chile S.A. on March 1st, 2016 and changed to Enel Chile S.A. on October 18th, 2016. As of December 31st, 2016, the total share capital of the Company was Th$ 2,229,108,975 represented by 49,092,772,762 shares. Its shares trade on the Santiago Stock Exchange and the New York Stock Exchange as American Depositary Receipts (ADR). The main business of the Company is the development, operation, generation, distribution, transformation, or sale of energy in any form, directly or through other companies. Total assets of the Company amount to Th$ 5,398,711,012 as of December 31st, 2016. Enel Chile controls and manages a group of companies that operate in the Chilean electricity market. Net profit attributable to the controlling shareholder in 2016 reached Th$ 317,561,121 and operating income reached Th$ 457,202,938. At year-end 2016 the Company directly employed 2,010 people through its subsidiaries in Chile.  Annual Report Enel Chile 2016  Summary > Letter from the Chairman > Open Power > Highlights 2016 > Main Financial and Operating Data > Identification of the Company and Documents of Incorporation > Ownership and Control > Management > Human Resources > Stock Markets Transactions > Dividends > Investment and Financing Policy > History of the Company > Investments and Financial Activity > Risk Factors > Corporate Reorganization > Industry Regulation and Electricity Industry Operations > Electricity Generation > Electricity Distribution > Environment and Sustainability > Participation in subsidiaries & associates and schematic table > Significant Events > Identification of Subsidiaries and Associate Companies > Statement of Responsibility > Consolidated Financial Statements > Management Analysis of Consolidated Financial Statements > Subsidiaries’ Summarized Financial Statements 4 10 12 16 20 26 32 54 64 70 76 80 84 92 112 116 128 146 152 160 164 172 182 186 344 372  Letter from the Chairman Dear shareholders, We have been able to achieve the goals set for the company for 2016 thanks to everyone’s work and dedication. In The first Annual Report and Financial Statement of Enel March, we formally created Enersis Chile S.A., one of the Chile S.A., company created as part of the reorganization forty companies that comprise the IPSA in the Chilean of Enersis S.A. that began in 2015, is now in your hands. market, and one of the companies in the MSCI index of The company is engaged in electricity generation and the New York Stock Exchange (NYSE). We also faced the distribution in Chile through its subsidiaries Enel Generación public electricity tenders carried out in August and with Chile and Enel Distribución Chile. satisfactory results. In December, we finished installing I would like to thank the Board of Directors members of a reflective process in which we asked ourselves what Enel Chile, whom, this past April 29th, trusted me with the kind of company we want to be and considering the new responsibility of leading this company. During these months, challenges in the electricity sector, we decided to change we have worked openly and have obtained excellent results the Group´s philosophy and brand name in Chile. over 50,000 smart meters in the city of Santiago. Following thanks to the dedicated effort of the Group´s executives, professionals, and technicians. I would also like to recognize Nicolas Cotugno, CEO of Enel Chile, who joined the company in August 2016. He has been crucial in facing the challenges we have set as a company: to be open, focusing on sustainability and our relationship with customers and the service we provide, and creating value that is transparent to shareholders. I appreciate the dedication of the Board, Generation alongside Enel Generación Chile including members that have been chosen by the controlling During 2016, we witnessed a strong and rapid change in shareholder as well as independent members, and the work the electricity sector. This change is not just happening in carried out by the secretary and general counsel, Domingo Chile it’s happening all over the world. Costs of electricity Valdés. generation have dropped thanks to new and different 4 Annual Report Enel Chile 2016 technologies. The USD 47.59 average price per MWh in the August 2016 public electricity tenders represents a historic minimum since the tender system was implemented in Chile. Through Enel Generación Chile, and thanks to the Company’s solid and diversified energy matrix, we obtained excellent results. We were awarded 5,950 GWh, 48% of the 12,430 GWh tendered. There is more electricity generation in the world today than customers, and Chile has been following this same trend. I am convinced that building new power plants just for the sake of building them does not make sense in the world today. However, this doesn´t mean that we will disregard the development of new projects when growth opportunities for the Group arise. We hope to have the Los Cóndores hydroelectric power plant, being built in El Maule region, operating by 2018. We also welcome the idea of entering the gas business. Today we have six satellite regasification plants located in Talca, Coquimbo, La Serena, Los Andes, San Antonio, and Temuco. I would like to highlight the work that we have been doing with local communities. Today, we should be open to listening to our neighbors and must care for our environment. If the Annual Report Enel Chile 2016 5 previous strategy was to ask for forgiveness, our approach Metropolitan Region where Enel Distribución operates. We today is to ask for permission. With this in mind, we have were the first to introduce smart metering in Latin America, made significant progress regarding our relationship with a technology that is not new to the world, but that we have communities in Paposo, who live close to our Taltal power successfully brought to Chile with the endorsement and plant in the north, and with several Pehuenche communities experience of our parent company, Enel. Enel has already in Alto Biobio, among others. implemented this technology in over 40 million homes in Electric Distribution through Enel Distribución Chile Europe, mainly in Italy and Spain. Regarding electric mobility, we took a significant leap into the future. I am very satisfied with what was accomplished during 2016, although the task must continue in 2017 with even more strength. In the short term, we see great opportunities to incorporate zero emissions mobility to the streets of Santiago, considering Transantiago´s next public 2016 was a year of important changes in the distribution tender, and the country´s decontamination plans. We are sector. New uses for electricity prompted us to change the focused on supporting and promoting these projects through traditional metering system to a digital two-way metering electric mobility, to offer clean and efficient transportation system that keeps our customers permanently connected for the country. We will also continue to expand our network to the company. We finished the first phase of this project, of public charging stations in Santiago and the rest of the replacing 50,000 meters within the 33 districts of the country. You will start seeing more and more “Electrolineras.” 6 Annual Report Enel Chile 2016 Enel Chile Kick-off Dear shareholders, I want to close this letter reassuring my commitment to the challenges that we have taken on as a Group. I am convinced that the projects we have designed for Another highlight during 2016 was the kick-off of our Enel Chile, and the subsidiaries Enel Generación Chile and new corporate image. Even though the company was Enel Distribución Chile, are ambitious but commensurate to incorporated in March as Enersis Chile S.A., on October 4th, the future of the electricity sector in Chile. 2016 we presented a proposal to change that name. We are convinced that we must make clear to our customers, We will focus on increasing the number of customers and authorities, and all citizens, our determination to work with digitalizing our relationship with customers. I completely tenacity not to forget the past, but to face future challenges. agree with Enel CEO Francesco Starace´s vision regarding Our initiative was welcomed by the shareholders of Enersis the importance of focusing on having more customers Chile, Endesa Chile, and Chilectra, who approved changing rather than more generation. I believe this equation is a the name to Enel. very efficient one when it comes to managing the Group´s equity. As I stated while launching the new brand in December, Enel Chile was created to contribute to the development of the country with an open power vision. With collaborative and global vocation, we seek to create, grow, and lead the new energy era. Herman Chadwick Piñera Chairman Annual Report Enel Chile 2016 7 Corporate Building. 76 Santa Rosa Ave. New Brand Kick-off, November 30th, 2016 ENEL CHILE IS Over the last decades, Enel has offered the world energy, innovation, and progress. It has touched the lives of thousands of people by changing the way in which they relate to energy. Today, understanding that the world has changed and the way things are done has changed, Enel Chile takes on the responsibility to lead the changes in the energy industry to change the world into a new, sustainable world and with the support of local communities. This new philosophy is Open Power and requires Enel Chile, and its subsidiaries Enel Generación Chile and Enel Distribución Chile to be open. Today the challenge is to open electricity to more people, partners, and add new applications to electricity. It implies opening it to new technologies and management methods. Open Power involves creating a new shared culture, with a long-term vision and a mission defined by five aspects and four principles that define the DNA of the Enel Group. MISSION Open energy to more people a y s w w O pen energy to ne w technologies O ffer p e o ple n e a n a g e e n er g y t o m e C p e n t h t o m o r e s t a O y n o l d e r s a h o m p e k i o n s t a c r g y O p e n e n e t o n e w a p p l i VISION Open Power to solve relevant global challenges VALUES Responsibility Each one of us is responsible for the success of the group, at every level. We place our energy at the service of people to improve their live and make them more sustainable. We live and work curiously, we make efforts to go beyond the ordinary and we overcome our fears, in order to open the energy to new uses, technologies and people. We learn from our mistakes and from our successes. Innovation Trust We act in a skilled, honest and transparent way, in order to gain our colleagues, clients and stakeholders’ confidence, and we also value the individual differences. At the same time, we trust in their ability to create and share value. Proactivity We take care of our job in first person. We interpret permanently the scenarios and global challenges to anticipate changes, thus redefining our priorities when needed. MISSION w w a y s to more people Open energy ne w technologies O pen energy to O ffer p e o ple n e a n a g e e n er g y o m p e k t o m o r e s t a r g y O p e n e n e t o n e w a p p l i t o m n t h e C O a e h p y n o l d e r s i o n s t a c VISION Open Power to solve relevant global challenges VALUES Responsibility Each one of us is responsible for the success of the group, at every level. We place our energy at the service of people to improve their live and make them more sustainable. Innovation We live and work curiously, we make efforts to go beyond the ordinary and we overcome our fears, in order to open the energy to new uses, technologies and people. We learn from our mistakes and from our successes. Trust We act in a skilled, honest and transparent way, in order to gain our colleagues, clients and stakeholders’ confidence, and we also value the individual differences. At the same time, we trust in their ability to create and share value. Proactivity We take care of our job in first person. We interpret permanently the scenarios and global challenges to anticipate changes, thus redefining our priorities when needed. 11  Highlights 2016 JANUARY FEBRUARY MARCH Standard & Poor´s ratifies the BBB+ rating of Enel Generación Chile The risk rating agency Standard & Poor’s confirmed the “BBB+” with a stable outlook international rating of Enel Generación Chile on February 3rd, 2016. The Hydraulic Works Authority, the Maule Surveillance Board, and Enel Generación Chile reach an agreement to optimize the use of water for both irrigation and hydroelectric generation On January 4th, 2016, the Hydraulic Works Authority (DOH in its Spanish acronym), which reports to the Ministry of Public Works, and Enel Generación Chile, signed an agreement that offers flexibility to the operation of the Maule Lagoon reservoir, the La Invernada Lagoon, and the Maule River. It is supplementary to the agreement in force since 1947 and ensures the use of water for farming and electricity generation. Enel Generación Chile and Universidad de Concepcion signed an Agreement for the Reforestation of 700 hectares with native species This agreement is an environmental initiative that is among the responsibilities of the Company as part of the construction of the Ralco hydroelectric power plant located in the Alto Biobio district. It was formalized on January 20th, 2016 and leads to roughly 3 million 200 thousand trees to be planted within a four-year period. Enel Chile is created According to the decision adopted by the Extraordinary Shareholders Meeting held on December 18th, 2016, Enel Chile S.A. was incorporated on March 1st, 2016 as a privately held limited liability stock corporation which arises from the division of Enersis S.A. (currently Enel Américas S.A.). Also, as of March 1st, 2016, Enel Generación Chile and Enel Distribución Chile became subsidiaries of the new company Enel Chile S.A, which controls all generation and distribution assets located in Chile. Woman’s Energy Award celebrates ten years of existence Within the context of the International Women’s Day, Enel Chile and its subsidiaries Enel Generación Chile and Enel Distribución Chile acknowledged 13 outstanding women for their contribution to the social development of the country. Each one was awarded for her contribution to her particular field, such as art, music and lyrics, public service, environment, energy efficiency and sustainability, education, innovation and new ventures, public debate, community work, journalism, entertainment, social communication, and sports. Enel Generación Chile and Energas distribute natural gas to Coquimbo and La Serena Máximo Pacheco, the Secretary of Energy at the time, led the inauguration ceremony of the new LNG regasification satellite plant (PSR in its Spanish acronym) APRIL Enel Chile begins trading on the Santiago and the New York Stock Exchange. On April 21st, 2016, after registering Enel Chile in the securities’ registers, the Company’s shares began trading on the Chilean and the United States securities’ markets. Enel Chile was included in the IPSA Index and the Morgan Stanley Capital International Index Enel Chile was included in the IPSA of the Santiago Stock Exchange on April 21st, 2016. Its inclusion represents the market’s recognition of the Company’s solvency, considering that since the Company was created in March of 2016 and therefore was lacking trading history to support the decision. Consequently, the most relevant index of the Santiago Stock Exchange began to include 42 companies. Also, on April 22nd, the Morgan Stanley Capital International Index (MSCI) added Enel Chile to its index as Large Cap. of Enel Generación Chile. This plant allows natural gas and its many benefits for commercial and household users to become a reality in Coquimbo and La Serena. This plant responds to an agreement between Enel Generación Chile that owns the plant, and GasValpo – through Energas. It represents a new highly efficient energy alternative, environmentally friendly and at increasingly competitive prices. Fitch Ratings ratifies the AA rating of Enel Generación Chile On March 2nd, 2016, Fitch Rating ratified its “BBB+,” rating in the local and foreign currency of Enel Generación Chile and also its “AA (cl)” long-term local rating. Also, outlooks were upgraded to “Positive.” Enel Distribución Chile begins changing the traditional meters of 50 thousand customers replacing them with smart meters Maximo Pacheco, the Secretary of Mining at the time, and the Chief Executive Officer of Enel Distribución Chile, Andreas Gebhardt, presented the new smart metering system for the La Florida district. This innovative technology allows customers to manage their electricity consumption directly. The smart meter offers customers relevant information about the electricity use of their home enabling them to change habits in order to use electricity more efficiently. 12 Annual Report Enel Chile 2016 JUNE Enel Generación Chile sold its stake in GNL Quintero Enel Generación agreed to sign a sales contract to sell its 20% ownership share of GNL Quintero to Enagás Chile, a subsidiary wholly owned by the Spanish company Enagás. Enel Generación Chile decided to sell its interest in GNL Quintero because it was not strategically relevant to develop the electricity business nor the natural gas trading business of the Company. Financially, the transaction represented approximately US$ 139 million in net income for Enel Generación Chile. JULY Nicola Cotugno is appointed Chief Executive Officer of Enel Chile The Board of Directors of Enel Chile appointed Mr. Nicola Cotugno as Chief Executive Officer of the Company after the resignation of Mr. Luca D´Agnese and informed that the resignation would take effect on August 16th, 2016. From that date on Mr. Luca D´Agnese will continue as Chief Executive Officer of Enel Américas. Feller Rate confirms rating of Enel Generación Chile On July 8th, 2016. Feller Rate confirmed the domestic “AA” stable outlook rating on local bonds, shares, and trade bills. The Santiago Municipality and Enel Distribución Chile inaugurated the first electric bus in the country and will be free of charge for passengers in the downtown area of the city. The first 100% electric bus will cover the downtown area of the city free of charge for the residents, workers, students, tourists and others. The goal is to take them closer to their destinations in a sustainable and responsible way, and spending 70% less than in a similar fuel charged vehicle. Passengers will enjoy free Wi-Fi and cellular phone chargers in every seat. The bus has 250 kilometers autonomy. Its battery has nearly 15 years of useful life, it may be charged in 5 hours, and emits no pollutants. The full charge of the BYD K9 battery costs a bit more than 20 thousand Chilean pesos, and runs 1 km per kWh, therefore costs approximately 80 Chilean pesos per kilometer. Herman Chadwick was elected Chairman of the Board of Directors of Enel Chile On April 29th, 2016, the Board of Directors of Enel Chile appointed Mr. Herman Chadwick Piñera, formal head of Copsa, the infrastructure trade association, and former Chairman of the National Television Council, as Chairman of the Company. Mr. Giulo Fazio was appointed Vice Chairman. Fazio. The independent Directors Gerardo Jofré, Pablo Cabrera, and Fernán Gazmuri were appointed as members of the Directors’ Committee, and Mr. Gazmuri was appointed Chairman of the Committee. Enel Chile is rated “AA” by Feller Rate and Fitch Rating Feller Rate and Fitch Rating’ gave Enel Chile a local rating “AA” with a stable outlook. This rating was ratified in July. MAY Enel Chile signs and agreement with Anglo American Sur Enel Generación Chile signed a contract to supply electricity to all operations of Anglo American Sur (Los Bronces, El Soldado, and Chagres). The estimated consumption of these operations is 2 TWh per year and is one of the two largest industrial customers of the Central Interconnected System (SIC in its Spanish acronym). This agreement with Anglo American Sur has a ten-year term beginning in 2021 and represents a milestone regarding the Company’s relationship with the country’s nonregulated customers. Enel Generación Chile, Enap, and Metrogas sign an agreement to export gas to Argentina Within the context of the Energy Convention between Chile and Argentina which took place in early 2016, on May 12th, 2016, Enel Generación Chile, Enap, and Metrogas, signed an agreement to export gas to Argentina. The additional 3 million m3/day of gas were delivered from the central region of Chile between June 1st and August 31st. The volume exported by Metrogas, Enap and Enel represented 14%, 29% and 57% of the total volume considered by the Convention between both countries. Annual Report Enel Chile 2016 13 AUGUST Enel Generación Chile relinquish the water rights of five projects After carefully analyzing the profitability of the projects and the social and environmental impacts, the board of directors of Enel Generación Chile decided to relinquish the water rights related to hydroelectric projects Bardón; Chillán 1 and 2; Futaleufú; Puelo and Huechún. The total investment in these projects, which amounted to USD 52 million, was written-off in 2016. Enel Distribución Chile installs the first photovoltaic system at a public hospital in the city of Parral in Chile. The project is part of the Solar Public Roof Project of the Energy Agenda that focuses on installing photovoltaic systems on public building roofs. The investment of the project exceeded ch$ 57 million and will allow the hospital to save more than ch$ 5 million a year on electricity. Enel Chile is rated “BBB+” by Standard & Poor’s The risk rating agency Standard & Poor’s began the international rating of Enel Chile on July 22nd, 2016. The Company was rated “BBB+” with a stable outlook. Enel Distribución Chile was awarded the Photovoltaic project for the Antofagasta Region In October 2016, Enel Distribución Chile won the bid “Purchase and installation of photovoltaic systems for the Chilean Army’s Motorized Squad No1 in Calama, Antofagasta as part of the Solar Roof Program “. The building awarded to Enel Distribución Chile is located in Calama where a 100 kWh photovoltaic system will be installed. SEPTEMBER The Minister of Energy at the time, Maximo Pacheco informs on construction progress of the Los Cóndores hydroelectric project The power plant will allow supplying nearly 150 MW to the Central Interconnected System (SIC In its Spanish acronym). One of the highlights of this project is its underground cabling, having practically no infrastructure at sight, and consequently causing a minimum environmental impact. The land on the surface will return to its original state once the power plant begins operations towards the end of 2018. Bike Santiago and Enel Distribución Chile began a new era in bike sharing in the Lo Barnechea district with the electric e-bike. The new electric e-bike was primarily conceived as a bike for steep terrain. It is equipped with a 250 KW/hr. electric motor with a sensor that determines when the bike rider needs “help” pedaling to reach a maximum speed of 25 km/hr. The bike has 100 kilometers autonomy and it takes 4 hours to charge the battery. OCTOBER Shareholders’ Meetings approve changing the Companies’ names The Shareholders’ Meetings of Enersis Chile, Endesa Chile and Chilectra on October 4th, 2016, approved changing the names of the three companies to Enel Chile, Enel Generación Chile, and Enel Distribución Chile, respectively. The decision responds to the new strategy of the Group consisting in getting ahead of the new worldwide energy industry scenario. Enel Distribución begins testing social network self- service By using hashtag #luz in Twitter when facing an electricity emergency, the customers of Enel Distribución located in the Metropolitan Region of Chile receive a quicker response from the Company. This service responds to the new instant messaging self-service platform named “Chattigo.” Chattigo was one of the three startups selected in 2015 by the “Energy Start” program of Enel Distribución. 14 Annual Report Enel Chile 2016 Enel Distribución Chile releases its new image on its electricity bill On December 1st, 2016, Enel Distribución Chile presented its new electricity bill to its 1.8 million customers, including residential, commercial and industrial customers located within the Company concession area comprised by 33 districts of the Metropolitan Region DECEMBER Enel Generación Chile and Taltal power plant rebuild their relationship with the territory Eight social institutions, Paposo community representatives, and Enel Generación Chile signed a Memorandum of Understanding representing a new phase in the relationship between the Company and the neighbors of the Taltal power plant. The MOU was suggested by the Ministry of Energy as part of the approval process of the Taltal power plant’s optimization project. It enables opening a work environment to deal with community and company concerns. Moody´s confirms rating of Enel Generación Chile The risk rating agency Moody’s Rating Services ratified the Baa2 corporate rating of Enel Generación Chile and with a stable outlook. NOVEMBER Enersis Chile begins to trade as Enel Chile On November 7th, 2016, the shares of Enel Chile S.A. began to trade under the new stock market ticker ENELCHILE. Vreni Häussermann, director of the Huinay Scientific Center, receives the Rolex Award for Enterprise 2016 for exploring Chilean Patagonia Waters On November 16th, 2016, the Rolex Awards for Enterprise acknowledged Vreni Häussermann, the Director of the Huinay Scientific Center owned by Enel Generación Chile and the Pontificia Universidad Católica de Valparaíso. The center is fully financed by Enel, and its purpose is to discover, explore and protect the Chilean Patagonia Fiords through a marine investigation program. The goal of the program is the sustainable use and preservation of the fiords. Thanks to this award, Vreni Häussermann will be able to continue exploring the sea using a submersible that can reach 500 meters deep underwater. Until now her investigations could not go deeper than 30 meters. Enel Distribución Chile completed the installation of 50 thousand smart meters On November 28th, 2016, Enel Distribución completed the first phase of the smart meter replacement plan for residential customers in the Metropolitan Region. As a result, Enel Chile becomes the first company, domestically, to install new technology that will: allow remote reading; generate a two-way communication mechanism between the company and its customers; promote self-generation of electricity by using photovoltaic panels enabling customers to consume the energy generated or feed it to the distribution network. Enel Chile presents its new corporate image On November 30th, 2016, the new corporate image of Enel Chile was presented at the Company’s headquarters located at 76 Santa Rosa Ave. The employees of the Company and important authorities from both public and private sectors attended the event. The Chief Executive Officer of the Company Nicola Cotugno said, “We strive to be a company that is more and more transparent, flexible, dynamic and collaborative.” Annual Report Enel Chile 2016 15 Main Financial and Operating Data Annual Report Enel Chile 2016 17 18 Annual Report Enel Chile 2016 Total Assets Total Liabilities Operating Revenue Ebitda Net Income (2) Current Ratio Debt Ratio (3) Generation Business Number of employees Number of Generation units Installed capacity (MW) Electricity generated (GWh) Energy sales (GWh) Distribution Business Energy sales (GWh) (4) Number of customers Energy losses Number of employees Customers/Employees As of December 31st of each year (figures in millions of Chilean pesos)(1) 2010 2011 2012 2013 2014 2015 2016 (5) 5,398,711 1,935,717 2,136,041 627,547 317,561 1.13 0.56 As of December 31st of each year 2010 107 5,611 20,914 21,847 2011 1,155 107 5,611 20,722 22,070 2012 1,141 105 5,571 19,194 20,878 2013 1141 105 5,571 19,432 20,406 2014 1261 111 6,351 18,063 21,157 2015 995 111 6,351 18,294 23,558 2016 15,924 111 6,351 17,564 23,689 As of December 31st of each year 2010 13,098 1,609,652 5.80% 719 2,239 2011 13,697 1,637,977 5.50% 712 2,301 2012 14,445 1,658,637 5.40% 734 2,260 2013 15,152 1,693,947 5.30% 745 2,274 2014 15,690 1,737,322 5.32% 690 2,518 2015 15,893 1,780,780 5.31% 686 2,596 2016 15,924 1,825,519 5.33% 688 2,653 (1) Accounting figures as determined by the instructions and regulations issued by the SVS. (2) Net earnings attributable to the controlling shareholder. (3) Total Liabilities/Equity plus Minority Interest. (4) Due to changes in the criteria, non-billable consumption (CNF in Spanish acronym) is not included in 2014 and 2015. (5) Only ten months since its creation (March 1st, 2016). Annual Report Enel Chile 2016 19 20 Annual Report Enel Chile 2016 Identification of the Company and Documents of Incorporation Annual Report Enel Chile 2016 21 21  Identification of the Company Name Address Company Type Taxpayer ID No Address Zip Code Telephone No P.O. Box Securities Registration No External Auditors Subscribed and paid-in capital (M$) Website Email Investor Relations Telephone Ticker in Chilean stock exchanges Ticker in New York stock exchange Custodial Bank ADR’s Depositary Bank ADR’s Domestic Risk Rating Agency International Risk Rating Agency Enel Chile S.A. Santiago, Chile, although able to establish branches or agencies in other parts of the country or abroad Publicly held Limited Liability Stock Company 76,536,353-5 76 Santa Rosa Ave., Santiago, Chile 833-0099 SANTIAGO (56) 2353 4400 – (56-2) 2378 4400 1557, Santiago 1,139 Ernst & Young 2,229,108,975 www.enelchile.cl comunicacion.enelchile@enel.com (56-2) 2353 4682 ENELCHILE ENIC Banco Santander Chile Citibank N.A. Feller Rate and Fitch Chile Clasiifcadora de Riesgos Limitada Standard & Poor´s 22 Annual Report Enel Chile 2016  Documents of Incorporation Enel Chile S.A., formerly named “Enersis Chile S.A.”, was created as a consequence of the corporate reorganization that began in April 2015. Enersis S.A. controlled the generation, transmission and distribution business in Chile and four other countries in the region (Argentina, Brazil, Colombia, and Peru). The Extraordinary Shareholders’ Meeting of Enersis S.A. held on December 18th, 2015, approved the first phase of the reorganization plan named “the Division,” which created Enersis Chile S.A. as the only vehicle to control the Group’s generation and distribution assets in Chile. Enersis S.A became Enersis Americas S.A., the vehicle to control all assets of the businesses in other countries in the region. The Division was recorded in a public deed issued on January 8th, 2016 by the Santiago Notary Public, Mr. Ivan Torrealba Acevedo, and its extract was registered in the Commercial Register (Registro de Comercio del Conservador de Bienes Raíces y Comercio de Santiago) on pages 4,288 No 2,570 of the year 2016 and published in the Official Gazette on January 20th, 2016. Later, on October 4th, 2016, the shareholders of Enersis Chile S.A. approved changing the name of the Company to “Enel Chile S.A.” This agreement was recorded in a public deed on October 18th, 2016 by the Santiago Notary Public, Mr. Ivan Torrealba Acevedo. Its extract was registered in the Commercial Register (Registro de Comercio del Conservador de Bienes Raíces y Comercio de Santiago) on pages 79,330 No 42,809 of the year 2016 and published in the Official Gazette on October 28th, 2016. Annual Report Enel Chile 2016 23  Corporate Purpose The corporate purpose of the company appears in the statutory modification approved by the Extraordinary Shareholders Meeting held on October 4th, 2016. It was recorded in a public deed on October 18th, 2016 granted by the Santiago Notary Public Mr. Iván Torrealba Acevedo, and its extract was registered on pages 79,330 N° 42,809 of the Commercial Register in 2016 and published in the Official Gazette on October 28th, 2016. The Company’s purpose is to perform the exploration, development, operation, generation, distribution, transmission, transformation and sales of energy in any of its forms and nature, directly or through intermediate companies, and also telecommunications activities and the provision of engineering consulting services within the country and abroad. It may also invest and manage its subsidiaries and associate companies, whether generators, transmitters, distributors or traders of electricity or whose business is any of the following: (i) energy, in any of its forms or nature, (ii) the supply of public utilities or whose main raw material is energy, (iii) telecommunications and information technology, and (iv) trading over internet. In complying with its main objects, the company will carry out the following functions: a) Promote, organize, build, modify, dissolve or liquidate companies of any nature which have similar corporate objects to its own. b) Propose investment, financing and business policies to subsidiary companies, as well as accounting criteria and systems that these should follow. c) Supervise subsidiary management 24 Annual Report Enel Chile 2016 d) Provide subsidiary or associate companies with the necessary financing for their business development and provide management services; financial, technical, legal and auditing advice; and in general any service that appears necessary for their best performance. In addition to its main purpose and always acting within limits established by the Investment and Financing Policy approved by the Shareholders Meeting, the Company may invest in: First, the acquisition, operation, construction, rental, administration, intermediation, trading, and disposal of all kinds of movable and immovable assets, either directly or through subsidiaries or associate companies. Second, all kinds of financial assets, including shares, bonds and debentures, commercial paper and in general all kinds of titles or securities and company contributions, either directly or through subsidiaries or affiliate companies. Annual Report Enel Chile 2016 25 Ownership and Control Annual Report Enel Chile 2016 27 27  Ownership Structure The total share capital of the Company was divided into 49,092,772,762 shares of a single series with no par value. As of December 31st, 2016, all shares were subscribed and paid, and ownership distributed as follows: Shareholders Enel Latinoamérica S.A. Enel Iberoamérica S.R.L. Chilean Pension Funds Citibank N.A.(per SVS Letter 1,375) Foreign investment funds Banco de Chile on behalf of third parties Stockbrokers, insurance companies & mutual funds Others Total Shares Number of shares 19,794,583,473 9,967,630,058 5,854,145,757 3,818,628,500 3,339,410,693 2,689,380,833 2,517,961,498 1,111,031,950 49,092,772,762 Shareholding 40.32% 20.30% 11.92% 7.78% 6.80% 5.48% 5.13% 2.26% 100.00% 28 Annual Report Enel Chile 2016  Identification of the Controlling Shareholder As defined by Title XV of Law No 18,045, Enel Chile S.A. is controlled by Enel S.p.A., an Italian company, through the Spanish company Enel Iberoamérica S.R.L, with 60.62% of the shares issued by Enel Chile S.A. On December 19th, 2016, Enel Latinoamérica, S.A. and Enel Iberoamérica, S.R.L. agreed to merge by the latter absorbing the first and therefore dissolving Enel Latinoamérica, S.A., and Enel Iberoamérica, S.R.L. becoming the surviving entity with all legal rights, obligations, and third party relationships. On December 20th, 2016 the agreement was formalized and recorded in a public deed granted by the Madrid Notary, Mr. Andrés Domínguez Nafría. The merger was registered in the Commercial Register of Madrid and the Company’s Shareholder Registry on January 13th, 2017, although the registration was retroactively effective as of the date of its presentation, which took place on December 21st, 2016. Enel S.p.A controls 100% of Enel Iberoamérica. Annual Report Enel Chile 2016 29  Shareholders of Enel S.p.A. as of December 31st, 2016 Ministero dell’Economia e delle Finanze de Italia Institutional Investors Retail Shareholders Total 23.6% 54.0% 22.4% 100.0% Source: https://www,enel,com/en-gb/investors/shareholders The shareholders of the controlling entity do not have a shareholders agreement. The Company’s Twelve Major Shareholders As of December 31st, 2016, Enel Chile S.A. was owned by 6,639 shareholders. The twelve shareholders with the largest stake are the following:: Name Enel Latinoamérica S.A. Enel Iberoamérica S.R.L. Citibank N.A. per SVS Letter 1,375 Banco de Chile on behalf of non-resident third parties Banco Itaú on behalf of Foreign Investors Banco Santander on behalf of Foreign Investors AFP Provida S.A. Pension Fund C AFP Hábitat S A Pension Fund C AFP Capital S A Pension Fund C AFP Cuprum S A Pension Fund C AFP Provida S.A. Pension Fund B AFP Cuprum S A Pension Fund A Subtotal 12 shareholders Other 6,627 shareholders TOTAL 6,639 SHAREHOLDERS Taxpayer ID 59,072,610-9 59,206,250-K 59,135,290-3 97,004,000-5 97,023,000-9 97,036,000-K 76,265,736-8 98,000,100-8 98,000,000-1 76,240,079-0 76,265,736-8 76,240,079-0 Number of Shares Shareholding 19,794,583,473 9,967,630,058 3,818,628,500 2,689,380,833 1,953,577,727 1,298,404,727 1,013,706,040 730,932,853 653,921,137 587,712,159 346,537,072 324,269,504 40.32% 20.30% 7.78% 5.48% 3.98% 2.64% 2.06% 1.49% 1.33% 1.20% 0.71% 0.66% 43,179,284,083 5,913,488,679 87.95% 12.05% 49,092,772,762 100.00% Most Important Changes in Ownership Share There were no changes in Enel Chile’s ownership during 2016 because the Company did not exist on December 31st, 2015. 30 Annual Report Enel Chile 2016  Stock Market Transactions among Related Parties during 2016 There were no transactions among related parties during 2016. Summary of Comments and Proposals by the Directors Committee and Shareholders Enel Chile received no comments regarding the progress of corporate businesses between March 1st and December 31st, 2016, from the Directors’ Committee or shareholders that own or represent 10% or more of the shares issued with voting rights, in accordance with the provisions of Article 74 of Law No 18,046 and Articles 136 of the Rules and Regulations to the Chilean Companies Law. Annual Report Enel Chile 2016 31 32 Annual Report Enel Chile 2016 Management Annual Report Enel Chile 2016 33 1 5 2 6 3 7 4 Board of Directors 1. CHAIRMAN Herman Chadwick Piñera Lawyer Pontificia Universidad Católica de Chile Taxpayer ID: 4.975.992-4 Since 06.30.2015 2. VICE CHAIRMAN Giulio Fazio Lawyer Universidad de los Estudios de Palermo Passport: YA 4656507 Since 04.28.2016 3. DIRECTOR Salvatore Bernabei Industrial Engineer Università degli Studi di Roma “Tor Vergata” Master’s Degree in Business Administration Politécnica di Milano Taxpayer ID: 24.220.743-2 Since 04.28.2016 4. DIRECTOR Pablo Cabrera Gaete Lawyer and Diplomat Pontificia Universidad Católica de Chile and Academia Diplomática Andrés Bello Taxpayer ID: 4.774.797-K Since 04.28.2016 5. DIRECTOR Vincenzo Ranieri Bachelor in Business Administration Universidad de LUISS in Italy Passport: YA 7616919 Since 04.28.2016 6. DIRECTOR Gerardo Jofré Miranda Commercial Engineer Pontificia Universidad Católica de Chile Taxpayer ID: 5.672.444-3 Since 04.28.2016 7. DIRECTOR Fernán Gazmuri Plaza Commercial Engineer Pontificia Universidad Católica de Chile Taxpayer ID: 4.461.192-9 Since 04.28.2016 34 Annual Report Enel Chile 2016  Board of Directors’ Compensation and Directors’ Committee Under Article 33 of Law No 18,046 the Chilean Companies The compensation of the Directors’ Committee consists of a Act, the Ordinary Shareholders’ Meeting held on April 28th, variable amount equal to 0.11765 thousandths of the annual 2016 approved the compensation of the Board of Directors net profit. Any advance payment is equal to one monthly and Directors’ Committee for 2016. compensation. A part of such monthly compensation is unconditional, and another part is conditional. Advances are The compensation of the Board of Directors consists of a deducted from the yearly variable compensation. variable annual amount equal to 0.001 thousandths of the annual net profit. Any advance payment is equal to one The total compensation expense during 2016 amounted to monthly compensation. A part of such monthly compensation $441,917,998 and it is detailed in the following table. The is unconditional, and another part is conditional. Advances Board of Directors did not have additional expenses for are deducted from the yearly variable compensation. consulting services. Annual Report Enel Chile 2016 35 Variable Compensation TOTAL 2016 - 129,577,699 - - - - - - - - - 106,113,433 106,113,433 106,113,433 441,917,998 2016 Figures in $ Board Member Name Position Fixed Compensation Ordinary and Extraordinary Herman Chadwick Piñera Chairman 84,744,306 44,833,393 Giulio Fazio (1) Vice Chairman Salvatore Bernabei (1) Vincenzo Ranieri (1) Pablo Cabrera Gaete Juan Gerardo Jofré Miranda Director Director Director Director Committee’s Fixed Compensation Directors Committee Ordinary and Extraordinary Sessions - - - - - - - - - - - - - - 51,643,865 29,219,885 17,214,472 8,035,211 51,643,865 29,219,885 17,214,472 8,035,211 Fernán Gazmuri Plaza Director 51,643,865 29,219,885 17,214,472 8,035,211 Total 239,675,900 132,493,048 51,643,417 24,105,633 (1) The Director waived his compensation for being an executive of the Enel SpA Group Incentive Plan Director’s compensation for 2016 did not include an incentive plan. Board of Directors’ consulting expenses The Board of Directors did not spend on consulting services in 2016. 36 Annual Report Enel Chile 2016  Social responsibility and sustainable development Ownership in Enel Chile S.A. As of December 31st, 2016, according to the shareholder’s registry, none of the Directors in office had an ownership share of the Company. Diversity in the Board of Directors Number of people by gender: Female Male Total Number of people by nationality: Chilean Italian Total Number of people by age group: Between 41 and 50 years Between 51 and 60 years Between 61 and 70 years More than 70 Total Number of people by years of service: Less than 3 years More than 12 years Total 0 7 7 4 3 7 3 0 2 2 7 6 1 7 Annual Report Enel Chile 2016 37  Directors’ Committee Enel Chile S.A., formerly named “Enersis Chile S.A.”, was created as a consequence of the Division of Enersis S.A. Directors’ Committee Annual Report approved by the Extraordinary Board Meeting of the The Directors’ Committee of the Company held fourteen company held on December 18th, 2015. On February 29th, sessions during 2017, fully complying with Article 50 bis of 2016, the Board of Directors appointed the members to the Chilean Companies Act Law No 18,046 and additional the Company’s first Directors’ Committee. The Directors applicable regulation. appointed to compose the Directors’ Committee were Pablo Cabrera Gaete, Gerardo Jofré Miranda, and Fernán Gazmuri During 2016, the Directors’ Committee addressed the Plaza. On February 29th, 2016, the Board of Directors, after matters that are summarized below: the Ordinary Shareholders Meeting held on April 28th, 2016 that appointed the members to the Board of Directors, designated the same gentlemen Cabrera Gaete, Jofré Miranda and Gazmuri Plaza as members to the Directors’ Committee. Mr. Fernán Gazmuri Plaza was appointed Chairman of the Directors’ Committee during the ordinary session of the Directors’ Committee held on February 29th, 2016 and Mr. Domingo Valdés Prieto was appointed Secretary to the Directors’ Committee during the session of the Directors’ Committee held on April 29th, 2016. 38 Annual Report Enel Chile 2016 1.- PRESENTATION OF DIRECTORS’ COMMITTEE AND ETHICS CHANNEL POLICIES: On February 29th, 2016, 3.- EXTRAORDINARY SESSION SUMMON PROCEDURE During the ordinary session held on February 29th, 2016, the Directors’ Committee, unanimously agreed (i) to the Directors’ Committee unanimously agreed that the take note of the functions of the Directors’ Committee Directors’ Committee extraordinary session summon be determined by the Board of Directors during the session carried out by an electronic mail sent by the Chairman or the held that same day and assume responsibility for such Secretary of the Directors’ Committee or their delegates and functions immediately (ii) to approve policies regarding a telephone call to each committee member. This summon employment of former members of the external auditing must be performed at least 24 hours in advance. firm according to the terms pointed out by the Chairman of the Directors’ Committee and (iii) to approve the Ethics Channel Rules and its immediate implementation. 2.- DIRECTORS’ COMMITTEE BUDGET : On February 4.- ELECTRONIC DELIVERY: During the ordinary session held on February 29th, 2016, the Directors’ Committee unanimously agreed to authorize the electronic delivery project to summon the members of the Committee and that 29th, 2016, the Directors’ Committee, unanimously all measures be taken to implement the project correctly. agreed to approve the Directors’ Committee 2016 Budget amounting to 10,000 Unidades de Fomento 5.- ELECTRONIC PARTICIPATION IN DIRECTORS’ (Chilean inflation-indexed, Chilean peso-denominated COMMITTEE SESSIONS: During the ordinary session monetary unit) for the Committee and its consultants’ held on February 29th, 2016, the Directors’ Committee expenses and operations. The members of the Directors’ unanimously agreed to approve communicating electronically Committee also unanimously decided to submit this 2016 with Committee members that are not physically present Directors’ Committee Budget proposal to the approval of in the meeting room. Members may participate in the the Board of Directors so that, if approved, they submit it Directors’ Committee session via Conference call or video to the Ordinary Shareholders Meeting for final approval. conference as long as the electronic communication allows all the members, those physically present and those not physically present, to be simultaneously and permanently in communication during the session. 6. RATIFICATION OF DIRECTORS’ COMMITTEE LEGAL ACTIONS: During the ordinary session held on March 22nd, 2016, the Directors’ Committee unanimously agreed to: 6.1. Take note of the Clarification Deed signed by Enersis Américas S.A., currently Enel Américas S.A, on March 21st, 2016 at the Santiago Notary Public Mr. Roberto Antonio Cifuentes Allel. The deed refers to the division of Enersis S.A., today Enel Américas S.A., formerly named Enersis Américas S.A. as the divided company and the legal incorporation of Enersis Chile S.A., today Enel Chile S.A., as the new company created from the division as of March 1st, 2016. Annual Report Enel Chile 2016 39 6.2 Take the above into consideration, and take note that firm according to the terms pointed out by the Chairman during the formation stage of the Company that took of the Directors’ Committee and (iii) approve the Ethics place before such date, the Directors’ Committee Channel Rules and its immediate implementation; reached several agreements to advance in making the new company operational. These agreements are c. Directors’ Committee Budget. Agreement No 3/2016; identified in the minute of the Directors’ Committee ordinary session number 1/2016 held on February 29th, d. Financial Statements of the Company to be submitted 2016. The Committee agrees that the minute was to the Superintendence of Securities and Insurance. completely reproduced in the present session and is Agreement No 4/2016; therefore included in the minute of the present session. Furthermore, the Committee states that the following e. Financial Statements (20-F) of the Company to be agreements are approved: submitted to the SEC and the NYSE. Agreement No a. Appointment of the Chairman and Secretary of the 5/2016; Directors’ Committee. Agreement No1/2016; f. Evaluation of the services to be provided by External Auditor. Agreement No 6/2016; b. Presentation of the Directors’ Committee and the Ethics Channel Policies. Agreement No 2/2016. This agreement g. Proposal of Private Risk Rating Agencies. Agreement No resolved to: (i) take note of the responsibilities delegated 7/2016; by the Board of Directors; (ii) approve the policies regarding employment of former members of the external auditing h. Service contracts between the Company and Enersis Americas, Enel Americas S.A. today. Agreement No 8/2016; i. Service contracts to be provided by Enersis Americas S.A., Endesa Americas S.A., and Chilectra Americas S.A. The last two companies have merged with Enel Americas S.A. Agreement No9/2016; j. Extraordinary sessions summon procedure. Agreement No 11/2016; k. 2016 Ordinary sessions’ calendar. Agreement No 12/2016; l. Electronic delivery. Agreement No 13/2016; m. Participation by using electronic means of communication. Agreement No 14/2016. 40 Annual Report Enel Chile 2016 6.3 As stated previously, certain actions performed by 7. CALENDAR OF THE DIRECTORS’ COMMITTEE’S the Company during its incorporation stage are all MAIN ACTIVITIES IN 2016: In the session held on known by the Directors’ Committee and are efficient April 29th, 2016, the Directors’ Committee, unanimously, regarding improving the operations and development agreed to take note of the presentation covering the main of the Company’s activities. The main objective of these subjects the Committee should examine and the time actions has been the organization of the Company frame within 2016 to perform the examinations. and also comply with the agreements adopted by the Extraordinary Shareholders Agreement of Enersis S.A. 8. FINANCIAL STATEMENTS: The financial statements held on December 18th, 2015, in which the Division was of the Company and its shares, to be submitted to the agreed. SVS, were analyzed during the session held February 29th, 2016. The Combined Financial Statements as of 6.4 Consider convenient for the Company and its December 31st, 2015, including relevant supplementary Shareholders that each action carried out its effects be information, and the respective audit report performed by fully undertaken by the company. the firm Ernst & Young were unanimously approved. The Directors’ Committee also recommended that the Board 6.5 Approve, ratify, confirm, convert, validate, and undertake of Directors approve such financial statements. every action previously referred to without exception, having reproduced every agreement, one by one, in the - During the same session held on February 29th, 2016, the same terms recorded in its respective minute, including Company’s financial statements to be submitted to the the actions carried out by Company delegates. SEC and the NYSE as the “Registration Statement” were analyzed. The Directors’ Committee unanimously agreed to declare the Financial Statements prepared according to the NIIF standards included in the Regsistration Statement as examined and therefore eligible to be submitted to the Security Exchange Commission of the United States of America (SEC) to comply with the rules and regulations of such Authority related to the securities issued in the United States. - In the extraordinary session held on May 6th, 2016, the Directors’ Committee declared having reviewed the Consolidated Financial Statements of the Company as of March 31st, 2016, its Notes, Income Statement and Significant Events. - In the ordinary session held on July 27th, 2016, the Directors’ Committee declared having examined the Consolidated Financial Statements of the Company as of June 30th, 2016, its Notes, Management’s Perfomance Analysis, Income Statement and Significant Events and also the external auditor’s opinion dated July 27th, 2016, and signed by Mr. Emiliano Ramos Colmenar, partner of Ernst & Young, which states that the financial statements of the Company are free from material misstatement. Annual Report Enel Chile 2016 41 - In the extraordinary session held November 3rd, 2016, 11. EXAMINATION OF INTERCOMPANY CONTRACTS the Directors’ Committee declared having examined the - During the session held on February 29th, 2016, the Consolidated Financial Statements of the Company as of Directors’ Committee agreed to declare having examined September 30th, 2016, its Notes, Income Statement and the service contract between Enersis Americas S.A., Enel Significant Events and agreed to recommend that they be Americas S.A. today, and Enersis Chile S.A., Enel Chile approved by the Board of Directors. S.A. today, in which Enersis Americas S.A. received the service and Enersis Chile S.A. rendered the service. The - In every case, the agreements were adopted unanimously, Committee also declares that the transaction contributed by all members of the Directors’ Committee. to the best interest of the Company and that prices, terms, and conditions of the contract were at arm’s length at 9. FORM 20-F FILING TO THE SEC IN THE UNITED the time of its approval according to the report prepared STATES OD AMERICA: In the ordinary session held on by PricewaterhouseCoopers, and presented during the April 29th, 2016, the Directors’ Committee declared having session. Endesa Americas S.A. and Chilectra Americas reviewed the Form 20-F and the Consolidated Financial S.A. at the time, currently merged into Enel Americas S.A., Statements of the Company included in the Form, to also received the contracted service. be submitted to the SEC to comply with the rules and regulations of such Authority related to the securities - During the same ordinary session held on February 29th, issued in the United States. 2016, the Directors’ Committee declared having examined the service contract between Enersis Americas S.A., Enel 10. EXAMINATION OF SERVICES TO BE PROVIDED BY Americas S.A. today, and Enersis Chile S.A., Enel Chile EXTERNAL AUDITORS: The services to be rendered by S.A. today, in which Enersis Americas S.A. rendered the the external auditors, different from the external audit and service and Enersis Chile S.A. received the service. The non-recurring audit services, were analyzed during ordinary Committee also declares that the transaction contributed sessions held on February 29th, March 22nd, August 30th, to the best interest of the Company and that prices, terms, September 27th, and December 16th, all in 2016, and during and conditions of the contract were at arm’s length at the extraordinary session held May 6th, 2016. The Committee the time of its approval according to the report prepared agreed to declare that the services do not compromise the by PricewaterhouseCoopers, and presented during the auditing company’s technical proficiency nor independence session. as required by Section 202 of the Sarbanes-Oxley Act and by Article 242 last paragraph of Law No 18,045, the Securities - During the session held on September 27th, 2016, the Market Law and by the Directors’ Committee Rules. Directors’ Committee declared having examined the service contract between Enersis Chile S.A., Enel Chile These agreements were adopted unanimously. S.A. today, and Enel Green Power Chile Limitada, in which 42 Enel Green Power Chile Limitada received the service. The Annual Report Enel Chile 2016 Committee also declares that the transaction contributed - During the session held on June 30th, 2016, the Directors’ to the best interest of Enersis Chile S.A., Enel Chile today, Committee unanimously agreed to request the Chief and that prices, terms, and conditions of the contract Financial Officer to hire the External Auditors to review were at arm’s length at the time of its approval according the transactions among related parties, lawsuit provisions to the report prepared by PricewaterhouseCoopers, and and the status of derivatives every six months. They also presented during the session. agreed to perform a historical analysis of related party - During the session held on October 27th, 2016, the Directors’ nature, amount, and parties involved in such transactions. transactions for the Committee to form an opinion on the Committee declared having examined the service contract between Enersis Chile S.A., Enel Chile S.A. today, and its 12. PROPOSED RISK RATING AGENCIES subsidiary Endesa Chile S.A., Enel Generación Chile S.A. - During the session held on February 29th, 2016, the Directors’ today, in which Endesa Chile S.A. received the service. The Committee unanimously agreed to recommend to the Committee also declares that the transaction contributed Board of Directors to propose Feller Rate Clasificadora de to the best interest of Enersis Chile S.A., Enel Chile today, Riesgo Limitada and Fitch Chile Clasificadora de Riesgo and that prices, terms, and conditions of the contract were Limitada to the Shareholders Meeting as the local risk at arm’s length at the time of its approval. rating agencies and Fitch Ratings, Moody’s Investors Service and Standard & Poors International Rating Services - During the session held on March 22nd, 2016, the Directors’ as the international risk rating agencies. Committee unanimously agreed to take note of the Chief Financial Officer’s, Mr. Raffaele Grandi presentation on the intercompany contracts costs informed in the previous session. Annual Report Enel Chile 2016 43 13. PROPOSED EXTERNAL AUDITING FIRMS 14. APPROVAL OF EXTERNAL AUDITING CONTRACTS During the session held on March 22nd, 2016, the Directors’ - During the session held on March 22nd, 2016, the Directors’ Committee unanimously agreed to propose to the Board of Committee unanimously agreed to declare the contract Directors to propose to the Ordinary Shareholders Meeting or letter of intent between Enersis Chile S.A., Enel Chile the following order of precedence in appointing the external S.A. today, and external auditors Ernst & Young to have auditing firm for Enersis Chile S.A., Enel Chile S.A. today, for been examined and approved. Ernst & Young has been 2016. First E&Y, second PKF, third RSM and fourth KPMG. contracted to perform auditing reports regarding the new The fundamentals considered relevant to this proposal are Enersis Chile S.A., Enel Chile S.A. today, as of December that E&Y (i) presented the most competitive offer, based on 31st, 2015. At that time, the Financial Statements of the technical and economic evaluation of the offers received; the Company and its subsidiaries included the assets (ii) has high-quality resources and extensive experience in and liabilities of Chilean operations of Enersis S.A. as a the electricity sector; (iii) is one of the four most important consequence of the Division of Enersis S.A. auditing firms both domestically and internationally and (iv) is the auditing firm with greatest synergies with Enersis - During the session held on May 30th, 2016, the Directors’ Chile S.A., Enel Chile S.A. today, because the parent and Committee unanimously agreed to declare the contract or controlling entities of the Company also have E&Y as their letter of intent between Enersis Chile S.A., Enel Chile S.A. main auditing firm. today, and the external auditors Ernst & Young as External Auditors appointed by the Ordinary Shareholder Meeting held April 28th, 2016, to have been examined and approved. 44 Annual Report Enel Chile 2016 15. ANALISIS OF ETHICAL CHANNEL COMPLAINTS 18. RISKS - During the extraordinary session held on July 29th, 2016, During the ordinary session held on March 22nd, 2016, the Directors’ Committee gave its opinion on each of the the Directors’ Committee unanimously agreed to take complaints received, offering guidelines as to how to note of the Chief Financial Officer’s, Mr. Raffaele Grandi proceed with each complaint and confirming what had presentation on the Company’s methodology to manage been already resolved by the Committee. In this regard, asset impairment risk. They also agreed that the Chief the Chairman of the Directors’ Committee is to summon Financial Officer is to inform the Directors’ Committee on an extraordinary session if he considers it to be necessary the methodology applied in every period’s closing and that to resolve a certain complaint. in a future session he is to deepen the explanation of the financial methodology. 16. PRESENTATION OF INSURANCE POLICIES FOR DIRECTORS AND SENIOR EXECUTIVE - During the session held on May 30th, 2016, the Directors’ - During the ordinary session held on March 22nd, 2016, Committee unanimously agreed to declare the Company’s the Directors’ Committee noted the presentation on the Risk Matrix as examined from the business and internal insurance policies for the Company’s directors and senior auditing perspective. executives. 17. INTERNAL CONTROL SELF-EVALUATION Committee unanimously took note of the presentation - During the session held on July 29th, 2016, the Directors’ on the Group’s policies regarding (i) risk management; Committee unanimously agreed to declare having (ii) financial derivatives; and (iii) expense capitalization, in - During the session held on June 30th, 2016, the Directors’ examined the Internal Control self-evaluation methods Chile. and procedures and the Internal Control Independent Monitoring Assessment. Annual Report Enel Chile 2016 45 - During the session held on August 30th, 2016, the 19. ANALYSIS OF EMPLOYEES’, MANAGERS’ AND Directors’ Committee unanimously agreed to approve the SENIOR EXECUTIVES’ COMPENSATION PLAN Material Risk Analysis Schedule presented by the Chief - During the session held on August 30th, 2016, the Directors’ Financial Officer adding the subjects proposed by the Committee unanimously declared having analyzed the Directors. The Directors’ Committee also agreed to declare compensation system and plans for employees, managers, having analyzed the risks related to a potential change to and senior executives of the Company. the Agreement, which would be discussed again as it progresses, as requested by the Chief Executive Officer. 20. VARIOUS OTHER MATTERS - During the session held on September 27th, 2016, the - During the session held on June 30th, 2016, the Director, Directors’ Committee agreed to declare having analyzed Mr. Gerardo Jofré Miranda informed that he had recently risks related to the Company’s Purchasing Process. received the interests’ statement that is requested from Directors. He requested that the Compliance Department - During the session held on October 27th, 2016, the be proactive by periodically sending the Directors and Directors’ Committee agreed to declare having analyzed senior managers their respective interests’ statement as a the risk related to a potential Natural Disaster that could reminder to update it if necessary or to confirm amounts. exceed the Insurance Coverage Limit, which would be The Chairman of the Directors’ Committee Mr. Fernán discussed again as it progresses, as requested by the Gazmuri Plaza agreed with the idea, indicating that sending Chief Executive Officer. This matter will be included in the the statement to the Directors once a year would be calendar of material risks to be analyzed by the Directors’ enough to remind them. Committee during the following months. 46 Annual Report Enel Chile 2016 - During the session held July 27th, 2016, the Director, Mr. Mr. Gerardo Jofré also expressed his interest in analyzing Gerardo Jofré Miranda expressed the need to analyze how the General Norm N° 385 issued by the Superintendence the Committee dealt with Transactions among Related of Securities and Insurance in detail make a proposal on the Parties. He requested that Mr. Domingo Valdés Prieto, matter to the Company’s Board of Directors. The Director General Counsel of the Company, make a presentation Mr. Pablo Cabrera stated that it was very important that the on the respective legislation. The Committee resolved to proposal be presented by the Chief Executive Officer, who continue analyzing the subject to make a proposal to the has had the time and necessary background information to Board of Directors. make and an adequate proposal to the Board of Directors. - During the session held September 27th, 2016, the Director, Mr. Gerardo Jofré Miranda stated that the days of accounts payables to small and medium-sized companies (Pymes in its Spanish acronym) is a sustainability matter, and from a social perspective, it is very sensitive because it tends to absorb the Pymes’ working capital by extending the payment date. The Chairman of the Committee expressed sharing Mr. Gerardo Jofré Miranda’s concern considering that extending the payment date contributes to the insolvency and bankruptcy of Pymes making their services more expensive and difficult to manage. Therefore Mr. Fernán Gazmuri proposed analyzing what the Company is doing about the matter and particularly if it has established a policy in this regard. He proposed that the Board of Directors, as the competent body, examine the subject. The members of the Committee then expressed the convenience to proceed to analyze the Transactions among Related Parties so as to propose to the Board of Directors the evaluation and adoption of a framework to govern such transactions. - During the session held October 27th, 2016, the Director, Mr. Gerardo Jofré Miranda referred to the convenience of deeply looking into the renewal of insurance considering that Cautiva is a reinsurance company of the insurance firm to be contracted by the Company. Cautiva is owned by the controlling shareholder of the Company, and therefore Mr. Jofré considers that the Directors’ Committee should analyze the insurance being contracted because in his opinion it is a Related Party Transaction. Mr. Gerardo Jofré expressed the matter to be a complex one and required extensive analysis, lacking the time for such analysis. The Chief Financial Officer stated that the contract was not presented by Cautiva but by Mapfre Chile, that reinsured with Mapfre España and Mapfre España then reinsured with several other companies, including Cautiva. Mr. Gerardo Jofré stated that he did not agree with such reasoning. Annual Report Enel Chile 2016 47  Enel Chile S.A. Directors’ Committee Expenses to the best interest of Enersis Chile S.A., Enel Chile today, and that prices, terms, and conditions of the contract were at arm’s length at the time of its approval. 4. During the session held on October 27th, 2016, the Directors’ Committee declared having examined the service contract between Enersis Chile S.A., Enel Chile S.A. today, and its subsidiary Endesa Chile S.A., Enel Generación Chile S.A. today, in which Endesa Chile S.A. received the service. The The Directors’ Committee did not spend its operational Committee also declares that the transaction contributed expense budget approved by the Ordinary Shareholders to the best interest of Enersis Chile S.A., Enel Chile today Meeting held April 28th, 2016. and that prices, terms, and conditions of the contract were In 2016, the Directors’ Committee analyzed the following related party transactions (OPR) at arm’s length at the time of its approval. 5. During the session held on November 25th, 2016, the Directors’ Committee declared having examined the new service contract that includes in one sole contract all the operational services rendered by Enel Chile S.A. to each of its subsidiaries, that is, Servicios Informáticos 1. On February 29th, 2016, the Directors’ Committee agreed e Inmobiliarios Ltda. (SIEI), Enel Generación Chile S.A., to declare having examined the service contract between formerly Endesa Chile S.A., Enel Distribución Chile S.A., Enersis Americas S.A., Enel Americas S.A. today, and formerly Chilectra S.A. and the subsidiaries of these last Enersis Chile S.A., Enel Chile S.A. today, in which Enersis two companies. The Committee also declares that the Americas S.A. received the service and Enersis Chile S.A. transaction contributed to the best interest of Enersis rendered the service. The Committee also declares that the Chile S.A., Enel Chile today, and that prices, terms, and transaction contributed to the best interest of the Company conditions of the contract were at arm’s length at the and that prices, terms, and conditions of the contract time of its approval, based on the report prepared by were at arm’s length at the time of its approval according PricewaterhouseCoopers, that performed the market to the report prepared by PricewaterhouseCoopers, and analysis of the existing services in addition to reviewing presented during the session. Endesa Americas S.A. and the terms and conditions of the contracts. Chilectra Americas S.A. at the time, currently merged into Enel Americas S.A., also received the contracted service. 2. During the same session, the Directors’ Committee declared having examined the service contract between Enersis Americas S.A., Enel Americas S.A. today, and Enersis Chile S.A., Enel Chile S.A. today, in which Enersis Americas S.A. rendered the service and Enersis Chile S.A. received the service. The Committee also declares that the transaction contributed to the best interest of the Company and that prices, terms, and conditions of the contract were at arm’s length at the time of its approval. 3. During the session held on September 27th, 2016, the Directors’ Committee declared having examined the service contract between Enersis Chile S.A., Enel Chile S.A. today, and Enel Green Power Chile Limitada, in which Enel Green Power Chile Limitada received the service. The Committee also declares that the transaction contributed 48 Annual Report Enel Chile 2016  Organizational Structure CHAIRMAN Herman Chadwick Piñera CHIEF EXECUTIVE OFFICER Nicola Cotugno INTERNAL AUDIT Raffaele Cutrignelli CHIEF FINANCIAL OFFICER Raffaele Grandi COMMUNICATIONS OFFICER José Miranda Montecinos GENERAL COUNSEL Domingo Valdés Prieto REGULATION Mónica de Martino SAFETY Andrés Pinto Bontá HUMAN RESOURCES OFFICER Alain Rosolino INSTITUTIONAL AFFAIRS Pedro Urzúa Frei SUSTAINABILITY AND COMMUNITY RELATIONS Antonella Pellegrini PROCUREMENT OFFICER Antonio Barreda Toledo SERVICES Francisco Silva Bafalluy Annual Report Enel Chile 2016 49  Senior Executives 3 4 1 5 2 6 6. INSTITUTIONAL AFFAIRS OFFICER Pedro Urzúa Frei* Journalist Universidad de Artes y Ciencias de la Comunicación Taxpayer ID: 11,625,161-2 Since 02.29.2016 1. CHIEF EXECUTIVE OFFICER Nicola Cotugno* Mechanical Engineer Universidad La Sapienza de Roma Taxpayer ID: 25,476,277-6 Since 08.16.2016 2. CHIEF FINANCIAL OFFICER Raffaele Grandi* Economist Universidad de Génova (Italy) Taxpayer ID 24,950,967-1 Since 05.06.2016 3. HUMAN RESOURCE OFFICER Alain Rosolino* Business Management Degree Universidad LUIS de Roma Taxpayer ID: 24,166,243-8 Since 10.01.2016 4. INTERNAL AUDIT OFFICER Raffaele Cutrignelli* International Business Degree Nottingham Trent University (United Kingdom). Master in Auditing and Internal Controls Universidad de Pisa (Italy) Diploma in Strategy, Innovation, Management and Leadership Massachusetts Institute of Technology (MIT). Taxpayer ID: 25,553,336-3 Since 10.01.2016 5. COMMUNICATIONS OFFICER José Miranda Montecinos* Audiovisual Communicator with a degree from DUOC UC Management Diploma, Universidad de Chile Taxpayer ID: 15,307,846-7 Since 02.29.2016 (*) Corresponds to senior executive of Enel Chile. 50 Annual Report Enel Chile 2016 7 11 8 9 10 12 7. GENERAL COUNSEL Domingo Valdés Prieto* Lawyer Universidad de Chile Master of Law University of Chicago Taxpayer ID: 6.973.465-0 Since 02.29.2016 8. SUSTAINABILITY AND COMMUNITY RELATIONS Antonella Pellegrini Marketing and Communications Degree European Design Institute Roma – Italy Taxpayer ID: 23,819,804-6 9. REGULATION Mónica de Martino Political Science Degree Universidad Luis LUISS Guido Carli, Roma Executive MBA Columbia Business School, NY. and London Business School, London Taxpayer ID: 25,629,782-5 11. SAFETY Andrés Pinto Industrial Engineer Pontificia Universidad Católica de Chile Diploma in Chemical Engineering Pontificia Universidad Católica de Chile Taxpayer ID: 13,686,119-0 10. PROCUREMENT OFFICER Antonio Barreda Toledo* Electrical Engineer Universidad de Santiago de Chile Diploma in Business Administration (ESAE) P. Universidad Católica de Chile Master of Business Administration P. Universidad Católica de Chile Taxpayer ID: 7,625,745-0 Since 05.06.2016 12. SERVICES Francisco Silva Public Management Degree Universidad de Chile Post graduate degree in Business Administration Escuela de Negocios Universidad Adolfo Ibáñez Taxpayer ID: 7,006,337-9 (*) Corresponds to senior executive of Enel Chile. Annual Report Enel Chile 2016 51  Senior Executives’ and Managers’ Compensation During 2016, the compensation and benefits received by the Chief Executive Officer and senior executives of the Company amounted to a fixed compensation of $1,487 million and $637 million in variable compensation and benefits. This amount included managers and senior executives that held their position in the Company at year-end and also those who left the company during the respective year. Benefits for Senior Executives and Managers The company maintains complementary health insurance and catastrophic insurance coverage for senior executives and their accredited dependents. The company also has life insurance coverage for each senior executive. These benefits are granted according to the managerial level of each employee at the time executed. In 2016, the amount spent on these benefits was $19,310 million, which is included in the compensation received by senior executives. 52 Annual Report Enel Chile 2016  Incentive Plans for Managers and Senior Executives Enel Chile has an annual bonus plan for its executives based on achieving objectives and the level of individual contribution to the company’s results. This plan defines a bonus range for each management or hierarchical level. Executive bonuses are expressed as a specific number of monthly gross salaries. Severance payments The company made severance payments to senior executives and managers that left the company amounting to $503,886,063 in 2016. Shareholdings in Enel Chile Based on the shareholder’s register, as of December 31st, 2016, no senior executive owned shares of the Company. Management of Main Subsidiaries Enel Generación Chile Valter Moro Mechanical Engineer Universidad Politécnica de Marche Italia Enel Distribución Chile Andreas Gebhardt Strobel Hydraulic Engineer Pontificia Universidad Católica de Chile Annual Report Enel Chile 2016 53 54 Annual Report Enel Chile 2016 Human Resources Annual Report Enel Chile 2016 55  Workforce The following table includes total employees of Enel Chile and its subsidiaries and jointly controlled entities as of December 31st, 2016: Company Enel Chile Enel Generación (1) Enel Distribución (2) Servicios Informáticos e Inmobiliarios Ltda. Total (1) Includes Pehuenche and GasAtacama (2) Includes Empresa Eléctrica de Colina and Luz Andes Managers & Senior Executives Professionals & Technicians Other employees 22 18 7 4 51 245 812 574 94 1,725 69 53 107 5 234 Total 336 883 688 103 2,010 56 Annual Report Enel Chile 2016  Diversity Diversity of the Chief Executive Office and other Departments that report to CEO or Board of Directors NUMBER OF EMPLOYEES BY GENDER ENEL CHILE SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. Female Male Total 3 19 22 - 4 4 NUMBER OF EMPLOYEES BY NATIONALITY ENEL CHILE SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. Chilean Spanish Italian Total 16 - 6 22 2 2 - 4 NUMBER OF EMPLOYEES BY AGE GROUP ENEL CHILE SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. Less than 30 years Between 30 and 40 years Between 41 and 50 years Between 51 and 60 years Between 61 and 70 years Total 4 9 9 - 22 - 3 1 - 4 NUMBER OF EMPLOYEES BY YEARS OF SERVICE ENEL CHILE SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. 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 Total 9 1 - 2 10 22 Annual Report Enel Chile 2016 2 - - - 2 4 57 Diversity in the Organization NUMBER OF EMPLOYEES BY GENDER ENEL CHILE SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. Female Male Total general 143 171 314 25 74 99 NUMBER OF EMPLOYEES BY NATIONALITY ENEL CHILE SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. Argentine Brazilian Chilean Colombian Spanish Panameña Rumanian Total - 2 307 2 1 1 1 314 5 2 90 2 - - - 99 NUMBER OF EMPLOYEES BY AGE GROUP ENEL CHILE SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. Less than 30 years Between 30 and 40 years Between 41 and 50 years Between 51 and 60 years Between 61 and 70 years Total general 10 130 102 69 3 314 2 33 32 27 5 99 NUMBER OF EMPLOYEES BY YEARS OF SERVICE ENEL CHILE SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. 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 Total general 22 60 31 48 153 314 7 24 12 10 46 99 Average fixed salary of women compared to men within the same professional category CATEGORY Senior Management Middle Management Administrative Staff Average 64.44% 80.06% 96.89% 80.46% 58 Annual Report Enel Chile 2016  Human Resources Activities Labor Relations Health Dissemination and Promotion This program aims to educate and train workers about activities that promote quality of life through massive dissemination efforts, such as posters, graphic material and emailed information titled “Advice that gives Life.” Among each month’s topics are: > March: Anti-stress campaign offering practical The program of periodic meetings with the Unions continued recommendations to eliminate its causes. in 2016, strengthening dialogue with the representatives of > April: Immunization campaign inviting to receive the workers and improving work conditions and climate. vaccination to prevent seasonal flu. Safety Measures and Occupational Health > May: Anti-tobacco campaign offering advice to prevent tobacco consumption. > June: Cervix and prostate cancer campaign inviting to the annual preventive exam. > July: Respiratory disease and viral infections prevention campaign. > August: Heart care campaign. > September: Gastric and colon cancer campaign offering In Enel Chile, safety and occupational health are goals closely preventive exams for timely detection of these diseases. linked to the business. Given the nature of the business, it > October: Breast cancer prevention campaign. is exposed to critical risks. Leadership in safety integration > November: Boost your energy campaign recommending and occupational health is particularly important throughout practical nutrition habits to improve the quality of life. the continuous improvement process, at every level and any > December: Year round skincare campaign. activity developed by the company, strengthening its priority in corporate management due to its strategic importance. Activities for Enel Chile Group’s employees 1. Immunization Program 2. Cardiovascular Risk Program 3. Preventive Medical Exams Program 4. Work Safety Programs 5. Implementing New Safety Standards 6. Safety Training 7. Emergency and First Aid Training Programs Annual Report Enel Chile 2016 59 60 Annual Report Enel Chile 2016 Human Resource Management Workplace Climate Management A work climate of excellence is a priority for Enel Chile and its subsidiaries. The Company understands that people are the core of the Company. We have developed several initiatives that focus on climate to support both managers and employees: 1. Manager strengthening program 2 “RHO with You” Program 3. Interact Program 4. Personal Development Itinerary (IDP in its Spanish acronym) is a system to detect development needs, in which an employee and his or her manager, together, identify present and future developmental needs that are used to elaborate the employee’s annual training program. 5. “One on One” interviews 6. A behavioral evaluation and goal accomplishment model entitled Performance Appraisal (PA) 7. “Recognizing Ourselves,” Program Diversity Enel Chile has developed a new diversity policy addressing subjects such as gender, age, nationality, and disability. This policy promotes the principles of non-discrimination, equal opportunities, inclusion and balance between personal life and work life, as fundamental values in the activities performed by the companies of the Group. Annual Report Enel Chile 2016 61 Work-Life Integration Measures and Flexibility Recruitment and Selection Enel Chile fosters a balanced work life for its employees For Enel Chile, the main objective is to hire the best people, and their families. Therefore, the Company has developed and the core principle is to give internal candidates the initiatives that aim in that direction. opportunity first. 1. The Telework Program: began in 2012 and is one of the Company’s most valued programs. Today, there are 85 teleworkers in the program, 36 are Enel Chile employees Filling Job Openings and work from their homes one day a week, reaching a During 2016, 16 positions were available in Enel Chile S.A. balanced work and family life. of which 19% were filled with applicants from within the Company. Of that number, 67% were filled by women 2. Sport and Culture Extension Program competing for the job. Of the external applicants that joined in 2016 (81% of all job openings), 13% were filled 3. Summer and winter camps for employees’ kids. by women. 4. The Summer Training workshops for workers’ families. 5. Universidad de Chile’s Summer School, an initiative that aims to improve employees’ high school kids’ academic performance. 6. Other initiatives such as Christmas Party, Senses Workshop, Family Day, End of the Year Party, the Olympics, and the Work Trajectory Award. 62 Annual Report Enel Chile 2016 Internships and Young Diversity and Inclusion Talent Attraction Program For Enel Chile, having diverse work teams and an inclusive work environment is essential. It translates into a permanent Enel Chile has implemented a project to attract young talent. search for new ways to create awareness and to facilitate It consists in recruiting interns and thesis students from building a diverse workforce and a work environment in the best universities in the country. In 2016, there were 46 which individual differences are respected and appreciated. students working as interns or thesis students. As such, the Entrance Program seeks to incorporate interns Furthermore, in 2016 Enel Chile, subsidiary of the Enel The company implemented this program by forming alliances Group, participated in the Job Fair of the Business with the Ministry of Education and various foundations. from technical and professional careers with different skills. Administration and Economics School of the University of Chile, and in the Job Fair of the Engineering School of the Universidad Católica de Chile. Our stand received students from Industrial Engineering, Electrical Engineering, and Commercial Engineering. Educational Action Training The Company’s training program for 2016 was built and Itinerary (IDP In its Spanish acronym) and has a two-year executed on two main management principles. implementation period. During 2016, the percentage of employees that had access to at least one of the three The first principal was to reach the right balance between activities identified in their IDP reached 52%. training activities focused on developing skills and critical technical knowledge to improve the performance of our In general terms, Enel Chile’s training activities during 2016 employees at their job, and also behavioral skills training reached 83% coverage, which means that 281 employees to enable our employees to increase their possibilities of participated in at least one training activity during the year. development within the Group. The total number of training hours reached 17,782, resulting in a 1.9 % training rate (training hours for every 100 hours The second principle was to justify the training program by worked). offering the employee and his or her manager a mechanism to identify together, the technical and behavioral gaps the employee needs to close, regarding individual productivity, to access potential development opportunities in the future. The mechanism is entitled Professional Development Annual Report Enel Chile 2016 63 64 Annual Report Enel Chile 2016 Stock Markets Transactions Annual Report Enel Chile 2016 65  Stock Market Transactions Quarterly transactions during 2016 of Enel Chile shares in Chile, on the Santiago Stock Exchange, the Electronic Stock Exchange and the Valparaíso Stock Exchange, as well as in the United States of America on the New York Stock Exchange (NYSE) are detailed below. Santiago Stock Exchange During 2016, a total 5,632 million shares were traded on the Santiago Stock Exchange, equivalent to $409,105 million. The closing price of the stock in December 2016 was $62.01. Month January February March 1° Quarter April May June 2° Quarter July August September 3° Quarter October November December 4° Quarter Total 2016 Units traded Amount ($) Average price ($) No Transactions No Transactions No Transactions No Transactions 189,438,882 1,060,670,974 748,549,069 1,998,658,925 544,329,032 862,353,691 520,192,838 1,926,875,561 505,024,616 712,779,896 489,046,630 1,706,851,142 5,632,385,628 15,723,107,849 84,113,666,262 58,043,133,609 157,879,907,720 41,846,874,988 64,424,188,210 35,154,286,972 141,425,350,170 33,370,359,554 45,852,083,519 30,577,894,316 109,800,337,389 409,105,595,279 82.96 79.3 77.51 79.92 76.88 74.7 67.55 73.04 66.06 64.26 62.51 64.28 66 Annual Report Enel Chile 2016 Chilean Electronic Stock Exchange During 2016, a total 635 million shares were traded on the Electronic Stock Exchange, amounting to $46,177 million. The closing price of the stock in December 2016 was $61.5. Month January February March 1° Quarter April May June 2° Quarter July August September 3° Quarter October November December 4° Quarter Total 2016 Units traded Amount ($) Average price ($) No Transactions No Transactions No Transactions No Transactions 427,903,221 6,434,240,391 8,456,080,146 15,318,223,758 7,943,890,284 6,155,602,250 4,086,431,290 18,185,923,824 3,688,953,794 3,401,355,879 5,583,136,921 12,673,446,594 46,177,594,176 5,131,460 80,298,645 108,989,814 194,419,919 103,517,612 82,298,616 58,748,440 244,564,668 54,719,188 53,515,720 88,352,071 196,586,979 635,571,566 83.39 80.19 77.17 80.25 76.63 75.39 69.98 74.00 67.13 64.80 62.95 64.96 Annual Report Enel Chile 2016 67 Valparaiso Stock Exchange During 2016, a total 134 million shares were traded on the Valparaiso Stock Exchange, amounting to $9.6 million. The closing price of the stock in December 2016 was $70.5. Month January February March 1° Quarter April May June 2° Quarter July August September 3° Quarter October November December 4° Quarter Total 2016 Units traded 14,000 14,000 28,000 92,460 120,460 134,460 Amount ($) No Transactions No Transactions No Transactions No Transactions No Transactions No Transactions 1,102,500 1,102,500 No Transactions 1,960,000 6,570,418 8,530,418 No Transactions No Transactions No Transactions No Transactions 9,632,918 Average price ($) 78.75 79.00 70.00 71.06 70.53 New York Stock Exchange (NYSE) Enel Chile shares began trading on the New York Stock Exchange (NYSE) on April 27th, 2016. One ADS (American Depository Share) represents 50 shares, and the ticker is ENIC. Citibank N.A. acts as a depositary bank and Banco Santander Chile as the custodian in Chile. During 2016, 84 million ADS’ were traded in the United States, amounting to US$459 million. The ADS closing price in December was US$4.55. Month January February March 1° Quarter April May June 2° Quarter July August September 3° Quarter October November December 4° Quarter Total 2016 Units traded 2,148,930 16,283,943 11,277,388 29,710,261 17,572,843 11,522,424 6,525,482 35,620,749 7,960,528 5,191,180 5,650,841 18,802,549 84,133,559 Average price ($) Amount (US$) No Transactions No Transactions No Transactions No Transactions 13,565,841 93,756,894 63,608,244 170,930,979 100,186,380 64,654,142 32,875,808 197,716,330 39,521,886 24,640,286 26,376,453 90,538,625 459,185,933 6.31 5.76 5.64 5.90 5.70 5.61 5.04 5.45 4.96 4.75 4.67 4.79 68 Annual Report Enel Chile 2016 Market Information The global economic scenario in 2016 experienced moderate Santiago Stock Exchange growth, in line with market projections and showing a slight The following table shows the changes in the price of the improvement or stabilization of emerging economies. The share of Enel Chile and the Selective Stock Price Index elections in the United Stated have increased the possibility (IPSA) on the local stock market over the past two years: of a more active fiscal policy and has lowered expectations of inflation which eventually leads to a stronger dollar and also limits the economic growth perspectives for Latin America. Similarly, Great Britain’s decision to leave the European Variation (04/21/2016 – 12/31/2016) Enel Chile* IPSA 2016 -27.8% 4.1% Union along with the weak performance of significant (*) Enel Chile begins trading on April 21st, 2016 economies, such as China and Brazil, have increased market volatility. Although the financial conditions for the emerging market economies in the region have adjusted, they are still attractive from a historical perspective. In Chile, the Selective Stock Price Index, IPSA (in its Spanish New York Stock Exchange (NYSE) acronym), which groups the 40 main shares traded in The following table shows the behavior of Enel Chile’s ADRs Chile(1) increased 12.8% in 2016. listed on the NYSE (ENIC), compared to the Dow Jones Industrial index and the Dow Jones Utilities index over the This performance was mainly due to the re-allocation of past two years: portfolios, responding to greater interest in assets from mature markets and led to capital outflows from emerging markets to equity instruments in mature markets. This situation explains the capital inflows to the United States given the better market expectations resulting from the Variation (04-27-2016 – 12-31-2016) ENIC Dow Jones Industrial Dow Jones Utilities 2016 -24.5% 9.5% 1.0% reforms that the new government administration elected in (1) Exceptionally, the IPSA in 2016 included 43 shares. This number was November 2016 is expected to implement. adjusted in 2017 to include 40 shares once again. The price of the share of Enel Chile has fallen 27.8% since In accordance to General Norm No 283, Numeral 5), the April 21st, 2016, due to the market’s reaction to the latest Company’s 2015 and 2016 dividends policies are transcribed electricity tender process ended in August 2016. below. Moreover, in spite of the devaluation of the Chilean peso against the US Dollar, the ADR’s of Enel Chile on the New York Stock Exchange fell 24.5% since April 27th, 2017. Annual Report Enel Chile 2016 69 70 Annual Report Enel Chile 2016 Dividends Annual Report Enel Chile 2016 71  Dividend Policy 2017 General Aspects Dividend Payment Procedure The payment of dividends, whether interim or final and to avoid payment mistakes, Enel Chile offers the following payment methods: 1. Deposit in a bank checking account, whose account- The Board of Directors of the Company, in the session held holder is the shareholder. on February 28th, 2017, approved the following Dividends Policy and the corresponding procedure for the dividend 2. Deposit in a bank savings account, whose account-holder payments of Enel Chile S.A. for 2017. is the shareholder. Dividend Policy 3. Mailing of a check or cashier’s check via certified mail to the address of the shareholder’s residence recorded in Enel Chile’s shareholders’ register. The Board of Directors’ intention is to distribute an interim 4. The collection of a check or cashier’s check from the dividend for fiscal year 2017, of up to 15% of net income offices of DCV Registros S.A., as the registrar of Enel as of September 30th, 2017, as shown in the consolidated Chile’s shares, or from the bank and branches defined for financial statements of Enel Chile S.A. at that date, payable this purpose and informed in the dividend payment notice in January 2018. published. The Board of Directors will propose to the Ordinary For this purpose, bank checking or savings accounts may be Shareholders’ Meeting, to be held during the first four located anywhere in the country. months of 2017, to distribute a final dividend equivalent to 55% of net income for fiscal year 2017. The final dividend will It should be emphasized that the payment method chosen be defined by the Ordinary Shareholders Meeting to be held by each shareholder will be used by the centralized during the first four months of 2018. depository of securities, DCV Registros S.A. for all dividend Compliance with the aforementioned dividend plan is the intention to change it and record a new option. subject to the actual net profit earned by the Company during the year, and to the results of the Company’s periodic Shareholders who have not registered a particular payment income projections or the existence of certain conditions, as method will be paid by method four indicated above. payments unless the shareholder communicates in writing applicable. If checks or cashier’s checks are returned by the post office to DCV Registros S.A., they will remain in its custody until collected or requested by the shareholder. 72 Annual Report Enel Chile 2016 In the case of deposits in bank checking accounts, Enel Chile S.A. or DCV Registros S.A. may request, for security reasons, that they be verified by the respective bank. If there is an objection to the account indicated by a shareholder, whether in the prior verification process or for any other reason, the dividend will be paid according to method No 4 indicated above. Dividend Policy 2016 Moreover, the company has adopted and will continue to dividend for the fiscal year 2016, of up to 15% of net income adopt in the future all the necessary security measures as of September 30th, 2016, as shown in the financial required by the dividend payment process to safeguard the statements of Enel Chile S.A. at that date, and payable in interests of the shareholders and Enel Chile S.A. January 2017. The Board of Directors’ intention is to distribute an interim The Board of Directors intends to propose to the Ordinary Shareholders’ Meeting, to be held during the first four months of 2017, to distribute a final dividend equivalent to 50% of the fiscal year 2016 net income. The final dividend will be determined by the Regular Shareholders’ Meeting, to be held during the first four months of 2017. Compliance with the aforementioned dividend plan is subject to the actual net profit earned by the Company during the year, and to the results of the Company’s periodic income projections or the existence of certain conditions, as applicable Dividend Payment Procedure: The payment of dividends, whether interim or final and to avoid payment mistakes, Enel Chile offers the following payment methods: 1. Deposit in a bank checking account, whose account-holder is the shareholder; 2. Deposit in a bank savings account, whose account-holder is the shareholder; 3. Mailing of a check or cashier’s check via certified mail to the address of the shareholder’s residence recorded in Enel Chile’s shareholders’ register; and 4. The collection of a check or cashier’s check from the offices of DCV Registros S.A., as the registrar of Enel Chile’s shares, or from the bank and branches defined for this purpose and informed in the dividend payment notice published. For this purpose, bank checking or savings accounts may be located anywhere in the country. Annual Report Enel Chile 2016 73 It should be emphasized that the payment method chosen by each shareholder will be used by the centralized depository of securities, DCV Registros S.A. for all dividend payments unless the shareholder communicates in writing the intention to change it and record a new option. 2016 Final Dividend Proposal Shareholders who have not registered a particular payment expressed the convenience of approving that the final method will be paid by method 4 indicated above. dividend distribution proposal of 2016 fiscal year’s net income be resolved by the Ordinary Shareholders Meeting Mr. Herman Chadwick, Chairman of the Board of Directors, If checks or cashier’s checks are returned by the post office of Enel Chile S.A. to DCV Registros S.A., they will remain in its custody until collected or requested by the shareholder. To do so, the Chief Financial Officer, Mr. Raffaele Grandi, noted that net income to be distributed according to the In the case of deposits in bank checking accounts, Enel dividend policy was calculated considering the following: Chile S.A. or DCV Registros S.A. may request, for security i) the Company’s net income for the Fiscal year 2016; and reasons, that they be verified by the respective bank. If there ii) net income already distributed by the Company as the is an objection to the account indicated by a shareholder, interim dividend last January equal to 15% of net income whether in the prior verification process or for any other as of September 30th, 2016. Consequently, Mr. Grandi reason, the dividend will be paid according to method No 4 informed that Enel Chile’s net income for the fiscal year indicated above. 2016 ascended to Th$ 317,561,122. Therefore the dividend distribution equivalent to 50% of net income according Moreover, the company has adopted and will continue to to the Company’s dividend policy would amount to adopt in the future all the necessary security measures Th$ 158,780,561. After discounting the Th$ 37,253,417 required by the dividend payment process to safeguard the interim dividend paid in January 2017, the amount of net interests of the shareholders and Enel Chile S.A. income pending distribution was Th$ 121,527,144. Therefore, the suggestion is to propose to the Ordinary Shareholders’ Meeting of Enel Chile S.A. the distribution of a final dividend equal to $ 3.23430 per share, representing 50% of the Company’s net income for the fiscal year 2016. After deducting the interim dividend paid in January 2017, the amount to be distributed to shareholders in May 2017 would be $ 2.475459 per share. 74 Annual Report Enel Chile 2016 Distributable Net Income for Fiscal Year 2016 The distributable net income for the fiscal year 2016 is shown below: Millions of $ 317,561 317,561 Net Income * Distributable Net Income * Attributable to controlling shareholder Dividends Distributed The following chart shows the dividends per share paid over the past two years: Dividend No 1 2 Type of Dividend Final Interim Closing date 12/31/2015 09/30/2016 Payment date 05/24/2016 01/27/2017 Pesos per share 2.09338 0.75884 Fiscal year 2015 2016 Annual Report Enel Chile 2016 75 76 Annual Report Enel Chile 2016 Investment and Financing Policy Annual Report Enel Chile 2016 77 The Ordinary Shareholders Meeting, held on date April 28th, 2015, adopted the policy of investment and financing which is designated below. Investment Policy 2016 Areas of Investment I. Enel Chile will invest, according to its bylaws, in the following areas: contributions to invest in or create subsidiaries and affiliate companies whose activity is aligned, related or linked to energy in any form or type, Participation in the Control of Investment Areas the supply of public utilities, or whose main input is Pursuant to Enel Chile S.A. corporate purpose, the following energy. procedure will be applied, whenever possible, to control the II. Investments related to the acquisition, exploitation, investment areas: construction, lease, administration, trading and disposal i. It will be proposed at the Ordinary Shareholders’ of any class of fixed assets, whether directly or through Meetings of our subsidiaries and affiliated companies subsidiaries. the appointment of Directors related to the Enel Chile’s stake in that company, preferably directors or executives III. Other investments in all kinds of financial assets, titles of the Company or its subsidiaries. or securities. ii. The investment, financial and commercial policies will be proposed to the subsidiaries and affiliate companies, as well as the accounting criteria and systems to be followed. iii. The management of the subsidiaries and related companies will be supervised. iv. There will be a permanent control of the level of debt. Maximum Investment Limits The maximum investment limits for each investment area are the following: I. Investments in the subsidiaries that operate in the electricity sector, those required for the fulfillment of the respective corporate purposes of these subsidiaries, with a maximum amount equivalent to 50% of the total equity of the consolidated balance sheet of Enel Chile as of December 31st, 2016. II. Investments in other subsidiaries, insofar at least 50.1% of total consolidated assets of Enel Chile are electricity sector assets. 78 Annual Report Enel Chile 2016  Financing Policy 2016 Maximum Level of Debt Management Powers to Agree with Lenders on Granting Guarantees The Extraordinary Shareholders’ Meeting is required to approve granting hard assets or personal guarantees to secure third party obligations when referring to the essential The maximum debt level of Enel Chile is determined by a assets identified below: Total Financial Debt to Equity ratio equal to or lower than Essential Assets for Company Operations 2.20 times based on figures in the consolidated balance The essential assets for the operation of Enel Chile are the sheet of Enel Chile as of December 31st, 2016. shares that enable, as a majority shareholder or through shareholders agreements, the control of Enel Generación Chile and Enel Distribución Chile. Management Powers to Agree with Lenders Restrictions related to Dividends’ Distribution Dividend restrictions may only be agreed with creditors if such restrictions were previously approved by the Shareholders’ Meeting (ordinary or extraordinary). Annual Report Enel Chile 2016 79 80 Annual Report Enel Chile 2016 History of the Company Annual Report Enel Chile 2016 81 82 Annual Report Enel Chile 2016  History of the Company Enel Chile S.A., formerly named “Enersis Chile S.A.”, was placing it among the most important energy companies in created as part of the corporate reorganization process that the country. began in April 2015. Enersis S.A. controlled the generation, transmission and distribution business in Chile and four Enel Chile participates in the distribution business through other countries in the region (Argentina, Brazil, Colombia, Enel Distribución Chile that operates a concessions area of and Peru). The Extraordinary Shareholders’ Meeting of more than 2,000 square kilometers, covering 33 districts in Enersis S.A. held on December 18th, 2015, approved the first the Metropolitan Region, representing 40% of total sales phase of the reorganization plan named “the Division,” which of distribution companies in the country, making Enel created Enersis Chile S.A. as the only vehicle to control the Chile the largest electricity distribution company in Chile. Group’s generation and distribution assets in Chile. Enersis The Company has also grown by adding new applications to S.A became Enersis Americas S.A., the vehicle to control all electricity and developing new ways to manage electricity. assets of the businesses in other countries in the region. Enel Chile was the first company in the country to offer its Endesa Chile S.A. and Chilectra S.A. went through this the first and only electric bus to operate in the downtown area customers intelligent metering technology. Also, it has placed same division process. of Santiago and completely free of charge to passengers. Enel Chile seeks to promote the efficient use of energy supplied On September 28th, 2016 the Shareholder’s Meeting of by Enel Distribución Chile to its almost 2 million residential Enersis Américas S.A, Endesa Américas S.A and Chilectra customers in Chile and thus to collaborate with its environment. Américas S.A approved the second phase of the plan called “the Merger” in which Enersis Américas S.A absorbed the In June 2016, Endesa Chile (Enel Generación Chile today) businesses of Endesa Américas S.A and Chilectra Américas sold its 20% share in GNL Quintero S.A. to Enagás S.A. During the same meeting, shareholders agreed to Chile S.p.A for US$ 200 million. This decision to sell its change the name of Enersis Américas S.A to Enel Américas shareholding in GNL Quintero was based on the fact that it S.A. did not represent a strategic asset for the development of the electricity business or the natural gas trading business On October 4th, 2016, the shareholders of Enersis Chile, of the Company. Endesa Chile and Chilectra agreed to change their names to Enel Chile, Enel Generación Chile and Enel Distribución Enel Chile is part of the Enel Group, a global energy Chile respectively. company and one of the main integrated operators in the electricity and natural gas sectors worldwide. It is present Now that the organizational simplification process of in 30 countries and four continents and supplies energy to the Group has concluded, Enel Chile participates in the nearly 61 million people and has net installed capacity of electricity generation business through its subsidiary Enel more than 90 GW. Generación Chile. This subsidiary has 103 generation units installed throughout the Central Interconnected System (SIC in its Spanish acronym) and eight units in the Northern Interconnected System (SING in its Spanish acronym) reaching a total aggregate 6,300 MW installed capacity, Annual Report Enel Chile 2016 83 84 Annual Report Enel Chile 2016 Investments and Financial Activities Annual Report Enel Chile 2016 85  Relevant projects of the Company’s Investment Plan The Group’s global financing strategy and intercompany The investment policy of Enel Chile S.A. is flexible enough loans are coordinated to optimize debt management in to adapt to changing circumstances, prioritizing each project addition to the terms and conditions of financing. The differently, based on profitability and strategic alignment. subsidiaries generally develop their capital expenditure plans independently, financed by internally generated From 2017 to 2019, $888 billion is expected to be disbursed, funds or direct financing. One of the objectives is to on a consolidated basis, relating to investments currently focus on investments that will provide long-term benefits, underway, maintenance of our distribution network, such as energy-loss reduction projects. Additionally, with maintenance of existing installed capacity, and studies the purpose of reducing the investment in areas such as related to the development of other potential generation acquisition systems, telecommunications, and information projects. technology, these services are centralized and provided for all Enel Chile Group companies. Although the form of The following table shows the expected capital expenditure financing these investments has been considered as part for the 2017 – 2019 period and the amount incurred by our of the company’s budgeting process, no particular financing subsidiaries in 2016, 2015 and 2014: structure has been committed. The investments will depend on market conditions at the time cash flows are needed. Chile Total (1) The figures represent actual disbursements each year, except for future projections (gross amounts) Investment (1) (in billions of $) 2017-2019 888 888 2016 (1) 157 157 2015 (1) 310 310 2014 (1) 197 197 86 Annual Report Enel Chile 2016  Annual Report Enel Chile 2016 87  Generation In Chile, the main investments developed during 2016 focused on the construction of the 150 MW Los Cóndores pass through hydroelectric power plant, which began in 2014 and also the investments related to finishing the 350 MW Bocamina II power plant. Projects Currently Underway The most important projects currently underway are: Relevant Investments in 2016, 2015 and 2014 > Optimization of Bocamina II Power Plant: Environmental improvements (coal field roofing, biomass filters, among others) and sustainability initiatives such as eradication programs, agreements with fishermen, shared value funds, among others. > Los Cóndores project: 150 MW hydroelectric power The capital investments carried out over the last three years plant located in the Maule region of Chile that began were mainly related to: construction in 2014. (i) The 350 MW Bocamina II power plant optimization project (ii) The 150 MW Los Cóndores project (iii) Maintenance of existing installed capacity The capital investments just mentioned and related to specific projects were financed as follows: > Optimization of Bocamina II: cash from operations > Los Cóndores: cash from operations 88 Annual Report Enel Chile 2016  Distribution During 2016, Enel Distribución Chile and its subsidiaries Finally, one of the greatest achievements of the Company (Colina and Luz Andes) invested $81 billion in projects in 2016 was the installation of 55,257 smart meters in primarily related to satisfying natural growth of our Santiago, a $5 billion investment. This project represents a customers, service quality, safety and information systems. milestone and the beginning of a new paradigm in electricity Furthermore, during 2015, a total $90 billion were invested, distribution in Chile and South America. This technology has $67 billion to satisfy electricity consumption needs related allowed customers to perceive the main benefits of the to demographic growth and $23 billion to extraordinary program such as, more convenient and safe remote reading; investments. electricity consumption self-management offering access to flexible and hourly rates; and two-way meters offering In 2016 a total $22 billion were invested in Medium and customers that have a self-generating photovoltaic solar Low Voltage networks, allowing to connect new customers, panel system the possibility to sell their household excess both residential and large customers, and also connect real energy to the system. This technology also allows improving estate projects. the quality of the electricity service received by being able to monitor the service and receive alerts from the central Focusing on increasing Enel Distribución Chile’s network administration system. capacity, a total $13 billion were invested in the start-up of three new HV/MV transformation units: Lo Boza Substation, Andes Substation, and Chacabuco substation. Regarding sub transmission lines, two lines were reinforced: the 110 kV Altamirano line and the 110 kV Espejo-Ochagavia line. Regarding medium voltage (MV) lines, four new feeders were added: Monkeberg feeder –La Reina Substation (12 kV), Talladores feeder – Macul Substation (12 kV), Angamos feeder – Cisterna Substation (12 kV) and Neruda feeder – Bicentenario Substation (12 kV). Regarding service quality, $13 billion were invested mainly in reinforcing certain feeders, those determined by our quality plan. Worth highlighting is the automation of the MV network that involved adding 500, from 700 to 1,200, new remote control devices, to the medium voltage network, and the necessary network adjustments. This plan condensed in one year the activities that would normally take six years to implement. At the same time, the second phase of the Medium Voltage SCADA Platform was implemented, named “MV Remote Control System,” STM in its Spanish acronym. Regarding telecommunications infrastructure, the first Digital Mobile Radio (DMR) platform and equipment was installed, and the first stage of the 3G update took place. The focus is to increase coverage and availability of communication links between MV equipment and the Control Center. The DMR platform was the first to be installed and operational in Chile and the rest of the Enel Group companies in Latin America. Annual Report Enel Chile 2016 89  Financial Activities Liquidity Hedging Policy As of year-end 2016, the subsidiary Enel Generación Chile relies on committed credit lines available for US$ 512 million. Also, undisbursed commercial credit lines available for a Exchange Rate maximum US$200 million. These were registered in the The exchange rate hedging policy of the Enel Chile Group Securities Register of the Superintendence of Securities and is based on cash flows and seeks to maintain a balance Insurance (SVS in its Spanish acronym) in January 2009 and between flows indexed to foreign currency (US$) and the expire in 2019. levels of assets and liabilities denominated in that currency. The goal is to minimize cash flow exposure to risk related to In addition to the liquidity instruments mentioned above, the exchange rate variations. Company and its subsidiaries ended 2016 with available cash amounting to US$367 million. Interest Rate Indebtedness The goal of the Group’s interest rate hedging policy is to maintain a balanced debt structure to minimize financial expenses and reduce income statement volatility. Hedging The consolidated financial debt of Enel Chile reached US$ instruments are purchased based on market conditions, the 1,273 million, mainly international bonds, and local bonds Company’s projections and debt structure objectives. with 11 years average life. At year-end 2016, consolidated fixed debt to total financial Net consolidated debt was US$ 906 million at year-end debt was 92%. 2016, and 1.0 was the leverage ratio(1) Main Financial Operations Risk Rating Regarding risk rating, the main events that took place in 2016 are summarized below: During 2016 the subsidiary Enel Generación Chile obtained Enel Chile was rated for the first time by Feller Rate on April a new international four-year term committed credit line for 20th, 2016. The Company was rated “AA” on the local scale US$200 million and renewed a three-year term US$ 112 with a stable outlook. This rating was later confirmed on July million domestic committed credit line. The disbursements 8th. of these credit lines have no restrictions. Enel Generación Chile also completely amortized a US$250 Chile S.A.. On April 21st, 2016 the local rating assigned to million intercompany loan with Enel Americas. the Company was “AA” with a stable outlook. Fitch Rating also began assigning a credit rating to Enel 1 Calculated as Net Financial Debt over Gross Operating Income (EBITDA) 90 Annual Report Enel Chile 2016 Furthermore, on July 22nd, 2016, Standard & Poor’s assigned Enel Chile S.A. a “BBB+” international credit rating with a stable outlook. This rating is an “investment grade” rating. Insurance The Company’s ratings are based on its diversified portfolio the Metropolitan Region. These assets are covered by a of assets, strong credit parameters, adequate debt structure global insurance program centralized by its parent company Enel Chile owns equipment and substations located in and high liquidity. International Rating Enel Chile Corporate S&P BBB+ / Stable Local Rating Enel that covers material damage, terrorism, business interruption and legal liability. The insurance policies’ renewal process was carried out through an international bid, where the leading insurance companies worldwide were invited to participate. The contracts were renewed on November 1st, 2016 and expire October 31st, 2017. Enel Chile Stocks Bonds Feller Rate 1° class, Level 2 AA / Stable Fitch Ratings 1° class, Level 1 AA / Stable Brands The company has registered the brand “Enersis Chile” for services, products, industrial and commercial facilities. The brand name “Enel Chile” is going through the registration process. Suppliers, Customers, and Main Competitors Considering that Enel Chile S.A. is a Holding Company that operates primarily in the electricity generation and distribution sectors in Chile, the suppliers, customers, and competitors are those relevant to the Company’s main subsidiaries. Based on the above, the suppliers, customers, and competitors are the following: Cencosud Group, Gerdau Aza, Metro S.A., CGE Distribución SA., SAESA, Chilquinta Energía S.A., Colbún S.A., AES Gener S.A., Engie Energía Chile S.A. (Suez), Empresa Eléctrica Guacolda S.A., Ferrovial Agroman Chile S.A., Echeverría Izquierdo Montajes Industriales, Abengoa Chile, Cables de Energía y Telecomunicaciones, FAE Lumisistemas Ltda., Ernst & Young. Annual Report Enel Chile 2016 91 92 Annual Report Enel Chile 2016 Risk factors Annual Report Enel Chile 2016 93  Risk Management Policy The companies of Enel Chile are exposed to certain risks, (ii) Criteria on counterparties which are managed through the application of identification, measurement, limit of concentration and supervision (iii) Authorized operators systems. The basic principles defined by the Group in establishing its market in which it operates, its position regarding risk risk management policy include the following: based on the strategy defined. • Each business and corporate area establishes, for each • Comply with rules of good Corporate Governance • All business operations and corporate areas are performed within limits approved for each case. • Comply strictly with the Group’s norms and procedures • Each business and corporate area defines: companies establish the risk management controls • The businesses, corporate areas, business lines, and (i) The markets in which it can operate based on having performed according to policies, rules, and procedures necessary to ensure that market transactions are sufficient knowledge and abilities to ensure effective risk of Enel Chile. management 94 Annual Report Enel Chile 2016 Interest Rate Risk Interest rate fluctuations modify the fair value of assets and liabilities that accrue interest at fixed rates, as well as the future flows of assets and liabilities based on a variable interest rate. The objective of interest rate risk management is to achieve a debt structure balance that allows minimizing the cost of debt with reduced income statement volatility. As of December 31st, 2016, 92% of total gross debt has a fixed or hedged interest rate. Depending on the Group’s estimates and debt structure objectives, hedging operations include derivatives that mitigate these risks. The instruments to mitigate interest rate risks currently in use include swaps that transform variable rates into fixed rates. Annual Report Enel Chile 2016 95 Exchange Rate Risk Commodities Risk Exchange rate risks are primarily related to the following The Enel Chile Group is exposed to certain commodity price transactions: fluctuations, primarily through: - Debt incurred by the Group’s companies in currencies - Fuel purchases in the process of generating electricity different from their respective operational cash flow currency. - Energy trading operations in local markets - Payments of project-related materials and corporate To reduce risk in situations of extreme drought, the insurance policies made in currencies different from their Group has designed a commercial policy that defines sale respective operational cash flow currency. commitments, consistent with its power plant’s generation capacity in a dry year, as well as risk-mitigation clauses - Revenues in the Group’s subsidiaries that are directly linked in some contracts with nonregulated customers. In the to currencies different from their respective operational case of regulated customers that are subject to long-term cash flow currency. tender processes, indexation clauses are included to reduce commodity price exposure. To mitigate exchange rate risk, Enel Chile aims to maintain an equilibrium between flows indexed in American dollars Considering the operating conditions faced by the electricity and levels of asset and liabilities in such currency. The generation market in Chile, such as droughts and commodity objective is to minimize cash flow exposure to exchange price volatility in international markets, the company rate fluctuations. is constantly evaluating the convenience of hedging instruments to mitigate the impact of price fluctuations on The instruments currently used to comply with this policy profits. As of December 31st, 2016, swap operations for 3 are currency swaps and exchange rate forwards. mill Brent oil barrels and 3.3 mill MBTU Henry Hub gas, to be liquidated between January and November 2017, were in place. As of December 31st, 2015, the company held swaps for 133 thousand Brent oil barrels. Because of constantly changing operating conditions, these hedging measures may be modified or could include other commodities. 96 Annual Report Enel Chile 2016 Liquidity Risk Credit Risk The Group maintains its liquidity through committed long- The Enel Chile Group conducts a detailed follow-up of credit term credit facilities and temporary financial investments, risk. for amounts sufficient to fund the projected needs of a period, calculated as a function of the overall situation and expectations in the debt and capital markets. These projected needs include net financial debt maturities; or in other words, maturities after financial derivatives. For more information on characteristics and conditions of financial debt and financial derivatives, see Note 17, 19 and Annex No 4. Trade Accounts Receivables As of December 31st, 2016, the Enel Chile Group had a The credit risk associated with accounts receivables liquidity of M$ 245,999,125 in cash and cash equivalents, stemming from commercial activity has historically been and M$ 342,827,047 in unconditionally available long-term limited, mainly due to short-term payment deadlines that committed credit lines. As of March 1st, 2016, the Enel Chile prevent clients from accumulating significant individual Group had a liquidity of $M 161,018,932 in cash and cash credit. This applies to the generation and distribution equivalents and M$ 277,668,000 in unconditionally available businesses. long-term committed credit lines. In some of our generation business contracts with nonregulated customers, in events of non-payment, we can interrupt such customer’s electricity supply. Contracts also stipulate that payment defaults qualify as a cause for contract termination. For this reason, and although the risk is limited, credit risk and maximum amounts exposed to payment risk are constantly being measured and monitored. Regarding our distribution business, supply disruption is included in the company’s powers against defaulting clients, as determined by industry regulation and enables the evaluation and control of the limited credit risk. Annual Report Enel Chile 2016 97 Financial Assets Risk Measurements Investments of cash surpluses are made in first class The Enel Chile Group measures the Value at Risk of its debt domestic and foreign financial entities (with investment and financial derivatives to monitor the risk assumed by the grade credit ratings when possible) within established limits company, thus limiting income statement volatility. for each entity. The positions included in the portfolio used to calculate the Investments may be backed by Chilean treasury bonds and present value at risk is composed of: securities issued by first-class banks, prioritizing the latter as they offer better returns (always within existing investment - Financial debt policy guidelines). - Debt hedging derivatives Derivative instruments are entered into with entities with solid creditworthiness; all derivative transactions are The calculated value at risk represents a potential loss of performed with entities with investment grade ratings. value of the portfolio in one trimester, with 95% confidence. To determine the value at risk, we take the volatility of the risk variables affecting the value of the portfolio into consideration including: - US dollar LIBOR interest rate - Exchange rates of currencies included in the calculations The calculation of Value at Risk is based on the extrapolation of future market value scenarios (one-quarter out) of the risk variables according to the scenarios based on real observations for the same period (quarter) for five years. The Value at Risk for the next quarter, with 95% confidence, is calculated as the percentile of the most adverse 5% of possible quarterly changes. Considering the hypotheses stated above, the Value at Risk for the next quarter is M$73,197,508. This value represents the potential increase in the debt derivatives portfolio and is therefore intrinsically linked, among other factors, to the value of the portfolio at the end of each quarter. 98 Annual Report Enel Chile 2016 Other Risk Factors Economic fluctuations in Chile, as well as certain interventionist economic policies proposed by the governmental authorities, can affect operational results and financial condition, as well as the value of our A financial crisis, or any other type of crisis, in any securities. region of the world, could have a significant impact on Chile, and consequently, adversely affect the company’s All operations are in Chile. Therefore, consolidated revenues operations and liquidity. could be affected by the performance of the Chilean economy. If local, regional, or global economic trends negatively affect Chile is vulnerable to external impacts, including financial the Chilean economy, the Group’s financial condition and and political events, which can cause significant economic operating results could be adversely affected. Additionally, difficulties and affects its growth. If the Chilean economy generating insufficient cash flow for subsidiaries could result achieves unexpectedly low growth rates or enters a in their incapacity to fulfill obligations and necessity to ask recession, customers are likely to reduce their electricity for dispensation for certain restrictive financial conditions. demands, and some might face difficulties paying their bills, which would possibly increase the company’s uncollectible The government of Chile has and continues to exercise accounts. Any of these situations could adversely affect the considerable influence on many aspects of the private company’s operational results and financial condition. sector, which may result in changes to economic policies and other policies. For example, in September 2014, the Chilean Financial and political crisis in other parts of the world could government approved the gradual increase in corporate also adversely affect the business. For example, instability taxes and a change to the tax system, which could have in the Middle East, or in other oil-producing regions, an additional negative effect on non-Chilean stockholders could result in higher oil prices worldwide, which in turn or ADSs. On February 8th, 2016, Law 20,899 was enacted, could increase fuel costs in thermal generation plants and which made some amendments to this tax system reform. adversely affect the company’s operational results and Other governmental decisions could include wage, price, financial condition. and tariff controls, as well as other interventionist measures such as expropriation or nationalization. Additionally, the negative impacts of a financial crisis on the finance industry could have an adverse impact on our Future adverse events in Chile or changes in tariff policies, ability to obtain new bank financing on historical terms and exchange rate controls, regulations or taxation could conditions. hinder the ability to execute strategic plans, which could negatively affect the company’s operational results and Political events or a financial crisis could also reduce access financial condition. Inflation, devaluation, social unrest and to capital markets in Chile, as well as other international other political, economic or diplomatic events, including the capital markets for additional sources of liquidity, or response of regional governments to these circumstances, increase the interest rates available. Reduced liquidity could affect the profitability of Enel Chile. Also, financial could affect capital expenditures, long-term investments, and securities markets are influenced by economic and and acquisitions, in addition to the company’s development market conditions of other countries and could be adversely projections and dividend policy. affected by events in other countries, which could adversely affect the company’s securities. Annual Report Enel Chile 2016 99 The electricity business is exposed to risks caused by In the distribution business, on May 6th, 2015, a fire damaged natural disasters, catastrophic incidents and acts of and affected the Alonso de Córdoba substation in Santiago, terrorism, which can adversely affect operations, profits, leaving 50,000 consumers without power throughout and cash flows. eastern Santiago, place where a significant amount of commercial and financial activity occurs. A short circuit The core facilities of Enel Chile include generation produced the massive blackout. Damages ascended to power plants and distribution assets. These facilities can US$ 5.8 million. Chilean authority fined Chilectra (now Enel sustain damage from earthquakes, floods, fires and other Distribución, 6,000 monthly tax units (UTM, in its Spanish catastrophic disasters, either natural or humanmade, as acronym), almost $ 277.1 million as of December 31st, 2016. well as vandalism, mutinies, and terrorism. A catastrophic event could cause interruptions in the to financing new projects and capital expenditures and business and significant reductions to revenues due to those associated to refinancing maturing debt; we are also reduced demand or significant additional costs not covered subject to debt obligations, which could affect the liquidity We are subject to financing risks, such as those associated by insurance clauses regarding business interruptions. of Enel Chile. There might be delays between a significant accident or catastrophic event and final reimbursements covered by As of December 31st, 2016, the combined debt of Enel Chile the insurance policies in place at Enel Chile, which usually amounted to $ 820 billion. include a deductible and maximum amount per claim. The maturity profile is as follows: • $ 18 billion in 2017; • $ 16 billion from 2018 to 2019; • $ 15 billion from 2020 to 2021; and • $ 771 onwards. Some of the debt contracts are subject to (1) compliance with financial ratios, (2) covenants, (3) events of default, (4) events of acceleration of debt due to non-compliance with contractual conditions, among others. A sizable portion of the subsidiaries’ financial debt is subject to cross-default clauses with different definitions, criteria, materiality limits and applicability for subsidiaries that may give rise to cross- defaults. If the subsidiaries fail to comply with any of these contractual obligations, creditors and bondholders may demand immediate repayment, and a considerable portion of debt could become payable on demand. 100 Annual Report Enel Chile 2016 It is possible that we do not have the ability to refinance debt Because the generation business heavily relies on or are unable to obtain refinancing on terms acceptable for hydrological conditions, droughts and climate change Enel Chile. In the absence of said refinancing, the company can adversely affect operations and profitability. might be compelled to dispose of assets at unfavorable prices to make the accrued debt payments. Moreover, Enel Approximately 55% of combined generation installed Chile may not sell these assets quick enough or for as much capacity in 2015 was hydroelectric. Therefore, extreme as needed to make such payments. hydrologic conditions and climate change could negatively affect the business, as well as operational results and The company might also not have the ability to obtain financial condition of Enel Chile. In the previous years, funds required to complete projects under construction or results have been affected by hydrologic conditions in development. Also, market conditions at the time funds are Chile, since they have been below the historical average. required, or other unforeseen extra costs could compromise the ability of Enel Chile of financing these projects and Below-average hydrological conditions not only reduce investments. the ability to operate the hydroelectric plants entirely but also increase the costs of water and water transportation Enel Chile’s inability to finance new projects and capital for cooling purposes to the San Isidro thermal plant. investments or refinance existing debt could adversely Enel Generación Chile has signed agreements with the affect its operational results and financial condition. Chilean government and local farmers regarding the use Enel Chile may not be able to make appropriate periods of drought. If drought conditions persist or of water in hydroelectric generation, especially during acquisitions. worsen, pressure from the Chilean government or third parties to further restrict the use of water may increase. The company continuously verifies the perspective (For more information on water rights agreements, see of acquisitions that may increase market share or “Item 4. Company Information – B. Business Summary – complement existing business units, but cannot guarantee Water Rights). Droughts may also affect the performance that appropriate acquisition deals will be identified and of thermal plants, including facilities that use coal, diesel, carried out in the future. The acquisition and integration of or natural gas as fuel, in the following ways: independent companies not controlled by Enel Chile are generally a complex, costly, and time-consuming process, • During periods of drought, thermal plants are used which requires considerable effort and expenses. If an more frequently. Since operating expenses in thermal acquisition is completed, the company may incur substantial plants can be considerably higher than in hydroelectric debt and assume unknown obligations, potentially lose plants, operating expenses could increase during these key employees, depreciation expenses related to tangible periods. Also, depending on commercial commitments, assets, and the distraction of management from other electricity might have to be purchased in the spot business concerns. Additionally, any delay or difficulty found market to comply with contractual obligations. The that relates to the acquisition or integration of multiple purchase price may exceed the sale price stipulated operations could have adverse effects on Enel Chile’s in the agreements, thus creating losses in those financial condition or operational results. contracts. For more information on how hydrology affects the business and financial results, see “Item 5: Operational and Financial Revision and Perspectives- A. Operating Results – 1. Analysis of the Main Factors that Affect Operational Results and Financial Condition” – A. Generation Business”. Annual Report Enel Chile 2016 101 • Thermal plants require water for cooling purposes, Government regulations can adversely affect the and droughts not only reduce water availability but also business of Enel Chile. increases the concentration of chemicals, such as sulfates, in water. High chemical concentration in water destined Enel Chile is subject to a wide range of regulations on for cooling purposes increases the risk of damage to the the rates it charges its customers. These regulations can plant’s equipment, as well as the risk of violating important adversely affect the company’s profitability. For example, environmental regulations. As a result, water must the Chilean government may impose electricity rationing be bought from farmlands that also experience water during periods of droughts or prolonged plant failure, which shortages. These water purchases may increase operating could adversely affect the business, operating results and costs and force negotiations with local communities. financial condition of Enel Chile. • Thermal plants that burn gas generate emissions such as Chilean governmental authorities can delay the distribution sulfur dioxide (SO2) and nitrogen oxide (NO) gases. When tariff revision process, or rate adjustments may be operating on diesel fuel, plants also emit particulate matter insufficient to overcome all the company’s expenses. into the atmosphere. Plants that operate on coal emit SO2 Electricity regulations issued by the Chilean government and NO. Therefore, increased use of thermoelectric power may affect the ability of Enel Chile’s generation companies plants in periods of drought increases the risk of emitting of raising enough revenue to cover operating costs. higher levels of pollutants. The droughts affecting the regions where most of the revenue to cover its consolidated operating expenses, it hydroelectric plants are located can last for a prolonged may affect the Company’s operations and could negatively period, and new drought situations may occur in the future. affect the business, financial and operational results in Enel If any of the Group’s companies are unable to obtain enough A prolonged drought exacerbates the risks mentioned above Chile. and will have an additional adverse impact on the business, operational results and financial condition of the company. Also, legislators and administrative authorities often receive proposals for changes in the regulatory framework, and some The distribution business is also affected by climate of these changes could have a material adverse impact on conditions: such as average temperature, which may the business, and affect Enel Chile’s results. For example, an modify heating or air conditioning, which affects energy amendment to the Chilean water rights law in 2005 forces consumption. Even with extreme temperatures, demand the payment of exclusive unused water rights, increasing may significantly increase in a short period, which could the annual cost of maintaining water rights for hydroelectric affect services and may result in service disruptions, which projects that are not technically or economically feasible. In the additional risk of being subject to fines. Depending on August 2016, Enel Generación Chile relinquished its unused climate conditions, Enel Generación Chile’s results may water rights, registering a loss of $ 35.4 billion. significantly vary year to year. In 2015, the CDEC-SING audited the GasAtacama Thermal plant for the Superintendence of Electricity and Fuel (SEC, in its Spanish acronym). In August 2016, the SEC fined GasAtacama 120,000 monthly tax units (UTMs, in its Spanish acronym, approximately $ 5.5 billion as of December 31st, 2016) alleging inexact information provided to the CDEC- SING relating to minimum times and technical minimums required to operate, which implied greater operating expenses in the system. More audits and changes to the minimum operating times and technical minimums may occur in the future. This and any future regulatory changes could affect the company. 102 Annual Report Enel Chile 2016 These changes could adversely affect the business, Regulatory authorities may impose fines on subsidiaries, operational results and financial condition of Enel Chile. which may adversely affect the operational results and financial condition of Enel Chile. The business and profitability of Enel Chile could be negatively affected if water rights are denied or if water In Chile, fines can be incurred for a maximum of 10,000 Annual concessions are granted for a limited time. Tax Units (UTA, in its Spanish acronym) or $ 5.4 billion, using the UTA as of December 31st, 2016. Generation subsidiaries Enel Chile’s water rights are granted by the General are supervised by local regulation authorities and are subject Directorate of Water (DGA, in its Spanish acronym) for the to these fines if, in the opinion of the regulatory entity, the supply of water from rivers and lakes near the production operational failures that affect the normal supply of energy facilities of the company. Under current Law, these rights to the system are the responsibility of the Company; for are (i) unlimited in duration (ii) absolute, and unconditional example, when different agents do not coordinate properly property rights and (iii) are not subject to further dispute. with the system operator. Also, the new transmission law Chilean generation companies must pay an annual license establishes compensation for final customers when power fee for unused water rights. New hydroelectric facilities are supply is interrupted beyond the standard time allowed. required to obtain water rights, whose conditions may affect Compensation is a part of the energy not supplied, with a the design, scheduling, or profitability of a project. minimum value between 20,000 UTA ($ 11.1 billion as of December 31st, 2016) and revenue from energy sales from Also, the Congress of Chile is currently analyzing the previous year, in the case of generators. amendments to the Water Code to prioritize the use of water by defining its access as a human right that must be guaranteed by the State. The amendment states that the use of water for human consumption, domestic subsistence and sanitation will always take precedence, in both granting and limiting the use of exploitation rights. Under this proposal: (i) concessions in the use of water would be limited to 30 years, extendable in relation to water rights effectively used during the 30-year period, unless the DGA can prove that the water rights have not actually been used, (ii) new non-consumptive water rights would expire if the holder does not exercise the rights within eight years; (iii) unused existing non-consumptive water rights would expire within eight years from the date of enactment of the new Water Code; and (iv) towards the end of 2015, a new requisite was added regarding the existence of an ecological flow for current and future water rights for consumptive and non-consumptive water usage, which would reduce water availability for generation purposes. Any limitations on current water rights, the need for additional water rights or water concessions of unlimited duration could have an adverse effect on the Company’s hydroelectric projects under development and profitability. Any limitations on the current water rights of Enel Chile or any need for additional water rights or water concessions of unlimited duration could have an adverse effect on the Company’s hydroelectric projects under development and profitability. Annual Report Enel Chile 2016 103 As of December 31st, 2016, Enel Distribución Chile has five Operating Results of Subsidiaries. The ability of subsidiaries outstanding fines from the SEC amounting to $ 1.8 billion, to pay dividends or make loan payments or other mainly due to regulation infractions related to the quality distributions to Enel Chile is limited by its operational results. and continuity of services during previous years and failures If any subsidiary’s cash needs exceed its cash available, the in two substations. The fines have not been paid yet, as combined entity cannot deliver cash to Enel Chile. appeals were submitted to the Electricity Authority and Courts of justice. For more information on fines, see Note Any of the situations described above can adversely affect 35 of Notes to Consolidated Financial Statements. the business, operational results and financial condition of Enel Chile. The Company depends on payments from subsidiaries, jointly-controlled entities, and affiliated companies to meet payment obligations. The company is partially dependent on cash received as dividends, loans, interest payments, capital reductions and other payments from subsidiaries to pay its obligations. The ability of subsidiaries to pay dividends, loans and other distributions to Enel Chile is subject to legal limitations such as dividend restrictions, fiduciary duties and contractual restrictions that may be imposed by local authorities. In the past, Enel Chile has been able to access subsidiaries’ cash flows, but future political and economic uncertainties, such as government regulations, economic conditions, and credit restrictions could affect future operational results, and Enel Chile may not be able to rely on the cash flows of these operations to pay the Company’s debt. Limits on dividends and other legal restrictions. The ability of any subsidiary that is not 100% owned by Enel Chile to deliver cash payments to the Company may be limited by fiduciary duties of Directors to the minority shareholders of these entities. Moreover, some subsidiaries may be required by law and applicable regulations to decrease or eliminate dividend payments. Because of these restrictions, subsidiaries may, under certain conditions, be prevented from delivering cash payments. Contractual Restrictions. Restrictions on dividend distribution included in some of the subsidiaries’ credit agreements may prevent dividends or other payments to shareholders if certain financial ratios are not met. In general, the credit agreements of Enel Chile prohibit any distribution if the company is in default. 104 Annual Report Enel Chile 2016 Exchange rate risks can adversely affect results and the The financial condition or operational results could be U.S. dollar value of dividends payable to ADS holders. adversely affected if Enel Chile does not achieve a positive outcome in the defense of these litigation cases or other The Chilean peso has been subject to devaluations and claims and proceedings against the Company. For more appreciations against the dollar and may have significant information on litigation, see Note 33.3 of “Notes to fluctuations in the future. Historically, a significant portion Combined Financial Statements. of combined debt has been denominated in U.S. dollars. Even though a substantial part of income is linked to the Long-term energy supply contracts of subsidiaries dollar (mainly in the generation business), the Company are subject to market price fluctuations of certain generally has and will continue to be considerably exposed commodities and other factors. to fluctuations in the peso against the U.S. dollar because of time lags and other limitations on adjusting rates to the In the generation business, the Company is economically dollar. exposed to fluctuations in the market price of determined products, because of the long-term energy sales contracts An important portion of operational cash flow is tied to signed. Currently, 83% of annual expected generation is sold the dollar. Therefore, Enel Chile aims to keep debt, in under contracts with a duration of at least 5 years at least. the Company and its subsidiaries, in one same currency; The company also has material obligations under long-term, however, due to market conditions, this may not be possible. fixed-price electricity contracts, such as the sale of parts. Because of this exposure, cash generated by subsidiaries Prices in these contracts are indexed to the price of different could materially decrease as the local currency depreciates raw materials, exchange rates, inflation and the market price against the U.S. dollar. Future volatility in the exchange rate for electricity. Any adverse changes to these indices would of the currencies in which we receive revenues or incur reduce the rates the Company charges in its long-term, expenditures may affect our business, operational results fixed price electricity sales contracts could adversely affect and financial condition. the business, operational results and financial condition of We are involved in various litigation proceedings. Enel Chile. In the distribution business, the company is also exposed Enel Chile is currently involved in various litigation fluctuations in the price of energy. During 2016, some proceedings that may result in unfavorable decisions or customers were capable of choosing their rate, under financial penalties against the company. The company will Chilean law, and even though they chose regulated rates continue to be subject to future litigations that could have in the past, opted for unregulated rates. These customers, negative consequences for the business. either directly or in association with other customers, are tendering their energy needs given current rates, which are comparatively lower than regulated rates, which have generally been based on tendered contracts in the past at higher rates. Lower prices in the market could reduce the number of customers that choose regulated rates, and could opt for an energy provider, which would reduce the number of customers. This could adversely affect the business, operational results and financial condition of the Company. Annual Report Enel Chile 2016 105 The controlling shareholder could have substantial Environmental regulations for current and future generation influence over the Company and could have differing capacity may become more stringent, which would require strategic visions with minority shareholders regarding increased capital investments. For example, Decree No the company’s development. 13/2011 of the Ministry of the Environment, enacted in January 2011 and published in June 2011, set stricter emission Enel owns 60.6% of the Company’s share capital. As the standards for existing thermoelectric plants which must be controlling shareholder, Enel may determine the outcome of met between 2014 and 2016, and even stricter standards almost all important matters that require shareholder voting, for new facilities or additional capacity. This regulation such as the election of Board members, and, subject to legal also requires the establishment of a continuous emission and contractual obligations, the dividend policy. Enel can monitoring system, under which thermoelectric plants must also exert influence over operations and business strategy. carry out a monitoring system abiding by protocols and Enel’s interests may in some cases differ from the interest guidelines issued by the Environmental Superintendence. of minority shareholders. For example, Enel conducts its In abiding by new environmental regulation, all its commercial operations in the field of renewable energy thermoelectric plants must invest incrementally to install sources in Chile through Enel Green Power S.p.A., in which reduction systems to control their emissions. For example, the Company holds no capital interest. Any present or future the Company is adapting the Tarapacá thermoelectric plant conflict of interest affecting Enel could be resolved against by installing a desulphurizer and measures to reduce nitrous the company’s interest in these matters. Therefore, growth oxide emissions. may be limited, which could adversely affect the business and operational results of Enel Chile. Environmental regulations and other factors can cause delays, prevent the development of new projects or increase operating expenses and capital expenditures. Subsidiaries are subject to environmental regulations, which, among other things, require environmental impact studies for future projects and permits from both local and national regulatory entities. Approval of these environmental impact studies may take longer than originally planned, and may also be retained by government authorities. Local communities, ethnic groups, or environmental activists, among others, could intervene in the approval process to delay or prevent the development of projects. They can also seek legal or other actions, with adverse consequences if they are successful. 106 Annual Report Enel Chile 2016 Any delay in complying with environmental standards The Company could incur additional expenses to remedy constitutes a violation of regulations that establish effective and implement an asbestos sanitation and control policy, or emission limits on June 23rd, 2015 or June 23rd, 2016, otherwise be subject to legal actions against the Company, depending on the plant’s location; failure to certify the correct which could have an adverse effect on the operational implementation of these monitoring systems can result in results and financial condition of Enel Chile. penalties. For example, during 2016, Enel Generación paid fines of $ 1.1 billion related to exceeding emission limits or Besides environmental concerns, other factors that could failing to send reports for the Bocamina, Huasco and Diego affect the Company’s ability to build new facilities or de Almagro plants in previous years. complete existing projects in time exist, which include Currently, the Ministry of Environment is working on a new increases in the price of equipment, materials, or labor; prevention and decontamination plan and new mitigation strikes; adverse climatic conditions and natural disasters, plans to comply with the Paris Treaty on climate change, and accidents and other unforeseen events. Any such which could modify Decree 13/2011, and even further event can adversely impact operational results and financial delays in obtaining regulatory authorization, shortages or restrict emission standards for thermoelectric plants, which condition. could mean additional investments in the future. Delays or modifications to any project and changes in laws In September 2014, the Chilean government enacted Law and regulations or their interpretations can adversely affect No 20,780 (fiscal law reform) which established an annual operations or plans for companies of vested interest to Enel tax on conventional electricity generators, such as thermal Chile, which could adversely affect the Company’s business, generators, based on their polluting emissions from the operational results and financial condition. previous year, which will be in force by 2018. In December 2016, the Ministry of Environment published a list of all Our business may be adversely affected by judicial thermal generators to be affected by this tax, and it includes decisions on environmental qualification resolutions for all the Company’s thermal plants. These plants must report electricity projects in Chile. their emissions during 2017 and will have an additional tax in 2018. The cost of this tax could increase in the future, The time required to obtain an environmental qualification discouraging thermal generation as the costs of operation resolution for an electricity generation or transmission increase. project in Chile has increased significantly, mainly due to legal actions against this type of projects, environmental In December 2016, Enel Generación Chile recorded a opposition, public criticism, and government delays. This penalty of $ 1 billion for the Tames 2 and Totoralillo thermal may cast doubt on the ability of a project to obtain such projects, given that their technology (coal-fueled steam approval and increase the uncertainty of investment in power turbine) have increased costs due to stricter regulation and generation and transmission projects in Chile. Uncertainty uncertain profits, among other reasons. forces companies to reevaluate their business strategies. Annual Report Enel Chile 2016 107 Power plant projects can face significant opposition Current operations in thermal plants may affect the from different groups that may delay their development, Company’s reputation with stakeholders because of increase costs, and tarnish, or potentially damage, the reputation and image of Enel Chile the in the eyes of its particulate matter, SO2 and NO2 emissions, which could be detrimental to the environment. stakeholders. Reputation is the foundation of the relationships the pressure on regulators, creditors, and other stakeholders, Company has with its stakeholders and other interested and may ultimately lead to projects and operations not being Damage to the Company’s reputation may put considerable parties. optimally developed, leading to a decrease in stock value, causing difficulties in attracting or retaining talent, which If the company cannot effectively manage problems or may result in damage to the Company’s name with these identify those that could negatively affect public opinion stakeholders. towards the Company, and adversely affect the operational results or financial condition of Enel Chile. The development of existing and new generation plants may encounter opposition from various interest groups, such as ethnic and environmental groups, landowners, farmers, local communities and political parties, among others, which may affect the reputation of the Company in charge of the plant and its image. For example, since December 2013, the Bocamina II plant power has encountered considerable opposition from local fishermen unions, who claim that generation plants damage marine life and cause pollution, which led to the interruption of operations for more than one year. On July 1st, 2015, Bocamina II resumed operations, after the approval of a new RCA in April 2015. Also, between November 23rd, 2015 and January 7th, 2016, a new group of fishermen illegally occupied the first high voltage tower, which supports the 154 kV and 220 kV circuits owned by Transelec S.A., which feed power plants Bocamina I and Bocamina II. As a consequence, Bocamina I and Bocamina II ceased operations temporarily. This group asserted that they should receive the same benefits package that Endesa Chile (now Enel Generación Chile) granted to the rest of the zone’s fishermen. The financial outcome of temporary interruption in electricity supply and illegal occupation amounted to US$3.8 million, ($ 2.3 billion, using end-of- year 2016 exchange rate) of the loss of contribution margins between November 23rd, 2015, and January 7th, 2016. At the electricity system level, this incident affected the increasing global costs of supplying demand and increased the spot price and expected use of hydroelectric reserves. These groups and other similar groups could block the plants and directly affect the results of Enel Chile. 108 Annual Report Enel Chile 2016 The business may experience adverse consequences if the Company is unable to reach satisfactory collective bargaining agreements with workers. A significant percentage of employees are unionized and have collective bargaining agreements, which must be renewed on a regular basis. The Company’s business, financial condition, and operational results may be adversely affected if agreements with any of the unions that represent employees fail, or if an agreement with a workers’ union contains conditions deemed unfavorable by the Company. Chilean Law establishes legal mechanisms so that judicial authorities impose labor agreements if the parties are incapable of reaching agreements on their own, which may increase costs beyond what is budgeted. Also, many employees have highly specialized skills, and certain incidents such as strikes, abandonment of duties or suspensions by employees may adversely affect the Company’s operational performance and financial condition, as well as reputation. Interruption or failure of the information technology and communication systems or external attacks or invasions to these systems could have an adverse effect In recent years, global cyber-attacks on security systems, on operations and results. IT systems, and financial operations have intensified. Enel Chile is exposed to cyber-terrorist attacks that aim to Enel Chile relies on information technology, communication damage the Company’s assets through computer networks, and process systems (“IT systems”) to operate the cyber-espionage in search of strategic information that may business, so any failures in these systems could adversely be beneficial for third parties, and cyber-theft of confidential affect the Company’s businesses, financial condition, and information, including information of Enel Chile’s customers. operational results. The company is exposed to several types of cyber-attacks, including massive attacks that cause services to become IT systems are essential for generation subsidiaries’ unavailable to users and attacks that target domain systems ability to monitor the operations of power plants, maintain which can prevent access to certain useful websites. generation and network performance, properly generate invoices for customers, achieve operational efficiency Enel Chile has suffered cyber-attacks by cyber-terrorists in and meet operational objectives and service standards. the past, which resulted in service interruptions. More cyber- Distribution subsidiaries can also be affected as they heavily attacks can occur and may adversely affect the Company in rely on IT systems to monitor networks, bill millions of the future. customers and maintain its customer service platforms. Temporary or long-term operational failures in any of these IT systems could have material adverse effects on operating results. Additionally, cyber-attacks could have an adverse on the company’s image and relationship with the community. Annual Report Enel Chile 2016 109 The Company trusts electricity transmission services it Also, increases in new non-conventional renewable energy does not own or control. If these facilities do not provide (ERNC, in its Spanish acronym) projects is congesting an adequate transmission service, delivering energy current transmission systems, as these projects are built sold to end customers may not be possible. relatively quickly, while construction of new transmission projects may take longer. In May 2014, the government of To deliver the energy it sells, Enel Chile depends on Chile announced the Energy Agenda, a plan that establishes transmission systems belonging to other unrelated the creation and implementation of a long-term energy companies and operated by them. This dependency exposes policy, which includes amendments to the legal framework the Company to several risks. If transmission is interrupted of energy transmission, mainly the interconnection between or transmission capacity is inadequate, recovering the cost the Central Interconnected System (“SIC”) and the Norte of sales and profits may be insufficient. If restrictive pricing Grande Interconnected System (“SING”). regulation is imposed on transmission, the transmission companies that Enel Chile relies on may not have sufficient On September 24th, 2011, approximately 10 million people incentives to invest in expanding transmission infrastructure, in central Chile experienced a blackout (affecting more than which may adversely affect operations and financial results. half the inhabitants of Chile) due to a failure in Transelec’s Currently, construction of new transmission lines is delaying 220 kV Ancoa substation, which produced an interruption more than in the past, mainly due to new social and in the SIC 500 kV double circuit line and the subsequent environmental requirements that are creating uncertainty failure of the remote recovery computer software used by regarding the probability of completing the projects. the Economic Cargo Dispatch Center (CDEC, in its Spanish acronym) to operate the grid. This blackout, which lasted two hours, exposed the transmission system’s fragility, and the need to increase investment in expansion and technological improvements to increase the transmission grid’s reliability. 110 Annual Report Enel Chile 2016 Chilean securities markets may also be affected, to different degrees, by the economy and market conditions in other Latin American countries, other emerging markets and the rest of the world. Even though economic conditions in these countries may differ significantly with conditions in Chile, investors’ reactions to evolution in any of these countries may have an adverse effect on the market’s value and liquidity of Chilean issuing instruments. An increase in perceived risk associated with investment in Latin American countries may discourage capital inflow to Chile and negatively affect the Chilean economy in general, but investors’ interests in stock of Enel Chile or ADSs in particular. No guarantees exist in any potential market for shares and ADSs on liquidity or price. Lawsuits presented against the Company outside Chile or claims against Enel Chile based on foreign legal concepts may be unsuccessful. All the Company’s assets are located outside the United States. All board members and all senior executives reside outside the United States, and most of its assets are located outside the United States. If any shareholder were to file a lawsuit in the United States against any board member, Any similar interruption or failure in transmission facilities senior executive or expert of Enel Chile, pursuing legal could disrupt the business, adversely affect operational process within the United States against such persons, or results and financial condition. enforce a judgment rendered in the courts of the United States or Chile based on civil liability provisions of federal The relative liquidity and volatility of the Chilean securities laws in the United States, it could be hard to securities market could negatively affect the price of achieve. Also, there is doubt as to whether an action could stock and ADS. be brought successfully in Chile on the basis of liability based solely upon the civil liability provisions of the United Chilean securities markets are substantially smaller and States federal securities laws. illiquid than major securities markets in the United States. Also, Chilean markets may be affected by incidents in other emerging markets. Illiquidity may impair ADS holders’ ability to sell common stock withdrawn from the ADS program to the Chilean market in the amount, price and time of their convenience. Annual Report Enel Chile 2016 111 112 Annual Report Enel Chile 2016 Corporate Reorganization Annual Report Enel Chile 2016 113 114 Annual Report Enel Chile 2016  Corporate Reorganization The reorganization proposal, which concluded with the this first stage, Enersis was also divided creating a creation of Enel Chile, began in April 2015 when the new company named Enersis Chile S.A. (currently Enel Board of Directors of Enersis S.A. informed its intention Chile). The existing Enersis changed its name to Enersis to study a reorganization process with the purpose of Américas S.A. (currently Enel Americas S.A.) to control separating generation and distribution activities carried Enel Group’s businesses in other countries in the region. out in Chile from those conducted in the rest of the region. The Boards of Empresa Nacional de Electricidad On March 1st, 2016, having complied with the conditions S.A (Endesa Chile, currently Enel Generación Chile) precedent, the Division of Enersis S.A. took place, and and Chilectra S.A (currently Enel Distribución Chile) in on that same day, Enersis Chile S.A. (currently Enel Chile) April 2015, also agreed to begin studies to analyze the was created. potential reorganization that would later determine the spin-off of each company, Endesa Chile and Chilectra The objective of the reorganization is, on the one hand, Chile, respectively. to differentiate the geographical areas that currently have different growth drivers allowing to offer a service that Both the Board of Directors and the Directors’ Committee focuses on the problems and opportunities of each region. reviewed the background information and, by a majority of On the other hand, continue simplifying the structure of its members, resolved that the reorganization operation, the Group in Latin America reducing the consolidation of as it was proposed, would contribute to the best interest minority shareholdings and improving the alignment with of the Company. strategic interests; and finally, implement a strategy that allows increasing operational efficiency, business growth The Reorganization was performed in two stages: first, and also have a differentiated shareholder return policy. separating the Chilean activities from the activities performed in other countries by dividing Endesa Chile Later, during the second stage, on December 1st, 2016, and Chilectra, and creating two new companies (Endesa these three companies with assets outside Chile merged Américas S.A. and Chilectra Américas S.A.). During into Enersis Américas S.A. (currently Enel Americas). Annual Report Enel Chile 2016 115 116 Annual Report Enel Chile 2016 Industry Regulation and Electricity System Operation Annual Report Enel Chile 2016 117 Enel Chile, its subsidiaries and jointly controlled From a physical point of view, the electricity sector in Chile companies participate in the generation, transmission, is divided into four interconnected electricity systems: the distribution, and trading of electricity in Chile. The Central Electricity Grid (SIC in its Spanish acronym), the following is a summary of the main legal bodies that Northern Electricity Grid (SING in its Spanish acronym), regulate the industry, its structure, and operations. and two medium-sized isolated systems in Aysén and Regulatory Framework Magallanes. The SIC is the main grid and extends 2,400 km from Taltal in the north to Quellón on the island of Chiloé to the south. The SING covers the northern part of the country, from Arica to Coloso, and extends 700 km. The interconnection of the SIC and the SING is currently under development. The electricity industry in Chile is divided into three Chile’s electricity sector is regulated by the Chilean segments or businesses: generation, transmission, Electricity Law, included in the Ministry of Mining and distribution. Operations are interconnected and in DFL No 1, 1982, whose restated and coordinated text coordination. The main objective is to supply electricity was determined by the Ministry of the Economy DFL at the minimum cost with certain safety and quality No 4, 2006 (the “Electricity Law”) and its corresponding standards required by electricity regulation. Transmission regulations included in DS No 327, 1998. Three and distribution activities are considered natural government entities are responsible for the application monopolies and are therefore regulated as such. The and compliance with the Electricity Law: the National industry regulation determines free access to electricity Energy Commission (CNE in its Spanish acronym), networks and regulated tariffs. which has the authority to propose regulated tariffs and to prepare indicative plans for the construction of new According to the Electricity Law, the Chilean electricity generating units; the Superintendence of Electricity market is coordinated by an independent public entity, and Fuels (SEC in its Spanish acronym), which controls the National Electricity Coordinator whose purpose is and monitors compliance with the laws, regulations to operate the existing Central Interconnected System and technical standards for electricity generation, and Northern Interconnected System, soon the National transmission and distribution, liquid fuels and gas; and Interconnected System, efficiently and safely. The lastly, the Ministry of Energy, which is responsible for National Electricity Coordinator is also responsible for proposing and conducting public policies regarding the calculation of the marginal hourly cost, which is the energy and oversees the SEC, CNE and the Chilean price of energy transfers between electricity generation Nuclear Energy Commission (CChEN in its Spanish companies. acronym), strengthening coordination and allowing for an overall view of the sector. The Ministry of Energy also oversees the Energy Efficiency Agency and the National Center for Innovation and Development of Sustainable Energies (CIFES in its Spanish acronym) that replaced the Center for Renewable Energies (CER in its Spanish acronym) in November 2014. The law also establishes the existence of a panel of experts whose primary objective is to solve the discrepancies between the different electricity market players: electricity companies, system operator, and regulatory entities, among others. 118 Annual Report Enel Chile 2016 Limits to integration and concentration (ii) Distribution companies: They supply their regulated customers through public tenders regulated by the CNE, and supply their free or nonregulated customers through bilateral contracts. (iii) Spot or short-term market: It refers to the transactions of energy and capacity between generation companies In Chile, competitive market legislation along with specific resulting from the efficient operation of the system which regulation applicable to the electricity industry, define is coordinated by the National Electricity Coordinator. The criteria to avoid certain levels of market concentration surplus (deficit) of production after supplying customer and abusive practices. commitments are transferred by selling (buying) to (from) other generators connected to the system. Electricity Companies are allowed to participate in the different transfers are priced at the marginal cost of the system. industry segments (generation, distribution and Capacity transfers are carried out at the corresponding commercialization) in so far an adequate level of corporate node price, as set every semester by the authority. and accounting separation exists. The transmission sector is where most restrictions are imposed, mainly due to the In Chile, capacity payments to each generator depend nature of the activity and the need to guarantee adequate on the calculation performed annually by the National access to all players. The electricity law defines limits to Electricity Coordinator, which determines the firm the market share of the domestic transmission business capacity of each power plant. Firm capacity does not that generation companies and distribution companies depend on power plant dispatch. may have and prohibits transmission companies from participating in the generation and distribution segments. Electricity Generation Segment The operations of generation companies are conditioned by the system coordinator’s Operations Plan, although they may freely decide whether to sell their energy to either regulated or nonregulated customers. Any surplus or deficit between sales and production is sold to or bought from other generators at the spot market price. A generation company may have the following types of customers: (i) Free or nonregulated customers: They are customers whose connected capacity is greater than 5,000 kW, mainly industrial and mining companies. These customers may freely negotiate their electricity supply prices with generators or distributors. Customers whose connected capacity ranges between 500 and 5,000 kW may choose to negotiate prices with their suppliers or be subject to regulated tariffs, for a minimum of 4 years in either regime. Annual Report Enel Chile 2016 119 Non-conventional renewable energies Law No 20,257 enacted in April 2008 creates incentives to use non-conventional renewable energies (NCRE). Electricity Transmission Segment This rule determines that by 2014, 5% of energy Transmission systems are comprised of lines and commercialized by generators must be renewable and substations that are not distribution installations. They must increase 0.5% every year from 2015 until 2024 to are divided into five segments: National Transmission, reach 10%. This law was modified in 2013 by Law No Development Pole Transmission, Zonal Transmission, and 20,698, called the 20/25 law, establishing that by 2025, Dedicated Transmission. International Interconnection 20% of the electricity matrix must be covered by NCRE Systems also belong to the transmission segment and sources. For contracts in force up to July 2013, the are ruled by specific regulation. withdrawals established by the previous law are to be respected. Transmission installations are open access to any user that requests it, without discrimination. The compensation for existing transmission installations, either national or zonal, is determined through a tariff setting process performed every four years. This process determines the Transmission Value Added, based on efficient operations and management costs and an annual charge to cover the investment, determined by a discount rate (minimum 7% after tax) set by the authority every four years based on a study and the useful life of assets. The development of the national and zonal transmission systems is determined by a regulated and centralized process carried out by the National Coordinator, which presents an expansion plan every year, and that must be approved by The National Energy Commission. The expansion of both systems is implemented through open bids. It discriminates between new transmission facilities that are awarded through open bids to any supplier and expansion projects of existing facilities that have an owner and therefore the expansion belongs to such owner. The remuneration of the expansion of existing facilities is determined by the outcome of the bid and represents the income for the first 20 years of operations. From year 21 on the remuneration of such transmission facilities is determined as existing assets. 120 Annual Report Enel Chile 2016 Electricity Distribution Segment regulated by law. The conditions of service provided to unregulated customers are freely negotiated and agreed upon in bilateral contracts between the customer and the electricity company (generation or distribution companies). Regarding the electricity service to regulated customer, For regulatory purposes, the distribution segment is the law determines that distribution companies must defined as all electricity supplied to end customers, at permanently provide electricity and through open, non- a voltage not exceeding 23kV. Distribution companies discriminatory, and transparent public tenders. These operate under the framework of a public service tenders are designed by the CNE and are carried out concession, having the obligation to provide electricity to at least five years in advance to award 20-year term regulated customers at regulated tariffs. contracts. If demand changes unexpectedly, the authority Consumers are classified according to the size of their regulated procedure to remunerate non-contracted has the power to call a short term tender and also a demand into regulated customers and nonregulated electricity sales. customers. Regulated customers are those whose connected capacity is under 5,000 kW. Customers with The processes for setting distribution tariffs are carried connected capacity from between 500 and 5,000 kW out every four years to establish the distribution value may choose between a regulated price scheme and an added based on the fixed costs, average energy losses, unregulated price scheme. and standard distribution costs of model companies. The Distribution companies supply electricity to both to the characteristics of their service area, hire an regulated and unregulated customers. Service to independent consultant to carry out studies to determine regulated customers is provided under conditions the distribution value added. The final distribution value CNE and the distribution companies, grouped according added is determined as a weighted average, one-third of the value estimated by the study of the companies and two-thirds by the CNE. The CNE then determines the basic tariffs and verifies that the aggregate return of the industry is within the 10% plus/minus 4% range. Additionally, every four years, when the distribution value added is being calculated, the related services, as determined by the Antitrust Court to be subject to price regulation, are reviewed. The Chilean distribution model is a consolidated model, because to this date, eight price-settings processes have been carried out since the privatization of the sector. Annual Report Enel Chile 2016 121 Regulatory Issues 2016 National Energy Policy Law No 20,928 - Tariff Equality Law On May 15th, 2014, the Minister of Energy released On June 22nd, 2016, the Ministry of Energy published the “Energy Agenda,” a document outlining general Law No 20,928 in the Official Gazette, establishing guidelines for the energy policy of the new government. tariff equality mechanisms for electricity services, In this context, on February 29th, 2016, the Ministry of amending the Electricity Law (DFL No 4) of 2006. This Energy published in the Official Gazette the approval of law states that the maximum tariffs that distribution the National Energy Policy contained in the document companies may charge to residential customers must entitled “Energía 2050: Política Energética de Chile” not exceed the average national tariff by more than (the “National Energy Policy”), establishing a long-term 10%. The differences arising from the application of this strategy for the electricity sector. The National Energy mechanism will be progressively absorbed by the rest of Policy is based on four pillars: Safety and Quality of Supply, the customers subject to regulated prices that are under Energy as a Development Engine, Compatibility with the the aforementioned average, except for those residential Environment, and Efficiency and Energy Education. customers whose monthly average consumption of energy in the prior calendar year was lower than or equal to 200 kWh. The Law also establishes a discount on the energy component of the node price that distribution companies supply to regulated customers located in districts with intensive energy generation and that are part of a grid with more than 200 MW of installed capacity. 122 Annual Report Enel Chile 2016 Law No 20,936 – Transmission Law Distribution Law On September 29th, 2016, the Seminar entitled “The Future of Electricity Distribution” took place formally On July 20th, 2016, the Transmission Law was opening the discussion on the new national electricity published in the Official Gazette, restructuring the distribution law. electricity system operation model, introducing a single The process was led by the Secretary of Energy in independent national operating agent (without prejudice collaboration with the university Pontificia Universidad to the continued existence of some medium and isolated Católica de Chile. During November and December 2016, electricity systems)that replaces the Economic Dispatch and until late January 2017, workshops were carried out Center, CDEC (in its Spanish acronym). Also, the Law discussing the following issues: “Development of the assigns the government a key role in transmission distribution network”, “Financing the Network of the planning and subsequent bidding and awarding of new Future and its Tariff Structure”, “Electricity Distribution projects and expansion projects. Open access is granted Business Model”, and “Services offered by the Network to all transmission facilities. The Law, among other of the Future”. relevant aspects, unifies all transmission segment’s qualification processes in a single process and modifies the remuneration scheme by applying a stamped rate to the demand side. Annual Report Enel Chile 2016 123 Tariff Revisions and Supply Processes Transmission Tariff Setting and the terms for the “Cost Study of Services related to Electricity Distribution”. The CNE defines six Typical Areas, each with separate tariffs, and Enel Distribución Chile was categorized within Typical Area No 1, as in the prior tariff process, reflecting the higher density of its network and, therefore, lower costs as compared to other companies in the industry. The subsidiaries Empresa Eléctrica de Colina and Luz Andes were categorized, as in the prior tariff process, within Typical Areas No 4 and No 2, respectively. In February 2016, the CNE published in the Official Gazette, Exempted Resolution No 83 containing the list of the qualified independent consulting firms eligible to be chosen by the distribution companies to carry out the tariff studies. In April 2016, Enel Distribución Chile In 2012, the tariff setting process for distribution and selected Consultor Systep Ingeniería y Diseños S.A. to distribution-related services to be applied for the 2012 – carry out the Distribution Value Added 2016 – 2020 Study. 2016 period was carried out. The results of the process were published in the Official Gazette through Decree No On September 5th, 2016, Enel Distribución Chile submitted 1T. As determined by the regulation, such tariffs were the tariff study to the government authority as required effective until November 3rd, 2016. by Law. In late 2015, the National Energy Commission (CNE in its The 2016-2020 tariff setting process is currently in Spanish acronym) began the 2016 – 2020 tariff setting progress and will conclude once the tariff decree is process by publishing Exempted Resolution No 699 released and applicable, retroactively, as of November communicating the definition for Typical Areas, the terms 4th, 2016. for the “Distribution Value Added 2016 – 2020 Study”, 124 Annual Report Enel Chile 2016 The tariffs applicable in 2016 to end customers were • On May 23rd, 2016, the Ministry of Energy determined based on the following decrees: published in the Official Gazette, Decree No 4T, setting the node prices for energy supply, i) Decree No 1T published in the Official Gazette on retroactively applied from March 1st, 2016. April 2nd, 2013, set the tariff formulas applicable to • On June 17th, 2016, the Ministry of Energy regulated customers. Tariffs were retroactively applied published in the Official Gazette, Decree No as of November 4th, 2012 until November 3rd, 2016. 7T, setting the node prices for energy supply, ii) Decree No 14 published in the Official Gazette on retroactively applied from April 1st, 2016. April 9th, 2013, set the tariffs and indexation formulas • On August 6th, 2016, the Ministry of Energy applicable to the sub transmission and additional published in the Official Gazette, Decree No transmission systems. Tariffs were retroactively 8T, setting the node prices for energy supply, applied as of January 1st, 2011 until December 31st, retroactively applied from May 1st, 2016. 2015. Subsequently, Decree No 7T extended the • On September 1st, 2016, the Ministry of Energy effective date until December 31th, 2015. published in the Official Gazette, Decree No 9T, iii) Tariff Decrees: a) Average Node Prices: setting the node prices for electricity supply as part of Law No 20,928 on Tariff Equality in relation • On January 4th, 2016, the Ministry of Energy to the Local Generation Acknowledgement, published in the Official Gazette, Decree No retroactively applied from August 1st, 2016. 22T, setting the node prices for energy supply, b) Short-Term Node Prices: retroactively applied from September 1st, 2015. • On July 2nd, 2016, the Ministry of Energy • On January 21st, 2016, the Ministry of Energy published in the Official Gazette, Decree No 5T, published in the Official Gazette, Decree No setting the short-term node prices for energy 24T, setting the node prices for energy supply, supply, retroactively applied from May 1st, 2016. retroactively applied from November 1st, 2015. • As of this date, the decree applicable to • On March 4th, 2016, the Ministry of Energy December 2016 has not been published. published in the Official Gazette, Decree No 1T, setting the node prices for energy supply, retroactively applied from January 1st, 2016. Annual Report Enel Chile 2016 125 Sub Transmission Tariff Setting Notwithstanding the above, on July 20th, 2016, Law No 20,936 was published, setting the new regulatory framework for electricity transmission systems, including sub transmission. According to Article eleven of the transitory provisions of Law No 20,936, the effective date The sub transmission tariffs are set every four years. The was extended again (Decree No 14 of 2012) to December sub transmission entities, grouped by system based on 31st, 2017. the qualification of their facilities as ruled by the National Energy Commission, are subject to a tariff setting Regarding the 2016 – 2017 tariff period, on December process to determine the Sub transmission System’s 29th, 2016 Exempted Resolution No 940 was published, Annual Value, which allows to set the tariffs applicable to which defined the necessary adjustments to Decree No the use of the sub transmission systems. 14 to extend its effective date to include 2016 and 2017. On January 29th, 2015, Law No 20,805 was published in generation power plants from paying for using sub the Official Gazette, which, among other matters, entitled transmission systems if they inject their generation into the Ministry of Energy to extend in one more year the the system through sub transmission lines. The main adjustment is related to exempting electricity effective date of Decree CNE No 14 of 2012, which set the sub transmission tariffs for the 2011 – 2014 period The 2016 – 2019 tariff setting process will continue its (i.e., such decree would be effective for the 2011 – 2015 progress, and in accordance with Article eleven of the period), and also to extend in one more year the effective transitory provisions of Law No 20,936, the results will date of the tariff setting process for the period 2015 – be used for the tariffs to be applied to the 2018 – 2019 2018 (i.e., 2016 – 2019). period. Consequently, on April 22nd, 2015, the Ministry of Energy published in the Official Gazette, Decree No 7T, extending the effective date of the sub transmission tariff decree and expressly stating the tariffs to be applicable as of January 1st, 2016. 126 Annual Report Enel Chile 2016 Tariff Setting of Electricity Distribution-Related Services Electricity Tenders Under the new tender’s law, two processes have been carried out: Supply Tender No 2015/01 and Supply Tender No 2015/02. The 2015/02 process began in June 2015 and ended in October 2015. The outcome resulted in three energy On March 14th, 2014, the Ministry of Energy published in blocks awarded for a total of 1,200 GWh per year (100%). the Official Gazette, Decree No 8T, that sets the prices for The weighted average price of the tender was US$ 79.3 electricity distribution-related services. These prices are per MWh, representing a 30% reduction as compared applicable from the date the decree was published, not to the prices of prior tenders, which indicates that the retroactively, and they are currently still effective. amendments to the Law have effectively reduced prices by increasing competition and reducing risks for During late 2015, the CNE through Exempted Resolution generators. No 699 communicated, among other matters, the terms for the “Cost Study of Services related to Electricity The 2015/01 process began in May 2016 and ended in Distribution Supply” as part of the 2016 – 2020 tariff July 2016. The outcome resulted in five energy blocks setting process. awarded for a total of 12,430 GWh per year (100%) to 84 companies, including new market players, at a weighted The terms identify five new electricity distribution-related average price of US$ 47.6 per MWh. services, of which the most significant are “Construction and installment of temporary junctions” and “Lease of Enel Generación Chile was awarded 5,918 GWh per year, temporary junctions”. which represents 47.6% of the total energy awarded. As of year-end 2016, the decree to set new tariffs has not been published. Annual Report Enel Chile 2016 127 128 Annual Report Enel Chile 2016 Electricity Generation Annual Report Enel Chile 2016 129 The electricity generation business is mainly carried out Hydroelectric sources represent 55% of the Company’s through our subsidiary Enel Generación Chile. consolidated installed capacity, thermal electric sources represent 44% and non-conventional renewable sources The total installed capacity of Enel Generación Chile was 1%. 6,351 MW as of December 2016, consolidated electricity generation amounted to 17,564 GWh, and electricity sales Therefore, the commercial policy defined is relevant to reached 23,689 GWh. manage the Company correctly. The segmentation of the business into hydroelectric and thermal electric generation is natural because the variable costs for each type of generation are different. Thermal generation requires the purchase of fossil fuels and hydroelectricity requires water reservoirs and rivers. Electricity Generation Operations Enel Generación Chile and its subsidiaries have a generating park comprised by 103 units spread out on the Central Interconnected Grid (SIC in its Spanish acronym) and 8 units on the Northern Interconnected Grid (SING in its Spanish acronym). 130 Annual Report Enel Chile 2016 Generation Power Plants of Enel Generación Chile and Subsidiaries Installed capacity (MW) (1) Power Plant Los Molles Rapel Sauzal Sauzalito Cipreses Isla Abanico El Toro Antuco Ralco Palmucho Taltal Diego de Almagro Huasco TG Bocamina San Isidro San Isidro 2 Quintero Ojos de Agua Pehuenche Curillinque Loma Alta Pangue Canela Canela II Tarapacá TG Tarapacá carbón Atacama Total Company Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile Enel Generación Chile GasAtacama Chile GasAtacama Chile Enel Generación Chile GasAtacama Chile Pehuenche Pehuenche Pehuenche GasAtacama Chile GasAtacama Chile GasAtacama Chile GasAtacama Chile GasAtacama Chile GasAtacama Chile Technology Hydroelectric Hydroelectric Hydroelectric Hydroelectric Hydroelectric Hydroelectric Hydroelectric Hydroelectric Hydroelectric Hydroelectric Hydroelectric Fuel/Natural gas Fuel/Natural gas Fuel/Natural gas Coal Fuel/Natural gas Fuel/Natural gas Fuel/Natural gas Hydroelectric Hydroelectric Hydroelectric Hydroelectric Hydroelectric Wind Wind Fuel/Natural gas Coal Diesel /Natural gas 2015 18 377 77 12 106 70 136 450 320 690 34 245 24 64 478 379 399 257 9 570 89 40 467 18 60 24 158 781 6,351 2016 18 377 77 12 106 70 136 450 320 690 34 245 24 64 478 379 399 257 9 570 89 40 467 18 60 24 158 781 6,351 (1) These figures result from the maximum capacities determined by Enel Generación Chile’s Operational Norm No 38 “Regulation for defining maximum capacity in the hydroelectric and thermal plants of Enel Generación Chile, as of December 31st each year. They are the maximum design capacity of the generating units, corroborated with contractual satisfaction guaranteed tests made by the manufacturer of the generating equipment, in most cases. In some cases, the figures of maximum capacity may differ from the capacity declared to the regulatory authority and customers in each country, due to criteria defined by these entities and compliance to the corresponding contractual frameworks. In 2016, electricity sales of Enel Generación Chile and its subsidiaries in the SIC reached 21,588 GWh, which represents a 43% share of total sales on the SIC, including sales to customers and net sales on the spot market. Sales to regulated customers represented 86% of total sales, non-regulated customer sales represented 14% and net spot market sales represented 1%. Also, electricity sales in the SING reached 2,101 GWh in 2016, which represents a 12% share of total sales on the SING. Annual Report Enel Chile 2016 131 Enel Generación Chile and Subsidiaries’ Installed Capacity, Generation and Energy Sales Installed capacity (MW) (1) Installed capacity (MW) (1) Enel Generación Chile Pehuenche S.A. Celta S.A. (3) GasAtacama Total Generation (2) Enel Generación Chile Pehuenche S.A. Celta S.A. (3) GasAtacama (3) Total Sales Sales to end customers Enel Generación Chile Pehuenche S.A. Celta S.A. (3) GasAtacama (3) Spot market sales Total 2015 3,757 699 1,115 781 6,351 2015 10,450 2,959 3,624 1,270 18,294 2015 20,490 281 981 189 1,618 23,558 2016 3,757 699 1,115 781 6,351 2016 11,538 2,369 2,429 1,229 17,564 2016 21,105 340 930 463 852 23,689 (1) These figures result from the maximum capacities determined by Enel Generación Chile’s Operational Norm No 38 “Regulation for defining maximum capacity in the hydroelectric and thermal plants of Enel Generación Chile, as of December 31st each year. They are the maximum design capacity of the generating units, corroborated with contractual satisfaction guaranteed tests made by the manufacturer of the generating equipment, in most cases. In some cases, the figures of maximum capacity may differ from the capacity declared to the regulatory authority and customers in each country, due to criteria defined by these entities and compliance to the corresponding contractual frameworks. (2) Refers to total generation after deducting own consumption and transmission losses. (3) Celta S.A. was absorbed by GasAtacama Chile S.A. on November 1st, 2016. 132 Annual Report Enel Chile 2016  Operational and Commercial Scenario Overall scenario The operations of Bocamina unit 2 were interrupted from December 2013 until 2015 due to legal issues. Later, towards the end of 2014, a Supreme Court ruling set a condition to restarting the operations of the power plant. The condition was to develop an optimization project consisting of techno- environmental improvements. Specifically the installation of advanced technology filters in the water suction process of cooling, a real time air quality control monitoring system and covering the coal fields. The high load factor of the power plant in 2016 is proof that the Company has fully complied with its commitment. The first two projects concluded in 2015 and in 2016 were operational all year. With regard The hydrology in the Central Interconnected System (SIC) to installing a roof on the coal fields, the largest of its was, on average, drier than 2015. This has been the trend kind in Latin America, the north field roofing concluded in over the past seven years, since 2010, experiencing a slight December 2016 and the administrative process with the improvement in 2014 and 2015, which led to a reduction in municipality should authorize operations as of March 2017. the hydroelectric contribution to the system and an increase The construction of the south field roof will begin as soon as in thermal generation in 2016 when compared to 2015. the municipal permission is received. These improvements Notwithstanding the above, generation costs and prices that represents an important portion of the Company’s on the SIC were, on average, lower than in 2015 mainly production and operating margin, particularly in a dry year because: i) fuel prices remained low, even lower than 2015; such as 2016. contribute to the sustainability of Bocamina, a power plant ii) 700 MW of new generation capacity entered the SIC, of which slightly more than 90% was renewable energy with zero variable generation costs, and iii) as in 2015, electricity consumption maintained its slow trend growing less than 2% compared to the previous year. Regarding thermal generation, the greater generation of Bocamina’s units I and 2 contributed to the lower cost of thermal generation in 2016. Bocamina restarted operations towards the end of the first semester of 2015, reached a high load factor from March through December of 2016 and was operational year round. Despite the fact that coal generation is the lowest cost thermal generation source of the system. Annual Report Enel Chile 2016 133 Main events that affected operational and commercial performance Due to the drought that had continued to affect the SIC, Enel Generación Chile signed an agreement with the hydraulic works authority (DOH in its Spanish acronym) overseen by the Ministry of Public Works and with the approval of the agricultural trade associations of the Laja basin, regarding the use of Laja reservoir water, similar to the agreements signed in previous years. This agreement refers to sharing the Laja reservoir when water is scarce due to drought conditions. Although this implies limitations for that both The successful participation of Enel Generación Chile in parties when compared to the original agreements, it offers the power supply bid for distribution companies is worth flexibility to water extraction during critical times (months). highlighting. The Company was awarded most of the energy The advantage of this agreement, is that on the one hand, tendered in the process, which concluded during the second it allows reducing conflict among users when scarcity is semester of 2016. As of today, two tender processes have due to dry conditions and also has a positive impact on Enel been carried out since the new law (Law No 20,805 passed Generación Chile’s generation in the region and therefore on in 2015) applicable to power bids was enacted. The first one the operating margin of the Company. was carried out in 2015 and concluded in October awarding 3 blocks amounting to 1,200 GWh/yr., all renewable energy, The situations Enel Generación Chile has faced, both in the at a weighted average price of 79.3 US$/MWh. This price bidding process previously described as well as the persistent was 30% lower than that the price of the previous tenders. dry weather conditions since 2010 and other unfavorable The invitation to participate in the second bidding process, situations, have allowed to confirm the Company’s strength a considerably larger one, was in May 2015 requesting to successfully perform its operational and commercial offers to be presented in 2016. The process ended in July activities. This is due to the following abilities that deserve 2016, having awarded 100% of the energy tendered in 5 highlighting: i) The Company has very significant generation blocks amounting to a total 12,430 GWh/yr. The contracts capacity, technologically diversified, mainly comprised by have a 20 year term, beginning with 42.5% in 2021 and the efficient hydroelectric and thermal power plants, and high remaining 57.5% in 2022. availability allowing its generation to be highly competitive; ii) The Company’s commercial policy has been designed and A total of 84 companies presented an offer in the 2016 is constantly updated to be coherent with the characteristics bidding process. The companies awarded, including Enel of its power plant’s electricity generation and with an Generación Chile, bid at an average price of about 50 US$/ increasingly competitive market and also aligned with MWh, with a significant participation of renewables, wind electricity industry regulation requirements. The objective and solar, which were awarded a bit more than 50% of total of such policy has been to achieve an attractive return, along energy tendered. Enel Generación Chile was the company with low exposure to hydrology risk and facing significant awarded with the most contracts amounting to a total market competition and supply surplus due to the market 5,918 GWh/yr., almost half (47.6%) of the energy tendered, penetration of NCRE in base generation, and iii) The power to begin supplying in 2022. The advantages of the above plant management policy considers ongoing permanent are two-fold. It allows the Company to renew its contracts optimization to attain high standards of quality, availability, with distribution companies whose contracts were expiring and sustainability by applying operations procedures and during that period and therefore avoiding to be exposed maintenance and modernization programs that fully comply to the spot market where prices are expected to be low with technical and environmental requirements established due to the supply surplus projected for the short and long by environmental and electricity sector regulation. term, particularly for generation technology using renewable sources. It also allows Enel Generación Chile to maintain l, its leadership position in the market, and proving as such, its ability to adapt to the new market scenario, a more and more competitive one with a significant number of new entrants, particularly NCRE generators. 134 Annual Report Enel Chile 2016 Hydrologic condition of the SIC SIC generation and supply costs Year 2016 may be characterized as a dry year, with very The hydrologic condition of 2016 was drier than 2015, little snow melt at the beginning of the year and a low and resulted in higher thermal generation in 2016. Energy level of rainfall the rest of the year. Although the first two supplied by the SIC in 2016 reached 53,799 GWh, 58% quarters had slightly more rainfall than the year before, the thermal and greater than the 49% in 2015. Hydroelectricity accumulated exceedance probability of rivers was just as represented 36%, falling significantly compared to the high, roughly 89% and 87% respectively. This condition 45% the previous year. Regarding thermal generation, coal worsened during the third quarter, and therefore the kept the leading position representing 32% of total SIC recovery of seasonal reservoirs was lower. Consequently, generation, higher than the 27% in 2016. LNG represented the exceedance probability reached 90% that quarter. The 18% compared to 16% in 2015, and diesel and biomass last quarter of the year, the snow melting season, was had a 4% and 3% share, respectively, of total electricity very dry, about 98%, which added to the conditions of the generation. previous quarters, resulted in a 93% average exceedance probability of rivers for 2016, which is the reflection of a In terms of renewable solar and wind electricity generation, much drier year than 2015 and one of the driest years since they maintain their 6% share of total SIC electricity statistics exist. generation, 4% for wind and 2% for solar. Annual Report Enel Chile 2016 135 Electricity generation of Enel Generación Chile represented 33% of the SIC’s total, and was slightly lower than the 34% the previous year. Hydroelectricity amounted to 9,084 GWh, 17% of total generation, lower than the 23% in 2016. Thermal electricity generation of Enel Generación Chile reached 8,724 GWh, which is equal to 16% of total generation and greater than the 5,919 GWh generated in 2016 (11%), to a great extent, due to great coal and natural gas generation. The Company’s coal generation went from 956 GWh in 2015 to 2,995 GWh in 2016. Therefore, the Company’s coal generation represented 6% of the system’s total generation, and natural gas represented 11%. Far behind comes wind generation reaching 110 GWh (0.2%) and fuel oil generation almost null (16 GWh). Enel Generación Chile maintained its leadership position in hydroelectricity reaching 48% of total hydro generation (51% in 2015). The Company also made the greatest LNG generation contribution to the system, representing 58% of total LNG generation. Wind generation of the company reached 110 GWh, 6% of total wind generation on the SIC. During 2016, the average price of fuels decreased when compared to 2015. Coal was the predominant fuel. The price of coal declined 12% from the 93 US$/ton average price in 2015 to roughly 82 US$/ton in 2016. The price of LNG, which followed coal as major fuel in the SIC and the main fuel used by Enel Generación Chile, declined nearly 5% from 240 US$/Dm3 to 191 US$/ Dm3 in 2016. Liquid fuel as an electricity generation source was used very little on the SIC. Its price declined significantly again in 2016, diesel approximately 19% and fuel oil dropped 27%. The average cost of generation and the average price of energy declined again in 2016 when compared to the previous year. With regard to energy, the spot market price at a relevant node in terms of consumption, such as the 220 kV Alto Jahuel Substation, dropped 36% compared to 2015. The annual average price went from 92US$/MWh in 2015 to 59 US$/MWh in 2016. 136 Annual Report Enel Chile 2016 The relevance of liquefied natural gas (LNG) In terms of gas commercialization, Metrogas, Enap and Enel Generación Chile, together exported natural gas to Argentina during the winter season using the existing transportation infrastructure that goes from the Quintero Terminal towards Argentina. This represents an unprecedented event and a significant milestone for Enel Generación Chile in the gas commercialization business. The Company contributed Enel Generación Chile entered the LNG market in 2009 when with 58% of the total 277 MMm3 of gas exported through the GNL Quintero regasification plant began operations, Chile’s central region. which was a project of national interest that required significant public and private commitment to ensure the With regard to the Northern Interconnected System (SING country a supply of natural gas since the Argentine supply in its Spanish acronym), the Company signed a contract had been interrupted. with GNL Mejillones to use the Terminal (TUA) to unload a shipment of LNG. This transaction allowed renewing natural Metrogas, Enap and Enel Generación Chile, jointly gas sales contracts with industrial customers located in promoted the development of the GNL Quintero Terminal, northern Chile and using natural gas for the generation a construction that has played a crucial role in the supply of units of Enel Generación Chile (Taltal and GasAtacama) energy to the central region of Chile for both residential and connected to the northern gas pipeline network. This has industrial customers and also for the electricity system. enabled the Company to currently be the main industrial gas commercialization firm in northern Chile. In 2016 Enel Generación Chile sold its entire 20% ownership share of GNL Quintero to Enagás, a leader in natural gas infrastructure, for US$ 197 million. This sales agreement with Enagás does not compromise Enel Generación Chile’s contracted regasification rights which amount to 5.4 MMm3/d (37% of the total capacity of the regasification terminal), in force until 2035 that allow the Company to satisfy the gas requirements of its power plants and also to commercialize. In terms of electricity operations, the availability of LNG allowed to compensate for the lower level of hydroelectricity available due to the extremely dry conditions during the year. The rental contracts signed in 2016 with AES-Gener regarding the Nueva Renca thermoelectric power plant were also a contribution allowing this unit to supply the SIC with natural gas fueled electricity in addition to San Isidro and Quintero plants. Total generation of Enel Generación Chile using natural gas (including operations of Nueva Renca) was 5.7 TWh throughout the year, which represented 11% of the SIC’s total annual generation, 16% more than in 2015. Annual Report Enel Chile 2016 137 Regarding LNG commercialization by using trucks as the means of transportation, four satellite regasification plants In the commercial front (PSR in its Spanish acronym) began operations, all related The commercial actions of Enel Generación Chile in 2016 to long term contracts signed by Enel Generación Chile were consistent with its commercial policy whose purpose with the GasValpo gas distribution companies (to supply was to align the joint achievement of the following objectives: La Serena-Coquimbo and Los Andes, in addition to Talca, maintain industry leadership; manage risk properly and the inaugurated towards the end of 2015), Intergas (to supply company’s return facing the unfavorable conditions in the Temuco) and GasStream to supply an industrial customer. SIC during 2016; carry out actions that strengthen customer Enel Generación Chile is pioneer in delivering gas to cities loyalty, search for additional customers and increase internal not connected to a gas pipeline. These events consolidate commercial management efficiency. The main actions taken the Company’s position as a LNG supplier. are described below. In terms of LNG trading activities, Enel Generación Chile With regard to customer contract management, new sold shipments of LNG. electricity supply contracts were signed with important mining and industrial customers, such as, Anglo American During 2016, the Quintero terminal unloaded 39 shipments and others. of natural gas, a total 3,976 Mm3. Of that amount 1,322 Mm3 were for Enel Generación Chile, to satisfy its electricity In August 2016, the results of the electricity supply bidding generation requirements, and also to commercialize. Of the LIC2015/01 for regulated customers in Chile was announced. remaining amount, 870 Mm3 of gas were destined to other Enel Generación Chile was awarded approximately 5,900 partners of the terminal, for electricity generation by other GWh/yr. for a 20 year period between 2022 and 2041. generators connected to the SIC. Within this context, Enel Generación Chile continues consolidating as a relevant player in the gas market in Chile, and a pioneer in developing new activities in gas and LNG commercialization. 138 Annual Report Enel Chile 2016  Annual Report Enel Chile 2016 139 Main progress in 2016: • The Raise Borer machine began the first digging phase of the vertical pique in March. • The excavation of the adduction tunnel downstream in the intake area of the project began in May 2016. • The distributor and the shield of unit 1 were received in June 2016. • The installation of the distributor and shield of unit 1 began in July 2016. • The installation of the structure to install the transmission line began in September 2016. • In November 2016 the tunnel boring machine (TBM) finished the excavation of Ventana Lo Aguirre and began digging the adduction tunnel downstream Ventana Lo Aguirre. Enel Generación Chile Projects under Construction and Optimization Los Cóndores Project The Los Cóndores hydroelectric power plant project is located in the San Clemente district, in the Maule basin and Maule region. The project involves the construction of a pass through power plant with a nominal installed capacity of approximately 150 MW, through 2 vertical axle Pelton units, that will use water from the Maule dam through a 12 km adduction tunnel. The plant will be connected to the national network (SIC) by an 87 km transmission line (2x220kV) to the Ancoa substation. The Environmental Qualification Resolution (RCA in its Spanish acronym) of the optimization project of the power plant and of the transmission line was obtained in November 2011 and May 2012 respectively. In November 2014, Chilean Water Authority (DGA in its Spanish acronym) approved the hydraulic works plan. In late 2016, voluntary easement agreements were reached for 93.2% of the total infrastructure required to connect the power plant to the Central Interconnected System (SIC). The final electricity concession process is underway simultaneously to be used if necessary. 140 Annual Report Enel Chile 2016 • The construction crane has been operational since • The installation of the Johnson filter to unit 1 finished in April. November 2016. The project is being primarily financed with funds generated in June and phase 2 finished in July. internally by the Company. The total investment is estimated to be $407,928 million and $172,479 million were disbursed • The construction of the geodesic structure on the north by December 31st, 2016. coal field finished in December, and should be operational • The improvements to the existing landfill phase 3 finished by 1/31/2017. Optimization of Bocamina Plant’s Second Unit The Bocamina is a coal fired generation power plant located in the Coronel district (Concepción, southern Chile) comprised by two units, 128 MW and 350 MW. Bocamina unit 2 began commercial operations in October 2012, but was interrupted in December 2013 due to a judicial order issued by the Concepcion Court. Enel Generación Chile submitted a new environmental impact study (EIA in its Spanish acronym) in December 2013, proposing a technical optimization plan. The EIA was approved on March 16th, 2015 and obtained the Environmental Qualification Resolution, RCA, approval on April 2nd, 2015. The plan involves the performing the following works: • Installation of Johnson filters to both units to mitigate the suction of microbiological organisms. • Installation of a geodesic structure on the north and south coal fields. • Improvement of the landfill for ashes. • Evaluation of a new landfill for ashes. • Installing a rainwater treatment plant. Main progress achieved in 2016: • The installation of the Johnson filter to unit 2 finished in January. Annual Report Enel Chile 2016 141 As of December 31st, the Municipal Works Department • Construction and startup of Lime silos; (DOM in its Spanish acronym) of Coronel has not authorized the construction of the dome on the south coal filed. On • Construction and startup of sea water desalination system; June 10th, 2016 the Comptroller Generals Office of Chile issued a letter to the Coronel’s DOM indicating that it must • Change the landfill for ashes to improve the manipulation issue the permit as soon as possible. The DOM’s response and elimination of waste resulting from the desulphurating is pending. process If the construction permit to build the dome on the south coal Main progress achieved in 2016: field is issued by the Dom in January 2017, the construction is expected to finish in 2018. The total estimated investment is • Desalination plant: operational since June 15th, 2016. $62,645 million. As of December 31st, 2016 a total $42,320 million had been disbursed. • Ash management system: operational since June 16th, Tarapacá DeSox & DeNOx environmental equipment project 2016. • Electric system: operational since June 24th, 2016. • SDA and ancillaries: operational since August 1st, 2016. • On November 4th, 2016 a provisional minute stating that the project had become operational was signed. • The performance tests with positive results of the desalinization plant were completed on November 15th, Tarapacá power plant is a 158 MW coal-fired thermal unit, 2016. whose average annual generation is 1,100 GWh, connected to the Northern Interconnected System (SING). • On December 15th, 2016 the company announces that the On June 23rd 2011, DS No 13 was issued to regulate the emissions of thermal power plants, forcing the reduction • The start-up of works that are pending will take place once of SO2 and NOx emissions by June 23rd 2016. This above the power plant can operate at full capacity, not needing to implied adapting the Tarapacá power plant to comply with stop the power plant again. power plant is commercially operational. the decree by installing a desulphurization system (DeSox) and adopting methods to reduce NOx emissions(DeNOx). The project is in its final stage, buy is still pending because the power plant is currently limited to 70 MW capacity. The scope of the activities to be developed is the following: • Preliminary activities (removal of electrostatic precipitator, demolition of foundations, demolition and construction of new electro mechanic workshop at the power plant); • Construction and startup of Desulphurating equipment; • Installation of new low NOx emission burners, improvement of coal mills and installation of new OFA (Over Air Force) systems; 142 Annual Report Enel Chile 2016 The project is expected to finish in March 2017. The total Therefore, although Enel Generación Chile has not reached investment estimate is $68,350 million. As of December a final decision regarding the cancellation of this project, it 31st 2016, $65,718 million have been disbursed. will not continue developing the project as it is defined now Enel Chile Projects in the Feasibility Study Stage due to current electricity market conditions and the impact of such conditions on the profitability of the project. After carrying out a consultation process with the indigenous community, the Environmental Impact Study (EIA in its Spanish acronym) of the Neltume hydroelectric project was withdrawn on December 29th, 2015 to explore different design alternatives taking the community’s proposals into consideration. During 2016, the Company worked on a new design for the potential project including technical and environmental aspects. This process continues and creating opportunities for collaboration and common views, as far as possible, In Enel Generación Chile, different growth opportunities with communities and local authorities. Enel Generación that respond to market requirements are continuously Chile’s purpose is to achieve the development of the analyzed. Since 2015, our projects’ portfolio has been project in a harmonious way with the geographic, social modified to increase flexibility by having options when and environmental surroundings, in line with the energy making investment decisions. The focus is placed on a requirements of the region and the country. portfolio with projects that are sustainable from a technical, environmental, social and economic perspective. Expected dates of commissioning of each of the projects are constantly reviewed and are defined based on commercial opportunities and on the Company’s capacity to carry out these projects. Taltal Converting to a Combined Cycle The projects currently being developed are the following: The Taltal power plant is located in the Antofagasta Region. It Neltume Hydroelectric Project is an energy efficiency project that uses the heat generated by the existing gas turbines to produce steam. This is done by installing a steam turbine and its generator, which allow converting the existing Taltal open cycle plant into a gas- fired combined-cycle plant. The Taltal power plant currently has two 120 MW gas turbines. The additional capacity to be added by the steam turbine would be approximately 130 The Neltume project is located in Los Ríos region, on the MW and therefore, the Taltal power plant would achieve a upper basin of the Valdivia River. It is a 490 MW installed total capacity of 370 MW. The energy produced would be capacity pass through hydroelectric plant to be connected supplied to the SIC through the existing 220 kV double to the SIC through 220 kV transmission line, 42 kilometers circuit Diego de Almagro – Paposo transmission line. long from Neltume to Pullinque. Any generation project developed by the Company must (DIA) of the optimization project was submitted to the be supported by communities affected, must be technically Environmental Evaluation Authority, SEA, for approval. The viable and economically sustainable. main modification relates to a change in the cooling system, In December 2013, an Environmental Impact Declaration which was originally designed as a wet system (using Annual Report Enel Chile 2016 143 sea water) and is being modified to a dry cooling system more than 500 people from the areas nearby the Pehuenche using air condensers. The Company decided to suspend Route. the environmental approval process voluntarily in 2016 in order to work on a memorandum of understanding, which The next steps involve finishing the technical designs, and the reached important agreements with the community. They basic environmental studies to prepare the environmental agreed on eliminating the maritime works and the maritime impact study and begin to work with the communities to concession application submitted to the Ministry of develop the projects and initiatives developed together to Defense. On Tuesday, January 17th, 2017 the Environmental create shared value in the territory. Qualification Resolution, RCA issued by the members of the Antofagasta Region Environmental Evaluation Commission Within the context of renewable energy in the country, (CEA in its Spanish acronym) was a unanimous approval of Vallecito wants to represent a sustainable contribution to the project. the growth of Enel Generación Chile. The Company currently continues implementing its community relations plan with Paposo and Taltal specifically working on defining a proposal to develop the community. Hydroelectric Project Vallecito Quintero Converting to a Combined Cycle The project is located in the Valparaiso Region. It is an energy efficiency project that consists in using the heat generated by the existing gas turbines to produce steam. This is done by installing a steam turbine and its generator, which allow The project is located in the Maule Region, specifically on converting the existing open cycle Quintero plant into a gas- the upper basin of the Maule River. It is a pass through fired combined cycle. The facility currently has two gas fired hydroelectric power plant with nearly 70 MW installed turbines with a total 250 MW capacity. The steam turbine capacity. The energy it produces is to be supplied to the would add approximately 130 MW capacity to the Quintero Interconnected System using the line that is currently in power plant and therefore total capacity would reach 380 construction to evacuate electricity from the Los Cóndores MW. The energy generated would be delivered to the SIC Hydroelectric power plant. through the existing Quintero-San Luis simple circuit 220 KV line built to evacuate the combined cycle. Vallecito has been designed using sustainable development criteria, which consists in developing the technical, Considering that the area where the project is located is an economic, environmental and social aspects of the project industrial one, the Company has decided to strengthen its considering high sustainability standards. This is why it global strategy by developing projects that are sustainable has included community collaboration processes that have and involve the collaboration of neighboring communities contributed to having a shared vision of the territory. Along in order to reduce the environmental impact, and link the with nine Pehuenche communities, the Company as another local industry supply to the demand of port operations member of the territory, have identified action plans that companies, diversify productive activities, promote tourism include aspirations, abilities and projects that aim towards and local development. the future they envision. Technical feasibility studies of the project were performed and also environmental campaigns and the implementation during 2016, culminating in a series of field studies (drilling, of the sustainable development plan by contributing to the soil testing, and geophysical prospecting, among others); shared vision activities identified for the territory. Feasibility studies of the project were performed in 2016, environmental campaigns and the implementation of the sustainable development plan. Support was given to the more than 45 workshops carried out with the participation of 144 Annual Report Enel Chile 2016 Ttanti Combined Cycle Power Plant Project The Ttanti Project is located near the Company’s existing Atacama Power Plant, in Mejillones, a city in the Antofagasta Public Land Concessions for Thermal Electric Projects Region. The project consists in building a gas-fired combined On March 10th, 2014, Enel Generación Chile and the cycle comprised of three blocks with approximately 1,290 National Asset Ministry signed a concession contract for MW installed capacity to be implemented in stages. the development of thermal electric projects on two lots. The cooling system of the power plant is based on air One of them is located in the Antofagasta Region north of condensers. The electricity generated will be delivered to Mejillones and the other in the Atacama Region, north of the Interconnected System through a 220 kV double circuit Caldera. line about 0.5 kilometers long to the Atacama Substation. The project is currently in the environmental evaluation economically viable projects, and given the current market stage. On February 4th, 2016, the Environmental Authority conditions and the ongoing analysis of projects, Enel issued ICSARA No 2, with observations to the project’s Generación Chile decided to suspend these projects. Within the context of developing sustainable and Addenda presented by the Company in December 2015. During 2016, answers to the ICSARA questions were prepared to be presented in March 2017. Land Reserved for Future Projects As of December 2016, Enel Generación Chile has approximately 78.8 hectares of immovable property (land), for natural gas fired thermal plants and hydroelectric plants. These assets are located in the Antofagasta Region (36.8 hectares.) and the Los Lagos Region (42 hectares). Annual Report Enel Chile 2016 145 146 Annual Report Enel Chile 2016 Electricity Distribution Annual Report Enel Chile 2016 147 Enel Chile participates in the distribution business through tariff setting process. The terms identify five new electricity its subsidiary Enel Distribución Chile. Enel Chile’s has a distribution-related services, of which the most significant 99.1% direct interest in Enel Distribución Chile. are “Construction and installment of temporary junctions” and “Lease of temporary junctions”. Enel Distribución Chile’s concession is a high-density consumption area, since it concentrates a large proportion As of this date, the decree to set the new tariffs has not of the country’s population, businesses parks, industrial been published. parks, small industry and commercial activities. Other groups of electricity distribution companies that participate in the electrical system are: Chilquinta Energía, CGE Distribución, Sociedad Austral de Electricidad and Empresa Eléctrica de la Frontera. Infrastructure and Networks Project Enel Distribución Chile Smart Meters Project During 2016, Enel Distribución Chile completed the first phase of the Smart Meter Project involving the replacement of 50,000 meters. This solution that involves new meters, data concentrators, telecommunications infrastructure and centralized systems, allows remote and automated management of meters through a two-way information Enel Distribución Chile is the largest electricity distribution flow. It contributes to the reliability, safety/security and company in Chile in terms of electric energy sales. It quality of the service and therefore benefits all electricity operates in 33 districts in Metropolitan Region and its industry players but particularly customers. concession area covers more than 2,105 square kilometers, including the areas covered by its subsidiaries Empresa The Enel group has had more than 40 millions smart meters Eléctrica de Colina Ltda. and Luz Andes Ltda. installed and operational, especially in Italy and Spain, for more than 15 years. This technological renovation in In 2016, the Company provided electricity service to Chile implied replacing 55,257 meters, installing 435 data 1,825,519 customers, 2.5% more than in 2015. Out of concentrators and a Control Room where to centralize the total, 89.5% are residential customers, 7.8% are the operations of the ten districts selected: La Florida, commercial customers, 0.7% are industrial customers and Independencia, Macul, Ñuñoa, Providencia, Vitacura, 2.0% other customers. Likewise, during 2016, Chilectra Santiago, Las Condes, La Reina and Estación Central. sold 15,924 GWh to its final customers, a 0.2% increase when compared to 2015. During the year, Enel Distribución Chile successfully fulfilled the Losses Plan developed and implemented to keep losses at economically acceptable levels, recording as of December a TAM indicator of 5.33%. Distribution tariffs are set every four years based on cost studies conducted by specialized consulting firms. In late 2015, the National Energy Commission (CNE in its Spanish acronym) issued R.E. N 699 that informs, among other matters, the terms of the “Costs Study of Electricity Distribution-Related Services” as part of the 2016-2020 148 Annual Report Enel Chile 2016 Solar Energy Projects Solar Photovoltaic During 2016, a program to significantly increase the sale of photovoltaic kits to residential customers was implemented and was very successful. By adopting a strategy that integrated employees, training them in the use of this technology, the Company was able to reach a price level similar to that in Germany for kits between 1 and 5 kWp capacity. Throughout the year and particularly during the last quarter, a pilot kit was launched among residential customers reaching record sales. Sets of 1, 2 and 3 KWp were offered including equipment and installation at very convenient prices. In three months, 40 kits were sold, the highest sale amount since the Net billing law began, adding 92 kWp to residential customers. Enel Distribución Chile also, for the second year in a row, won two tenders of the Ministry of Energy’s Solar Public Roof Program in Peñaflor and Calama. The Implementation of the Cauquenes and Parral Solar Public Roof Program projects also concluded in 2016 and were inaugurated by Maximo Pacheco, the Secretary of Energy. Annual Report Enel Chile 2016 149 Energy Efficiency Projects Full Electric The implementation of Enel Chile’s Full Electric system, in addition to the application of the Hourly Residential Plus Rate (THR Plus) that includes different kWh prices/ values offering the possibility to obtain discounts of up to 30% at certain times of the day. During 2016, Full Electric apartments represented 41% of the all new apartments built in Santiago. Consequently, by December, 2016, “Full Electric” projects refers to the use of only electric there are roughly 110,500 Full Electric apartments in the equipment in an apartment, using high tech and efficient country’s Metropolitan Region mainly in the central and devices. “Full Electric” apartments include kitchen east central districts. appliances, hot water solutions and heating systems. On the other hand, “Solar Electric” refers to heating water and fluids using a solar-electric mix solution, both energy sources environmentally friendly. Energy efficiency projects for hospitals During 2016, several “Full Electric’ agreements were signed Enel Distribución Chile was awarded two highly complex with real estate companies, such as, SuKsa, Hogares, Euro, hospital projects through the tender organized by the Ictinos, Cidepa, Sinergia and Fundamenta. Sales of this Chilean energy efficiency agency, Agencia Chilena de real estate product reached approximately $ 2,500 millions Eficiencia Energética (ACHEE). Both projects involved during the same period. thermal power plants as requested by each hospital, the Hospital in Castro and the Regional Hospital Dr. Guillermo Grant Benavente in Concepcion. This represented approximately $75 millions in revenues. 150 Annual Report Enel Chile 2016 Innovation Projects Chispers Flex Energy Home The Chispers project had an ambitious plan for 2016: enter critical retail locations, public areas and significantly increase its customer base. New charging locations were installed The Flex Energy Home project seeks to develop an in busy places within the Metropolitan region. A pilot was automated tool to manage renewable energy generated by installed in Transvip offering passengers going to the airport at home. to enjoy this mobile electric mobile service. A new modern image of the product and application was released including To achieve this, the system has a local means of storing new user experiences. energy and monitoring consumption that allows the automation of energy management according to the users need and market sign. Electric Mobility The Flex Energy Home product consists in photovoltaic generation, battery storage, energy management/ optimization and maintenance and assistance service. In 2016, the results of the quantitative study of the Flex Energy Electric Bus Home product were presented. The Initiative developed and promoted by the Innovation Chile team is already operating in Chile. The bus has been The results: very high perception of the attributes and approved by the transportation authority and has standards differentiation of the concept proposed (above 90%), some that are compatible with Transantiago, the urban public challenges regarding the financial formula offered to final transportation system that operates in the metropolitan customers due to the amount of the investment required area. This will allow verifying how this type of vehicle and some commercialization challenges. adapts to the current public transportation system that will be tendered between 2018 and 2020 and will renew more Significant commercial milestones of this product/service than 6,000 buses. This is the first 100% electric vehicle. are expected for 2017, which already has real estate It reduces the energy cost by 70% when compared to a companies interested in incorporating them into their conventional bus, has free Wi-Fi and Chispers in each seat residential projects. (to charge cellular phones). Annual Report Enel Chile 2016 151 152 Annual Report Enel Chile 2016 Environment and Sustainability Annual Report Enel Chile 2016 153 During 2016 the Company implemented a multi-location regarding the valuation of plaster and consequently allowing Integrated Management System (SGI in its Spanish acronym) its commercialization. This is additional to the sanitary covering the operations of all facilities in Chile and obtained authorizations obtained to perform the valuation of ashes ISO 14,001, OHSAS 18,001 and ISO 9,001 certification for its and plaster of the Thermoelectric Power Plant. entire generation park. Consequently, as of December 31st, 2016, 100% of Enel Generación Chile’s installed capacity has In 2016, the Tarapacá power plant implemented specific a management system that monitors environmental, safety, actions determined by the Clean Production Agreement occupational health and quality conditions. (APL in its Spanish acronym) of Tarapacá Region Shoreline. Environmental Management Highlights In July, 2016, progress was audited and 100% of specific goals and actions were reached by predetermined deadlines. Also, during 2016, the employees of the Tarapacá power plant participated in monthly workshops offered by the Industrials Association that presented the power plant’s progress in terms of environmental issues. Regarding the commitments related to the Environmental Qualification Resolution (RCA) of the Ralco hydroelectric power plant, 2016 highlights are the following: The San Isidro power plant, located in the Valparaiso Region, continues working on the implementation of its plan to add • As part of the power plant construction mitigation program, an additional water supply for cooling purposes due to the in January, Enel Generación Chile and Universidad de deteriorated quality of its well water, which has limited Concepción signed an agreement regarding reforestation its electricity generation. The supply of water from wells with native species. The University will be in charge of located at a distance of the power plant were reduced 50% implementation, planting from 2016 until 2020, a total 700 and therefore the truck trips needed to transport water hectares with native trees. were reduced. The Company has also continued working on diversifying the possible solutions to this situation. Progress • The activities to restore the lots used as dumps and in 2016 was related to the technical and environmental deposits during the contraction began in January. The goal feasibility studies of the ZLD (Zero Liquid Discharge) project. is to recuperate the land by planting native trees. This project involves installing a well water treatment plant that would allow extracting sulphate from the water • In March, Enel Generación Chile officially handed over before it begins the cooling process. Additionally, the the cemetery to the El Barco community. The Bio-Bio environmental authority responded favorably to the inverse regional director of the National Indigenous Development osmosis system, used to maximize the water available for Corporation, (Conadi in its Spanish acronym) performed reutilization after the cooling process, which was submitted the honor. Building this cemetery was a commitment of for approval to the Environmental Impact Evaluation System Enel Generación Chile related to the construction of the (SEIA in its Spanish acronym). The General Water Authority Ralco Power plant. (DGA) also determined the flow rate available for dilution at the discharge area of the Aconcagua River. • In March, a thematic map identifying the location of heritage sites in the district was presented to the mayor Regarding progress in the environmental management of of the Alto Bio-Bio district, Nivaldo Piñaleo, to be exhibited thermal plant Bocamina, the construction of the roof on the in the local museum. Three thousand brochures written in north coal field had been completed. three languages (English, Spanish and Chedungun) were During 2016, the environmental authority resolved in favor of the project “Identifying and Protecting Heritage Sites”, of the questions we submitted to the SEIA relative to which Is one of the five compensatory measures defined the use of coal from small local coal producers and also by the environmental authority in 2006. also donated to promote these sites. This activity is part 154 Annual Report Enel Chile 2016 • The construction of the Lonquimay Bridge, one of the compensatory measures related to the construction of the Ralco Power plant, concluded in April. It is the access to Green taxes the New Barrio community in Lonquimay. The entire thermal park of Enel Generación and GasAtacama proposed a methodology to quantify emissions according to • Within the context of Ralco’s RCA, the implementation resolution SMA No 1,053. As of December 30th, 2016, all proposal of the Long-Term Development Plan for the Ayin proposals had been approved and therefore the Company Mapu and El Barco communities that were relocated will report emissions based on such methodology and taxes was prepared in 2016. The proposal was defined by the for 2017 will be paid based on such report. New Projects In November 2016 a memorandum of understanding was signed by the Paposo community and Enel Generación Chile as part of the Environmental Impact Study process of the DIA for the thermoelectric Taltal combined cycle that began in December 2013. This agreement allowed reaching an agreement with the community that involve changes to the project and a greater relationship with the community. This protocol was included in Addendum 3 of the project’s evaluation presented in December. members of the communities, and their leaders through workshops in which they Identified their Interests, and opportunities for Improvement, by defining the activities and projects they expect to begin developing in 2017. Thermoelectric power plant emission standard compliance The thermoelectric park of Enel Generación Chile and its subsidiary GasAtacama S.A. continue working to comply with the latest versions of protocols and guides defined by D.S No 13/11 Thermoelectric Power Plant Emission Standards issued by the Environment Superintendence. During 2016, the power plants also concluded the projects necessary to comply with the MP, SO2, and NOx standards established by the regulation. Consequently, the Tarapacá Thermoelectric Power Plant has a semi dry type desulphurizer and a low NOx burner system to reduce NOx emissions. The Taltal power plant has implemented a demineralized water injection system that ensures compliance with the NOx standards applicable to diesel operations. In October 2016, the SMA published the standards compliance verification report informing on the compliance of most power plants to standards in force in 2015. This report is based on the emissions data uploaded quarterly by each plant to the “Thermoelectric Power Plant” portal of the SMA. Based on this verification, on December 31st, 2016, the report states that most of the Electricity Generation Units (UGE in its Spanish acronym) of the Company comply with required standards. Annual Report Enel Chile 2016 155 Sustainability Responsible growth is the guideline of the Sustainability Policy of Enel Chile. Establishing a responsible relationship with the community is one of the main pillars to reach its goal to position the strategic concept of Open Power and also to create shared value in the societies in which it operates. During 2016, the Company consolidated its structure geographically, organizing teams in different locations. It also defined criteria and principles to create righteous relationships, in which stakeholders are involved since the design stage of the project, assuring equal opportunities of dialogue and guaranteeing access to the information required to make decisions. The objective is to develop long-term relationships of trust with the stakeholders present in the respective territory, to maintain continuous and consistent relationships in order to minimize and mitigate the risks related to the company’s integration into a certain territory. Enel Chile focuses its sustainability plan on the vision of Open Power, on complying with the Sustainable Development Objectives of the United Nations, on creating shared value and complying with its Human Rights Policy. Open Power Vision Enel Generación has identified the central aspect of its business to be the “Open” concept, a cornerstone of its strategy and operations: Open energy to more people; Open energy to new technologies; offer people new ways to manage energy; add new uses to energy; add more alliances to energy. 156 Annual Report Enel Chile 2016 Objectives of Sustainable Development • Decent job and economic growth: Promote sustainable, inclusive job opportunities and economic growth for 500,000 people. • Action for the climate: Adopt initiatives to fight climate change to reach the goal to carbon neutral by 2050. In 2015, the United Nations adopted the new Sustainable Development Objectives (ODS in its Spanish acronym). This initiative invites companies to use creativity and innovation to face sustainable development challenges, such as poverty, gender equality, clean water and energy, and climate change. Shared Value as a long-term strategy At the time, Enel announced the Group’s intention to relevant social matters into business opportunities that lead contribute to achieving four of the 17 objectives. Particularly, to benefits for society and the Company. Enel Generación Chile’s long-term vision is to transform Enel and its companies worldwide have focused on the following objectives: • Quality education: Support educational activities for 400,000 people by 2020, similar to those already underway, such as the scholarship program in Latin America. • Affordable energy: Commit to promoting affordable, sustainable, and modern energy through the initiative Enabling Electricity that is to benefit three million people, mainly in Africa, Asia and Latin America. Annual Report Enel Chile 2016 157 Human Rights Policy Sustainability Plan The Company approved its Human Rights Policy in 2013. The guidelines of the Sustainability Plan of Enel Chile 2016- It represents Enel Chile’s commitment and responsibility 2020 are consistent with the sustainable development regarding social and corporate sustainability. The document pillars adopted by the Company: occupational health and sets out the Company’s commitment to all human rights, safety, economic and financial value creation, solid corporate particularly those that affect corporations and the activities governance and environment. The specific approach of carried out by all Company employees in Chile. this plan in based on five implementation perspectives: Within this framework, the company performed a Human relationship with local communities, customer relations Rights diagnosis (Due Diligence) in Chile to identify situations management, personnel motivation and development, at risk and prevent them. The results of the diagnosis were decarbonization of the energy matrix. innovation and operational efficiency, responsible disclosed to the stakeholders. Along with these guidelines and perspectives, another core element that contributes to the plan is the identification of the stakeholders’ priorities. The identification of these priorities is achieved by performing a materiality matrix. This materiality study identified demographic changes and a growing middle class in the country. Consequently, new 158 Annual Report Enel Chile 2016 customer demands arise, such as, access to information technology, digitalization of information and decentralized energy management. The work carried out according to these guidelines led Enel Generación Chile to focus its social and environmental investments on projects related to electricity access, operational efficiency, environmental improvements and local economic development. Regarding personnel motivation and development, several programs related to inclusion and diversity have been launched. In power plant operational efficiency and environmental improvements, some emblematic projects have been implemented, such as the dome covering the coal field of Bocamina power plant. Finally, regarding the energy matrix, hydroelectricity has reached 50% of Enel Generación’s total matrix. With regard to the relationship with the community, the Company has developed projects in energy access, education and social and economic development involving 600,000 beneficiaries. Regarding the performance of Enel Distribución Chile in 2016, we want to highlight its perspectives of “Customer Relations Management”, “Innovation and Operational Efficiency”, and “Responsible Community Relations”. Customer relations management achieved increasing the number of customers 2.4% and installing 50,000 smart meters. From the perspective of innovation and operational efficiency, the company introduced the first electric bus to offer transportation to the residents of Santiago. This initiative is related to the Atmospheric Prevention and Decontamination Plan (PPDA in its Spanish acronym) of the Metropolitan Region. To contribute to this plan, Enel Distribución Chile also Introduced 10 electric cars to its corporate transportation fleet and has promoted electric vehicles among its employees favoring the replacement of traditional cars. Within the scope of responsible relations with communities, Enel Distribución Chile continues developing the “Enel in your Neighborhood” program. This program seeks sensitizing customers to the efficient use of energy and streamline the normalization of customers’ past due electricity bills. This initiative is being carried out in 33 districts of the concession area and has benefitted 120,000 people. Annual Report Enel Chile 2016 159 160 Annual Report Enel Chile 2016 Participation in Subsidiaries & Associates and Schematic table Annual Report Enel Chile 2016 161  Direct and Indirect Economic Interest Company Enel Generación Chile Eólica Canela Pehuenche HidroAysén Aysén Energía Aysén Transmisión Enel Distribución Chile Transquillota GasAtacama Chile Electrogas GNL Chile EE Colina Luz Andes SIEI Cameros Gasoducto Atacama Argentina Gx: Generation Dx: Distribution Tx: Transmission Ox: Gas pipeline, others Business Segment Gx Gx Gx Gx Gx Tx Dx Tx Ox Ox Ox Dx Dx Ox Ox Ox Ownership Share 59.98% 45.77% 55.57% 30.59% 30.59% 30.59% 99.09% 30.52% 61.03% 25.49% 19.99% 99.09% 99.09% 100.0% 57.50% 61.03% 162 Annual Report Enel Chile 2016  Organizational Structure ENEL CHILE S.A. 99.8967% 99.09062105% 59.98% SERVICIOS INFORMATICOS E INMOBILIARIOS LTDA, 57.50% SOC, AGRICOLA DE CAMEROS LTDA, 0.1033% ENEL DISTRIBUCIÓN CHILE S.A. ENEL GENERACIÓN CHILE S.A. 2.6299% 97.3701% GASATACAMA CHILE S.A. 0.10% 99.90% LUZ ANDES LTDA, 0.0002% 99.9998% EMPRESA ELECTRICA DE COLINA LTDA, Annual Report Enel Chile 2016 163 164 Annual Report Enel Chile 2016 Significant Events Annual Report Enel Chile 2016 165  Significant Events or Essential Facts Chile and its shares in the Securities Registry, according to a certificate issued by this entity, and that it has made the respective listings in the Santiago Stock Exchange, the Valparaíso Stock Exchange, the Chile Electronic Stock Exchange and the New York Stock Exchange of United States of America, all in accordance with the decision made at the Extraordinary Shareholders’ Meeting of Enersis In accordance with Articles 9 and 10, section 2, of the Américas S.A. (formerly Enersis S.A.) held on December Securities Market Law N° 18,045 and as established under 18th, 2015. Therefore, the shares of the divided equity of General Norm N° 30 of the Superintendence of Securities Enersis Chile should be distributed free of any payment and Insurance, the following significant events were to the shareholders of Enersis Américas S.A. entitled to informed: receive them. Enel Chile S.A. (Ex – Enersis Chile S.A.) 2. The Board of Directors of Enersis Chile agreed to carry out the distribution and delivery of a total of 49,092,772,762 shares issued by Enersis Chile, all nominative, of a unique and single series and without nominal value, on April 21st, 2016, to the shareholders of Enersis Américas that were listed in its shareholders’ registry at midnight the day • On March 22nd, 2016 the following was informed as a before April 21st, 2016. significant event: Pursuant to what was resolved by the Extraordinary Shareholders’ Meeting held January 29th, 2016, that approved the spin-off of Enersis S.A. as of December 18th, 2015, the spin-off has become legally effective as of March 1st, 2016, at which time Enersis Chile S.A. (‘Enersis Chile”) began to exist and the former Enersis S.A. became “Enersis Américas S.A.” As agreed by the above-mentioned Shareholders’ Meeting, Enersis Chile applied to be registered in the Securities Register of the Superintendence of Securities and Insurance and in the stock exchanges for it and its corresponding shares, in which the shares of Enersis Américas S.A. are currently traded. The distribution and physical delivery of the shares of stock issued by Enersis Chile shall take place on the date resolved by the Board of Directors of Enersis Chile, following the registration of the Company and its shares in the Securities Register of the Superintendence of Securities and Insurance and stock exchanges of the country and following the compliance of all legal and regulatory requirements to that effect. • On April 14th, 2016 the following was informed as a significant event: 1.- To announce that, on April 13th, 2016, the Superintendence of Securities and Insurance proceeded to record Enersis 166 Annual Report Enel Chile 2016  3. This distribution to the shareholders of Enersis Américas A new Board of Directors has been appointed for a three- S.A. will be carried out by exchanging one share of year period, comprised by the following members: Enersis Chile for each share of Enersis Américas S.A. registered under the shareholders name in the registry at Mr. Herman Chadwick Piñera midnight the day before April 21st, 2016. From April 21st, 2016 onwards, the shares issued by Enersis Chile may be Mr. Giulio Fazio officially quoted in the stock markets mentioned above. Mr. Vicenzo Ranieri 4. Representative titles of the shares in Enersis Chile will be available for shareholders of Enersis Américas S.A. Mr. Salvatore Bernabei to be withdrawn on April 21st, 2016 at DCV Registros S.A. offices, located at 770 Huérfanos Ave., 22nd floor, in Mr. Fernán Gazmuri Plaza Santiago, from Monday through Thursday from 9:00 am to 5:00 pm, and Friday from 9:00 am to 4:00 pm. Mr. Pablo Cabrera Gaete • On April 26th, 2016 the following was informed as a Mr. Gerardo Jofré Miranda. significant event: The Securities and Exchange Commission of the United 29th, 2016 appointed Mr. Herman Chadwick Piñera as States of America declared the Registration Statement Chairman of the Board, Mr. Giulio Fazio was appointed on Form F-6 effective, which was filed to register the Vice Chairman of the Board of Directors and Mr. Domingo American Depositary Receipts program issued by the Valdés Prieto was appointed Secretary of the Board of The Board of Directors of Enersis Chile held on April Enersis Chile S.A., and to register the Company as Directors. an issuer of American Depositary Shares (“ADS”) in accordance with the aforementioned program. Therefore, Similarly, in the aforementioned meeting, the Directors’ as of such date, Enersis Chile S.A has carried out the Committee, in accordance to the Chilean Companies physical distribution of its ADRs. Act Law N° 18,046 and the Sarbanes - Oxley Act, was appointed. The Directors’ Committee is composed of A copy of the Form F-6 and its annexes will be available to Directors Fernán Gazmuri Plaza, Pedro Pablo Cabrera the shareholders and the general public beginning today Gaete and Gerardo Jofré Miranda. As required by the on the Company’s website, www.enersischile.cl. provisions of Circular N° 1,956 of the Superintendence of Securities and Insurance, the three aforementioned The Ordinary Shareholders Meeting held Abril 28th, 2016, members are declared to be independent directors. agreed to distribute a minimum obligatory dividend (that is reduced by the pro-forma interim dividend paid in January The Board of Directors of the Company has appointed 2016) and an additional dividend of $ 125,919,205,080, Mr. Fernán Gazmuri Plaza as the Financial Expert and the equivalent to $ 2.56492 per share. Directors’ Committee has appointed Mr. Fernán Gazmuri Since the interim dividend has already been paid, the Domingo Valdés Prieto as Secretary of the Directors’ Plaza as Chairman of the Directors’ Committee and Mr. remaining definitive dividend for $ 102,769,943,963, Committee. equivalent to $2.09338 per share dividend will be distributed and paid. Annual Report Enel Chile 2016 167 • On May 5th, 2016 the following was informed as a results. The financial effects of these contracts on Endesa significant event: Chile will depend on factors that will have an influence on the behavior of the electricity market during the 10 year Empresa Nacional de Electricidad S.A. (“Endesa Chile”) has life span of the contracts, such as, but not limited to, the informed that on this day it has signed with Anglo American price of fuel, hydrology, growth of demand, and international Sur S.A. (“Anglo American Sur”) three electricity supply inflation indexes, which to date cannot be determined for contracts for Anglo American Sur operations, whose annual that period. consumption is estimated to amount to 2 TWh. Supply will begin in January 2021 for a 10 year term. • On June 9th, 2016, the following was informed as a The price and indexation conditions of the contract are significant event: consistent with long-term contract market conditions. As Empresa Nacional de Electricidad S.A. (“Endesa Chile”) referential information, and order-of-magnitude estimate of agreed and signed a contract for the sale of its shares in the amount that such supply contracts could involve, the GNL Quintero S.A., equivalent to 20% of the equity of such expected average annual sales of these contracts would be company, to Enagás Chile S.p.A (“Enagás Chile”), which is a equivalent to 8% of Endesa Chile’s total contractual sales subsidiary 100% controlled by the Spanish company Enagás expected for that time period. S.A. for US$ 200 million, to be paid on the closing date of At this time it is not possible to reasonably quantify the the transaction. financial effects these contracts will have on the Company’s The sale of this stake to Enagás Chile is subject to the compliance with standard conditions for this type of transaction, including that other GNL Quintero S.A. shareholders’ not exercise their pre-emptive right. The financial effect of the transaction for Enersis Chile would be a net income of approximately US$ 83 million. • On July 27th, 2016, the following was informed as a significant event: During the Meeting held July 27th, 2016, the Board of Directors of the Company unanimously appointed Mr. Nicola Cotugno as Chief Executive Officer, replacing Mr. Luca D’Agnese who submitted his resignation during the same session. Mr. D’ Agnese’s resignation, and the appointment of Mr. Cotugno, will become effective on August 16th, 2016. • On August 2nd, 2016, the following was informed as a significant event: In accordance with Article 63 of the Chilean Corporations Law N° 18,046, the Board of Directors of Enersis Chile S.A. (“Enersis Chile” or the “Company”), pursuant to the Company’s by-laws has summoned an Ordinary Shareholders’ Meeting to be held on October 4th, 2016 at 168 Annual Report Enel Chile 2016 10:00 a.m. at the Enersis Group Stadium located at 858 2. Modification of Article Four in order to insert a comma (,) Carlos Medina Ave., Independencia District, in Santiago. in the first paragraph between the words “abroad” and The issues to be discussed at the Extraordinary Meeting of with “related companies, subsidiaries and affiliates” in Shareholders will be the following: letter d), resulting in the text of Article Four reading as “the exploration” and to replace the words “subsidiaries” 1. The modification of Article One in order to change the follows: Company’s name from Enersis Chile S.A., to Enel Chile “Article Four: The purpose of the Company shall be, in the S.A., and to add the term “public” before the expression country or abroad, the exploration, development, operation, “ limited liability stock ccorporation”, resulting in the text generation, distribution, transmission, transformation or of Article One reading as follows: sale of energy, in any of its forms, directly or through other “Article One: An public limited liability stock corporation providing engineering consulting services, in the country which is to be named “Enel Chile S.A.” (“the Company”), or abroad. An additional purpose shall be to invest and and shall be governed by these by-laws and, in their manage its investments in subsidiaries and affiliates such absence, by legal and regulatory norms that apply to this as generators, transmission companies, distributors, or companies, as well as telecommunications activities and type of company.” electricity traders or whose business activity corresponds to any of the following: (i) energy in any of its forms or nature, (ii) providing utility services or services whose main input is energy, (iii) telecommunications and information technology services, and (iv) business intermediation via the Internet. In order to comply with its purpose, the Company will carry out the following activities: a) Promote, organize, establish, modify, dissolve or liquidate companies of any kind, whose corporate purpose is related to the purposes of the Company. b) Propose investment, financing and trade policies to its subsidiaries, as well as the accounting systems and principles to which they must adhere. c) Oversee the management of its subsidiaries. d) Loan its related companies, subsidiaries and affiliates the financial resources necessary to develop their businesses and, furthermore, provide management services including financial, commercial, technical and legal, and audit services to its related companies, subsidiaries and affiliates; and, in general, services of any nature that may be necessary to improve their performance. Annual Report Enel Chile 2016 169 In addition to its main purpose and always acting within the “Article 43: In all matters that are not expressly addressed limits established by the Investment and Financing Policy within these by-laws, the provisions of Law 18,046, its approved at the Shareholders’ Meeting, the Company may amendments and regulations applicable to public limited invest in: liability stock corporations and those contained within Decree 3,500 Article 111.” First. The acquisition, development, construction, rental, management, intermediation, trading and disposal of all 4. Delete the following transitory provisions: Transitory kinds of movable and immovable assets, either directly or Article Two, Transitory Article Four, Transitory Article Five, through subsidiaries and affiliates. Transitory Article Six, Transitory Article Seven, Transitory Article Nine and Transitory Article Ten, and Second. All types of financial assets, including stocks, bonds and debentures, trade bills, and, in general, all kinds 5. The adoption of agreements that are necessary to of transferable securities and contributions to companies, carry out the proposed by-law reform, under the terms either directly or through subsidiaries and affiliates” and conditions that shall ultimately be approved by the Shareholders Meeting, and also to grant the necessary 3. Modification of Article 43 to insert the phrase “applicable powers of attorney, especially to legalize, complete to the public limited liability stock corporations” between and execute agreements adopted by said Shareholders the expressions “Regulations” and “and the ones Meeting. relevant”, resulting in the text of the Article 43 reading as follows: 170 Annual Report Enel Chile 2016 • On October 4th, 2016, the Extraordinary Shareholders’ Ordinary Shareholders’ Meeting of Enersis Chile S.A, Meeting, in compliance with the quorum required by currently Enel Chile S.A., held on April 28th, 2016, with law and the Company’s by-laws, resolved to change the respect to the Company’s 2016 Dividend Policy. The Company’s current name from Enersis Chile S.A., to “Enel Company will distribute an interim dividend of up to 15% Chile S.A.”. of the net income as of September 30th, 2016 as shown in the Financial Statements of Enel Chile S.A. on that date, • On November 25th, 2016, the approval by the Board of to be paid in January 2017. Directors of Enel Chile S.A. of the Industrial Plan of the Enel Chile Group for the period of 2017-2019 was informed Pursuant to what has been stated before, the Board has as a significant event. also unanimously agreed to pay an interim dividend of $0.75884 per share, attributable to the 2016 fiscal period, to A copy of the aforementioned Industrial Plan of the Enel be paid on January 27th, 2017. This amount is equal to 15% Chile Group for the period of 2017-2019 can be obtained of the net income of Enel Chile as of September 30th, 2016, from the Company’s website, www.enelchile.cl. considering the Financial Statements of the Company on Taking into consideration that the content of the referred that date. to Industrial Plan follows and is based on projections and Pursuant to the Bulletin N° 660 of 1986, issued by this hypotheses that might or might not come true in the future, Superintendence, we are hereby sending Form N° 1 that its effects cannot be determined at this date. confirms the information related to the agreed upon interim • On November 25th, 2016 the Company in formed as a significant event that the Board of Directors of Enel Chile S.A. (“Enel Chile” or the “Company”), has unanimously resolved, to augment the information related to the dividend. Annual Report Enel Chile 2016 171 172 Annual Report Enel Chile 2016 Identification of Subsidiaries and Associate Companies Annual Report Enel Chile 2016 173 AGRÍCOLA DE CAMEROS Telephone N° (562)2713 5000 Telephone N° (562) 2713 5000 Name Sociedad Agrícola de Cameros Limitada Type of Company Limited Liability Company Taxpayer ID 77,047,280-6 Address Camino Polpaico a Til-Til, S/N Til-Til, Chile Telephone N° (56 2) 2378 4700 Subscribed and Paid Capital (Th$) 5,738,046 Corporate Purpose The purpose of the company is the exploitation of agricultural land. Core Business Real estate and agriculture Administration By-laws include a Board of Directors: Directors Hans Knoop Frick Francisco Silva Bafalluy Hugo Ayala Espinoza María Cristina Auad Faccuse Cristián Guadi Imbarack Dagach Alternate Directors Solange Zincke Cavalieri Ingrid Morales Ávila Jorge Geldres Reyes Andrés Garib Auad Senior Executives Hugo Ayala Espinoza Chief Executive Officer Business Relations Services Contract by Enel Chile: Provision of Internal Audit and Compliance Control Services, Price: amounts expressed in per working hour that Enel Chile’s staff assign to the contracted services. Enel Chile’s Stake (Direct and indirect) 57.50% - Unchanged AYSÉN ENERGÍA Name Aysén Energía S.A. Type of Company Privately held corporation Taxpayer ID 76,091,595-5 Address 383 Miraflores, office 1302, Santiago, Chile. Subscribed and Paid Capital (Th$) 4,900 Subscribed and Paid Capital (Th$) 22,368 Corporate Purpose Comply with the ruling of the Free Competition Defense Tribunal in the first article of Resolution No 30 dated May 26th, 2009; to fulfill the commitment made by HidroAysén S.A. with the community of the XI Region of Aysén, within the framework of the development of the Aysén Hydroelectric Project, to provide the region with an electricity supply at a cost below the current value, through the development, funding, ownership and operation of projects that generate and transmit electricity in that region. In order to comply with the above, the company may develop the following activities, among others: a) produce, provide and commercialize electricity, by any means of generation; b) electricity transportation; c) provide services related to its Corporate Purpose; and d) to request, obtain or acquire and benefit from the concessions, rights and permits that are required. Core Business Electricity generation and transmission (project) Directors Carlo Carvallo Artigas Bernardo Larrain Matte Luis Ignacio Quiñones Sotomayor Juan Eduardo Vasquez Ramiro Alfonsín Balza Luis Felipe Gazitúa Achondo Alternate Directors Claudio Helfmann Soto Eduardo Lauer Rodríguez Bernardo Canales Fuenzalida Sebastián Moraga Zúñiga Rodrigo Pérez Stiepovic Rodrigo Paredes Barría Senior Executives Camilo Charme Ackermann Chief Executive Officer Business Relations The company does not have business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 30.59% - Unchanged AYSÉN TRANSMISIÓN Name Aysén Transmisión S.A. Type of Company Privately held corporation, registered in the Securities Register of the SVS. Taxpayer ID 76,041,891-9 Address 383 Miraflores, office 1302, Santiago, Chile. Corporate Purpose Develop and alternatively or additionally manage electricity transmission systems required in the hydroelectric generation project that HydroAysén plans to build in the Aysén Region. In order to fulfill its purpose, its business activities include the following: a) the design, development, construction, production, ownership, maintenance and operation of electricity transmission systems, b) electricity transportation, and c) providing services related to its Corporate Purpose. Core Business Electricity transmission Directors Carlo Carvallo Artigas Bernardo Larraín Matte Ignacio Quiñones Sotomayor Juan Eduardo Vasquez Luis Felipe Gazitúa Achondo Ramiro Alfonsín Balza Alternate Directors Claudio Helfmann Soto Eduardo Lauer Rodríguez Bernardo Canales Fuenzalida Sebastián Moraga Zúñiga Rodrigo Pérez Stiepovic Rodrigo Paredes Barría Senior Executives Camilo Charme Ackermann Chief Executive Officer Business Relations The company has no business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 30.59% - Unchanged CELTA (Merged with GasAtacama Chile) Name Compañía Eléctrica Tarapacá S.A. Type of Company Privately held corporation Taxpayer ID 96,770,940-9 Address 76 Santa Rosa Ave. Santiago, Chile Telephone N° (562) 2630 9000 Subscribed and Paid Capital (Th$) 331,770,543 174 Annual Report Enel Chile 2016 Corporate Purpose Exploitation of electricity production, transmission, distribution and supply, both locally and abroad, for which it may obtain, acquire and benefit from the respective concessions and grants. Additionally, its purpose shall also be: the purchase and sale of natural gas, liquefied natural gas and diesel oil; to promote and develop renewable energy projects; to identify and develop Clean Development Mechanisms (Mecanismos de Desarrollo Limpio: MDL) and to act as depositary and trader of Emissions’ Reduction Certificates obtained from said projects. Additionally, the company will make or participate in all kinds of investments, especially related to the electrical business. It may particularly make, maintain and manage investments in energy projects linked to the companies Gasoducto Atacama Compañía Limitada, Gasoducto Cuenca Noroeste Limitada and Nor Oeste Pacífico Generación de Energía Limitada; as well as in Administradora Proyecto Atacama S.A. or in its legal successors. Likewise, the Corporate Purpose shall cover the renting, purchase, sale, administration and exploitation of all kinds of movable property, real estate, securities and other negotiable instruments, through its own account or through third parties. In addition, the Corporate Purpose includes carrying out studies and consultancies, and providing all kinds of services including: engineering services, work inspections, inspections of materials and equipment, the reception of materials and equipment, laboratory services, lending expert opinion, extending business management services for the company’s several fields, providing environmental consultancies --such as carrying out environmental impact studies--, and providing other consultancy services in general. Likewise, its purpose shall also be the catchment, extraction, treatment, desalination, transportation, distribution, trade, delivery and supply of sea water in every state, be it natural, potable, desalinated, or else treated, which can be carried out by its own account or through third parties. Core Business Electricity Generation Board of Directors Humberto Espejo Paluz Mario Enero Bravo Raúl Arteaga Errazuriz Senior Executives Valter Moro Chief Executive Officer Business Relations (i) (ii) Contract for Service Provision by Enel Chile: Internal audit and compliance control. Price: UF amount per worked hour that Enel Chile’ staff dedicated for the provision of services. Contract for Service Provision by Enel Chile: Communication, Global Services, Human Resources Administration and Equity Management. Price: monthly amount expressed in U.F. Senior Executives Camilo Charme Ackerman Chief Executive Officer Business Relations The Company has no business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 30.59% - Unchanged ENEL DISTRIBUCIÓN CHILE S.A. Name Enel Distribución Chile S.A. Type of Company Publicly Traded Company Taxpayer ID 96,800,570-7 Address 76 Santa Rosa, 8th floor. Santiago, Chile Telephone No (56 2) 2675 2000 Subscribed and Paid Capital (Th$) 230,137,980 Corporate Purpose Operate the distribution and sale of electric, hydraulic, thermal or any other kind of energy in Chile or abroad, as well as the distribution, transport and sale of fuels of any kind, thus supplying this energy or fuel directly or through other companies to as many customers as possible. Core Business Electricity distribution. Board of Directors Gianluca Caccialupi (Chairman) Francesca Romana Napolitano (Vice Chairman) Monica Hodor Iris Boeninger von Kretschmann Hernán Felipe Errázuriz Correa Senior Executives Andreas Gebhardt Strobel (Chief Executive Officer) Simone Tripepi Andrés González Cerruti Francisco Miqueles Ruiz Daniel Gómez Sagner Pietro Corsi Misle Horacio Aránguiz Pinto Enel Chile’s Stake (Direct and Indirect) 61.49% Proportion on Enel Chile’s Assets 0.17% GasAtacama Chile S.A. acquired Compañía Eléctrica Tarapacá S.A. on November 1st, 2016. CENTRALES HIDROELECTRICAS DE AYSÉN Name Centrales Hidroeléctricas de Aysén S.A. Type of Company Privately held corporation, incorporated in Santiago, Chile, registered in the Securities Register of the SVS. Taxpayer ID 76,652,400-1. Address In Santiago, Chile: 383 Miraflores, office 1302 In Coyhaique, Chile: 260 Baquedano In Cochrane, Chile: 324 Teniente Merino Telephone No (562) 2713 5000 Subscribed and Paid Capital (Th$) 185,045,662 Corporate Purpose The development, finance, property and exploitation of a hydroelectric project in the XI Region of Aysén, of an estimated capacity of 2,750 MW through five hydroelectric power plants, collectively Named “Aysén Project”. To fulfill its purpose, the company may engage in the following activities: a) generate and transport electricity; b) supply and commercialize electricity to its shareholders; c) manage, operate and maintain hydraulic infrastructure, electricity systems and hydroelectric power generating plants. Core Business Electricity generation (project). Directors Carlo Carvallo Artigas Bernardo Larraín Matte Luis Ignacio Quiñones Sotomayor Juan Eduardo Vasquez Luis Felipe Gazitúa Achondo Ramiro Alfonsín Balza Alternate Directors Bernardo Canales Fuenzalida Eduardo Lauer Rodríguez Claudio Helfmann Soto Rodrigo Pérez Stiepovic Sebastián Moraga Zúñiga Rodrigo Paredes Barría Annual Report Enel Chile 2016 175 Business Relations (i) Contract for services provision by Enel Chile: Comprehensive Supply Service; Materials Procurement Management; Contracting of Works, Services and Consultancies; Reception, Storage and Supply of Recurrent and Non-recurrent Materials; Sales Agent. Price: Mark-up over average price of consumed materials. Contract for services provision by Enel Chile: Financial Management, management and corporative services. Price: monthly amount fixed in UF. (ii) (iii) Contract for utilization of Lo Sáez Stadium, located at 858 Carlos Medina, Independencia. Price: Monthly amount fixed in UF per Chilectra worker. (iv) Trade accounts receivable (v) Contract for administration services provision by Enel Chile. Price: Monthly amount fixed in UF. Alternate Directors Andrés Opazo Irarrázaval Patricio Pérez Cotapos Luis Le Fort Pizarro Juan Oliva Vásquez Rodrigo Bloomfield Sandoval Alex Díaz Sanzana Senior Executives Alan Fischer Hill Chief Executive Officer Business Relations The Company has no business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 25.49% - Unchanged Enel Chile’s Stake (Direct and Indirect) 99.09% - Unchanged EMPRESA ELÉCTRICA DE COLINA Proportion of Enel Chile Assets 16.57% Name Empresa Eléctrica de Colina Ltda. ELECTROGAS Name Electrogas S.A. Type of Company Privately held corporation Taxpayer ID 96,806,130-5 Address 5900 Alonso de Córdova, Office 401, Las Condes, Santiago, Chile. Telephone N° (562) 2299 3400 Subscribed and Paid Capital (Th$) 14,222,060 Corporate Purpose Provide transportation services for natural gas and other fuels, personally or for a third party, for which it can build, operate and maintain gas pipelines, oil pipelines, multipurpose pipelines and complementary facilities. Core Business Gas Transportation Directors Humberto Espejo Paluz Juan Eduardo Vásquez Moya Ricardo Santibáñez Zamorano Eduardo Lauer Rodríguez Marco Arróspide Rivera Pedro de la Sotta Sánchez Type of Company Limited Liability Company Taxpayer ID 96,783,910-8 Address 31 Chacabuco, Colina Santiago, Chile Telephone N° (56 2) 2844 4280 Subscribed and Paid Capital (Th$) 82,222 Corporate Purpose Distribution and sale of electricity and various electrical and computational appliances for home, sports, and entertainment. Core Business Electricity distribution. Pooled Administration Francisco Javier Evans Miranda Rodrigo Vicente Arévalo Cid Senior Executives Francisco Javier Evans Miranda Chief Executive Officer Business Relations (i) Contract for service provision by Enel Chile: Comprehensive Supply Service; Materials Procurement Management; Contracting of Works, Services and Consultancies; Reception, Storage and Supply of Recurrent and Non-recurrent Materials; Sales Agent. Price: Mark-up over average price of consumed materials. Contract for service provision by Enel Chile: Provision of internal audit and compliance control services. Price: Amount of UF per hour worked that Enel Chile’ staff dedicates to the contracted services. (ii) (iii) Contract for management services provision by Enel Chile Price: monthly amount in UF. Enel Chile’s Stake (Direct and Indirect) 99.09% - Unchanged. ENEL GENERACIÓN CHILE Name Enel Generación Chile S.A. Type of Company Publicly Traded Company Taxpayer ID 91.081.000-6 Address 76 Santa Rosa Ave. Santiago, Chile Telephone N° (56 2) 2630 9000 Subscribed and Paid Capital (Th$) 552,777,321 Corporate Purpose Generation and supply of electricity; provision of engineering and consulting services; and construction and exploitation of infrastructure projects in Chile and abroad. Core Business Electricity Generation Board of Directors Giuseppe Conti (Chairman) Francesco Giorgianni (Vice Chairman) Francesco Buresti Julio Pellegrini Vial Mauro Di Carlo Umberto Magrini Luca Noviello Enrique Cibié Bluth Jorge Atton Palma Senior Executives Valter Moro (Chief Executive Officer) Raúl Arteaga Errázuriz (Deputy Executive Officer) Luis Ignacio Quiñones Sotomayor Bernardo Canales Fuenzalida Humberto Espejo Paluz Claudio Helfmann Soto Jorge Burlando Bonino Luis Vergara Adamides Business Relations (i) Contract for services provision by Enel Chile: Supply Services; Materials Procurement Management; Contracting of Works, Services and Consultancies. Price: Directly proportional to costs associated to staff list and to operational and maintenance expenses. Every year, value for next annual period is determined, introducing the proper improvements and efficiencies. Contract for services provision by Enel Chile: Money desk and treasury service. Price: Monthly amount expressed in UF. (ii) 176 Annual Report Enel Chile 2016 Claudio Betti Pruzzo Rodrigo Arias Suarez Senior Executives Carlo Carvallo Artigas Chief Executive Officer Business Relations (i) (iii) Contract for services provision by Enel Chile: Accounting Services. Price: Monthly amount expressed in UF. (iv) Contract for services provision by Enel (v) Chile: Service provision of internal audit and compliance control. Price: UF amount per worked hour that Enel Chile staff dedicates to contracted services. Agreement for the use of the Stadium Lo Sáez located at 858 Carlos Medina, Independencia. Price: Monthly amount expressed in UF per Endesa Chile’s employee. (vi) Trade accounts receivable (vii) Loan from Enel Chile for $250 million dated December 16, 2015, due on December 15, 2016. As of December 31, 2015, the balance was $250 million. (ii) Contract for services provision by Enel Chile: Provision of Internal Audit and Compliance Control Services, Price: amounts expressed in per working hour that Enel Chile’ staff assign to the contracted services. Contract for management services by Enel Chile. Price: monthly amount expressed in U.F. (viii) Administration services provision agreement by Enel Chile. Enel Chile’s Stake (Direct and Indirect) 45.77% - Unchanged Enel Chile’s Stake (Direct and Indirect) 59.98% - Unchanged Proportion on Enel Chile’ Assets 63.67% GASATACAMA (merged with GasAtacama Chile) EÓLICA CANELA Name Central Eólica Canela S.A. Type of Company Privately held corporation Taxpayer ID 76,003,204-2 Address 76 Santa Rosa, Santiago, Chile Telephone N° (562) 2630 9000 Subscribed and Paid Capital (Th$) 12,284,743 Corporate Purpose Promote and develop renewable energy projects, mainly in wind-powered energy; identify and develop Clean Development Mechanism (MDL in its Spanish acronym) projects, and act as a depositary and trader of Emission Reduction Certificates resulting from such projects. It may also generate, transport, distribute, supply and commercialize electricity, allowing the company to acquire and benefit from the corresponding concessions. Core Business Electricity Generation Directors Raúl Arteaga Errázuriz (Chairman) Carlo Carvallo Artigas Claudio Helfmann Soto Bernardo Canales Fuenzalida Juan Cristóbal Pavez Recart Alternate Directors Carlos Peña Garay Ariel González Rogget Name GasAtacama S.A. Type of Company Privately held corporation Taxpayer ID 96,830,980-3 Address 76 Santa Rosa, Santiago, Chile. Telephone N° (562) 2366 3800 Subscribed and Paid Capital (Th$) 176,857,970 Corporate Purpose The company has the following purposes: a) managing and directing the companies Gasoducto Atacama Chile Limitada, Gasoducto Atacama Argentina Limitada, GasAtacama Generación Limitada, and other companies the partners agree on; b) investing on resources, either through its own account or through third parties, of all kinds of movable property, real estate, securities and other negotiable instruments. Core Business Investment company Directors Raúl Arteaga Errázuriz (Chairman) Sergio Ávila Arancibia Pablo Arnes Poggi Humberto Espejo Paluz Alternate Directors Bernardo Canales Fuenzalida Carlo Carvallo Artigas Rodrigo Paredes Barría Senior Executives Valter Moro Chief Executive Officer Business Relations The company does not have any business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 61.03% GasAtacama S.A. merged with Compañía Eléctrica Tarapacá S.A., and then Compañía Eléctrica Tarapacá S.A. merged with Gasatacama Chile S.A. on November 1st, 2016. GASATACAMA CHILE Name GasAtacama Chile S.A. Type of Company Privately held corporation Taxpayer ID 78,932,860-9 Address 76 Santa Rosa, Santiago, Chile. Telephone N° (562) 2366 3800 Subscribed and Paid Capital (Th$) 482,511,131 Corporate Purpose The company has the following purposes: a) develop the generation, transmission, purchase, distribution and commercialization of electricity or energy of any other source; b) purchase, extract, operate, process, distribute, commercialize and sell solid, liquid and gaseous fuels; c) sell and provide engineering services; d) acquire, purchase, transfer, lease, charge and develop, in any form, the concessions referred to in the General Law on Electricity Services, maritime concessions and water usage rights of any nature; e) transport natural gas, through its own means or jointly with third parties within the territory of Chile or abroad, including the construction, siting and operation of gas pipelines and other activities directly or indirectly related to such operations; f) the capture, extraction, treatment, desalination, transportation, distribution, commercialization, delivery and supply of seawater, in all its forms, including natural, drinkable, desalinized or with any other treatment, either personally or through a third party; g) invest in all types of assets, tangible or intangible, movable or fixed; h) organize and create all kinds of companies whose objectives are related or linked to the energy industry in any form, or use electricity as their main input, or that relate to any of the aforementioned activities. To achieve its purpose, the company may carry out all acts and enter into all contracts contributing to its business activities, including the purchase, sale, acquisition or disposal, on any account, of all kinds of assets, tangible or intangible, movable or fixed, and may enter existing companies or join in their formation, whatever their kind. Annual Report Enel Chile 2016 177 Core Business Electricity generation and gas transportation Directors Raúl Arteaga Errázuriz (Chairman) Pablo Arnés Poggi Humberto Espejo Paluz Sergio Ávila Arancibia Alternate Directors Rodrigo Paredes Barría Bernardo Canales Fuenzalida Carlo Carvallo Artigas Senior Executives Valter Moro Chief Executive Officer Business Relations The company does not have any business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 61.03% Proportion on Enel Chile’s Assets 0.68% GASODUCTO ATACAMA ARGENTINA Name Gasoducto Atacama Argentina S.A. Type of Company Privately held corporation Taxpayer ID 78,952,420-3 Address 76 Santa Rosa, Santiago, Chile. Telephone N° (562) 2366 3800 Subscribed and Paid Capital (Th$) 126,309,044 Corporate Purpose The transportation of natural gas, either personally, through or jointly with a third party, within the Chilean territory or abroad, including the construction, siting and operation of gas pipelines and other operations directly or indirectly related to this objective. The company has incorporated an agency in Argentina under the Name of Gasoducto Cuenca Noroeste Limitada Sucursal Argentina, whose purpose is the construction of a gas pipeline between the locality of Cornejo, province of Salta and the Argentina-Chile border in the vicinity of Paso de Jama, in Chile’s second Region. Core Business Gas transportation Directors Raúl Arteaga Errázuriz (Chairman) Alex Díaz Sanzana Pablo Arnes Poggi Alternate Directors Bernardo Canales Ricardo Santibáñez Zamorano Rodrigo Paredes Barría Senior Executives Valter Moro Chief Executive Officer Business Relations The company has no business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 61.03% GASODUCTO TALTAL (Merged with GasAtacama Chile) Name Gasoducto Taltal S.A. Type of Company Privately held corporation Taxpayer ID 77,032,280-4 Address 76 Santa Rosa, Santiago, Chile. Telephone N° (562) 2366 3800 Subscribed and Paid Capital (Th$) 14,255,421 Corporate Purpose Transporting natural gas, either personally, through or jointly with a third party, within the Chilean territory or abroad, especially between the localities of Mejillones and Paposo in Chile’s second region, including the construction, siting and operation of gas pipelines and other operations directly or indirectly related to this objective. Core Business Gas transportation Directors Juan Oliva Vásquez Alex Díaz Sanzana Ricardo Santibañez Zamorano Senior Executives Valter Moro Chief Executive Officer Business Relations The company has no business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 60.74% This company was absorbed by GasAtacama Chile S.A. on September 1st, 2016 GNL CHILE Name GNL Chile S.A. Type of Company Privately held corporation Taxpayer ID 76,418,940-K Address 532 Rosario Norte, office 1303, Las Condes, Santiago. Telephone No (562) 2892 8000 Subscribed and Paid Capital (Th$) 2,023,789 Corporate Purpose To a) hire the services of GNL Quintero S.A., a liquefied natural gas (“LNG”) regasification company, and utilize all its storage, processing, regasification, and delivery capacity of natural gas and LNG available at its regasification terminal, including its expansions, if any, and any other matter stipulated in the contracts the company might sign for the use of the regasification terminal; b) import LNG from suppliers, complying with LNG sales contracts; c) sell and deliver natural gas and LNG, complying with the natural gas and LNG sales contracts signed by the company with its customers; d) manage and coordinate the schedules and nominations of LNG cargoes, as well as the delivery of natural gas and LNG among various customers; and e) fulfill all its obligations and demand the enforcement of all its rights under the previously identified contracts, coordinate all operations under these contracts and, in general, carry out any type of act or enter into any contract that might be necessary, useful or convenient in order to accomplish its purpose. Core Business Importing and commercializing natural gas Directors Andres Alonso Rivas Alex Díaz Sanzana Klaus Lürhmann Poblete Alternate Directors Luis Arancibia Yiacometti Yasna Ross Humberto Espejo Paluz Senior Executives Alejandro Palma Rioseco Chief Executive Officer Business Relations The company has no business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 19.99% - Unchanged 178 Annual Report Enel Chile 2016 Senior Executives Antonio Bacigalupo Gittins Chief Executive Officer Business Relations The company has no Business Relations with Enel Chile. Business Relations The company has no business relationships with Enel Chile. Enel Chile’ Stake (Direct and Indirect) 60.74% GNL QUINTERO (Sold, no longer part of the Enel Group) Name GNL QUINTERO S.A. Type of Company Privately held corporation Taxpayer ID 76,788,080-4 Address 532 Rosario Norte, office 1604, Las Condes, Santiago, Chile Telephone N° (562) 2499 0900 Enel Chile’s Stake (Direct and Indirect) 12.00% - Unchanged On September 14th, 2016, the shareholding held by Enel Generación Chile of GNL Quinteros was sold and therefore from that date on it is no longer a subsidiary. GNL NORTE (Merged with GasAtacama Chile) Subscribed and Paid Capital (Th$) 80,953,329 Name GNL Norte S.A. Corporate Purpose The development, financing, design, engineering, supply, construction, startup, operation and maintenance of a liquefied natural gas (GNL in its Spanish acronym) storage and regasification plant, and its corresponding maritime terminal for GNL loading and unloading and its expansions, if any, including all necessary installations and connections needed to deliver GNL through the freight yard with trucks and/or one or more pipeline delivery points (“Regasification Terminal”); as well as any other activity that is conducive or related to said purpose, including, but not limited to, managing and directing all necessary trade agreements required to receive or deliver GNL to customers, GNL regasification, natural gas delivery, offering services and storage capacity, processing, regasification, and loading and unloading in the Regasification Terminal and GNL delivery (“the Project”) and its expansions, if any; and b) provision of management services and administrative advice in general necessary for the company’s proper operation. This term is defined in section 13.4 of the Thirteenth Article of the bylaws, which stipulates that GNL Chile S.A. will have the ability to carry out any act or sign any contract that might be necessary, useful or convenient in order to fulfill its purpose. Core Business Unloading, storing, regasification, and delivering liquefied natural gas and natural gas. Directors Marco Arróspide Rivera Víctor Turpaud Fernández Juan Oliva Vásquez José Antonio de las Heras Sultán Al Bartami Alternate Directors Ricardo Santibáñez Zamorano Jorge Beytía Moure Rafael González Rodríguez Hilal Al Kharusi Type of Company Privately held corporation Taxpayer ID 76,676,750-8 Address 76 Santa Rosa Ave. Santiago, Chile Subscribed and Paid Capital (Th$) 1,000 Corporate Purpose The Corporate Purpose of the company is the production, transportation, distribution, storage and supply of any kind of energy and fuel, to the effect of which it may obtain, purchase and benefit from the respective concessions and grants. The purpose shall also be to acquire, design, construct, maintain and exploit all types of civil and infrastructure works related to energy and fuel, especially those related to its maritime reception, processing and transportation. For a better and proper compliance with its Corporate Purpose, the company may constitute, purchase, enter as partner, shareholder or in any other direct way or with third parties or subsidiary companies, societies, institutions of any kind or nature, both in Chile and abroad, and in general, celebrate any acts or agreements and develop any activity related directly or indirectly with said purposes. Core Business Production, transportation and storage of all kinds of energy and fuels Directors Alex Díaz Sanzana Juan Oliva Vásquez Ricardo Santibañez Zamorano Senior Executives Valter Moro Chief Executive Officer This company was absorbed by GasAtacama Chile S.A. as of September 12th, 2016. INVERSIONES GASATACAMA HOLDING (Merged with GAT Chile) Name Inversiones GasAtacama Holding Limitada Type of Company Limited Liability Company Taxpayer ID 76,014,570-K Telephone N° (562) 2366 3800 Subscribed and Paid Capital (Th$) 202,362,770 Corporate Purpose The company’s purpose is to a) participate, either directly or indirectly, in companies whose purpose includes one or more of the following activities: i) the transportation of natural gas in any form; ii) the generation, transmission, purchase, distribution and sale of electricity; iii) the funding of the operations mentioned in i) and ii), developed by related third parties, and b) the reception and investment of assets for investment, including the related for-profit activities already mentioned. Core Business Investments Directors Vacant Raúl Arteaga Errázuriz Pablo Arnes Poggi Humberto Espejo Paluz Rodrigo Paredes Barría Senior Executives Valter Moro Chief Executive Officer Business Relations The company has no business relationships with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 60.74% This company was absorbed by CELTA and then CELTA was absorbed by GasAtacama Chile S.A. as of November 1st, 2016. Annual Report Enel Chile 2016 179 LUZ ANDES Name Luz Andes Limitada Type of Company Limited Liability Company Taxpayer ID 96,800,460-3 Address 76 Santa Rosa, Santiago, Chile Telephone N° (56 2) 2634 6310 Subscribed and Paid Capital (Th$) 1,224 Corporate Purpose Distribution and sale of electricity, and sale of household, sports, entertainment and computer appliances Core Business Electricity distribution. Joint Administration (must act jointly) Claudio Inzunza Diaz Jaime Manríquez Kemp Senior Executives Claudio Inzunza Díaz Chief Executive Officer Business Relations (i) Contract for services provision by Enel Chile: Procurement Integral Services: Comprehensive Supply Service, Materials Procurement Management, Contracting of Works, Services and Consultancies, Reception, Storage and Supply of Recurrent and Non recurrent Materials, Sales Agent. Price: Mark-up over average price of consumed materials. Contract for services provision by Enel Chile: Provision of internal audit and compliance control services. Price: UF amount per worked hour that Enel Chile’ staff dedicates to contracted services. (iii) Administration service provision agreement by Enel Chile. Price: Monthly amount expressed in UF. (ii) Enel Chile’ Stake (Direct and Indirect) 99.09% - Unchanged PEHUENCHE Name Empresa Eléctrica Pehuenche S.A. Type of Company Publicly held corporation. Taxpayer ID 96,504,980-0 Address 76 Santa Rosa, Santiago, Chile. Telephone N° (562) 2630 9000 Subscribed and Paid Capital (Th$) 175,774,920 Core Business Gas supply Board of Directors Alex Díaz Sanzana Ricardo Santibañez Zamorano Juan Oliva Vásquez Corporate Purpose Generate, transport, distribute and supply electricity, for which the company may acquire and benefit from the respective concessions. Senior Executives Valter Moro Chief Executive Officer Core Business Electricity generation Board of Directors Raúl Arteaga Errázuriz (Chairman) Luis Ignacio Quiñones Sotomayor Jorge Burlando Bonino Claudio Helfmann Soto Fernando Vallejos Reyes Senior Executives Carlo Carvallo Artigas Chief Executive Officer Business Relations (i) Contract for Service Provision by Enel Chile: Communication, Global Services, Human Resources Administration and Equity Management. Price: monthly amount expressed in U.F. Enel Chile’s Stake (Direct and Indirect) 55.57% - Unchanged Business Relations The company has no business relationships with Enel Chile. Enel Chile’ Stake (Direct and Indirect) 60.74% Progas was absorbed by GasAtacama Chile S.A as of September 1st, 2016. SERVICIOS INFORMÁTICOS E INMOBILIARIOS LTDA. Name Servicios Informáticos e Inmobiliarios Limitada Type of Company Limited Liability Company Taxpayer ID 76,107,186-6 PROGAS (Merged with GasAtacama Chile) Address 76 Santa Rosa, floor 9. Santiago, Chile Name Progas S.A. Type of Company Privately held corporation Taxpayer ID 96,905,700-K Address 3356 Isidora Goyenechea, 8th floor, Santiago, Chile. Telephone N° (562) 2366 3800 Subscribed and Paid Capital (Th$) 1,154 Corporate Purpose Develop the following businesses in the 1st, 2nd and 3rd regions of the country: the acquisition, production, storage, transportation, distribution, transformation and trading of natural gas and other oil derivatives and fuels in general, the supply of services, manufacture, trading of equipment and materials, and carrying out works related to the above purposes or those necessary for their execution and development, any other activity necessary or leading to comply with the aforementioned purposes. Telephone N° (562) 2353 4606 Subscribed and Paid Capital (Th$) 61,948,674 Corporate Purpose The purpose will be to carry out on its own or through third parties, the following activities: 1) Consultancy services provision in matters related to information technology and computing, telecommunications and data transmission; management, consultancy, advisory and administration of the company’s or a third party’s contracts that are related to said matters; establishing, managing and exploiting data base centers; creation, development, design, management, operation, marketing, purchase, sale, import, and export of all kinds of software; contracts’ management and administration and projects’ development and execution, 2) To acquire and sell all kinds of corporeal or incorporeal property related to its object; to provide services and to obtain representations for the best compliance of its purpose; organize, constitute, participate and be part of all kinds of companies, associations or joint accounts; to make all kinds of money, service and property contributions, whichever its sort and to sign service and consultancy provision agreements, either in Chile or abroad, 3) Administration and exploitation of own or third 180 Annual Report Enel Chile 2016 parties’ businesses and, in general, development of any activity connected or supplementary to the aforementioned purposes, and those the partners deem mutually convenient, 4) Purchase, alienation, parceling, subdivision, lot division, sale and exploitation at any title of all kinds of real estate, on its own account or through third parties, to invest the corporate funds in all kinds of property, immovable or movable, corporeal or incorporeal and rights in societies; to manage them and to receive its fruits and rents. Core Business Consultancy services in information technology; computing, telecommunications, data transmission, purchase and alienation of all kinds of property within the Corporate Purpose; and real estate services Senior Executives Tomás Blásquez de la Cruz (Chief Executive Officer and Trustee Administrator) Francisco Javier Galán Ángel Barrios Romo Hans Richard Knoop Frick TRANSQUILLOTA Name Transmisora Eléctrica de Quillota Ltda. Type of Company Limited liability Company Taxpayer ID 77,017,930-0 Address Route 60, km 25, Lo Venecia, Quillota, V Region of Valparaíso, Chile. Telephone N° (562) 2630 9000 Subscribed and Paid Capital (Th$) 4,404,446 Corporate Purpose Transportation, distribution, and supply of electricity, either personally or through a third party. Business Relations (i) (ii) Professional service agreement for ICT’s Management. Price: Operation cost plus margin. Agreement for the use of Lo Sáez Stadium located at 858 Carlos Medina St., Independencia. Price: Monthly amount expressed in UF, per ICT’s worker. (iii) Contract for services provision by Enel Chile: Supply Services. Management of Materials’ Procurement and Works Contracting, Services and Consultancy. Price: Directly related to associated staff’s costs and to operational and maintenance expenses. Every year the annual value for the next period is determined annually, introducing the proper improvements and efficiencies. (iv) Contract for services provision by Enel Chile: Provision of internal audit and compliance control services. Price: UF amount per worked hour that Enel Chile’ staff dedicates to contracted services. (v) Trade accounts receivable. (vi) Administration services’ provision by Enel Chile. Price: Monthly amount expressed in UF. Enel Chile’s Stake (Direct and Indirect) 100.00% Proportion on Enel Chile’ Assets 0.50% Core Business Electricity transmission Representatives Vacant Ricardo Santibáñez Zamorano Juan Eduardo Vásquez Moya Mauricio Cabello Business Relations The company has no commercial relations with Enel Chile. Enel Chile’s Stake (Direct and Indirect) 30.52% - Unchanged Notes 1. 2. There are no contracts or acts signed by Enel Chile S.A. with its subsidiaries or associate companies that significantly influence its operations or outcomes. Regarding business relations, the future connections with subsidiary or associated companies are to be aligned with the Corporate Purpose; especially when providing financial resources necessary for the development of a subsidiary companies’ business and trade; and also when providing management services; financial, commercial, technical and legal consultancy services; audit services, and in general, any service that seems necessary to improve its business performance. Annual Report Enel Chile 2016 181 182 Annual Report Enel Chile 2016 Statement of Responsibility 183 184 Annual Report Enel Chile 2016 Statement of Responsability The Directors of Enel Chile S.A. and its 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 Superintendence of Securities and Insurance. CHAIRMAN Herman Chadwick Piñera Taxpayer Id.: 4,975,992-4 VICECHAIRMAN Giulio Fazio Passport: YA4656507 DIRECTOR Salvatore Bernabei Taxpayer Id.: 24,220,743-2 DIRECTOR Pablo Cabrera Gaete Taxpayer Id.: 4,774,797-K DIRECTOR Vicenzo Ranieri Passport: YA7616919 DIRECTOR Gerardo Jofré Miranda Taxpayer Id.: 5,672,444-3 DIRECTOR Fernán Gazmuri Plaza Taxpayer Id. : 4,461,192-9 CHIEF EXECUTIVE OFFICER Nicola Cotugno Taxpayer Id.: 25,476,277-6 Annual Report Enel Chile 2016 185 Consolidated Financial Statements 188 Annual Report Enel Chile 2016 

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