Transelec S.A

Transelec S.A.

2011t Annual Repor 01. COMPANY INFORMATION

2 IDENTITY

Name: Transelec S.A. National Securities Registration: number 974 Legal Domicile: Santiago, while not restricting the establishment of agencies, branches or offices in other parts of the country or overseas. Tax list number: 76.555.400-4 Address: Avenida Apoquindo Nº 3721, 6th Floor, Las Condes Phone: (56-2) 467 7000 Fax: (56-2) 650 8517 E-mail: [email protected] Webpage: www.transelec.cl

SHARE OWNERSHIP Far North (SING) and in the area ranging execution and power transmission and from Tal Tal as far as Isla de Chiloé (SIC). connection solution design to project man- Transelec capital is divided into 1,000,000 Transelec´s power transmission system agement and construction, commissioning nominative ordinary shares with no nom- features a total 8,525 kilometers of single consultancy, operation, maintenance and inal value. Transelec Holding Rentas Lim- and double circuit power lines, as well as management of new facilities. itada owns 999,900 shares and Rentas 54 substations. The company owns 92% Eléctricas I Limitada owns 100 shares. of all power lines belonging to the trunk Transelec currently contributes its exten- system in the SIC power grid and 78% of sive experience and know-how regarding THE COMPANY all power lines in the SING power grid. the execution of power projects to a wide Transelec is the leading supplier in high range of clients from the power, mining voltage power transmission systems in Throughout its corporate history, Tran- and industrial sectors throughout Chile. Chile and the only company that operates selec has gained extensive experience These clients have put their trust in the 500 kV and 200 kV power lines and sub- in each of the links making up the power support and excellence of integral power stations throughout the country. Likewise, transmission service value chain: ran- transmission solutions provided by the Transelec facilities shape the two main ging from project evaluation, basic and company. national interconnected power grids, in the conceptual engineering, systematic study

3 LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS

MESSRS. SHAREHOLDERS: practices in order to further advance work continued at the same time. The project On behalf of the Transelec S.A. Board of started after the 27 February 2010 earth- was originally designed as part of the sub- Directors, it is with great pleasure that we quake, clearly for the purpose of main- transmission system, but the latest Trunk present the company’s Annual Report cor- taining reliability levels and transporting Transmission Study (TTS) determined responding to the 2011 fiscal year for the power consumed by nearly 98% of the that the project would be a trunk system consideration of Transelec shareholders. country safely and continuously. In addition, facility. This power line will enable trans- work continued on a series of projects in the mission of part of the power generated by 2011 was an intense year for the electricity trunk system, subtransmission and addi- new power plants located in the Coronel industry. The most relevant milestones tional systems in order to strengthen the zone and support growing demand in the include publication of Decree N°61 for system and support the country’s growth. Concepción zone. updated valuation of the trunk system, delivery of a Technical Report containing Accomplishment of this year include the Some projects such as construction of the subtransmission tariffs and the issuing of a completion of the construction of the 220 Lagunillas 220/154 kV Lagunillas sub- new trunk system expansion plan amount- kV Nogales-Polpaico power line, includ- station, construction of a new 110/23 kV El ing to approximately US$ 900 million. ing a 220 kV diagonal at the Nogales Salado substation and the 110 kV Diego substation and two 220 kV bays at the de Almagro-Nueva El Salado-Chañaral In this scenario, 2011 was a year for Tran- Polpaico substation. Construction work on power line have been highlighted in the selec to review its systems and operating the 220 kV Charrúa-Lagunillas power line subtransmission system.

4 Transelec reaffirmed its interest in the mina Copper Chile Caserones Mine pro- Navia substation. These were recognized additional transmission market and its ject (owned by the Japanese firm Lumina as facilities in the TTS trunk system. desire to become a strategic partner Copper). Commissioning is scheduled for for the execution of energy develop- August 2012. The project features a new Transelec completed several financing ments required by the market. This was 220 kV Maitencillo-Caserones power line, activities throughout 2011, including the understood by Metro S.A., which signed which includes the construction of a GIS issuing of local bonds for an aggregate an agreement with Transelec for the substation with two 220 kV bays at the amount of UF 7 million. development of a power transmission Maitencillo substation. system to supply increased consumption Transelec liquidity is currently high thanks in the future. The project consists of a In turn, the 220 kV Pan de Azúcar- to positive results in 2011. This will en- 220 kV power line between the Neptuno Carmen de Andacollo power line was able the company to finance its upcom- substation and Metro facilities. Project commissioned for our customer Minera ing investment plans in new transmis- commissioning has been scheduled for Carmen de Andacollo, which included the sion assets. In addition, the company is 2014. In addition, a second circuit for the construction of a 220 KV bay at the Pan backed by a firm commitment from its 220 kV Bocamina – Lagunillas – Hualpén de Azúcar substation. shareholders. power line was completed for connecting the SIC power grid to the new Bocamina 2 In addition, last year Transelec finished Chilean transmission market has under- thermoelectric power plant. construction of a project to increase power gone significant changes over the years transmission capacity for the 500 kV and we have consequently implemented a In the mining sector, which is highly system between the Ancoa, Alto Jahuel series of initiatives and programs that are relevant for the country and has positive and Polpaico substations. This meant in tune with our Strategic Plan to ensure development perspectives, construction that a CER device was commissioned at growth with sustainable profitability in of a 220 kV power transmission system the Polpaico substation and a STATCOM alignment with our mission to continue started in 2011 for the SCM Minera Lu- device was commissioned at the Cerro delivering the best service to Chile and its inhabitants.

RICHARD LEGAULT CHAIRMAN OF THE BOARD OF DIRECTORS

5 OUR HISTORY TRANSELEC: UNITING CHILE WITH ENERGY

1943 1955 1965

Corfo created Empresa Nacional de The Central Interconnected System (SIC) A submarine cable was laid across Canal Electricidad (Endesa) in order to execute was created by connecting the recently de Chacao (now an aerial cable), sup- a national electrification plan featuring built Cipreses Power Plant by means plying power for Isla Grande de Chiloé. construction of new power generation of the 154 kV Cipreses-Santiago and Another important milestone was con- units and especially a network of regional Charrúa-Itahue power lines to consump- struction of the first 220 kV power line, power lines to connect these units. tion centers in Santiago and Concepción. Rapel-Cerro Navia. This connected the Rapel power plant to growing electricity 1954 demand from the central zone in 1966.

There were four independent regional 1974 systems in Chile: La Serena-Punitaqui, La Ligua-Talca, Chillán-Victoria and Valdivia- The 220 kV kV system expanded Puerto Montt. Only some isolated cities westward, supplying Concepción, and throughout the rest of the country had northward in order to transport power to their own power plants at the time. Santiago. In addition, the SIC expanded northward with the construction of 110 kV systems and the Maitencillo-Car- dones and Pan de Azúcar-Maitencillo power lines.

6 1978 1993 2000

Interconnection with Chile’s Near North Endesa transformed its power transmis- All Transelec shares were purchased by was intensified with power lines con- sion division into the subsidiary Compañía the Canadian company Hydro-Québec. necting San Isidro (presently Quillota) and Nacional de Transmisión Eléctrica S.A., Cardones. In the early 80s, the SIC was followed by the creation of Transelec S.A., 2003 extended to Diego de Almagro in order to designed to plan, operate and maintain Transelec entered the SING power grid connect the El Salvador mine, while 220 the system, providing services to different after purchasing 924 kilometers of 220 kV kV power lines were laid as far as Puerto user power companies in the SIC. The power lines. Montt in southern Chile. aerial crossing of Canal de Chacao was commissioned this same year, consisting 2004 1986 of two 179-meter towers and power lines spanning a length of 2,680 meters. The largest power transmission develop- The extra high voltage era started with the ment in history was completed: powering commissioning of the first 500 kV power 1996 up the system between Charrúa and Alto lines (Ancoa-Alto Jahuel 1 and 2) required Jahuel to 500 kV, which enabled connec- in order to inject power generated by the Transelec laid its first 220 kV power line tion of the Ralco power plant (690 MW). Colbún-Machicura complex into the SIC. between Charrúa and Ancoa to connect the Pangue power plant (460 MW), which was later expanded in order to connect the Ralco power plant.

7 2006 2009 2011

The Canadian consortium led by Brook- The Nogales substation was commis- Transelec signed a contract with Minera field Asset Management purchased a sioned, which will enable efficient expan- Lumina Copper Chile for execution of 100% stake in Transelec, contributing its sion of the system from Chile’s 5th Region the Caserones project, one of the most solid financial strength at the service of northward. important projects in the mining indus- Chile’s growth requirements. try. The company also commissioned 2010 the Nogales-Polpaico project (Nogales 2008 substation, Nogales power line diagonal, Transelec purchased the Punta Colo- bays at the Polpaico station and the Energization of the Alto Jahuel-Polpaico rada substation from Barrick Gold in Nogales-Polpaico power line). In addi- 500 kV double circuit power line brought order to consolidate service provision tion, sixteen new projects were under- northbound network saturation to an end to the mining sector and purchased the taken, such as Maitencillo-Caserones and was largely responsible for creation Tinguririca Substation from Hidroeléctrica power line (including expansion of the of a 500 kV ring surrounding Santiago, La Higuera. The company also commis- Maitencillo GIS substation), as well as one of the key developments for the sioned the Las Palmas substation, which the Neptuno substation and its connec- system’s future. is the core wind power contribution to the tion to the SIC power grid. SIC power grid.

8 SING -C Sistema Perú

Río Lluta CHAPIQUIÑA CENTRAL ARICA Arica EL AGUILA PARINACOTA ARICA CHUÑO QUIANI

PUKARA Bolivia de Transmisión CHINCHORRO

Río Camarones

DOLORES

PACIFICO CERRO COLORADO CENTRAL IQUIQUE Iquique PALAFITOS POZO ALMONTE CERRO DRAGON CONDORES LA CASCADA ALTO HOSPICIO CAVANCHA

TAMARUGAL Salar de Pintados

C. TARAPACA LAGUNAS QUEBRADA BLANCA DOÑA INES TARAPACA DE COLLAHUASI NUEVA VICTORIA

EL ABRA Océano R.TOMIC CRUCERO LOA SALAR 9 NUEVA TOCOPILLA CHUQUICAMATA TOCOPILLA Pacífico TAMAYA ENCUENTRO CALAMA Río Loa SPENCE C. ANGAMOS ío San Pedro GUAYAQUES R GAS ATACAMA ATACAMA SAIRECABUR C. ANDINA LICANCABUR GNL - C. MEJILLONES MUELLE EL TESORO C. HORNITOS CHACAYA MANTOS BLANCOS ESPERANZA MEJILLONES LABERINTO Salar de CAPRICORNIO Atacama EL COBRE OESTE IVAN C. MANTOS GABY BLANCOS LOMAS BAYAS DESALANT LINCE SIERRA MIRANDA NUEVA ZALDIVAR Antofagasta EL NEGRO ANDES C. ANTOFAGASTA LA NEGRA ZALDIVAR ESMERALDA ALTO NORTE SULFUROS PALESTINA O´HIGGINS LLANOS COLOSO URIBE CENTRO DOMEYKO SUR ESCONDIDA PORTADA OXIDOS LAGUNA SECA

Salar de Punta Negra SALTA 200Km. PAPOSO CENTRAL TALTAL

TALTAL

LAS LUCES FRANKE

PLANTA OXIDO EL SALVADOR

EL SALADO CHAÑARAL MONTANDON SAN LORENZO DIEGO POTRERILLOS EMELDA DE ALMAGRO

MANTO VERDE Isla San Félix Isla San Ambrosio CARRERA PINTO MINERA MANTOS DE ORO Isla Sala y CHAMONATE Gómez CALDERA Isla de Pascua HERNAN FUENTES PAIPOTE TIERRA AMARILLA COPIAPO CENIZAS MAGNETITA GEN. DEL PACIFICO PLANTAS LA CANDELARIA CARDONES CERRILLOS T. AMARILLA KAZAN LOS LOROS Río Copiapó MINA EL REFUGIO CASTILLA

CHUSCHAMPIS LOS COLORADOS

GUACOLDA HUASCO PELLETS AGROSUPER VALLENAR MAITENCILLO

ALGARROBO

DOS AMIGOS ALTO DEL CARMEN PAJONALES INCAHUASI

BARRIK PUNTA COLORADA

ROMERAL ROMERAL EL INDIO La Serena LAS COMPAÑIAS COQUIMBO Río Elqui MARQUESA GUAYACAN VICUÑA PAN DE AZUCAR ANDACOLLO CM. ANDACOLLO EL PEÑON

MONTE PATRIA LOS OVALLE MOLLES Río Limarí

MONTE REDONDO PUNITAQUI TOTORAL LAS CANELA PALMAS EL SAUCE COMBARBALA Argentina Río Illapel LOS ILLAPEL PELAMBRES

LOS ESPINOS CHOAPA LOS VILOS OLIVOS

ío Petorca QUINQUIMO CABILDOR Río de la Ligua C.VIEJAS NUEVA VENTANAS VENTANAS NOGALES

COLMITO ío Colorado CALERA R QUINTERO NEHUENCO Río Aconcagua SAN ISIDRO SAN LUIS LOS QUILOS ACONCAGUA AGUA SANTA CHACABUQUITO Valparaiso QUILLOTA SALADILLO SAN PEDRO LAS VEGAS LAGUNA VERDE EL MANZANO LOS VIENTOS DISPUTADA POLPAICO LAMPA EL SALTO CERRO ALFALFAL Archipiélago Juan Fernández CASA BLANCA NAVIA N. RENCA SAN ANTONIO CHENA SANTIAGO BUIN LOS ALMENDROS ALTO MELIPILLA EL MONTE BUIN LOS MORROS ALTO PUNTILLA MELIPILLA Río Maipo I. de MAIPO JAHUEL FLORIDA MANDINGA PAINE MAIPO MAITENES HOSPITAL CAENSA LOS BAJOS QUELTEHUES QUELENTARO LAS ARAÑAS PORTEZUELO GRANEROS CANDELARIA VOLCAN MINERO RAPEL COLON RANCAGUA MINERA VALLE CENTRAL LOS LIRIOS PANGAL Embalse P. de CORTES COYA Rapel Río Cachapoal TILCOCO CHACAYES RENGO SAUZAL SAN VICENTE DE SAUZALITO TAGUA TAGUA MALLOA MARCHIHUE LA RONDA PELEQUEN SAN FERNANDO Río Tinguiririca PANIAHUE NANCAGUA TINGUIRIRICA LA HIGUERA CONFLUENCIA

QUINTA

Río Teno TENO HUALAÑE CURICO ITAHUE

Río Mataquito SAN PEDRO LICANTEN V.PRAT Río Claro ELEKTRAGEN SAN RAFAEL CONSTITUCION E. VERDE Talca SAN IGNACIO Río Maule LOMA ALTA ARAUCO MAULE SAN JAVIER CURILLINQUE NIRIVILO COLBUN ANCOA CHIBURGO CIPRESES VILLA ALEGRE OJOS DE AGUA PANIMAVIDA ISLA CHACAHUIN PEHUENCHE LINARES MACHICURA Laguna CAUQUENES del Maule LONGAVI

PARRAL Río Achibueno

Río Perilauquén Río Longaví SAN CARLOS ÑIQUEN TOME Río Itata P. BELLAVISTA Río Ñuble HUACHIPATO NVA. ALDEA COCHARCAS TALCAHUANO PENCO CHILLAN Río Larqui SAN VICENTE CONCEPCION PETROQUIMICAS C.CHEPE BULNES PETROPOWER TRES ESQUINAS HUALPEN CHIGUAYANTE ANTUCO MAPAL PETROXCAMPANARIO CHARRUA FPC SAN PEDRO EL TORO LAGUNILLAS LOS PINOS QUILLECO Laguna BOCAMINA L. COLORADA RUCUE de la Laja CORONEL CORONEL SANTA LIDIA QUILACOYA Río Laja ABANICO HORCONES LOTARío Biobío CHOLGUAN ARAUCO HORCONES LAJA MAMPIL CARAMPANGUE SANTA FE NACIMIENTO LOS ANGELES PEUCHEN CMPC LAJA CURANILAHUE Río Biobío PANGUE TRES NEGRETE LEBU PINOS PACIFICO ZONA CAIDA ANGOL Río Renaico Lago Lleulleu RALCO COLLIPULLI Río Malleco LA ESPERANZA PALMUCHO Río Traiguén TRAIGUEN VICTORIA Río Cautín CURACAUTIN LAUTARO PUMAHUE TEMUCO Río Huichache PADRE LAS CASAS CAUTIN

Lago Colico Río Toltén PITRUFQUEN

Lago Caburga

Lago Villarica LONCOCHE PTA.VALDIVIA Lago Calafquén CIRUELOS PULLINQUE PANGUIPULLI CALLE CALLE Lago Lago Neltume CHUMPULLO VALDIVIAPanguipulli Lago Riñihue PICARTE Lago Pirihueico GRAL. LAGOS ANTILHUE LOS LAGOS CORRAL

LA UNION

Río Pilmaiquén PILMAIQUEN BARRO BLANCO CHUYACA Lago OSORNO Puyehue Río Rahue CAPULLO

PURRANQUE TRANSELEC Lago Rupanco

Lago Llanqihue

FRUTILLAR Lago Todos los Santos TERMOELECTRICAS HIDROELECTRICAS 66 ómenores PUERTO VARAS SUBEST LINEAS -kV CENTRALES CENTRALES CENTRALES

PUERTO MONTT EOLICAS Río Maullín NUDO 110 154 220 345 500

MELIPULLI ACION TRAPEN Seno de CANUTILLAR Lago Chapo Reloncaví EMPALME Río Puelo í COLACO CALBUCO EMPRESAS

Canal de Chacao Punta Barranco OTRAS Estuario de Reloncav Punta San Gallan ANCUD RIO NEGRO DEGAÑ QUEMCHI

ACHAO

CASTRO T ANT

PID-PID E CHI PUQUELDON RRIT CHONCHI A LENO RTIC

ISLA ORIO CHAITEN P DE QUEILLEN E RÚ EL AVION FUTALEUFU O CHILOE EL AMARILLO ARGENTINA PTO. CARDENAS PTO. RAMIREZ QUELLON EL MALITO BOLIVIA CHILOE PALENA RIO AZUL VILLA Golfo Corcovado SANTA LUCIA VILLA Actualizado a abril de 2012 VANGUARDIA Perú

Río Lluta CHAPIQUIÑA CENTRAL ARICA Arica EL AGUILA PARINACOTA ARICA CHUÑO QUIANI PUKARA Bolivia CHINCHORRO

Río Camarones

DOLORES

PACIFICO CERRO COLORADO CENTRAL IQUIQUE Iquique PALAFITOS POZO ALMONTE CERRO DRAGON CONDORES LA CASCADA ALTO HOSPICIO CAVANCHA

TAMARUGAL Salar de Pintados

C. TARAPACA LAGUNAS QUEBRADA BLANCA DOÑA INES TARAPACA DE COLLAHUASI NUEVA VICTORIA

EL ABRA Océano R.TOMIC CRUCERO LOA SALAR NUEVA TOCOPILLA CHUQUICAMATA TOCOPILLA Pacífico TAMAYA ENCUENTRO CALAMA Río Loa SPENCE C. ANGAMOS ío San Pedro GUAYAQUES R GAS ATACAMA ATACAMA SAIRECABUR C. ANDINA LICANCABUR GNL - C. MEJILLONES MUELLE EL TESORO C. HORNITOS CHACAYA MANTOS BLANCOS ESPERANZA MEJILLONES LABERINTO Salar de CAPRICORNIO Atacama EL COBRE OESTE IVAN C. MANTOS GABY BLANCOS LOMAS BAYAS DESALANT LINCE SIERRA MIRANDA NUEVA ZALDIVAR Antofagasta EL NEGRO ANDES C. ANTOFAGASTA LA NEGRA ZALDIVAR ESMERALDA ALTO NORTE SULFUROS PALESTINA O´HIGGINS LLANOS COLOSO URIBE CENTRO DOMEYKO SUR ESCONDIDA PORTADA OXIDOS LAGUNA SECA

Salar de Punta Negra SALTA 200Km. PAPOSO CENTRAL TALTAL

TALTAL

LAS LUCES FRANKE

PLANTA OXIDO EL SALVADOR

EL SALADO CHAÑARAL MONTANDON SAN LORENZO DIEGO POTRERILLOS EMELDA DE ALMAGRO

CHUSCHAMPIS LOS COLORADOS

GUACOLDA HUASCO PELLETS AGROSUPER VALLENAR MAITENCILLO

ALGARROBO

DOS AMIGOS ALTO DEL CARMEN PAJONALES INCAHUASI

BARRIK PUNTA COLORADA

ROMERAL ROMERAL EL INDIO La Serena LAS COMPAÑIAS COQUIMBO Río Elqui MARQUESA GUAYACAN VICUÑA PAN DE AZUCAR ANDACOLLO CM. ANDACOLLO EL PEÑON

MONTE PATRIA LOS OVALLE MOLLES Río Limarí

MONTE REDONDO PUNITAQUI TOTORAL LAS 10 CANELA PALMAS EL SAUCE COMBARBALA Argentina Río Illapel LOS ILLAPEL PELAMBRES

LOS ESPINOS CHOAPA LOS VILOS OLIVOS

ío Petorca QUINQUIMO CABILDOR Río de la Ligua C.VIEJAS NUEVA VENTANAS VENTANAS NOGALES

QUINTA

Río Teno TENO HUALAÑE CURICO ITAHUE

PARRAL Río Achibueno

Lago Colico Río Toltén PITRUFQUEN

Lago Caburga

LA UNION

Río Pilmaiquén PILMAIQUEN BARRO BLANCO CHUYACA Lago OSORNO Puyehue Río Rahue CAPULLO

PURRANQUE TRANSELEC Lago Rupanco

Lago Llanqihue

FRUTILLAR Lago Todos los Santos TERMOELECTRICAS HIDROELECTRICAS 66 ómenores PUERTO VARAS SUBEST LINEAS -kV CENTRALES CENTRALES CENTRALES

PUERTO MONTT EOLICAS Río Maullín NUDO 110 154 220 345 500

MELIPULLI ACION TRAPEN Seno de CANUTILLAR Lago Chapo Reloncaví EMPALME Río Puelo í COLACO CALBUCO EMPRESAS

Canal de Chacao Punta Barranco OTRAS Estuario de Reloncav Punta San Gallan ANCUD RIO NEGRO DEGAÑ QUEMCHI

ACHAO

CASTRO T ANT

PID-PID E CHI PUQUELDON RRIT CHONCHI A LENO RTIC

Río Lluta CHAPIQUIÑA CENTRAL ARICA Arica EL AGUILA PARINACOTA ARICA CHUÑO QUIANI PUKARA Bolivia CHINCHORRO

Río Camarones

DOLORES

PACIFICO CERRO COLORADO CENTRAL IQUIQUE Iquique PALAFITOS POZO ALMONTE CERRO DRAGON CONDORES LA CASCADA ALTO HOSPICIO CAVANCHA

TAMARUGAL Salar de Pintados

C. TARAPACA LAGUNAS QUEBRADA BLANCA DOÑA INES TARAPACA DE COLLAHUASI NUEVA VICTORIA

Salar de Punta Negra SALTA 200Km. PAPOSO CENTRAL TALTAL

TALTAL

LAS LUCES FRANKE

PLANTA OXIDO EL SALVADOR

EL SALADO CHAÑARAL MONTANDON SAN LORENZO DIEGO POTRERILLOS EMELDA DE ALMAGRO

CHUSCHAMPIS LOS COLORADOS

GUACOLDA HUASCO PELLETS AGROSUPER VALLENAR MAITENCILLO

ALGARROBO

DOS AMIGOS ALTO DEL CARMEN PAJONALES INCAHUASI

BARRIK PUNTA COLORADA

ROMERAL ROMERAL EL INDIO La Serena LAS COMPAÑIAS COQUIMBO Río Elqui MARQUESA GUAYACAN VICUÑA PAN DE AZUCAR ANDACOLLO CM. ANDACOLLO EL PEÑON

MONTE PATRIA LOS OVALLE MOLLES Río Limarí

MONTE REDONDO PUNITAQUI TOTORAL LAS CANELA PALMAS EL SAUCE COMBARBALA Argentina Río Illapel LOS ILLAPEL PELAMBRES

LOS ESPINOS CHOAPA LOS VILOS OLIVOS

ío Petorca QUINQUIMO CABILDOR Río de la Ligua C.VIEJAS NUEVA VENTANAS VENTANAS NOGALES

QUINTA

Río Teno TENO HUALAÑE CURICO ITAHUE

PARRAL Río Achibueno

Lago Colico Río Toltén PITRUFQUEN 11 Lago Caburga

LA UNION

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PURRANQUE TRANSELEC Lago Rupanco

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FRUTILLAR Lago Todos los Santos TERMOELECTRICAS HIDROELECTRICAS 66 ómenores PUERTO VARAS SUBEST LINEAS -kV CENTRALES CENTRALES CENTRALES

PUERTO MONTT EOLICAS Río Maullín NUDO 110 154 220 345 500

MELIPULLI ACION TRAPEN Seno de CANUTILLAR Lago Chapo Reloncaví EMPALME Río Puelo í COLACO CALBUCO EMPRESAS

Canal de Chacao Punta Barranco OTRAS Estuario de Reloncav

Punta San Gallan - ANCUD RIO NEGRO DEGAÑ QUEMCHI

ACHAO

CASTRO T ANT

PID-PID E CHI PUQUELDON RRIT CHONCHI A LENO RTIC

BOARD OF DIRECTORS Hogg, Patrick Charbonneau, Brenda Directors Richard Legault, Bruce Hogg, Eaton, Bruno Philippi Irarrázabal, Mario Patrick Charbonneau and Brenda Eaton According to its articles of incorporation, Valcarce Durán, Blas Tomic Errázuriz, waived payment corresponding to the the Board of Directors is made up of nine José Ramón Valente Vias and Alejandro 2011 fiscal year. Compensation paid to members elected by the shareholders at Jadresic Marinovic, and their respective directors throughout the 2011 fiscal year is the respective shareholders meeting, who alternate directors Messrs. Jeffrey Blidner, thus listed as follows: hold these positions for two years and are Daniel Fetter, Paul Dufresne, Richard eligible for reelection. There will be one Dinneny, Enrique Munita Luco, Juan José Blas Tomic clp 33,904,150 alternate director for each director elected. Eyzaguirre Lira, Federico Grebe Lira, Bruno Philippi clp 33,904,150 The Chairman of the Board of Directors is Juan Paulo Bambach Salvatore and Juan Mario Valcarce clp 33,904,150 elected by directors chosen at the share- Irarrázabal Covarrubias. José Ramón Valente clp 33,904,150 holders meeting. Alejandro Jadresic clp 33,904,150 BOARD OF DIRECTORS COMPEN- In conformity with the law and its By-laws, As for the Transelec S.A. subsidiary the Board of Directors shall meet at least SATION Transelec Norte S.A., directors are not once a month. Throughout the 2011 fiscal It was agreed at the fourth Transelec compensated for their services in accord- year, Transelec S.A. corporation held S.A.’s shareholders meeting held 28 April ance with the provisions of Article 8 of the twelve shareholders meetings and one 20011, that directors would be compen- subsidiary’s By-laws. special Board of Directors meeting. sated for their services, amounting to a gross annual sum of USD 70,000 regard- The Board of Directors is currently made less of the number of sessions held or up by Messrs. Richard Legault, Bruce attended by these directors. These sums are to be paid on a quarterly basis.

12 BOARD OF DIRECTORS EXPENS- who may be one of its members or the of sessions held or attended by these ES Secretary of the Board of Directors. The members. Committee held four meetings in 2011. No payment associated to directors’ Compensation for services rendered by expenses was made throughout the fiscal As of 31 December 2011, the Audit Com- members of the Audit Committee through- year. mittee was made up of President José out the 2011 fiscal year is listed as follows: Ramón Valente Vías, Directors Patrick AUDIT COMMITTEE Charbonneau, Brenda Eaton and Mario Mario Valcarce clp 4,680,100 Creation of an Audit Committee different Valcarce Durán, as well as Secretary José Ramón Valente clp 4,680,100 from that established in the Corpora- Fernando Abara Elías. tions Law was approved in April 2007.

The Audit Committee’s duties include Committee members have the right to reviewing the company’s auditor reports, compensation for their services in con- balance sheets, other financial statements formity with agreements reached at the and internal systems, among others. shareholders meeting. Transelec’s Audit Committee is made up of four directors elected by the Board of It was agreed at the fourth Transelec Directors. These directors serve a term of S.A.’s shareholders meeting held 28 April two years and are eligible for reelection. 2011, that each member of the Commit- The Committee will appoint a Chairman tee would be paid the gross annual sum from among its members and a Secretary, of USD 10,000 regardless of the number

13 BOARD OF DirectorS

CHAIRMAN DIRECTOR DIRECTOR Richard Legault Bruce Hogg Patrick Charbonneau Bachelor of Accounting Master’s Degree in Commerce, Chartered Financial Analyst Universite du Quebec University of Alberta Bachelor of Business Adminis- Canadian Master’s Degree in Law, Uni- tration, Bishop’s University versity of Toronto Canadian Canadian

DIRECTOR DIRECTOR DIRECTOR Brenda Eaton Mario Valcarce Durán Bruno Philippi Irarrázabal Economist Commercial Engineer Civil Engineer Master’s Degree in Economics, Pontificia Universidad Católica M. Sc. Operation Research University of Victoria de Valparaíso Ph. D. Engineering Economic Canadian Tax ID Number 5.850.972-8 System Stanford University Tax ID Number 4.818.243-7

DIRECTOR DIRECTOR DIRECTOR Blas Tomic Errázuriz José Ramón Valente Vías Alejandro Jadresic Marinovic Civil Industrial Engineer Commercial Engineer Civil Industrial Engineer Ph.D. in Economic Develop- MBA, University of Chicago PH.D. in Economics, Harvard ment, Sussex University Tax ID Number 8.533.255-4 University Tax ID Number 5.390.891-8 Tax ID Number 7.746.199-K

SECRETARY OF THE BOARD OF DIRECTORS Fernando Abara

14 MANAGEMENT TEAM

As of 31 December 2011, Transelec’s management group is made up of leading executives in each area of expertise with outstanding track records in the sector:

Andrés Kuhlmann Jahn Eric Ahumada Gómez Francisco Castro Crichton Rodrigo López Vergara GENERAL MANAGER VICE PRESIDENT OF BUSINESS VICE PRESIDENT OF FINANCE VICE PRESIDENT OF Civil Industrial Engineer DEVELOPMENT Civil Industrial Engineer OPERATIONS Pontificia Universidad Católica Civil Electrical Engineer, Pontificia Universidad Católica Civil Electrical Engineer de Chile Universidad de Chile de Chile Universidad de Chile Tax ID Number 6.554.568-3 Tax ID Number 9.899.120-4 Tax ID Number 9.963.957-1 MBA Universidad Adolfo Ibáñez Tax ID Number 7.518.088-8

Alexandros Semertzakis Pandolfi Claudio Aravena Vallejo Fernando Abara Elías Claudio Vera Acuña VICE PRESIDENT OF VICE PRESIDENT OF HUMAN VICE PRESIDENT OF LEGAL AF- CORPORATE AFFAIRS ENGINEERING AND PROJECT RESOURCES FAIRS AND GENERAL COUNSEL MANAGER DEVELOPMENT Commercial Engineer, Lawyer Journalist Civil Engineer Pontificia Universidad Católica Universidad Católica de Pontificia Universidad Católica Universidad de Santiago de Chile Valparaíso de Chile Post-graduate Diploma in Post-graduate Diploma in MBA, Universidad Gabriela Tax ID Number 10.963.893-5 Administration, Universidad Administration and Human Mistral Adolfo Ibáñez Resources Management, Tax ID Number 8.003.772-4 Tax ID Number 7.053.358-8 Pontificia Universidad Católica Tax ID Number 9.580.875-1

15 03. OUR PEOPLE

16 HUMAN RESOURCES shared plan for all workers and focus- Economic support provided by the ing on customer orientation, leadership, company to the Transelec Sports Club One of the fundamental pillars that effective communication and project continued in 2011 using the one-plus-one Transelec’s strategic plan rests on is the evaluation. model in order to conduct activities of all company’s collaborators. High quality kinds proposed by Club management. standards and complexity in the industry, After completing the shared plan, our pro- as well as the company’s future challen- fessionals can take another two courses OUR CURRENT EMPLOYEES AND ges mean that Transelec seeks to recruit and apply for the Graduate Diploma in and hold on to the best professionals the IMPORTANT MILESTONES Project Direction or the Graduate Diploma market has to offer at different perform- Transelec employed 507 workers as of in Operations Management. The program ance levels. 31 December 2011 (not including project executed in conjunction with Universidad personnel). Over 96% of these workers Adolfo Ibañez in 2011 features 23,100 Transelec consequently has employee are technically or professionally special- training hours. benefit, worker compensation and bonus ized in what they do. This means that plan policies allowing the company to workers are a fundamental component Special emphasis has been placed be competitive in terms of attracting and for the company to be able to maintain its throughout 2011 on the creation of spaces retaining talent. stringent technical standards and continue to improve workers’ quality of life. This to provide quality service required by includes educational, cultural and rec- The company implements and conducts society. reational programs designed to support training programs in order to maintain its worker’s integral development, firmly present high professional quality stan- 75.15% of the company’s workers are convinced that this directly contributes to dards, developing the concept of Know- employed in the operations, engineering productivity. Along these same lines, the ledge Management, which is crucial for and project development divisions. Gimnasia de Pausa program started this the meeting of high technical standards. year. The program was hosted at the Cen- This is clearly evidenced by development LABOR RELATIONS tral Office, Antofagasta, Iquique, Cerro of the E-class program together with Navia, Alto Jahuel, Itahue, Concepción Good labor relations with the company’s Universidad Adolfo Ibáñez. This program and Temuco. In addition, nutritional and two unions continued throughout 2011. aims to standardize know-how for the kinesthiological evaluations were provided This was achieved by means of constantly company’s professionals, based on a for our collaborators at some substations. open communication channels, evidenced

17 by the fact that no lawsuits related to union matters have been filed. 2% 8% EXECUTIVES ADMINISTRATIVE PERSONNEL 21% KNOWLEDGE MANAGEMENT MANAGERS / ASSISTANT MANAGERS Total training time in 2011 came to 45,938 hours, or 4.2% of the overall hours worked throughout this period. In all, 90% of 26% Transelec’s workers attended training TECHNICIANS programs related to operating divisions, management support, innovation, post- 43% PROFESSIONALS graduate degrees and post-graduate diplomas, languages and information technology, among others. We wish to highlight that important collab- The company’s Knowledge Management oration agreements were signed with the strategic initiative was further developed Universidad de Chile. in 2011. Several talks related to the company’s activities were transmitted as Public Health Faculty and Universidad videoconferences to workers throughout de la Frontera in 2011. Other agree- Chile’s different regions, substantially in- ments had already been signed in 2010 creasing productivity and cutting costs. In with Universidad de Chile, Universidad addition, the teacher training, innovation Católica de Valparaíso, Universidad and library programs were continued in or- Técnica Federico Santa María and der to gain, develop and share knowledge Universidad de Concepción. Agreements within the organization. were also signed some years before with

18 Universidad Católica and Universidad de VICE PRESIDENT AND MANAGER BONUS PLANS Santiago within the framework of the RET SALARIES Transelec has an annual bonus plan for (Transmission Studies Network) initiative Transelec paid executive salaries amount- its executives that is directly related to the launched at the end of 2009, which makes ing to CLP 2,126,380,000 throughout the meeting of goals and their personal contri- up an integral part of the Knowledge Man- 2011 fiscal year. This amount includes bution to the company’s results. agement program. salaries paid to executives employed as of 31 December 2011 and executives who retired in 2011.

GENERAL MANAGER (CEO) Andrés khulmann J.

CORPORATE AFFAIRS LEGAL AFFAIRS DIVISION VICEPRESIDENCY Claudio Vera A. Fernando Abara E.

OPERATIONS BUSINESS DEVELOPMENT ENGINEERING AND FINANCE HUMAN RESOURCES VICEPRESIDENCY VICEPRESIDENCY PROJECT DEVELOPMENT VICEPRESIDENCY VICEPRESIDENCY Rodrigo López V. Eric Ahumada G. VICEPRESIDENCY Francisco Castro C. Claudio Aravena V. Alexandros Semertzakis P.

19 04. THE BUSINESS

20 THE REGULATORY SCENARIO Subtransmission systems are made up of TRUNK TRANSMISSION facilities interconnected to the electrical Transelec’s business is power transmis- Transelec revenue in this segment con- system available for the exclusive supply sion. The legal framework regulating the sists of the “annual transmission value of groups of regulated or end consumers power transmission business in Chile by segment” (VATT), which is calculated located in distribution companies’ conces- defines power transmission systems, based on the “annual investment value” sion areas. classifying power transmission facilities (AIV), plus “operating, maintenance and into three categories (Trunk Transmis- administration costs” (OMAC) for each of In turn, additional systems are made up of sion Systems, Subtransmission Systems the segments that make up the current power lines and transmission equipment and Additional Systems) and establishes trunk system. VATT is determined every mainly designed for supplying electrical an open access layout for the first two four years by a consultant that performs energy to non-regulated customers or for systems and for additional power lines a study known as the Trunk Transmission evacuating production of a power plant or making use of rights of way and those that Study (TTS). During the four-year period a limited group of power plants. use national public goods for their layout, between two consecutive TTSs, both specifying that these respective facilities the AIV and the OMAC of each segment 2011 was an unusually busy year. The can be used by third parties under non- are indexed using formulas designed to most important milestones in the regu- discriminatory technical and economic maintain the real value of the AIV and the latory scenario include publication of conditions. In addition, this framework OMAC during this period. Both indexing Ministry of Energy Decree N°61 - 2011 establishes criteria and procedures for formulas and application frequency are that establishes trunk facilities and their determining compensation power trans- determined in the TTS. valuation, delivery of a subtransmission mission facilities owners are entitled to. tariff technical report, the issuing of a new In addition, the consultant establishes ex- trunk work expansion plan amounting to Trunk facilities are defined as the set of pansion plans for the trunk system in said approximately US$ 900 million, collapse economically efficient power lines and TTS, together with reference investment of the Campanario Generación payment substations required in order to supply all values. These expansion plans feature channel that affected both power trans- demand stemming from different power investment that must be classified as new mitters and generators, causing the first generation availability scenarios. projects or as expansions. bankruptcy of a business in the CDEC- SIC power grid.

21 MARKET SHARE (share per kilometer of power lines) The facility owner, who shall be required Final TTS results for the 2011-2014 period 100% to execute a project construction bid, were delivered in 2011, setting VATT for shall execute current facility expansion. the segments considered to be part of the In the case of new projects, exploitation trunk system according to the publication 500 kV and execution rights are auctioned by the of Ministry of Energy Decree N° 61-2011. respective Economic Load Dispatch Cen- VATT for Transelec and Transelec Norte ter (CDEC) by means of an international identified by this process came to a re- tender and awarded to the proposer spective US$ 186.8 million and US$ 14.1 53% 47% presenting the lowest VATT for the project million, appraised as of December 2009. bid. MARKET SHARE 220 kV The CDEC analyzes consistency of the Transelec owns 100% of the 500 kV expansion plan and trunk system facilities power lines and has a 47% stake in the contained in the ETT on an annual basis, 220 kV power lines. The company there- together with effective system develop- fore has an 86% market share for 154 kV 14% 86% ments in terms of power generation, power lines and a 12% share for 110 kV transmission and demand performance. and 66 kV power lines. The National Energy Commission (CNE) 154 kV subsequently determines the expansion plan for the following 12 months.

88% 12%

66 + 110 kV

22 Trunk system projects in the Ventanas zone and from Los Vilos northward. A. neW PROJECTS Transelec finished construction of the 220 Construction work for the 220 Charrúa-La- kV Nogales-Polpaico power line, includ- gunillas power line continued at the same ing a 220 kV diagonal at the Nogales time. The project was originally conceived substation and two 220 kV bays at the as part of the subtransmission system, but Polpaico substation. The project featured was classified as a trunk system facility the construction and operation of a new in the last TTS. This power line will allow 220 kV double circuit power transmission transmission of part of the power gener- line between the Nogales and Polpaico ated by the new power plants located in substations in Chile’s 5th Region, both the Coronel zone and support growing of which are owned by Transelec. This demand in the Concepción zone. The was done in order to ensure that this can budget for this 78-km power line comes to eventually be transformable into a 500 kV US$ 44 million. simple circuit power line without modify- ing any structures, in accordance with B. EXPANSION the provisions of Ministry of Economy SD Transelec finished construction of the N°118. 220 kV transfer busbar at the Cardones substation and it was commissioned 19 The power transmission line features a April 2011 for an investment amounting to strip 60 m wide and 82.6 km long, with US$ 3.7 million. nominal capacity amounting to 1,500 MVA per circuit (for 220 kV power lines) Projects associated to the replacement of and 3,400 MVA in a 500 kV circuit. The conductors with high capacity conductors overall investment for this project came for the 220 kV Alto Jahuel-Chena power to US$146.6 million and the project was line segment (circuit 1), installation of built in order to expand transmission a second 500/220 kV-750 MVA auto- capacity for this segment and improve transformer at the Polpaico substation dispatch from the power plants located

23 and 50 MVAr capacitor banks at the Alto The contract was awarded to CME Jahuel and Cerro Navia substations were 3 January 2011 and features invest- completed. These were commissioned 8 ment amounting to US$ 2.3 million. October, 4 September and 4 April with a respective final investment amounting to • Circuit breaker replacement at the US$ 4.1, 25.6 and 5.1 million. 220 kV Ancoa substation, featuring replacement of the 500kV circuit Similarly, the company started con- breaker for the auto-transformer bank struction for the following trunk system N°2, 52KT2 bay. expansion works associated to Decrees The contract was awarded to CME 243/2010, 115/2011, 116/2011 and 3 January and features investment 143/2011: amounting to US$1.5 million.

• Expansion of the Ancoa substation, • Auto-transformer bank at the 500/220 which features expansion of the 500 kV 750 MVA Charrúa substation, kV yard, extending the main 500 kV featuring expansion of the 500 kV busbars and transfer busbars at the yard, extending the main busbars and substation. transfer busbars, as well as the sup- The contract was awarded to Elecnor ply, assembly and commissioning of 3 January 2011 and features invest- the auto-transformer bank. ment amounting to US$ 11.5 million. The contract was awarded to Hyosung 4 January 2011 and features • Circuit breaker replacement at the investment amounting to US$ 35.4 220 kV Charrúa substation, featuring million. the replacement of circuit breakers at the J9 and JCE1 bays, busbar • Expansion of the Alto Jahuel sub- connection disconnectors, ground station, extending the main 500 kV disconnectors, current transformers busbars and transfer busbars in three and wave traps. positions: one for a future busbar sec-

24 tionizer, another for a new 500 kV bay • 220 kV Rahue sectioning substation • 220 kV transfer busbar at the Carrera and the third for the Ancoa 3 power featuring sectioning of circuit N°1 of Pinto substation, featuring incorpora- line bay. This project will enable con- the 2x220 kV Valdivia - Puerto Montt tion of a 220 kV transfer busbar for nection of the first circuit of the new power line, completion of circuit N°2 the trunk bays with the corresponding 2x500 kV Ancoa - Alto Jahuel power as an express line for the 2x220 kV coupling bay at the current Carrera line owned by Elecnor. Valdivia–Puerto Montt power line, as Pinto substation. The project includes The contract was awarded to Elecnor well as main busbar N°1 and a trans- expansion of the 220 kV yard plat- 25 August 2011 and features invest- fer busbar, two 220 kV power line form, expansion of the grounding grid ment amounting to US$ 9 million. bays, a coupling bay and a bay for and perimeter fencing, extension of installation of the circuit N°2 express the main busbar, expansion of secur- • Normalization of the 220 kV Chena line at the 220 kV Rahue sectioning ity systems, as well as control, protec- substation, featuring construction of substation. tion and telecommunications systems, a 220 kV power line with GIS equip- The contract was awarded to HMV among other works that incorporate ment, a layout for two power line Ingenieros Ltda. and Energy Intena- transfer busbars. bays, busbars and accessories for tional 1 September 2011 and features The contract was awarded to Con- interconnecting bars from the Chena investment amounting to US$ 9.7 sorcio Cobra 26 August 2011 and substation (Chilectra), together with million. features investment amounting to works for the complete sectioning of US$ 7.4 million. the 2x220 kV Alto Jahuel–Cerro Navia • Circuit breaker replacement at the power line with a tap-off toward the Alto Jahuel and Polpaico substations, • A 220kV transfer busbar at the Los substation, direct current auxiliaries, as well as a 50 kA short-circuit cur- Vilos substation, consisting of the as well as control, protection and rent. installation of two new independent telecommunications systems. The contract was awarded to Sie- 220 kV transfer busbars, one for each The contract was awarded to Sie- mens 1 September 2011 and features main busbar section at the Los Vilos mens 1 September 2011 and features investment amounting to US$ 5 mil- substation. This requires installation investment amounting to US$ 16.9 lion. of the respective coupling bays and million.

25 connection of the current trunk bays tures investment amounting to US$ sorcio Cobra 26 August 2011 and corresponding to the Las Palmas 1 7.2 million. features investment amounting to and 2 and Nogales 1 and 2 power US$ 1.8 million. lines to the new busbars for transfer. • A 500kV transfer busbar at the This will be done in order to meet the Polpaico substation, consisting of the • CCEE bank at the 220 kV Pan de provisions of Article 3-29 of the new design and installation of six 500 kV Azúcar substation, consisting of the Technical Standard for the Safety and unipolar disconnectors for the reactor design and installation of a 75 MVAR Quality of Service (NTSyCS) and thus bay of the Ancoa power line in order static capacitor bank connected to normalize the Los Vilos substation. to replace these with the reserve the 220 kV busbar. This considers The contract was awarded to Con- reactor. necessary adjustments to be made to sorcio Cobra 1 September 2011 and The contract was awarded to Con- control, protection, telecommunica- features investment amounting to sorcio Cobra 26 August 2011 and tions and measurement systems. US$ 10.4 million. features investment amounting to The contract was awarded to Agro- US$ 1.7 million. sonda 1 September 2011 and fea- • Incorporation of a 220kV transfer tures investment amounting to US$ busbar at the Valdivia substation, con- • A 500 kV transfer busbar at the Alto 3.8 million. sisting of the construction of a transfer Jahuel substation, consisting of the busbar, its respective coupling bay design and installation of 3 500kV • The2x220 kV Charrúa-Lagunillas and installation of the maneuvering unipolar disconnectors at the reactor power line (laying the first circuit), equipment required in order to enable bay of the Ancoa 1 and 3 power lines which includes a new 78 km 2x220 the transfer of bays Puerto Montt 1, and 500 kV unipolar disconnectors at kV power line connecting the Charrúa Puerto Montt 2, Cautín and Ciruelos the reactor bay of the Polpaico power substation and the new Lagunillas at the Valdivia substation. line in order to replace these with the substation, as well as a 220 kV bay at The contract was awarded to EF- reserve reactor. the Charrúa substation. ACEC 1 September 2011 and fea- The contract was awarded to Con-

26 MAIN TRANSELEC PROJECTS IN 2011. TRUNK TRANSMISSION SYSTEM

Values in US$ thousand Real Commis- Project Type Project Investment Status sioning (US$ thousand) Date Studies Project studies 2x220 kV Nogales Polpaico power line 132.4 In Service 11.05.2011 New Projects Laying of the 1st circuit for the 2 x 220 kV Charrúa Lagunillas power line 44 In Service 02.27.2012

STATCOM equipment at Cerro Navia Substation 27.2 In Service 03.26.2011 CER equipment at Polpaico substation 18.9 In Service 08.06.2011 Alto Jahuel - Chena segment conductor replacement 4.1 In Service 10.08.2011

Auto-transformer Bank 2, 500/220/66 kV 750 MVA, Polpaico substation 25.6 In Service 09.04.2011

Expansion of 220 kV busbar, Cerro Navia substation 3.1 In Service 01.11.2011 03.16.2011 220 kV transfer busbars, Cardones substation 3.5 In Service and 04.19.2011 31.03.2011 50 MVAr capacitor banks at Cerro Navia and Alto Jahuel substations 5.1 In Service and 2.4.2011 Conductors replaced with high capacity conductors for 2x220 kV Alto Ja- 4.1 Underway 04.30.2012 huel – Cerro Navia power line, Chena-Cerro Navia segment Expansion Construction of works related to sectioning of the 1x500 kV Ancoa-Polpaico Projects 24.6 Underway 02.28.2013 power line. Installation of flow control equipment at 2x220 kV Polpaico-Cerro Navia 31 Underway 04.14.2012 power line Expansion of 500 kV yard at Ancoa substation 11.5 Underway 07.03.2012 MAIS equipment redundancy 1.4 Underway 01.22.2012 Replacement of circuit breakers at 220 kV Alto Jahuel and Polpaico sub- 5 Underway 05.01.2013 stations Circuit breaker replacement at 220 kV Charrúa substation 2.3 Underway 06.18.2012 Circuit breaker replacement at 500 kV Ancoa substation 1.5 Underway 08.03.2012 750 MVA auto-transformer bank at 500/220 kV Charrúa substation 35.4 Underway 07.04.2013 500 kV yard expansion at Alto Jahuel substation 9 Underway 02.25.2013 Normalization of 220 kV Chena substation 17.8 Underway 09.01.2013 Construction of 220 kV Rahue sectioning substation 10 Underway 09.01.2013 Expansion Plan 2010 - 2011 expansion plan projects 37.4 Tendered ------Project Carryover Miscellaneous project carryover Total 454.9

27 SUBTRANSMISSION • Construction of the 220/154 kV-390 • 220/110 kV transformation capacity MVA Lagunillas substation and 220 increase at the Diego de Almagro, The National Energy Commission kV bays at the Hualpén substation, Cardones and Maitencillo substations delivered a technical report listing its with an investment value of US$54.2 for an investment value of US$3.2 substransmission tariffs and respective million, commissioned 15 August million, with a transformer commis- indexing formulas for the 2011-2014 2011. sioned at Maitencillo 1 September period to the Ministry of Energy in August 2011. 2011. This report included background • Construction of a new 110/23 kV-15 information from subtransmission studies MVA El Salado substation as part • Cerro Navia substation, installation and specifications from the correspond- of the Diego de Almagro-Chañaral of a 220/110 kV- 400MVA auto- ing Honorable Panel of Experts. A Decree power line project, with an investment transformer bank with a backup unit, establishing subtransmission tariffs and value of US$4.1 million, commis- commissioned 21 November 2011. their respective indexing formula for the sioned 17 April 2011. aforementioned period is expected to be published at the end of the first quarter in • 1x110 kV Diego de Almagro-Nueva El 2012. Salado-Chañaral power line, with an investment value of US$7.7 millones, Transelec put the following subtransmis- commissioned 17 April 2011. sion projects in service throughout Chile in 2011.

28 MAIN TRANSELEC PROJECTS UNDERWAY, SUBTRANSMISSION SYSTEM

Values in US$ thousand REAL INVESTMENT DATE PROJECT TYPE PROJECT 2011 STATUS COMMISSIONED (US$ thousand) Studies Miscellaneous ------Lagunillas and Hualpén substations 54.2 In service 8/15/2011 El Salado substation 4.1 In service 4/17/2011 SIC North Maitencillo substation 3.2 In service 9/1/2011 1x110 kV Diego de Almagro - Nueva El Salado - Chañaral power 7.7 In service 4/17/2011 line substations 2x154 kV Tinguiririca-Rancagua-Alto Jahuel power line, conductor 3.011 In service 12/30/2011 replacement at Malloa Tilcoco segment Sufficiency Works Subtotal 72 Replacement after Installation of 220/110 kV – 440 MVA auto-transformer bank with a 10.10 In service 11/21/2011 the expiry of service backup unit at Cerro Navia substation (4) life Replacement after Service Life Works Subtotal 10.10 Project Carryover Miscellaneous project carryover In service Total Subtransmis- 82.311 sion Projects

(*) Projects commissioned in 2010 or before with outstanding payment made in 2011.

29 ADDITIONAL SYSTEMS

Additional power transmission systems are made up of power transmission facilities essentially and mainly designed to supply electrical energy to users that are not subject to price regulation (i.e. large industries, mining, etc.) and of facilities designed to allow power companies to inject production into the electrical system. Power transmission by means of these systems is regulated by private contracts between parties.

The additional systems market is not without extensive environmental and concession processes currently faced by power transmission projects. It has been observed that estimated deadlines greatly differ from real conditions.

Even so, Transelec has confirmed its interest in developing the additional power transmission market and establishing the company as a strategic partner for the execution of energy development required by the market. This was understood by Metro S.A., which signed an agreement with the company in order to develop a power transmission system to meet our

30 customer’s increasing power consumption In the mining market, construction started The Caserones Mine is a mining mega- requirements in the future. The Neptuno on a power transmission system for the project located in Chile’s 3rd Region, 160 Substation Project features construction Caserones Mine Project belonging to km southeast of Copiapó. It is a US$ 2 of a ring bus configuration GIS substation, SCM Minera Lumina Copper Chile (owned billion investment with electricity demand the installation of two 220/20.4 kV, 55/80 by the Japanese firm Lumina Copper). amounting to 190 MW. MVA power transformers and construction The system had been 30% completed of a 2x220 kV power line to connect this at the end of 2011 and commissioning is Completion of this project is undoubtedly substation to the SIC power grid. Commis- scheduled for August 2012. an essential step for Transelec’s entry into sioning is scheduled for 2014 considering the national copper sector. an investment of US$ 21 million. COMMISSIONING Durante 2011, Transelec completed construction of the 500 kV System Transmission Capacity Increase between the Ancoa substation and the Alto Jahuel in and Polpaico substations for its customer

Transelec has confirmed its interest Endesa. This required commissioning of CER equipment at the Polpaico substation developing the additional powerth transe com- - and establishing the exe- and STATCOM equipment at the Cerro mission market tner for tegic par Navia substation. These were respectively pany as a stra required development commissioned 20 August and 23 March cution of energy . 2011. These new facilities were recog- by the market nized as part of the Trunk System in the TTS concluded in 2010.

31 Overall project investment, including the was commissioned 30 May 2011 for the Finally, a second circuit was installed compensator bank at the Polpaico sub- customer Minera Carmen de Andacollo. at the 220 kV Bocaminas II- Lagunillas- station commissioned in 2010, comes to This included construction of a 220 kV bay Hualpén power line 21 December with an US$ 43 million. at the Pan de Azúcar substation with an investment value of US$ 10.2 million. This investment value of US$ 36.6 million. project is part of the investment agree- In turn, the 220 kV Pan de Azúcar- ment with Endesa. Carmen de Andacollo power line project

MAIN TRANSELEC PROJECTS UNDERWAY, ADDITIONAL SYSTEMS

Values in US$ thousand Real investment in 2011 Date Project Type Projects Status (US$ thou- commissioned sand) Studies and Services Miscellaneous - Statcom equipment at Cerro Navia substation 24.8 Completed 3/23/2011 Las Palmas substation 21.4 Completed 4/6/2011 220 kV bay at Pan de Azúcar substation 1.6 Completed 5/30/2011 Investment Agreement 1x220 kV Pan de Azúcar-Carmen de Andacollo with Endesa 15.2 Completed 5/30/2011 power line CER equipment at Polpaico substation 15 Completed 8/20/2011 Bocamina II Lagunillas - Hualpén power line 10.2 Completed 12/21/2011 220/20.4 kV Neptuno substation Underway 19.1 2x220 kV power line. Neptuno connected to SIC Underway Other Customers 220 kVs Maitecillo-Caserones power line and 119 Underway 8/31/2012 Maitencillo substation expansion Project Carryover Miscellaneous projects Total Additional Systems Projects 226.3

32 OUR CUSTOMERS pectations and directly focus on bridging the gaps identified. 2011 was a year of crosswise evaluations at Transelec. With the assistance As part of the company’s commitment of an international company, changes as the provider of a public service that have been made to the way we face new is critically important for the country’s business opportunities and this change development, Transelec is looking for new of perspective is evidenced in a new business models to facilitate the con- initiative by the Business Development nection of non-conventional renewable Vicepresidency: market orientation. energies. Chilean legislation does not presently provide systems to properly en- Transelec has understood recent changes courage the development of these ener- and has established strategies to relate to gies and we therefore hope that the new each of the regulated and additional sys- law will facilitate these projects, which are tems segments as a proactive response considered to be a fundamental part of the to development of the national energy energy development pillars established by market, seeking for a differentiated value the government. proposal. Adjustments made to the company’s structure have focused interest on CUSTOMER SERVICE POLICY customers’ needs in response to concerns perceived from the interaction with them. Our fundamental pillars are based on customer service and confidence in our As in former years, the company has as- knowledge as system specialists. sessed stakeholder satisfaction, identify- ing perception and positive or negative Our policy is to interpret and understand encouragement by its customers. Results our customers’ needs, executing their obtained evidence that changes made are projects in conformity with the best quality, completely in line with our customers’ ex- safety and environmental parameters and

33 understanding that each customer needs consultative selling into the development VI individual treatment. This is a total com- of new business. Total commitment for The current regulation framework estab- mitment that continues over the years, project execution and support throughout lishes calculation and publication mech- establishing a satisfactory long-term the contract period clearly evidences the anisms for the valuation of power trans- relationship for everyone involved. quality of our services and our proposal mission company investment at market for differential market value, which have prices, information that is used for setting Our commitment is to work closer and all been validated by our customers over service tariffs. closer to our customers (ongoing custom- the years. Our specialized supply enables er service and consulting) and to pro- us to develop the best power transmission Valuation of Transelec power transmission vide all of our extensive and specialized solutions in the market. Our experts study facilities as of 31 December 2011 comes knowledge regarding power transmission, market trends and projections on an on- to US$ 2.950 million. Transelec Norte keeping in mind the final goal of always going basis, enabling us to always apply facilities account for US$ 161,21 million of meeting their expectations the results of our experience to solutions this total. for all of our customers. Keeping this objective in mind, we have decided to incorporate the concept of

34 VI TRANSELEC REVENUE DISTRIBUTION (values in US$ million as of 31 December of each year) BY SYSTEM

3000 2.789 5% 1% AUSTRAL OTHERS 2500 5% NORTH 25% 2,233 REGULATED 18% TRUNK SYSTEM 2000 1,986 2,003 ADDITIONAL SYSTEMS 1,591 1,657 1500 1,494 1,544

1,138 1,191 1,063 1000 929 19% 27% SUBTRANSMISSION 500 TRUNK SYSTEM CONTRACTS

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

REVENUE DISTRIBUTION BY CUSTOMER

37% ENDESA GROUP 9.99% PACIFIC HYDRO-LA HIGUERA 1.01% COMPAÑÍA BARRICK CHILE GENERACIÓN 0.60% ARAUCO GROUP 0.90% TRANSNET GROUP 4.52% ENERGÍA AUSTRAL LTDA. 2.62% GASATACAMA CHILE S.A. 13.01% OTHERS 20.05% COLBÚN GROUP 10.16% AES GENER GROUP

35 05. THE OPERATION

36 Transelec’s commitment as an important Transelec consequently employs highly collaborator in the country’s growth and specialized personnel and contractors development means that its essential trained on an ongoing basis. These objective is to supply power with high people prepare and execute maintenance safety and quality service standards. The programs and procedures for the oper- company operates its facilities in close ation of transmission systems meeting coordination with different stakeholders high standards, many of which have been every day, providing immediate and accur- adopted by current Chilean legislation. In ate answers to contingencies that arise in addition, the company has state-of-the-art order to ensure ongoing service over the telecommunications, control and protec- long term. tion equipment for network operation and safety.

37 Work started on the MEGA project in consulting company. These processes start of each year. This year’s index also 2011. This project was designed to move are presently being implemented and a included basic preventive maintenance, from excellence maintenance in order to change management plan was designed pruning and cutting along easement strips extend the service life of assets toward for this purpose. and the execution of extraordinary main- asset management, which aims to man- tenance scheduled. age assets by realizing that these have The second phase is about processes a set life cycle. This project is part of the in the asset management area. This Different activities executed in 2011 change process established in the 360 area determines what, where and when include the awarding of equipment pro- Excellence Plan as one of its three funda- maintenance tasks are executed. Phases curement contracts for the different zone mental pillars. three and four are respectively related to divisions corresponding to the 2011-2013 information technology tools to support period, highlighting the supply of circuit The Vicepresidency of Operations has management and continuous improve- breakers, instrument transformers, light- focused a lot of its efforts on this pro- ment mechanisms. ning rods, transformer disconnects and ject, which aims to provide continuous battery banks. improvement in order to face the challen- Operation, maintenance and replacement ges of new times. of equipment or systems at Transelec The company developed its strategy for facilities generally advanced in accord- replacing control and protection assets. The first phase of the project executed ance with annual programs. There are still The strategy’s criticality evaluation deter- over the second half of 2011 was about some corrections and adaptations to be mined that 381 protection systems had network service processes, an area spe- made due to work stemming from the ef- to replaced over a term of six years and cializing in the execution of maintenance fects of the 27 February 2010 earthquake. 36 differential busbar protection devices tasks. These processes were analyzed, had to be replaced over a term of eight designed and documented by a team The annual compliance index for prevent- years. The replacement plan for control made up of personnel from the zone div- ive maintenance activity execution came and protection assets will increase the isions with extensive experience, as well to 88.5%, an index that compares work reliability of protection systems, reducing as support provided by the UMS Group progress with scheduling executed at the the failure rate and increasing compliance

38 to current technical safety and service The consulting company KEMA Inc. was quality standards. hired for this purpose and commissioned to prepare the functional and technical Technical specifications and minimum baselines for an international tender of requirements for equipment and facilities this project. The suppliers ABB, AREVA, were developed in 2011 in order to stan- GE, OSII and SIEMENS were called to dardize criteria in the telecommunications bid. The company awarded the con- area with the Engineering Vicepresidency tract for supply and future support over for application in new projects. The the coming five years in the Evergreen microwave network supervision system modality was the supplier Open System was implemented throughout 100% of International from Minneapolis, USA. The the trunk system. This system will reduce supplier will work through its representa- failure repair time and will soon expand to tive and integrator in Chile TECNET from the access network and to equipment that the Ibermática group. This supplier shall is not presently supervised. In addition, a be required to deliver the system to the strategy to replace and update teleprotec- operation over a term of 17 months. tion equipment corresponding to the trunk transmission system was executed in Certification of Real-time Operation of the order to enhance system security. Finally, Electrical System was renewed in 2011 in microwave projects were executed in the accordance with ISO 9001 quality stan- Far North Zone. These will replace OPGW dards, incorporating the Far North COZ. fiber optic cables that are currently out of This process includes ongoing super- service. vision of the electrical system, analysis of facility operation status, decision-making, In addition, the SCADA/EMS System coordination and execution of maneuvers Renovation Project was started in 2011. required in order to keep facility conditions within pre-established safety ranges.

39 By means of this Quality Management System certification, Transelec commits to continuously improve power supply safety by means of proper power transmission system operation.

The company gained ISO 9001 certification of the “Energy Measures Manage- ment” process in 2011. TRANSELEC thus evidenced its commitment to the concept of quality control in the company’s critical processes, such as invoicing and the energy balance for customers and regula- tors.

Moreover, work on the plan for mitigat- ing the effects caused by the presence of corrosive sulphur in power transformer oil continued throughout 2011. Another six 500 kV devices and three 220 kV devices, in addition to the fifty-four devices already subjected to corrective measures in former years, were subjected to the insulat- ing oil passivation process. This plan will

40 continue in 2012 with the treatment of 30 disconnections attributed to Tran- system (integrated platform) and the lack another three devices to be subjected to selec’s own facilities were reported in of backup personnel at the Central Zone this process since the passivation element the SIC power grid in 2011. These led substations. Notwithstanding, due to the shows reduced concentration. This was to power supply shortages amount- existence of a SCADA backup system detected by ongoing follow-up and control ing to EIT of 24.4 minutes-system. The for the main SCADA (Alto Jahuel Control of the effectiveness of mitigation actions event causing the greatest impact was Center), service recovery at Transelec implemented. the failure of a 220 kV circuit breaker at facilities was achieved within normal the Ancoa substation, which led to the timeframes. Investment, improvements and modern- disconnection of a 220 kV busbar and the ization such as those indicated above, separation of 220 and 500 kV busbars at As for service quality reported for Tran- as well as the application of thorough the same substation due to the discon- selec Norte facilities in the SING power operational procedures, aim to reduce nection of the 220/500 kV transformer. grid, EIT amounted to 8.7 minutes-system, Equivalent Interruption Time (EIT), an indi- Due to the appearance of a subharmonic practically due to the overall service loss cator that measures service safety, to a resonance phenomenon in the 500 kV due to a failure that was not detected by level within the expected parameters. EIT, system between the series compensation the protection systems in a 220 kV power which represents total power not supplied and reactors, both 500 kV Ancoa – Alto line operated by third parties. Service to free and regulated customers over a Jahuel and Ancoa Polpaico power lines recovery was partially delayed by the fail- twelve-month period, stems from unavail- were subsequently disconnected, leading ure of control equipment at the Lagunas ability at power withdrawal points for the to loss of service in an extensive area of substation owned by Transelec Norte. Transelec power transmission system and the SIC power grid between the regions is expressed as “equivalent interruption of Valparaíso and Maule, which accounts Due to TRANSELEC failures in the month minutes” during the maximum system for 65% of SIC consumption. Service of July 2010, the Vice Presidency of demand hour. recovery was delayed by the conges- Operations conducted an internal analysis tion of information in the SCADA control and diagnosis, followed by proposal of an

41 EIT Action Plan to improve network operation As for participation at Load Economic Dis- 25 and internal processes. The Action Plan patch Centers, a Transelec executive has

20 considers the following measures: been serving as the CDEC-SIC Chairman of the Board of Directors since November. 15 Implementation of the N-1 criteria in The company has two representatives

utos - sistema 10

Mi n transformers and busbars. and two deputy representatives in the 5 CDEC-SIC, as well as three directors and

0 Internal risk management improve- two replacement directors representing 2004 2005 2006 2007 2008 2009 2010 2011 ment. the landowner segments at power trans- SING EIT mission facilities in the CDEC-SING. SIC EIT Implementation of a Risk Manage- ment System in the CDEC. With regard to cable theft that has been seriously compromising TRANSELEC power lines that use copper conductors CoPPeR

50 since 2007, the number of events in 2011 came to 23, with criminals removing a 40 total 14.6 metric tons of material. Copper 30 conductor theft is still a problem but it has 20 been gradually going down year after year Amount of Copper (kg) 10 thanks to efforts put forth by company in coordination with political and police 0 2009 2010 2011 authorities, as well as authorities from Copper Theft (kg) Copper Recovered (kg) Number of events the Public Ministry and other companies

42 in order to prevent this theft. In any case, conductor theft is a structural factor based on current copper prices and the inherent nature of the junk business, which is hard to eliminate and creates a market for selling stolen material.

More specifically, criminal activity increased substantially over the first quarter of 2011. However, two policemen were killed by a band of criminals in a police raid in late March. The leader of the band was also killed. In addition, copper prices dropped in the middle of the year and criminal activity went down considerably over the second half of the year, with the total number of kilograms of copper stolen in 2011 down 25% compared to 2010.

43 06. FINANCE

44 MAIN ACTIVITIES IN THE 3.65%, the M series, UF 1.5 million at an and Corpbanca banks agreed to a credit FINANCIAL AREA annual 4.05% and the N series, UF 3.0 line amounting to UF 3,000,000, which

Throughout 2011, Transelec completed million at an annual 3.95%) in order to re- has not been used to date. iii) In Septem- several financing initiatives in the financial pay existing debt, whose last coupon ma- ber 2011, Transelec issued the remaining sector. We wish to highlight the following: tured 15 April 2011. ii) In March 2011, in UF 1.9 million corresponding to the M ser- i) In January 2011, Transelec issued local order to finance expenditure correspond- ies at an annual 4.05%. These funds were bonds amounting to a total UF 7 million ing to the company’s investment program, used for corporate activities. (the L series, UF 2.5 million at an annual Transelec, the Scotiabank-Sudamericano

DEBT AS OF 31 DECEMBER 2010 SERIE DATE OF INTEREST MATURITY CURRENT currencY ISSUE RATe aMOUNT Serie D 14-Dic-2006 4,25% 15-Dic-2027 13.500.000 uF Serie C 21-Mar-2007 3,50% 01-Sep-2016 6.000.000 uF Serie E 13-Ago-2009 3,90% 01-Ago-2014 3.300.000 uF Serie F 13-Ago-2009 5,70% 01-Ago-2014 33.600.000.000 clp Serie H 13-Ago-2009 4,80% 01-Ago-2031 3.000.000 uF Serie I 03-Dic-2009 3,50% 01-Sep-2014 1.500.000 uF Serie K 04-Dic-2009 4,60% 01-Sep-2031 1.600.000 uF Serie L 19-Ene-2011 3,65% 15-Dic-2015 2.500.000 uF Serie M 19-Ene-2011 4,05% 15-Jun-2032 3.400.000 uF Serie N 19-Ene-2011 3,95% 15-Dic-2038 3.000.000 uF

UF: Unidad de Fomento (readjustable unit set by the Central Bank of Chile, Law 18,840) All bonds are bullet bonds (principal paid upon maturity of the last coupon).

45 DEBT SERVICING RESERVE AVAILABLE CREDIT LINES

Starting in December 2006, Transelec has In order to ensure the availability of funds a Debt Reservicing Reserve required for in order to cover the requirements of bond issuing contracts corresponding to working capital, fixed assets investment the C, D, E, F, H, I, K, L, M and N ser- project financing (underway and upcoming ies. This reserve comes to the amount of projects), procurement of power lines and interest and amortization for the principal possible debt refinancing, the company -with the exception of final payment- cor- has committed to the following credit lines, responding to a six-month period for the which have not been used as of the end aforementioned bonds. of the 2011 fiscal year and are completely available according to the following conditions:

BANK AMOUNT (UP TO) MATURITY loan TYPE Scotiabank US$ 15,000,000 11-15-2012 Working Capital DnBNor US$ 30,000,000 02-28-2012 Working Capital Scotiabank US$ 15,000,000 03-31-2012 Working Capital Scotiabank y Corpbanca uF 3,000,000 03-31-2012 project Financing and Refinancing

46 PERFORMANCE INDICATORS 2011 OPERATING RESULTS tem toll reliquidation for the March 2004 The company has two main sources of - December 2007 period, according to the LIQUIDITY revenue generation: a) regulated revenue provisions of Decree 207 dated 15 Janu- Due to positive results in 2011, Transelec from services provided by assets belong- ary 2008 amounting to a total CLP 20.97 features high liquidity, which together ing to the Trunk Transmission and Sub- billion. This figure is expressed in currency with a) availability of currently committed transmission systems, and b) contractual as of 31 December 2008. credit lines, b) the issuing of a commit- revenue stipulated in bilateral contracts ted credit line amounting to UF 3 million which feature additional power transmis- Evolución de Ingresos y EBITDA and c) partial reinvestment of its own sion assets, as defined by Short Law I, 200 cash generation allows the company to 8 among others. 13 finance its upcoming investment plans in 150 157 154 153 146 new power transmission assets, backed 110 The company’s properly protected rev- 100 104 104 by the firm commitment of the company’s 96

enue structure, market conditions, legisla- Billones de pesos shareholders. 50 tion, current regulatory framework and 112 120 123 130 163 185 177 193

the quality and solvency of its custom- 0 2004 2005 2006 2007 2008 2009 2010 2011 ers have allowed the company to report LIQUIDITY Ingresos de Explotación stable long-term results, despite the global 250 Reliquidación Troncal 2004-2006 67,2 financial crisis triggered in the second half Reliquidación Troncal 2007 200 of 2008. EBITDA 68,8 30,4 Note 1: Information used for 2004 and 2005 comes from the corres- 150 66,9 ponding HQI Transelec S.A. Consolidated Financial Statements as of 31 137,9 December each year.

CLP mn We wish to highlight that operating rev- 100 37,6 Note 2: EBITDA, Revenue and Operating and Administrative Expenses 31,9 31,1 information for 2006 corresponds to the line-by-line sum of HQI Tran- enue reported in 2008 included non-recur- selec Chile S.A. results for the 1 January 2006 - 30 June 2006 period, 64,3 29,8 66,8 28,1 64,2 50 16,7 duly updated according to the CPI as of December 2006, plus Tran- 43,5 15,4 selec S.A. FECU results between 1 July 2006 and 31 December 2006. 35,5 ring revenue, which basically corresponds 32,4 32,6 We wish to highlight that although Transelec started operations 6 June 0 2006, operating movements were only reported starting 1 July 2006. 2004 2005 2006 2007 2008 2009 2010 2011 to the results of Trunk Transmission Sys- Note 3: EBITDA = Profits before Tax - Exchange Rate Difference - Re- adjustment Unit Results - Least Investment Value Amortization* - Fi- Cash and Cash Equivalent nancial Costs - Financial Revenue - Depreciation + Intangible Amortiza- tion + Financial Leasing Interest. Credit Lines (Working Capital) Depreciation considers the concepts of losses due to obsolescence Credit Lines (Capex/Refinancing) and withdrawal of fixed assets that were part of the company’s non- operating results for the 2004-2009 period according to CHGAAP fi- Note: historical values as of 31 December each year. nancial standards. (*) Applies to the 2004-2009 period in which financial statements were presented using CHGAAP.

47 RISK FACTORS Decree 207 published 15 January 2008 tariffs and reliquidation corresponding to established the Annual Transmission 2011 is scheduled for the first half of 2012. In keeping with the characteristics of the Value by Segment (VATT) and its indexing In addition, the provisions contained in Chilean electricity market and standards formulas for the four-year period between Decree 61 establish a series of issues that regulating this sector, Transelec S.A. 2007 and 2010, as well as application allow trunk facility owners to collect VATT is not exposed to substantial risk in the conditions for establishing payment of from their facilities. course of operating its main line of busi- transport services in trunk transmission ness. However, the following risk factors systems. The provisions contained in In turn, Decree N° 320 by the Ministry should be mentioned and taken into Decree 61 establish a series of issues of Economic Affairs, Development and consideration: that allow trunk facility owners to collect Reconstruction published in the Of- VATT from their facilities. A second Trunk ficial Gazette dated 9 January 2009 set THE REGULATORY FRAMEWORK Transmission Study was conducted in subtransmission tariffs. These new tariffs Legal standards regulating Chile’s electri- 2010 in order to set tariffs and indexing were first applied 14 January 2009 and city transmission business were amended formulas corresponding to the four-year remained in force until 31 October 2010. by the passing of Law 19,940, known as period between 2011 and 2014. Decree New subtransmission tariffs for the Nov- Short Law l, published 13 March 2004. 61 published 17 November 2011 lists tar- ember 2010 – October 2014 period will iffs that will be applicable retroactively as be set by the Ministry of Energy based on A second Trunk Transmission Study was of 1 January 2011. The application of new subtransmission facility valuation studies completed in 2010

48 started in 2010. Publication of a decree subsidiaries Pangue and Pehuenche will that will set subtransmission tariffs and generate most of Transelec’s future cash LABOR CONFLICTS their respective indexing formulas for the flow and any substantial change made to Delays, suspensions or other labor aforementioned period is expected toward Endesa’s business model, financial status conflicts affecting Transelec could have the end of the first quarter in 2012. Tariffs or operating income could negatively af- an adverse material effect on the cor- set by means of decree 320/2009 will fect Transelec. poration’s business, financial conditions, apply during the interim. The difference operating income and expectations. Ap- between what was provisionally invoiced OPERATING RISKS proximately 51% of Transelec’s workforce and the final values established shall be Despite the fact that its Administration belongs to one of its two trade unions. In reliquidated. believes Transelec to have proper risk addition, 32% of the company’s person- coverage in conformity with industry prac- nel is covered by group agreements with SINGLE CUSTOMER REVENUE CON- tices, we cannot guarantee that current these workers’ unions. These agree- CENTRATION insurance policy coverage will be enough ments expire in 2012 y 2014. Although 37% of Transelec’s revenue comes from to cover certain operating risks, including Transelec’s Administration believes that one single customer, Empresa Nacional forces of nature, damage to transmission current labor relations evidence mutual de Electricidad S.A., Endesa and its facilities, accidents on the job and equip- collaboration between the company and power generation subsidiaries. Transmis- ment failure. its workers, and there have been no sion tolls to be paid by Endesa and its strikes, delays or suspensions since the

49 company was founded, this is no guaran- 2010. The Environmental Law requires mental Superintendence, institutions tee that these events will not take place companies developing high-voltage commissioned to regulate, evaluate and prior to or at the time the current group power lines and electrical substations to enforce activities and projects generat- contracts expire. The Administration is not observe the regulations of the Environ- ing environmental impacts. These new able to estimate the effect of these events mental Impact Evaluation System (SEIA) institutions replaced the National Environ- on Transelec operations. and to present Environmental Impact mental Commission (“CONAMA”) and the Studies (EIS) or Environmental Impact Regional Environmental Commissions and FINES STEMMING FROM TRANSMIS- Declarations (EID) to the new Environ- are totally operational, with the exception SION SERVICE SUSPENSION mental Evaluation Service as required for of: (i) enforcement and sanction capacity Transelec currently has legal procedures any upcoming project or activity likely to of the Environmental Superintendence, pending with the Superintendence of generate environmental impacts. which specifically depends on the upcom- Electricity and Fuel (SEC) due to charges ing creation of Environmental Courts; and pressed by the Authority stemming from As previously indicated, the environmental (ii) new requirements for Environmental forced electricity transmission service law was amended and this has entailed Impact Studies and Environmental Impact disconnection. Some procedures have not changes to environmental institutionality, Declarations, as well as new powers for yet been settled by the SEC and Tran- creating new environmental management environmental institutions, which shall selec has requested reconsideration of instruments or changing existing instru- become operational by means of a regula- the resolution in other cases, while char- ments. Transelec must therefore adjust tion that has not yet been reviewed by the ges are currently being pressed for others. to these new environmental require- General Comptrollership of the Republic. ments. According to recent amendments, APPLICATION OF ENVIRONMENTAL among other issues, a new institutional Even if Transelec observes environmental STANDARDS AND/OR POLICIES framework was created and this is made law requirements, this will not ensure Transelec operations are subject to Law up of the following: (i) the Ministry of the that presentations (EIS and EID) to the N°19,300 on General Environmental Environment; (ii) the Council of Ministers environmental authorities will be approved Guidelines (“Environmental Law”), passed for Sustainability; (iii) the Environmental by government authorities, or that public in 1994, which was recently amended in Evaluation Service; and (iv) the Environ- opposition will not lead to delays or modi-

50 fications to the projects proposed, or that under favorable conditions and at reason- laws and regulations will not change or be able rates. Any of the aforementioned fac- interpreted in such a way as to negatively tors could lead to delays in the partial or affect the company’s operations and total completion of the capital investment plans, since this new institutionality has program, while increasing the cost of the just been implemented. projects considered in this program.

CONSTRUCTION DELAYS FOR NEW EXCHANGE RATE RISK TRANSMISSION FACILITIES Depending on market fundamentals, Success of the Expansion and New specific financial characteristics of its busi- Works program for the electricity trans- ness and other considerations, when ne- mission network will depend on several cessary Transelec has conducted hedging factors, including the cost and availability operations such as cross currency swaps of financing. Although Transelec has or currency forwards in order to cover the experience with large-scale projects, the risk of UF-US dollar ratio variation for its construction of new facilities may be ham- bonds expressed in US dollars. In addi- pered by factors commonly associated to tion, these operations allow the company projects, including delays for the approval to set the underlying portion in Chilean of regulatory authorizations; lack of equip- pesos contained in its revenue that will be ment, materials or labor, or price variation; invoiced according to US dollar-Chilean adverse weather conditions; natural disas- peso parity. ters and unforeseen circumstances or dif- ficulties when it comes to taking out loans However, we cannot guarantee that Tran-

51 selec will be totally protected by the fact that it holds exchange rate hedging contracts. In addition, cross currency swaps and forwards bear credit risk for the counterpart, cash requirements at maturity dates and other associated risks

TECHNOLOGICAL CHANGES Compensation from Transelec electricity transmission facility investment is made by an annual existing facility assessment (EFA) fee at market prices, which are regularly recalculated according to the process established in current standards. If important technological advances are made for equipment at Transelec facilities, this assessment could be lower and thus prevent overall recovery of investments made.

CREDIT RISK Credit risk corresponding to accounts receivable stemming from power transmission activity has historically been very low because of the limited number of customers, their risk rating and short collection time (less than 30 days).

52 However, revenue is highly concentrated In addition, specific insolvency problems mutual funds and covenants) held by in a few power generation customers that for some members of the CDEC-SIC the company, Treasury policy sets limits will produce most of Transelec’s future power grid were observed in 2011 and for the exposure of a specific institution cash flow. Any substantial change to these somewhat affected the collection of depending on each institution’s risk rating the these power generation companies’ tariff revenue for the power transmission and capital. In addition, only mutual funds goods, financial status and/or operating system. that have risk ratings qualify. results could negatively affect the Cor- poration. As for credit risk associated to financial LIQUIDITY RISK assets (term deposits, fixed income Liquidity risk is the risk of the company not being able to satisfy a monetary commitment in cash or make debt payment upon maturity. Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner or at a reasonable price.

In order to ensure that the company is ts in 2011, Transelec to positive resul the com- able to react quickly to investment op- Due , allows portunities and to pay its obligations upon features high liquidity to finance its upcoming investment maturity. Transelec had committed credit pany transmission assets, lines for the purpose of working capital plans in new power of the the firm commitment amounting to US$ 60 million as of 31 backed by December 2011, in addition to its cash company’s shareholders. surpluses and short-term accounts receivable. These credit lines have never been used yet.

53 In addition, as of March 2011, the Com- Dispatch Center) by collecting from or 2011. In virtue of the legal and regulatory pany has a committed credit line amount- paying the different companies owning information held by the Corporation, it ing to UF 3 million. This credit line will be power generation assets in order to col- is believed that there is no indication to used to cover expenditure associated to lect payment established in subsection 1, claim that accounts receivable related to transmission asset investment. Article N°101 of the aforementioned SD tariff revenue evidence any deterioration N°4/20,018. of the same. Transelec S.A. has con- The Company is exposed to risks associ- sequently registered a bad debt provision ated to its debt, including the risk of re- The Corporation could face the risk of amounting to CLP1,026,284,000 corres- financing debt upon maturity. These risks not collecting revenue in a timely manner ponding to accounts payable for different are mitigated by the use of long-term debt from any of the companies owning power concepts from tariff revenue. There was and structure of debt maturity over time. generation assets established in CDEC no certainty of the Corporation recover- payment charts, which could temporarily ing this amount at the time these financial RISK ASSOCIATED TO THE LIQUIDA- affect the Corporation’s liquidity status. statements were presented. TION OF TARIFF REVENUE FROM THE In this sense and in the Corporation’s TRUNK TRANSMISSION SYSTEM opinion, work executed by Transelec INTEREST RATE RISK In virtue of Ministry of Economic Affairs, regarding the aforementioned collec- Company assets are mainly long lasting Development and Reconstruction SD tion does not consist of managing how fixed assets and intangibles. Consequent- N°4/20,018 articles 81, 101, 104 and 106, it charges due payment but rather the ly, financial liabilities used to finance these as well as their complementary provisions, mere collection and transfer of absolutely assets mainly consist of long-term liabil- Transelec is entitled to temporarily receive external appraised surplus and deficit ities at a fixed rate. Debt is reported in the tariff revenue from the trunk system pro- revenue to third parties, with the exception balance sheet at its amortized cost. duced in each period. Transelec reliquid- of estimated tariff revenue. ates tariff revenue temporarily collected in Management of this risk aims to create conformity with payment charts prepared The Campanario Generación S.A. corpor- a balanced debt structure and reduce by the respective CDEC (Economic Load ation declared bankruptcy 13 September impacts on financial costs due to fluctuat-

54 ing interest rates, reducing volatility of the RISK RATING results account. In their latest reports made available for the market, the following Risk Rating Agencies have reaffirmed the Investment Grade rating assigned to Transelec for the different Although higher inflation in Chile could lines of bonds issued and placed by the company. affect debt costs expressed in UF and consequently affect the company’s non- LOCAL CLASSIFICATION operating results, these impacts will be mitigated by the company’s revenue, RISK RATING CURRENT which is also partially adjusted according AGENCY RATING to local inflation variation by means of Humphrey’s A+ indexing polynomials. Feller- Rate A+ Fitch Ratings Chile A+

In addition, commercial current accounts that the Corporation holds with related In addition, the Company has also been rated by the following international risk rating companies are expressed in Chilean agency: pesos and in US dollars and feature a fixed interest rate. The corporation thus International CLASSIFICATION believes that changes in market interest RISK RATING CURRENT rates do not pose any risk that could affect AGENCY RATING its results. Fitch Ratings BBB-

55 INSURANCE THE COMPANY’S PROFIT SHARING

Transelec continued its policy of holding POLICY FOR 2011 insurance policies to protect fixed asset For 2011, the company’s profit sharing goods and to cover other operating risks policy establishes for any given year throughout the 2011 fiscal year. Cover- that its Board of Directors recommends age is provided by means of an industrial sharing the highest possible amount, multi-risk policy that includes physical considering Transelec’s financial status, damage, machinery breakdown, earth- commitments signed by the company quakes and the forces of nature. Cover- when issuing bonds in the national and age of physical risks for power lines was international markets, and the impact of considered unnecessary, since good inter- IFRS implementation. More specifically, national practices and Chilean standards dividends to be paid shall be equal to are observed for construction of the same distributable earnings, which are subject and these standards are deemed to be to limits regarding dividends. Distributable stringent enough. earnings means the total consolidated distributable earnings for the respective In addition, the company continues to hold fiscal year, after tax and extraordinary civil responsibility, terrorism and sabotage items, in addition to non-distributed ac- insurance, with vehicles, national trans- cumulated earnings, minus losses from port operations, equipment and material former periods. Limits regarding dividends imports all covered as well. The company with regard to a given fiscal year mean continues to hold insurance contracts for that no dividends may be declared if these its workers. mean that the company will not be able to meet its financial commitments. If the Finally, a new “Civil Professional Liability” Board of Directors were to see fit, it would policy covering eventual claims stemming be entitled to declare temporary dividends from Transelec collaborator management for a given fiscal year to be distributed de- was incorporated this year. pending on conditions at that time. Overall

56 payment of temporary dividends shall not DIVIDENDS PAID EACH YEAR (Provisional and Final) exceed 75% of the company’s consoli- YEAR HISTORICAL VALUE dated liquid earnings estimated for the CLP MN fiscal year in course in Transelec’s Annual 2006 2,339 Business Plan. 2007 34,955 2008 20,934 PROFITS SHARED IN 2011 2009 28,118 It was agreed at a Transelec S.A. 2010 55,129 shareholders meeting meeting held 28 2011 45,866 April 2011 that the remainder of a cash ( * ): Values as of December of each year. dividend paid in 2010 amounting to CLP19,815,903,600 would be distributed PROFITS SHARED

In addition, it was agreed at a Transelec (charged from each fiscal year) S.A. Board of Directors meeting held 18 YEAR CLP MN ( * )% proFITS FROM May 2011 that a first provisional dividend THE FISCAL YEAR amounting to CLP12,550,000,000 would 2006 14,849 100% be distributed and charged to earnings 2007 31,774 100% from the 2011 fiscal year. 2008 12,510 22% 2009 47,238 100% Lastly, at a Transelec S.A. Board of Direc- 2010 55,825 100% tors meeting held 16 November 2011, it 2011(**) 26,050 55% was agreed that a provisional dividend ( * ): Values as of December each year. (**): Only corresponds to provisional dividends paid in 2011, since final dividends to be paid from the 2011 fiscal year had not yet been reported amounting to CLP13,500,000,000 would as of 31 December 2011. These will be agreed to at the shareholders meeting to be held in 2012. be distributed and charged to 2011 fiscal year earnings.

57 CONSOLIDATED RELEVANT FACTS headquarters located at Av. Apo- subsection 2 of Article 10 of Law Nº quindo 3721, sixth floor, Las Condes. 18,045: TRANSELEC S.A. 1) on January 19th 2011, and according This meeting aimed to inform the The regular shareholders meeting to article 9 and subsection 2 of article shareholders and request their ap- was held 28 April 2011 and the follow- 10 of the law No 18,045 of Securities proval for the following matters: ing matters were agreed: Market and General Rules No 30 and 1) annual Report, General Balance, 1) approval of the Annual Report, No 210 of such Superintendence, the Financial Statements and External General Balance, Financial State- following relevant fact was reported: Auditors Report corresponding to ments and the External Auditors the period ending 31 December Report corresponding to the period on that same date, Transelec S.A. 2010. finishing 31 December 2010. placed the L, M and N series of bonds 2) Final profit sharing. 2) approval of the amount of in the local market, to be charged to 3) Profit sharing policy and informa- CLP19,815,903,600 as the final the 10- and 30-year lines, registered tion about payment procedures. dividend for 2010. This dividend is in the SVS under numbers 598 and 4) Board of Directors and Audit Com- to be paid starting 27 May 2011 to 599, respectively mittee fees. shareholders registered in the cor- 5) appointment of external auditors. responding list 20 May 2011. 2) The following relevant fact was re- 6) newspaper used to publish a no- 3) Board of Directors and Audit Com- ported 17 March 2011 in accordance tice of shareholders’ meeting. mittee fees were set. with the provisions of Article 9 and 7) other matters of interest for the 4) approval of the appointment of subsection 2 of Article 10 of Law No company and within the sharehold- Ernst & Young as the company’s 18,045 on the Securities Market: ers’ competency. external auditors for the 2011 fiscal at a meeting held March 16th 2011, year. the Transelec S.A. Board of Directors 3) The following relevant fact was 5) Diario Financiero was approved agreed to schedule a regular share- reported 29 April 2011 in accordance as the newspaper to be used holders meeting to be held April 28th with the provisions of Article 9 and for publishing notices of general 2011 at 9:00 am, at the company’s shareholders’ meetings

58 4) The following relevant fact was located at Av. Apoquindo 3721, sixth Increasing the company’s share reported 19 May 2011 in accordance floor, Las Condes. capital by CLP19,732,724,601, cor- with the provisions of Article 9 and responding to the restatement of subsection 2 of Article 10 of Law Nº The purpose of the meeting is to share capital corresponding to the 18,045 on the Securities Market: inform the shareholders and request 2009 fiscal year, in accordance with at a meeting held 18 May 2011, their approval for the following matter: the Chilean Securities and Insurance the Transelec S.A. Board of Dir- Superintendence Circular N°456 dat- ectors agreed to distribute a pro- Increasing the company’s share ed 20 June 2008, which is accounted visional dividend amounting to capital by CLP19,732,724,601, cor- for under the line “Other Reserves” in CLP12,550,000,000 to be charged to responding to the restatement of the Equity section. the 2011 fiscal year, in accordance share capital corresponding to the with the provisions of the Dividend 2009 fiscal year, in accordance with 7) The following relevant fact was re- Policy approved by the company’s the Chilean Securities and Insurance ported 23 September 2011 in accord- Board of Directors and reported at the Superintendence Circular N°456 dat- ance with the provisions of Article 9 regular shareholders meeting held in ed 20 June 2008, which is accounted and subsection 10 of Law Nº 18,045 April 2011. for under the line “Other Reserves” in on the Securities Market: the Equity section. 5) The following relevant fact was The company privately issued off- reported 23 May 2011 in accordance 6) The following relevant fact was exchange bonds 23 September 2011 with the provisions of Article 9 and reported 25 May 2011 in accordance in favor of Corpbanca S.A. for the subsection 2 of Article 10 of Law Nº with the provisions of Article 9 and remainder of the M series bonds, 18,045 on the Securities Market: subsection 2 of Article 10 of Law Nº which were originally issued 19 Janu- 18,045 on the Securities Market: ary 2011. The shareholders agreed to call a special shareholders meeting to be The company’s shareholders meeting 8) The following relevant fact was re- held Tuesday 24 May 2011 at 9:00 was held 24 May 2011 and the follow- ported 17 November 2011 in accord- AM, at the company’s headquarters ing matter was agreed: ance with Article 9 and subsection 2

59 of Article 10 of Law N° 18,045 on the of Article 10 of Law N° 18,045 on the at a meeting held 16 March 2011, Securities Market: Securities Market: the Transelec Norte S.A. Board of Directors agreed to schedule a The company’s Board of Directors at a meeting held 16 November regular shareholders meeting to be acknowledged Mr. Jeffrey Blidner’s 2011, the company’s Board of held 28 April 2011 at 10:00 AM, at the early resignation from his position as Directors agreed to distribute a company’s headquarters located at director and Mr. Richard Legault’s re- provisional dividend amounting to Av. Apoquindo 3721, sixth floor, Las signation from his position as deputy CLP13,500,000,000 to be changed to Condes. director for Mr. Blidnerat at a meeting the 2011 fiscal year. This was done held 16 November 2011. in accordance with the provisions of The purpose of this meeting is to the Dividend Policy approved by the inform the shareholders and request at the same meeting, the company’s company’s Board of Directors and their approval for the following mat- Board of Directors agreed to ap- reported at the regular shareholders ters: point Mr. Richard Legault as director meeting held in April 2011. 1) annual Report, General Balance, and the company’s chairman, and Financial Statements and External to appoint Mr. Jeffrey Blidner as his TRANSELEC NORTE S.A. Auditors Report corresponding to respective deputy director. 1) The following relevant fact was re- the period ending 31 December ported 17 March 2011 in accordance 2010. 9) The following essential fact was re- with the provisions of Article 9 and 2) Final profit sharing. ported 17 November 2011 in accord- subsection 2 of Law Nº 18,045 Article 3) Profit sharing policy and informa- ance with Article 9 and subsection 2 10 on the Securities Market: tion about payment procedures. 4) appointment of external auditors. 5) newspaper used to publish a no- tice of shareholders meeting. 6) other matters of interest for the company and within the shareholders’ competency.

60 2) The following relevant fact was 3) The company’s 2011 profit sharing Legault’s resignation from his position reported 29 April 2011 in accordance policy was reported. as deputy director for Mr. Blidnerat at with the provisions of Article 9 and 4) approval of the appointment of a session held 16 November 2011. subsection 2 of Law Nº 18,045 Article Ernst & Young as the company’s 10 on the Securities Market: external auditors for the 2011 fiscal at the same session, the Transelec year. Board of Directors agreed to ap- The company’s regular shareholders 5) Diario Financiero was approved point Mr. Richard Legault as Director meeting was held 28 April 2011 and as the newspaper to be used and Chairman of the company, and the following matters were agreed: for publishing notices of general to appoint Mr. Jeffrey Blidner as his shareholders meetings. respective deputy director. 1) approval of the Annual Report, General Balance, Financial State- 3) The following relevant fact was re- ments and the External Auditors ported 17 November 2011 in accord- Report for the period finishing 31 ance with Article 9 and subsection 2 December 2010. of Article 10 of Law N° 18,045 on the 2) approval of the amount of US$ Securities Market: 2,885,478.70 as the final dividend for 2010. This dividend is to The Transelec Norte Board of be paid starting 27 May 2011 to Directors acknowledged Mr. Jeffrey shareholders registered in the cor- Blidner’s early resignation from his responding list 20 May 2011. position as director and Mr. Richard

61 07. LEGAL INCORPORATION AND AMENDMENTS

62 Transelec S.A. is an open stock corpora- published in the Official Gazette Nº 38,501 and its shares in the Securities Registry tion originally founded as a limited liability dated 30 June 2006. The aforementioned of the Superintendency of Securities and company with the firm name “Rentas Elé- amendment extract was corrected and Insurance. The minutes of this first special ctricas III Limitada”, by public deed dated registered in the Business Registry of shareholders meeting were executed as 6 June 2006 granted before the Santiago the Real Estate Official Property Registry public deed dated 25 April 2007. notary Ms. María Gloria Acharán Toledo. of Santiago, sheet 28,355, Nº 19,800 The extract corresponding to its incorpora- corresponding to the year 2006, and was The corporation’s articles of incorporation is registered in the Business Regis- published in the Official Gazette Nº 38,518 tion were amended at the second special try of the Real Estate Official Property dated 20 July 2006. shareholders meeting held 30 June 2007. Registry of Santiago, sheet 22,031, Nº The firm name was changed to “Tran- 15,264 corresponding to the year 2006, By means of public deed dated 26 March selec S.A.” and a new Board of Directors and was published in the Official Gazette 2007 granted before the Santiago notary was elected. The minutes of this second Nº 38,485 dated 9 June 2006. Ms. María Gloria Acharán Toledo, the cor- special shareholders meeting were exe- poration became an open stock corpora- cuted as public deed dated 30 June 2007 The assignment of rights and actions for tion with the firm name “Rentas Eléctricas at the Santiago notary Ms. María Gloria the corporation was executed by means of III S.A.”. The extract corresponding to this Acharán Toledo. An extract of this reform public deed dated 15 June 2006 granted corporate transformation is registered in was registered in the Business Registry of before the Santiago notary Ms. María the Business Registry of the Real Estate the Real Estate Official Property Registry Gloria Acharán Toledo, with the corpora- Official Property Registry of Santiago, of Santiago, sheet 27,530, Nº 19,941 tions Rentas Eléctricas I Limitada and sheet 12,696, Nº 9,344 corresponding to corresponding to the year 2007, and was Rentas Eléctricas II Limitada established the year 2007, and was published in the published in the Official Gazette Nº 38,812 as partners. In addition, the corpora- Official Gazette Nº 38,727 dated 30 March dated 13 July 2007. tion’s share capital was increased and its 2007. administration was changed. The extract In June 2007, Transelec S.A., tax list num- corresponding to this corporate modifica- It was agreed at the company’s first ber N° 76.555.400-4, absorbed Transelec tion is registered in the Business Registry special shareholders meeting held 24 April S.A., tax list number N° 76.555.430-6, as of the Real Estate Official Property Regis- 2007 that the company would be founded stated in public deed dated 30 June 2007, try of Santiago, sheet 25,168, Nº 17,510 as an open stock corporation by means of granted at the Santiago notary owned corresponding to the year 2006, and was the voluntary registration of the company by Ms. María Gloria Acharán Toledo, an

63 extract of which was published in sheet lar and alternate directors . The following 2009, that the agreement reached by the 27,509, N° 19,936 corresponding to the persons were elected for the positions of corporation’s Board of Directors regarding year 2007, and was published in the directors: Jeffrey Blidner, Bruno Guilmette, approval for the issuing of a line of 10- Official Gazette N° 38,812 dated 13 July Scott Lawrence, Brenda Eaton, Felipe year bonds and another line of 30-year 2007. Lamarca Claro, Juan Andrés Fontaine Ta- bonds should be ratified by signing the lavera, Blas Tomic Errázuriz, José Ramón respective bond issuing contracts and It was agreed at the company’s third Valente Vías and Alejandro Jadresic approving the company’s debt by means special shareholders meeting held 4 April Marinovic. The following alternate direc- of future issuing and placing of bonds 2008 that according to the bargain and tors were elected: Derek Pannell, Patrick deducted from both lines, amounting to up sale contract dated 30 June 2006 be- Charbonneau, Graeme Bevans, Richard to UF20,000,000 each. tween HQ Puno Ltd. and Hydro-Québec Dinneny, Enrique Munita Luco, Juan José International Transmisión Sudamérica Eyzaguirre Lira, Federico Grebe Lira, It was agreed at the company’s seventh S.A. and Rentas Eléctricas IV Limitada, Juan Paulo Bambach Salvatore and Juan special shareholders meeting held 28 and in the bargain and sale contract dated Irarrázabal Covarrubias. October 2009, that all members of Board 27 June 2006 between IFC and Rentas of Directors should be renovated, both Eléctricas IV Limitada, that the agree- It was agreed at the company’s fifth spe- regular and alternate directors directors. ment regarding IV adjustment between cial shareholders meeting held 16 October The following persons were elected for Transelec and the Vendors should be 2008 that all actions by Transelec repre- the positions of directors: Jeffrey Blid- corrected, authorizing Transelec manage- sentatives when negotiating and issuing ner, Bruce Hogg, Patrick Charbonneau, ment to proceed to pay IV adjustment, the Committed Credit Facility with the Brenda Eaton, Felipe Lamarca Claro, among other issues. Corpbanca and Scotiabank Sudamericano Juan Andrés Fontaine Talavera, Blas banks amounting to up to UF3,206,453 Tomic Errázuriz, José Ramón Valente It was agreed at the company’s fourth should be expressly ratified. Vías and Alejandro Jadresic Marinovic. special shareholders meeting held 21 July The following alternate directors were 2008, that all members of the Board of It was agreed at the company’s sixth elected: Thomas Keller, Graeme Bevans, Directors should be renovated, both regu- special shareholders meeting held 3 June Paul Dufresne, Richard Dinneny, Enri-

64 que Munita Luco, Juan José Eyzaguirre October 2010 that Corporation debt 2011 that price level restatement corres- Lira, Federico Grebe Lira, Juan Paulo should be approved, be it in UF, Chilean ponding to the 2009 fiscal year amounted Bambach Salvatore and Juan Irarrázabal pesos or dollars of the United States of to CLP 19,732,724,601. The company’s Covarrubias. America, by taking out bank loans and/or By-laws were therefore modified and its issuing a combination of bonds and bank share capital was increased. The minutes It was agreed at the eighth special share- debt. This is to be executed by issuing of this eleventh special shareholders holders meeting held 24 August 2010 bonds charged against registered lines meeting were executed as public deed that all members of the Board of Direc- of bonds currently in force, which will be dated 6 June 2011 at the Santiago notary tors should be renovated, both regular issued under Law Number 18,045 of 1981 Ms. María Gloria Acharán Toledo. An and alternate members. The following and its amendments and/or in the United extract of this reform was registered in persons were elected for the positions States of America (as 144A or registered the Business Registry of the Real Estate of directors: Jeffrey Blidner, Bruce Hogg, under the SEC) and/or by means of bank Official Property Registry of Santiago, Patrick Charbonneau, Brenda Eaton, loans, as long as these do not exceed the sheet 33,736, Nº 25,194 corresponding to Bruno Philippi Irarrázabal, Mario Valcarce equivalent amount of UF 10,000,000. In the year 2011, and was published in the Durán, Blas Tomic Errázuriz, José Ramón addition, the Board of Directors agreed to Official Gazette Nº 39,994 dated 24 June Valente Vias and Alejandro Jadresic Mar- entitle the Corporation to set the amounts, 2011. inovic. The following alternate directors characteristics, opportunities, terms and were elected: Richard Legault, Daniel Fet- conditions specific to future issuing of ter, Paul Dufresne, Richard Dinneny, En- bonds in the local market or in the United rique Munita Luco, Juan José Eyzaguirre States, which in all cases shall be limited Lira, Federico Grebe Lira, Juan Paulo to the maximum authorized amounts and Bambach Salvatore and Juan Irarrázabal correspond to market conditions at the Covarrubias. time these are issued.

It was agreed at the company’s ninth It was agreed at the company’s eleventh special shareholders meeting held 21 special shareholders meeting held 24 May

65 THE CORPORATION’S HISTORICAL from HQI TRANSELEC CHILE S.A., tax BACKGROUND list number 77.498.870-K to TRANSELEC S.A., with the same tax list number, at the Transelec S.A., formerly known as Rentas 8th special shareholders meeting for the Eléctricas III S.A., is the successor of the HQI TRANSELEC CHILE S.A. corpora- following companies whose incorporation, tion held 16 August 2006 and executed mergers or transformation are summar- as public deed 23 August that same year ized as follows: at the Santiago notary owned by Mr. Iván Tamargo Barros, when the corporation’s DISOLUTION BY ABSORPTION OF name was changed to TRANSELEC S.A. COMPAÑÍA NACIONAL DE TRANS- MISIÓN ELÉCTRICA S.A. INTO HQI DISSOLUTION BY ABSORPTION OF TRANSELEC CHILE S.A. TRANSELEC S.A. INTO NUEVA TRAN- Compañía Nacional de Transmisión SELEC S.A. Eléctrica S.A. was dissolved in virtue of Subsequently, at Transelec S.A. Board of article 103 N° 2 of the Stock Corporations Directors session number 101, held on Law 18,046, since all of its shares were 30 November 2006, the aforementioned concentrated in the possession of HQI corporation was declared to be dissolved Transelec Chile S.A., the company suc- by absorption, since the shares were in ceeding the same. This dissolution was possession of Nueva Transelec S.A., reported at Board of Directors session N° tax list number 76.555.430-6, which was 113 on 30 January 2001 and executed executed as public deed at the same date as public deed at that same date at the at the notary Mr. Iván Tamargo Barros. Santiago notary Mr. Fernando Opazo The extract was published in the Business Larraín. FIRM NAME CHANGED FROM Registry of the Real Estate Official Prop- HQI TRANSELEC CHILE S.A. TO TRAN- erty Registry of Santiago sheet 49,292, N° SELEC S.A. The firm name was changed

66 35,195 corresponding to the year 2006. DISSOLUTION BY ABSORPTION OF III S.A., tax list number 76.555.400-4, This confirmed corporation dissolution and TRANSELEC S.A. INTO RENTAS ELÉC- since the same had purchased all of the a note was made regarding the same in TRICAS III S.A. corporation’s shares, were executed as the margin of the company incorporation The minutes of the 16th Transelec S.A.’s public deed dated 30 June 2007. Rentas records. This was published in the Official special shareholders meeting held 6 June Eléctricas III S.A. declares that it is the Gazette dated 6 December 2006. 2007 were executed as public deed dated legal successor of Transelec S.A., assum- 30 June 2007 granted at the Santiago no- ing its rights and obligations and declaring FIRM NAME CHANGED FROM NUEVA tary Ms. María Gloria Acharán T., reporting to be jointly responsible for taxes owed or TRANSELEC S.A. TO TRANSELEC S.A. dissolution by the absorption of Transelec which may be owed. It was agreed at the corporation’s 3rd S.A., tax list number 76.555.430-6 by special shareholders meeting held 30 Rentas Eléctricas III S.A., tax list num- November 2006 that the firm name Nueva ber 76.555.400-4, since the latter had Transelec S.A. would be changed to Tran- purchased all of the corporation’s shares. selec S.A., tax list number 76.555.430-6. The 16th Transelec S.A. special Board of This was executed as public deed that Directors meeting was executed as public same day at a notary Ms. María Gloria deed and registered in the Business Acharán Toledo. An extract of the same Registry of the Real Estate Official Prop- was published in the Business Registry of erty Registry of Santiago in sheet 27,509, the Real Estate Official Property Registry N° 19,936 corresponding to the year 2007 of Santiago in sheet 49,963, N° 35,710 and was published in the Official Gazette corresponding to the year 2006. This dated 13 July 2007. The minutes of the confirmed the firm name change and a 5th Rentas Eléctricas III S.A.’s special note was made regarding the same in the Board of Directors meeting held that same margin of the company’s incorporation date announcing dissolution due to the records. This was published in the Official absorption of Transelec S.A. tax list num- Gazette dated 9 December 2006. ber 76.555.430-6, by Rentas Eléctricas

67 08. Transelec Norte S.A.

68 IDENTIFICATION

Name: Transelec Norte S.A. Corporate Registration: Business Registry of the Real Estate Official Property Registry of Santiago, Sheet 14,386, Nº 11018, 2003. Tax List Number: 99.521.950-6 Domicile: Avenida Apoquindo Nº 3721, 6th Floor, Las Condes, Santiago Legal Nature: Open Stock Corporation Subscribed Capital: US$30,005,000 Paid-in Capital: US$30,005,000

CORPORATE PURPOSE In keeping with the same, Transelec Norte CAPITAL provides consulting services to engineer- The company’s exclusive purpose is to Transelec Norte capital is divided into ing and management divisions of compan- exploit and develop electrical systems 750,125 shares. 750,050 of these were ies related to its exclusive purpose. The designed for the transport or transmission subscribed and paid in by Transelec S.A., company also performs other commercial of electrical energy and owned by Tran- amounting to 99.99% of the corporation’s and industrial activities related to the selec Norte or by third parties. For this share capital, while 75 shares were sub- harnessing of electricity transmission purpose, the company shall be entitled to scribed and paid in by Transelec Holdings infrastructure. In keeping with its corpor- obtain, purchase and operate respective Rentas Limitada, amounting to 0.01% of ate purpose, the corporation is entitled to concessions and permits and to exercise the corporation’s share capital. act directly or by means of its subsidiaries all rights and authorities granted to power or associated corporations in Chile and companies by current legislation. The Therefore, as of 31 December 2011, the abroad. Transelec Norte performs elec- corporate purpose includes commercial- corporation’s overall paid share capital tricity transmission activities, especially ization of power line transport capacity, came to 30,005,000 dollars of the United in the Far North Interconnected System, substation transformation and associated States of America (USD). SING. equipment in order for both domestic and foreign power plants to transmit electrical energy produced by the same and to reach their power consumption centers.

69 BOARD OF DIRECTORS CHAIRMAN Richard Legault The Transelec Norte Board of Directors is made up of nine Chilean and Canadian DIRECTORS directors and their respective deputy Bruce Hogg directors, who shall remain in these pos- Patrick Charbonneau itions for a period of two years and shall Brenda Eaton be eligible for reelection. The Chairman is Mario Valcarce Duran José Ramón Valente Vías appointed by the directors chosen at the Bruno Philippi Irarrázabal shareholders meeting. Blas Tomic Errázuriz Alejandro Jadresic Marinovic The Board of Directors is presently made up of Directors Richard Legault, Bruce SECRETARY OF THE BOARD OF DIREC- Hogg, Patrick Charbonneau, Brenda TORS Eaton, Bruno Philippi Irarrázabal, Mario Fernando Abara Valcarce Durán, Blas Tomic Errázuriz, José Ramón Valente Vias and Alejandro Jadresic Marinovic, and by their respective Deputy Directors Jeffrey Blidner, Daniel Fetter, Paul Dufresne, Richard Dinneny, Enrique Munita Luco, Juan José Eyzaguirre Lira, Federico Grebe Lira, Juan Paulo Bambach Salvatore and Juan Irarrázabal Covarrubias.

70 MANAGEMENT TEAM Fernando Abara Elías VICE PRESIDENT OF LEGAL AFFAIRS As of 31 December 2011, the Transelec AND PROSECUTOR management group was made up of Attorney leading executives in each of their areas Universidad Católica de Valparaíso of expertise, featuring outstanding track MBA, Universidad Gabriela Mistral records in the power sector: Tax ID number 8.003.772-4

MAIN EXECUTIVES Andrés Kuhlmann Jahn COMMERCIAL RELATIONS WITH General MANAGER TRANSELEC S.A. Civil Industrial Engineer Transelec Norte signed a general ser- Pontificia Universidad Católica de Chile vices provision contract with Transelec Tax ID number 6.554.568-3 S.A. for the operation and maintenance of Transelec Norte facilities. In addition, this Rodrigo López Vergara contract features a series of administrative VICE PRESIDENT OF OPERATIONS services including treasury, accounting, in- Civil Electrical Engineer formation technology, legal, tax and com- MBA, Universidad Adolfo Ibáñez mercial consulting duties, among others. Tax ID Number 7.518.088-8

Alexandros Semertzakis Pandolfi VICE PRESIDENT OF ENGINEERING AND CONSTRUCTION Civil Engineer Universidad de Santiago Postgraduate degree in Administration, Universidad Adolfo Ibáñez Tax ID number 7.053358-8