CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS ANNUAL REPORT ESVAL CONTENTS Esval’s Main Offices Commercial Offices ANNUAL REPORT ESVAL 2010 General Management and Headquarters VALPARAÍSO SAN IGNACIO 348 SAN IGNACIO 751 Cochrane, Valparaíso VALPARAÍSO BLANCO 738 BLANCO Telephone (32) 2209000, Fax (32) 2209502 VIÑA DEL MAR 275 1 NORTE CONCÓN 25420 AV. BORGOÑO Area of Quillota QUILPUÉ 625 CLAUDIO VICUÑA 452 Chacabuco, Quillota VILLA ALEMANA 654 SANTIAGO Telephone (33) 291700, Fax (33) 310916 CASABLANCA 56 GENERAL BONILLA Mailing address: P.O. Box 66, Quillota QUILLOTA 452 CHACABUCO LA CALERA 673 AV. LATORRE Area of San Felipe - Los Andes LIMACHE 338 URMENETA 4 LETTER FROM THE PRESIDENT 233 Freire, San Felipe Telephone (34) 494300, Fax (34) 494390 QUINTERO 2025 NORMANDIE LA LIGUA 255 URIBE 6 LETTER FROM THE CEO Area of Southern Coast CABILDO 748 AVDA. HUMERES 2410 Barros Luco, San Antonio PETORCA 535 SILVA Telephone (35) 205500, Fax (35) 205520 PAPUDO 176 MIRAFLORES 8 COMPANY INFORMATION ZAPALLAR 156 DIEGO SUTIL SAN FELIPE 233 FREIRE PUTAENDO 670 SARMIENTO 10 HISTORICAL ACCOUNT LLAY LLAY 139 SAN FRANCISCO Service Telephone Number LOS ANDES 572 SANTA ROSA 12 COMPANY’S EQUITY 600 600 6060 SAN ANTONIO 2352 AV. RAMÓN BARROS LUCO CARTAGENA 390 AV. CARTAGENA www.esval.cl ALGARROBO 700 AV. PEÑABLANCA 14 LINE OF BUSINESS AND ACTIVITIES [email protected] VALPARAÍSO HEADQUARTERS 751 COCHRANE
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 2 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION 2010
19 ORGANIZATIONAL CHART ANNUAL REPORT ESVAL
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 3 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 4 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 5 CONTENTS ANNUAL REPORT ESVAL 2010 LETTER FROM THE PRESIDENT 4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO Dear Shareholders,
8 COMPANY INFORMATION On behalf of the Board of Directors and all the personnel at Esval S.A., I kindly present to you this Annual Report, corresponding to year 10 HISTORICAL ACCOUNT 2010, which was affected by the earthquake that struck the central-south region of the 12 COMPANY’S EQUITY country.
14 LINE OF BUSINESS AND ACTIVITIES Our premises withstood the earthquake fairly well and in four days near 100% of our 16 BOARD OF DIRECTORS AND systems were operative, and three days later ADMINISTRATION it was completely normal with the operation of a small area of the province of San Antonio. Nevertheless, we had to perform significant 19 ORGANIZATIONAL CHART repairs in Las Vegas Aqueduct, main source of supply of Gran Valparaíso, and in the drinking 21 MANAGEMENT REPORT water pipe that goes from San Juan Plant, in San Antonio, to Algarrobo. 39 ADMINISTRATION REPORT According to our plan, we continued investing, in 2010, 18 billion 640 million pesos, for the 47 STATEMENT OF LIABILITY maintenance of assets, extension of our services and renewal of grids. In relation to 49 FINANCIAL STATEMENTS Aguas del Valle, we invested 6 billion 218 million more.
During this financial year, we also invested in drinking water and we even advanced some work such as the extension of 250 liters per second of the production capacity of Concón Plant, which had to be carried The effects of climate change require our water sources and thus have a sustainable out in 2016. Also, we performed a series of utmost attention and it is compelling for our development. interconnections to make up for the lesser company to act with greater intelligence, volume of water Lago Peñuelas is supplying. creativity, and responsibility, not only to Concón-Zapallar drinking water pipe, work This work allowed us to face water scarcity in diminish said effects, but also to share them in which the company invested more then a better way. with the community in order to look after our 20 billion pesos between 2003 and 2008,
ANNUAL REPORT ESVAL 2010 4 CONTENTS ANNUAL REPORT ESVAL 2010 continues benefiting the communities of the in 2009; and drinking water, from 95.2% to For all the aforementioned, I would like Central Coast of our Region. To date it has 99.3% between 1999 and 2009. to thank Esval’s workers, suppliers, and made possible to reinforce drinking water contractors for their enormous contribution in urban areas of Quintero, Puchuncaví, La As a result from the above, the Region of in the company development. Also, to the Laguna, Cachagua, and Zapallar. And also, Valparaíso is among the nations and cities customers, not only for the recognition they important industries were also supplied, and with greater wastewater treatment coverage, gave us in the service quality perception we have also benefited the Rural Drinking according to the information stated in a that I mentioned above, but also for their Water System, such as Ventanas, Horcón, report of the Organization for Economic Co- contributions, which have allowed us to Chocota, and La Greda, although these operation and Development (OECD) and the improve our job day by day. I would like to LETTER FROM THE PRESIDENT 4 locations are not within the Esval licensed Association of Sanitary Companies (ANDESS). especially thank my colleagues of the Board area. Apart from the aforementioned, there According to the official information of the of Directors for their constant support and 6 LETTER FROM THE CEO are a series of other real state projects latter organism, and which was announced dedication. This has allowed us, together interested in our services. in 2010, Chile is ranked eighth in the world with the whole team, to grow in the task of 8 COMPANY INFORMATION regarding wastewater treatments, with improving the service to our customers on Given Cachagua’s rate of growth, we also 84% of coverage, at the same level as the a daily basis. I have no doubt that working expanded its treatment system by adding a average of the nations that are part of the together makes it possible to add value to 10 HISTORICAL ACCOUNT module to the plant that operates since 2002. European Union. The first place is held by the company and continue contributing the Netherlands, Switzerland, the United substantially to the development and growth 12 COMPANY’S EQUITY Once the great works in the last decade were Kingdom, Germany, Spain, Austria, and of the regions of Valparaíso and Coquimbo. finished with the construction of 60 drinking Sweden. However, our Region, as you know, 14 LINE OF BUSINESS AND ACTIVITIES water accumulation tanks, and 16 wastewater treats 100% of the collected waters, which treatment systems, Esval has addressed the places it at the top of the international 16 BOARD OF DIRECTORS AND modernization of grids, for which we invested ranking. ADMINISTRATION more than 100 million dollars in the 1999- 2009 period. This task not only considers As Esval’s Board of Directors, it satisfies pipeline renewal but also the construction of us to see the improvement of the services 19 ORGANIZATIONAL CHART sand trap chambers, the installation of cut-off coverage and also the perception that our valves to organize neighborhoods in sectors customers have of the Company. As to the 21 MANAGEMENT REPORT and to reduce the number of customers latter, Superintendence of Sanitary Services affected by supply interruptions; apart from (SISS, in Spanish) revealed a study carried 39 ADMINISTRATION REPORT the installation of pressure valves to regulate out during January to March 2010 on the water flow and thus avoid the rupture of Customers’ Service Quality Perception. matrixes due to unexpected flow changes. And Esval holds the third position in the 47 STATEMENT OF LIABILITY Due to the aforementioned, it is important ranking. Aguas del Valle is first. However, if to state that only during the financial year we consider only large companies, Esval held 49 FINANCIAL STATEMENTS 2010, we modernized 64 thousand and 588 the first place. meters of grid, with an investment of around 15 million dollars. We are very pleased with During this financial year, the Company what we have done in this respect, as it aims actively participated in the Bicentenary at improving the quality of the customer celebrations, and also in the Third Universal service, which is one of our main objectives. Forum of Cultures, Valparaíso 2010, supporting activities that will entail constant The aforementioned made a significant contributions for the Region. This is the case, increase of the service coverage possible. for instance, of Plaza Bicentenario, built at Thus, collected wastewater treatment Yolanda Roundabout, in Avenida España; or increased from 59.4 % in 1999 to 100% since the sponsorship for a Short Story Contest 2006. On the other hand, the sewer system carried out during the Meeting of Writers of Jorge Lesser García-Huidobro coverage went from 86.9% in 1999 to 91.8% the 3rd Forum. PRESIDENT OF THE BOARD OF DIRECTORS
ANNUAL REPORT ESVAL 2010 5 CONTENTS ANNUAL REPORT ESVAL 2010 LETTER FROM THE CEO
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO Messrs Shareholders, As CEO of Esval, I am pleased to inform you 8 COMPANY INFORMATION about the most relevant events occurred during financial year 2010, which had 10 HISTORICAL ACCOUNT additional difficulties due to the earthquake and tsunami that devastated a part of the 12 COMPANY’S EQUITY country. Although these events alter the normal operation speed of a Company, we have the satisfaction of having confirmed, 14 LINE OF BUSINESS AND ACTIVITIES once more, the reaction capacity of the Company and its personnel; as well as the 16 BOARD OF DIRECTORS AND readiness of the authorities and of our ADMINISTRATION customers to collaborate in emergency situations. 19 ORGANIZATIONAL CHART operative; some areas with difficulties went as Communal Councils and Neighborhoods The consolidated outcome at December 2010 back to normality after four days, with the Committees, which help with the diffusion reached profits for 17 billion 293 million and exception of a small sector in the province of of the cut-off and informed the location of 21 MANAGEMENT REPORT 193 pesos, and shows a decrease of 34.3% San Antonio. At first, we were affected by the the tanks, as well as hundred of volunteers regarding December 2009. The decrease of lack of electrical power which is so essential to of Un Techo Para Chile (A Roof For Chile), 39 ADMINISTRATION REPORT the outcome of 2010, regarding 2009 of 9 send water up to the tanks and then regulate who participated in the supply of drinking billion 039 million and 743 pesos, is accounted its distribution towards thousands of homes, water. Also, we received the collaboration of 47 STATEMENT OF LIABILITY for by a strong decrease in the outcome per but simultaneously, our teams checked a contingent of the Army, the Navy and the readjustment unit (UF), when going from a and repaired the pipeline networks and Police. Due to the aforementioned, I would 49 FINANCIAL STATEMENTS negative variation of the UF in 2009 of -2.4% installations that sustained damage. Las Vegas like to publicly express our honest recognition to a positive variation in 2010 of 2.5%. This Aqueduct, 84 kilometers long and 1 meter to these entities and people. effect has caused a decrease in the outcome and 20 centimeter of diameter, which cracked of the company for this item of -12 billion 815 in several parts, the most serious being that We also received in 2010, with great pleasure, million and 919 pesos. through which 100 liters of drinking water an award granted by the Association of per second were lost, was perhaps our most Industries of the 5th Region (Asiva, in It is important to mention that the company important challenge. The repair was carried Spanish) for contributing to improving the has continued making substantial investments out on March 9, 10, and 11. Subsequently, environment; and the Municipality of Villa that reached 24 billion 758 million pesos, out and as a consequence of the earthquake in Alemana awarded us with a commemorative of which 6 billion 218 million correspond to February, a new supply cut-off had to be made plaque as recognition for the collaboration Aguas del Valle. due to the repair of another point of the same rendered to that Municipality. aqueduct carried out in August. In both cases In relation to the earthquake of February we had the collaboration of the authorities Both events relate to a matter that has had 27, most of our systems were immediately and especially of social organizations such out attention for several years, Sustainable
ANNUAL REPORT ESVAL 2010 6 CONTENTS ANNUAL REPORT ESVAL 2010 Development to conciliate economic, Commerce and that of Asiva; Committees Another factor to be mentioned is obtaining social, and environmental aspects in all our of Infrastructure and Housing of the certifications that affect all the processes activities. In the Sustainability Report of 2099 Chilean Chamber of Construction, Region of the company and subjects as decisive that corresponds to its second public version, of Valparaíso, the Territorial Committee and sensitive as the environment (ISO a big step was taken when recording the of Con-Cón, Quintero, Puchuncaví, Asiva’s, 14001:2004), service quality (ISO 9001:2000), opinion of the representatives of the social among others. and occupational safety and health (OHSAS organizations of the region; and also when 18001:2007). Also, significant technological including new human rights indicators related We support important activities, among progress was made, and the personnel 4 LETTER FROM THE PRESIDENT to the code of conduct of the Company, others, sports competitions at a Regional or received the necessary training to go hand in according to the methodology established National level, mainly because of what sports hand with the modernization of the company. 6 LETTER FROM THE CEO by Global Reporting Initiative (GRI). Also, mean in terms of a healthy life. This is how we However, perhaps one of the events that we requested the external verification sponsored the First Regional Championship pleases us the most and that, I believe, also to consultant Bureau Veritas, for which of Street Soccer, together with the Sports influenced the results of the study of theS iss, 8 COMPANY INFORMATION this document was worthy of the highest National Institute; and the Bicentenary is how during these years we have related with qualification. During the financial year, we National University Championship, organized the community and its social organizations 10 HISTORICAL ACCOUNT worked in the 2010 version of the Report, by the five universities that are part of the through Agua Sana Campaign, to talk with which is about how the most transcendental Council of Rectors of our region. Also, we the customers face to face, understand their 12 COMPANY’S EQUITY resource of life is managed, as well as the cooperated with marathons and runnings of problems and be part of the solution. importance of water in the environment, and different organizations. 14 LINE OF BUSINESS AND ACTIVITIES informs the manners in which the Company All the aforementioned was experienced relates with the different sectors and the Messrs Shareholders, just as mentioned by by Esval as well as by Aguas del Valle, and collaboration given to other organizations to the President of the company in his letter, the both companies are strongly attached to the 16 BOARD OF DIRECTORS AND help, from the sanitary perspective, among Superintendence of Sanitary Services (Siss) realities of the regions we assist, where our ADMINISTRATION other topics. This document will be rendered carried out a study during the first quarter work aims at achieving a greater development to the community the first semester of 2011. of 2010, which recognized Esval as the third and growth of people and entities. We are 19 ORGANIZATIONAL CHART company in the country in rendering quality glad with the actions carried out, and grateful Regarding our collaboration with public service, and the first among large sanitary for the recognitions given to us. We reiterate entities, we contributed with design studies companies; while our affiliate Aguas del Valle, our commitment to continue progressing 21 MANAGEMENT REPORT for organisms of the Regional Government in the general ranking that considered the with our performance to improve, on a daily that are part of the program of Vulnerable performance of 20 companies, had the first basis, the service we render to our customers 39 ADMINISTRATION REPORT Territories, aimed at providing better life position. and thus contribute to the growth of the conditions to the population that does not regions of Valparaíso and Coquimbo and the 47 STATEMENT OF LIABILITY have good access to their homes, electricity, We are proud of the aforementioned, which generation valuable to the Company. water or sewer system. Also, we signed is not by chance, since it is a consequence of 49 FINANCIAL STATEMENTS agreements with the ministerial regional the effort on a daily basis of the management secretaries of Education and Health in and its workers for making Esval and Aguas order to spread through Campaigns Agua del Valle a better company since it became Sana (Healthy Water) and Las Gotitas (The part of the private sector. Many other factors Droplets) good dietary and hygiene habits, have influence on this recognition and, in the in educational and health institutions of the case of Esval, the investment of more than region. 500 million dollars made in the last decade in large-scale constructions is relevant that Our professionals assign part of their time to allowed us to treat 100% of collected waste organizations such as the Board of Directors waters and, something as important as the of the Regional Chamber of Commerce aforementioned, having increased 25% of (CRCP, in Spanish); the Advisory Council of the drinking water accumulation capacity, Un Techo Para Chile; the Committee of Social to support the growth of the cities, and GUSTAVO GONZÁLEZ DOORMAN Responsibility of the Regional Chamber of also to modernize the pipeline network. CEO
ANNUAL REPORT ESVAL 2010 7 CONTENTS ANNUAL REPORT ESVAL 2010 COMPANY INFORMATION
4 LETTER FROM THE PRESIDENT BUSINESS NAME REGISTRY OF SECURITIES POST CODE Esval S.A. No. 0348 dated October 24, 1989 2370020 6 LETTER FROM THE CEO TRADE NAME ADDRESS P.O. BOX 8 COMPANY INFORMATION Esval 751 Cochrane, Valparaíso, Chile # 616 Valparaíso
TAX CARD No. TELEPHONE Internet 10 HISTORICAL ACCOUNT 89.900.400-0 (56-32) 2209000 http://www.esval.cl
12 COMPANY’S EQUITY TYPE OF PARTNERSHIP Fax E-MAIL Publicly Held Company (56-32) 2209502 [email protected] 14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
FOUNDING INCORPORATION DOCUMENTS Act of Incorporation granted on June 12, 1989, before the Notary of Santiago, Mr Raúl Undurraga Laso, summary of which was registered in the Register of Business of Valparaíso on page 449 reverse side, number 469 of 1989, and published in the Official Gazette on June 15, of 1989.
ANNUAL REPORT ESVAL 2010 8 CONTENTS ANNUAL REPORT ESVAL 2010 COMPANY MODIFICATIONS
RECORD IN THE REGISTER OF No. DATE NOTARY CITY OFFICIAL GAZETTE COMMERCE OF VALPARAÍSO
1 17/01/1991 Eduardo Bravo Ubilla Valparaíso PAGE 73 BACK No. 76/1991 12/02/1991 RECTIFICATION OF SUMMARY 20/02/1991
4 LETTER FROM THE PRESIDENT 2 08/11/1995 Eduardo Bravo Ubilla Valparaíso PAGE 902 BACK No. 805/1995 06/12/1995 3 25/06/1996 Eduardo Bravo Ubilla Valparaíso PAGE 462 No. 434/1996 31/07/1996 6 LETTER FROM THE CEO 4 03/06/1998 Eduardo Bravo Ubilla Valparaíso PAGE 395 BACK No. 353/1998 12/06/1998 8 COMPANY INFORMATION 5 30/09/1998 Eduardo Bravo Ubilla Valparaíso PAGE 835 BACK No. 682/1998 14/11/1998
10 HISTORICAL ACCOUNT 6 03/02/1999 Eduardo Bravo Ubilla Valparaíso PAGE 73 BACK No. 63/1999 06/02/1999 PAGE 180 No. 155/1999 16/03/1999 12 COMPANY’S EQUITY 7 11/11/1999 Eduardo Bravo Ubilla Valparaíso PAGE 449 BACK No. 469/1991 (*)
14 LINE OF BUSINESS AND ACTIVITIES 8 27/03/2000 Eduardo Bravo Ubilla Valparaíso PAGE 449 BACK No. 469/1991 (*)
16 BOARD OF DIRECTORS AND 9 08/05/2000 Eduardo Bravo Ubilla Valparaíso PAGE 364 No. 353/2000 06/06/2000 ADMINISTRATION 10 04/08/2000 Eduardo Bravo Ubilla Valparaíso PAGE 496 No. 456/2000 10/08/2000 PAGE 599 No. 546/2000 21/09/2000 19 ORGANIZATIONAL CHART (COMPLEMENTS SUMMARY)
21 MANAGEMENT REPORT 11 21/07/2003 Eduardo Bravo Ubilla Valparaíso PAGE 550 BACK No. 473/2003 01/08/2003 08/09/2003 Eduardo Bravo Ubilla Valparaíso COMPLEMENT NOTARIAL CERTIFICATION
39 ADMINISTRATION REPORT 12 26/11/2003 Eduardo Bravo Ubilla Valparaíso PAGE 878 BACK No. 820/2003 19/12/2003
47 STATEMENT OF LIABILITY 13 26/01/2004 Eduardo Bravo Ubilla Valparaíso PAGES 82 No. 71/2004 31/01/2004
14 12/12/2007 Eduardo Bravo Ubilla Valparaíso PAGE 1143 BACK No. 977/2007 15/12/2007 49 FINANCIAL STATEMENTS
(*) As these are capital decreases by operation of law, they will be noted apart from the registration of the partnership and there is no publication in the Official Gazette.
COMMENTS AND The shareholders representing 10% or more of PROPOSALS OF the shares issued, with right to vote have not made any comments or proposals regarding the SHAREHOLDERS progress of the social businesses, so comments and proposals in said respect are not included in this annual report.
ANNUAL REPORT ESVAL 2010 9 CONTENTS ANNUAL REPORT ESVAL 2010 HISTORICAL ACCOUNT
Esval S.A. (hereinafter referred to as “Esval” Consorcio Financiero S.A. and Proyectos In January 2004, share transfers subscribed by or the “Company”) was organized as such in e Inversiones Longovilo S.A., BP S.A., Cía. de Seguros Generales Consorcio Nacional 4 LETTER FROM THE PRESIDENT 1989 by The Chilean Development Agency and Inversiones Teval S.A., Consorcio Inversiones de Seguros S.A. by the end of 2003 were the Chilean Treasury under law No 18.777. Limitada and Compañía de Seguros Generales recorded in the shareholder registry, in virtue 6 LETTER FROM THE CEO Consorcio Nacional de Seguros S.A., granted of which, the company was completely clear of In December 1998, Esval was the first on the same day before notary of Santiago all their shares; Compañía de Seguros de Vida sanitary company to open to the process Mr Humberto Santelices Narducci, Consorcio CN Life S.A. purchased 110.000.000 shares, 8 COMPANY INFORMATION of incorporating private capital, considered Financiero S.A. transferred: 140.314.207 and Compañía de Seguros de Vida Consorcio in law 19.459, by a bidding process. Aguas shares to Consorcio Inversiones Limitada and Nacional de Seguros S.A. 130.000.000 shares. 10 HISTORICAL ACCOUNT Puerto S.A., company formed, at that time, 240,000,000 shares to Compañía de Seguros These last two companies are controlled by by Enersis Group (72%) and Anglian Water Generales Consorcio Nacional de Seguros Consorcio Financiero S.A. 12 COMPANY’S EQUITY Chile Ltda. (28%), the latter affiliate of Anglian S.A., both companies completely controlled Water Inc. (hereinafter “Anglian Water”) from by Consorcio Financiero S.A., 30,915,792 In Extraordinary Meeting on January 23, UK, was awarded 40% of Esval’s property. The 14 LINE OF BUSINESS AND ACTIVITIES shares to BP. S.A., company completely owned 2004, the companies agreed to increase the property transfer and take-over on the part by the General Manager and the Chairman of capital in $24,136 million, with the issuance of Aguas Puerto S.A. were carried out on 15 Consorcio Financiero S.A., 320,583,321 shares of 462,372,090 payment shares, to partly 16 BOARD OF DIRECTORS AND April 1999. to Inversiones Teval S.A., company controlled finance the payment of the contract price, by ADMINISTRATION by the directors of Consorcio Financiero which Esval S.A. acquired the right to exploit On August 4, 2000, Anglian Water bought S.A. Mr Eduardo Fernández León and Mr the sanitary concessions held by ESSCO S.A. in 19 ORGANIZATIONAL CHART their share in Aguas Puerto S.A. from Enersis José Antonio Garcés Silva, and member of the Region of Coquimbo. Group, becoming the controller of the the business group to which Banvida S.A. Company. The capital increase was registered in a 21 MANAGEMENT REPORT belongs which, in turn, is holder of 47.70% of Consorcio Financiero S.A., and 320.583.321 92.27%, with which Esval’s signed and paid At the end of 2000, a $25,063 million capital shares to Proyectos e Inversiones Longovilo capital is M$ 162,384,714.- After the capital 39 ADMINISTRATION REPORT increase was carried out, which consisted S.A., company controlled by the directors of increase, Esval S.A.’s controller was organized in the issuance of 541,559,555 shares, in Consorcio Financiero S.A. Mr Juan Hurtado by Consorcio Corredores de Bolsa (4.34%), CN 47 STATEMENT OF LIABILITY order to finance the early termination of Vicuña and Mr Pedro Hurtado Vicuña, and his Life Compañía de Seguros de Vida S.A. (9.91%), the Investment Management Agreement four brothers, and member of the business Compañía de Seguros de Vida Consorcio 49 FINANCIAL STATEMENTS between Esval and Aguas Quinta S.A. With group to which P&S S.A. belong, holder of Nacional de Seguros S.A. (9.55%), Compañía de the shares subscribed, Aguas Puerto S.A. 22.7% of Consorcio Financiero S.A. and Altas Seguros de Vida Vitalis S.A. (3.45%), Proyectos remained with 49.82% of Esval’s property. Cumbres S.A. holder of 25% of Consorcio e Inversiones Longovilo S.A. (10.37%), BP S.A. Financiero S.A. (1.0%), and Inversiones Teval S.A. (10.37%), On November 12, 2003, Consorcio Financiero with 49.00% of Esval S.A.’s shares. S.A. signed a share purchase agreement by On November 25, 2003, Esval was awarded, means of which they bought from Aguas for a 30 years period, the right of exploitation On November 18, 2007, Inversiones OTPPB Puerto S.A. 1.484.000.000 Esval series A of the water treatment concessions operated Chile III Limitada and Westwater Investments shares, accounting for 44.78% of their issued by Essco S.A., water treatment plant of the Limited published a notification establishing shares; therefore, the take-over by Consorcio 4th Region, for UF 3,177,000 VAT included, a Takeover bid (in Spanish Oferta Pública de Financiero S.A. materialized that same day. through their affiliate Aguas del Valle S.A. Adquisición, OPA) for all Esval's series “A” Thus, Esval achieved a market share close shares, including series B shares that may On November 14, 2003, through public to 17% of the customers of that area in the have been exchanged for series A shares, writ of Accountability and Release between country. in virtue of the what is stipulated in their
ANNUAL REPORT ESVAL 2010 10 CONTENTS ANNUAL REPORT ESVAL 2010
social statutes, establishing, among other Registry had to be carried out at the end-of- Inversiones OTPPB Chile III Limitada is a Chilean conditions for the takeover to be declared day of the publication of the result notification limited liability company, which up to December 4 LETTER FROM THE PRESIDENT as successful, that Esval shareholders had that states the takeover as successful. The 31, 2009 owned 1,122,170,725 series A shares, to agreed, in an Extraordinary Shareholder minutes of the meeting were raised to public and 10,437,782,849,266 series C shares of 6 LETTER FROM THE CEO Meeting, on a reform of their statutes, which deed of even date in the notary of Valparaíso Esval. OTPPB Chile III Limitada, company that consisted in modifying the denomination and of Mr Eduardo Bravo Ubilla and a summary of in turn is controlled by Inversiones Southwater distribution of the shares in which the social said writ was published in the OfficialG azette Ltda. ("ISL"), affiliate of AndesCan SpA., vehicle 8 COMPANY INFORMATION capital is divided in, without increasing the on December 15, 2007 and was recorded of investment in Chile of Canadian institution latter, so that the capital is divided in three on page 1143 reverse side, No. 977 of the Ontario Teachers' Pension Plan Board (OTPPB) 10 HISTORICAL ACCOUNT new share series, called Series A, B and C. Registrar of Real State and Commerce of is the direct controller entity. Apart from being Valparaíso of 2007. related to Esval, they are related to Inversiones 12 COMPANY’S EQUITY On December 12, 2007, Esval’s Extraordinary OTPPB Chile III Limitada, OTPPB Chile Inversiones Shareholder Meeting was held, which On December 21, 2007, the notification that S.A. (Tax Card No. 76.833.170-7), Castlefrank Investments Limited (Tax Card No. 59.141.730- 14 LINE OF BUSINESS AND ACTIVITIES was called to discuss all the social statute stated the takeover that Inversiones OTPP modifications, under the terms requested Chile III Limitada and Westwater Investments 4), Inversiones OTPPB Chile I Limitada (Tax Card by the bidders. Among other matters, they Limited set forth to have the control of the No. 76.833.300-9), Inversiones OTPPB Chile 16 BOARD OF DIRECTORS AND agreed to increase the number of shares in Company as successful was published. In II Limitada (Tax Card No. 76.833.340-8), and ADMINISTRATION which the capital of the Company is divided, virtue of the aforementioned, said companies Essbio S.A. (Tax Card No. 96.579.330-5). On 3,740,569,084 to 14,962,276,336,000, became the controllers of Esval with 69.37% the other hand, Ontario Teachers Pension Plan 19 ORGANIZATIONAL CHART without increasing the social capital, under of the total of the shares issued by the Board has an indirect participation with 50% of the following terms: (i) Series A and B shares Company, which materializes that same day. Inversiones Los Lagos II S.A., holding company were withdrawn and new series A, B and C of Sociedad Austral de Electricidad S.A. (SAESA) 21 MANAGEMENT REPORT shares were created; (ii) the new series A and As in said takeover the bidders purchased with 99.99% of the shares of said company. B shares keep all the rights and privileges, more than two thirds of the shares issued with 39 ADMINISTRATION REPORT respectively, that the old series A andB shares voting power of Esval, the new controllers set Mareco Holdings Corp. is a limited liability had; (iii) the new series C shares do not have forth a new takeover for the total shares of the company organized and existing under the 47 STATEMENT OF LIABILITY the right to chose directors, but they will have Company, under the terms established by article laws of the Ontario Province, Canada; as at the privilege of calling at an extraordinary 69 of Law 18.046 on Public Limited Companies. December 31, 2009 it owned 1,487,520,566 49 FINANCIAL STATEMENTS shareholder meeting, when they request it series A shares of Esval. so, at least 5% of these shares. Due to this second takeover, which finished on February 18, 2008, said controllers obtained Morgan McCague is the final controller of All the new shares, no matter the series they up to that date, 69.72% of the total of the Mareco Holdings Corp. There is a shareholder belong to, participate on equal terms in the shares issued by Esval. agreement between Inversiones OTPPB Chile profits and other economic rights. In that III Limitada and Mareco Holdings Corp, in virtue same meeting, the exchange between the old Finally, on December 21, 2009, Westwater of which certain limitations were established series A and B shares and the new series A, Investments Limited sold all of their shares for the free assignment and transfer of their B and C shares was approved, according to in Esval to company Mareco Holdings Corp, shares in Esval, as well as certain preferential which the shareholders received a new series which signed a shareholders' agreement with purchase rights regarding shares, establishing A or B share for each series A or B they had, Inversiones OTPPB Chile III Limitada. In virtue also certain regulations regarding the exercise plus 3,999 of the new series C shares. Also, of the aforementioned, these companies are of voting power corresponding to Mareco they provided that the allocation of the new currently the controllers of Esval, with 69.78% Holdings Corp. in regard to the election and shares and their update in the Shareholder of all the shares issued by the Company. renewal of Esval's board of directors.
ANNUAL REPORT ESVAL 2010 11 CONTENTS ANNUAL REPORT ESVAL 2010 COMPANY’S EQUITY
As at December 31, 2010, the main shareholders were:
SHARES NAME OR BUSINESS NAME TOTAL PERCENTAGE ESVAL-A ESVAL-B ESVAL-C
4 LETTER FROM THE PRESIDENT INVERSIONES OTPPB CHILE III LIMITADA 1,122,170,725 0 10,437,782,849,266 10,438,905,019,991 69.77% CORPORACIÓN DE FOMENTO DE LA PRODUCCIÓN 16,945,090 1,083,889,342 4,402,236,893,568 4,403,337,728,000 29.43% 6 LETTER FROM THE CEO INVERSIONES GUALLATIRI LIMITADA 2,494,988 0 12,379,516,035 12,382,011,023 0.08% SUC. ZAMORA VILLALBA DAVID 1,734,690 0 6,937,025,310 6,938,760,000 0.05% 8 COMPANY INFORMATION BUSTILLOS MUNOZ MANUEL 1,390,000 0 6,598,610,000 6,600,000,000 0.04% INVERSIONES TACORA LIMITADA 1,192,426 0 6,232,363,389 6,233,555,815 0.04% 10 HISTORICAL ACCOUNT BANCOESTADO S.A. C DE B 472,358 0 6,122,548,196 6,123,020,554 0.04% VALENCIA UBILLA ARTURO 1,333,029 0 5,330,792,582 5,332,125,611 0.04% 12 COMPANY’S EQUITY INVERSIONES LAGOA LIMITADA 1,332,491 0 5,328,631,509 5,329,964,000 0.04% CHILE’S TREASURY 877,294 0 3,508,298,706 3,509,176,000 0.02% 14 LINE OF BUSINESS AND ACTIVITIES TOBAR LEIVA MANUEL 800,000 0 3,199,200,000 3,200,000,000 0.02% 786,039 0 3,143,369,961 3,144,156,000 0.02% 16 BOARD OF DIRECTORS AND GALLARDO BILBAO ANA MARÍA ADMINISTRATION OTHER SHAREHOLDERS 1,505,046,529 104,083 59,735,668,394 61,240,819,006 0.41% Total 2,656,575,659 1,083,993,425 14,958,535,766,916 14,962,276,336,000 100.00% 19 ORGANIZATIONAL CHART The Chilean Development Agency is the only shareholder other than the controllers that owns more than 10% of the social capital. 21 MANAGEMENT REPORT THE CONTROLLING GROUP IS CONSTITUTED 39 ADMINISTRATION REPORT BY THE FOLLOWING MEMBERS: SHARES TOTAL PERCENTAGE A SERIEs B SERIEs C SERIEs 47 STATEMENT OF LIABILITY INVERSIONES OTPPB CHILE III LIMITADA 1,122,170,725 - 10,437,782,849,266 10,438,905,019,991 69.77% 49 FINANCIAL STATEMENTS SHARES SERIES PARTICIPATION 42.24% 0.00% 69.78% SERIES PARTICIPATION WITH POLITICAL RIGHTS (A AND B) 30.00% MARECO HOLDINGS CORP. 1,487,520,566 - - 1,487,520,566 0.01% SHARES SERIES PARTICIPATION 55.99% 0.00% 0.00% SERIES PARTICIPATION WITH POLITICAL RIGHTS (A AND B) 39.77% TOTAL OF SHARES RELATED TO OTPPB III CHILE LIMITADA 2,609,692,291 - 10,437,782,849,266 10,440,392,540,557 69.78% SHARES SERIES PARTICIPATION 98.24% 0.00% 69.78% SERIES PARTICIPATION WITH POLITICAL RIGHTS (A AND B) 69.77%
The control of OTPPB and MARECO is based on having 98.24% of series A shares, with which they own 69.77% of the political rights of theC ompany (30% possessed by the former and 39.77% possessed by the latter).
ANNUAL REPORT ESVAL 2010 12 CONTENTS ANNUAL REPORT ESVAL 2010 SUMMARY OF SHARE TRANSACTIONS OF THE COMPANY
The dividends paid per share during the last No. SHARES TOTAL AMOUNT AVERAGE YEAR QUARTER AGREED SETTLED IN $ PRICE three years are the following:
4 LETTER FROM THE PRESIDENT 2008 1 103,559,440,007 2,837,385,918 0,02740 DIVIDEND PAID 2008 - 2010 2008 2 3,435,513,795 90,866,856 0,02645
2008 3 3,574,999,622 61,418,174 0,01718 FINANCIAL TYPE OF DIVIDEND PAYMENT $ PER SHARE 6 LETTER FROM THE CEO YEAR DATE 2008 4 1,537,674,984 23,116,262 0,01503 2007 PROVISIONAL 18/02/08 0,00041750 2009 1 2,681,334,318 45,717,243 0,01705 2007 DEFINITE 19/05/08 0,00082239 8 COMPANY INFORMATION 2008 PROVISIONAL 20/08/08 0,00025000 2009 2 1,116,005,398 16,086,206 0,01441 2008 PROVISIONAL 23/02/09 0,00025000 2009 3 540,202,848 10,857,842 0,02010 2008 DEFINITE 18/05/09 0,00084889 10 HISTORICAL ACCOUNT 2009 PROVISIONAL 20/08/09 0,00025000 2009 4 1,278,098,811 25,578,129 0,02000 2009 PROVISIONAL 02/02/10 0,00025000 2009 DEFINITE 24/05/10 0,00100296 2010 1 136,737,638 2,767,275 0,02024 2010 PROVISIONAL 27/08/10 0,00025000 12 COMPANY’S EQUITY 2010 2 1,086,061,535 37,356,441 0,03440 1.- In nominal currency upon payment date. 2010 3 581,499,910 25,866,874 0,04448 14 LINE OF BUSINESS AND ACTIVITIES 2010 4 1,118,699,892 44,082,876 0,03941 DISTRIBUTABLE PROFITS 2010 2009 (**) 2008 (**)
* It considers the Stock Exchange of Santiago, the Stock Exchange of Valparaíso and the Electronic Stock Exchange. FINANCIAL YEAR PROFITS 17,293,187 22,476,545 19,819,061 16 BOARD OF DIRECTORS AND DEFINITE DIVIDEND 22,476,545 19,819,061 ADMINISTRATION PROVISIONAL DIVIDENDS 7,481,138 % DISTRIBUTED AS DIVIDENDS (*) 100% 100% of June and September 2010 has been DIVIDEND POLICY / (*) This amount will be agreed on the next Ordinary Meeting of 19 ORGANIZATIONAL CHART PAYMENT OF DIVIDENDS respectively verified. If said dividends have to Shareholders. be distributed, they would be paid in August (**) Values determined according to the valid accounting regulation MANAGEMENT REPORT In the Ordinary Shareholder Meeting, held on 2010 and February 2010. in those annual periods. 21 The amounts of 2009 and 2008 are expressed in currency as at 31 30 April 2010, it was agreed to distribute as December 2009, according to the regulation valid on that date. Regarding the definite dividends related to 39 ADMINISTRATION REPORT definite dividends for the financial year 2009, $0.00150296 per share, which corresponds that same financial year, the shareholders approximately to 100% of the profits obtained were informed that the purpose of the Board RISK CLASSIFICATION 47 STATEMENT OF LIABILITY in said financial year. of Directors is to distribute 80% of the profits of financial year 2010, notwithstanding that In 2010, ESVAL hired the services of Feller 49 FINANCIAL STATEMENTS the respective Ordinary Meeting will have Rate Clasificadora de Riesgo Limitada and CI R to make a decision regarding those definite Clasificadora de Riesgo Limitada to carry out dividends. a risk classification of their shares, bonds and 2010 DIVIDEND POLICY bond facilities. It was left on record that the aforementioned The Shareholders Meeting was informed of policy, both regarding provisional dividends the Esval S.A.’s Board of Directors Agreement, No. CLASSIFICATION as well as definite dividends, corresponds to VALID ISSUANCE REGISTER SERIES Feller Rate ICR consisting in that distribution of up to two an intention of the Board of Directors of the SHARES - A, B, C LEVEL 4 LEVEL 4 provisional dividends of $0.00025 per share Company; therefore, their compliance will NEGOTIABLE INSTRUMENTS 43 5A AA- / LEVEL 1+ AA / LEVEL 1+ as maximum – each time - charging it to the NEGOTIABLE INSTRUMENTS 44 7A AA- / LEVEL 1+ AA / LEVEL 1+ depend on the profits actually obtained, as well BONDS 232 A AA- AA profits of financial year 2010 will be possible; BOND FACILITY 293 D AA- AA as on the results indicated by the projections BOND FACILITY 375 E AA- AA under the condition that said provisional that the Company does periodically, or on the BOND FACILITY 419 H AA- AA dividends do not exceed 80% of the profits BOND FACILITY 493 J AA- AA existence of certain conditions that may make BOND FACILITY 561 K AA- AA of financial year 2010, and that the closure said policy vary. BOND FACILITY 562 M AA- AA
ANNUAL REPORT ESVAL 2010 13 CONTENTS ANNUAL REPORT ESVAL 2010 LINE OF BUSINESS AND ACTIVITIES
4 LETTER FROM THE PRESIDENT Esval is a producing and distributing drinking Additionally, the company renders potable stated in DFL No. 382 of 1988, of the Ministry water company, engaged in the collection, water services to other locations, outside of Public Works, and other applicable norms. 6 LETTER FROM THE CEO treatment, and disposal of wastewater, which the awarded area in Algarrobo, based on also renders services regarding said activities, signed agreements with the communities of The Superintendence of Sanitary Services, 8 COMPANY INFORMATION in the manner and under the conditions Algarrobo Norte, Mirasol and Las Brisas. created in 1990, through Law No. 18.902, stated by Law that authorizes its creation and is the body that regulates the activity of 10 HISTORICAL ACCOUNT other applicable norms. On November 25, 2003, Esval was awarded, Esval and the sanitary sector in its totality by public bidding, the right of exploitation for in order to guarantee to the population that The operational territory of the Company 30 years of the concessions, holder of which the rendering of sanitary services, regarding 12 COMPANY’S EQUITY includes the urban areas of the Region of is ECONSSA CHILE S.A. (at that time SSCO E amount, quality and price, corresponds to Valparaíso, which the former Empresa de S.A.), water supply and sanitation company of that offered and can be maintained in the 14 LINE OF BUSINESS AND ACTIVITIES Obras Sanitarias de la V Region attended the Region of Coquimbo. For these purposes, long term, and that the water, once used, is to until January 27, 1986, except for the a subsidiary public limited company was treated and will be disposed of in accordance 16 BOARD OF DIRECTORS AND areas franchised to private or municipal organized, called Aguas del Valle S.A., on to sustainable development. ADMINISTRATION services, plus the expansion areas included December 4, 2003, which has to comply with within the development plans approved by the regulations for open held corporations. the Superintendence of Sanitary Services, Aguas del Valle produces and distributes 19 ORGANIZATIONAL CHART according to what is stipulated by Law No. drinking water, recollects, treats and disposes 18.777 and decree No. 2.166/78 and 69/89, wastewater, for which also renders services 21 MANAGEMENT REPORT both from the Ministry of Public Works. related to other activities, under the terms
39 ADMINISTRATION REPORT OPERATION DATA 2010 47 STATEMENT OF LIABILITY ESVAL Aguas del Valle CONSOLIDATED 49 FINANCIAL STATEMENTS URBAN POPULATION * 1,480,834 556,655 2,037,489 DRIKING WATER CUSTOMERS 525,578 188,922 714,500 SEWER SYSTEM CUSTOMERS 473,238 179,401 652,639 DRINKING WATER COVERAGE (%) * 99.3 99.9 99.5 SEWER SYSTEM COVERAGE (%) * 91.9 96.1 93.1 DRIKING WATER INVOICING (000m3) 98,130 34,216 132,346 SEWER SYSTEM INVOICING (000m3) 86,467 30,879 117,346
*Management Report of Sanitary Sector 2009, published by SISS [Superintendence of Sanitary Services].
ANNUAL REPORT ESVAL 2010 14 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY Petorca, La Ligua, Cabildo, Papudo, Zapallar, La Serena, Vicuña, Paihuano, REGION OF Putaendo, Santa María, Catemu, Nogales, San Felipe, REGION OF Andacollo, Coquimbo, Ovalle, 49 FINANCIAL STATEMENTS VALPARAÍSO San Esteban, Puchuncaví, La Cruz, La Calera, Hijuelas, COQUIMBO Monte Patria, Punitaqui, Combarbalá, Quillota, Quintero, Llay Llay, Rinconada, Calle Larga, Canela, Illapel, Salamanca, Los Andes, Concón, Limache, Viña del Mar, Valparaíso, Los Vilos. Villa Alemana, Quilpué, Algarrobo, Casablanca, El Quisco, El Tabo, Cartagena, San Antonio. Sectors out of the awarded area: La Higuera, Río Hurtado.
Sectors out of the awarded area: Sto. Domingo, Olmué, Panquehue.
ANNUAL REPORT ESVAL 2010 15 CONTENTS ANNUAL REPORT ESVAL 2010 BOARD OF DIRECTORS AND ADMINISTRATION
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT BOARD OF DIRECTORS Alexander Galetovic Pöstch 47 STATEMENT OF LIABILITY As at December 31, 2010, the board of 7.626.817-7, Economist directors of Esval was constituted by the 49 FINANCIAL STATEMENTS following members: Stacey Leanne Purcell 48.121.218-9, Bachelor of Commerce, Dalhousie University
DIRECTORS Nicolás Navarrete Hederra 11.947.222-9, Industrial Civil Engineer Pedro Pablo Errázuriz Domínguez PRESIDENT 7.051.188-6, Civil Engineer Olivia Penelope Steedman 48.120.868-8, Civil Engineer, Queen’s University
Jorge Lesser García Huidobro VICE-PRESIDENT Carlos Williamson Benaprés 6.443.633-3, Industrial Civil Engineer 6.065.778-5, Business Administrator PUC
ANNUAL REPORT ESVAL 2010 16 CONTENTS ANNUAL REPORT ESVAL 2010 BOARD OF DIRECTORS’ REMUNERATION OF THE EXPENSES FOR BOARD OF COMMITTEE BOARD OF DIRECTORS DIRECTORS AND COMMITTEE OF DIRECTORS Since the Company does not comply with the According to Law No. 18.046 of Limited requirements stated in sub-paragraph 1 of Companies, during 2010 and 2009 financial In 2010, the Board of Directors and the article 50 bis of the Law of LimitedC ompanies years, the Directors received the following Committee of Directors did not record any – which was modified by Law No. 20.382 – gross remunerations for allowances and expenses. the Board of Directors organized in Esval S.A. participation in committee of directors; no 4 LETTER FROM THE PRESIDENT ceased its functions on December 31, 2009. revenues or remuneration for subsidiary Due to the aforementioned, all those matters companies or other items were recorded. that had to be acknowledged by the Directors Allowances received during 2010 were agreed 6 LETTER FROM THE CEO Committee up to December 31, 2009, started upon in the Ordinary Shareholders Meeting to be submitted, as from January 1, 2010, on 30 April 2010. 8 COMPANY INFORMATION to the Board of Directors of the Company, according to the general rules. 10 HISTORICAL ACCOUNT In any case, during 2010, the Board of 12 COMPANY’S EQUITY Directors adopted agreements related to operations referred to by Title XVI of Law 18.046. 14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION ALLOWANCES AND PAYMENTS FOR BOARD OF DIRECTORS’ COMMITTEES 19 ORGANIZATIONAL CHART
YEAR 2010 YEAR 2009 21 MANAGEMENT REPORT ALLOWANCE FEES COMMITTEES ALLOWANCE FEES COMMITTEES 39 ADMINISTRATION REPORT PEDRO PABLO ERRÁZURIZ 76,463 15,087 5,098 30,166 18,840 2,011 JORGE LESSER 34,332 0 3,052 34,009 0 3,023 47 STATEMENT OF LIABILITY ALEXANDER GALETOVIC 15,344 0 4,092 0 0 0 NICOLÁS NAVARRETE 15,344 0 0 0 0 0 49 FINANCIAL STATEMENTS STACEY PURCELL 13,443 0 0 0 0 0 OLIVIA STEEDMAN 22,888 0 0 0 0 0 CARLOS WILLIAMSON 7,658 0 2,046 0 0 0 STEPHEN DOWD 0 0 0 20,784 0 0 KEVIN KERR 11,353 0 0 30,262 0 0 EDUARDO NOVOA 0 0 0 7,590 0 0 RODRIGO PÉREZ 7,544 0 1,006 22,673 0 4,287 ALEJANDRO REYES 7,544 0 2,012 22,673 0 6,046 MÓNICA SINGER 7,544 0 1,006 22,673 0 3,023 219,457 15,087 18,310 192,719 18,840 18,390
(In thousands of chilean pesos)
ANNUAL REPORT ESVAL 2010 17 CONTENTS ANNUAL REPORT ESVAL 2010 MAIN EXECUTIVES
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS CEO FINANCE AND 6.645.077-5, Lawyer PLANNING AND LEGAL ADVISOR George Seal Comte George 8.018.789-0, Psychologist 5.390.299-5, Civil Engineer 4.899.487-3, Civil Engineer 7.523.281-0, Civil Engineer STUDIES MANAGER Mauricio Coll Olivares COMMERCIAL AND Sergio Pinto Fernández Pinto Sergio Domingo Tapia Navarro Tapia Domingo Leonel Fuentes Espinoza Leonel Fuentes Francisco Ottone Vigorena Ottone Francisco OPERATIONS MANAGER Gustavo González Doorman González Gustavo ENGINEERING MANAGER 7.067.713-k, Business Administrator DEVELOPMENT MANAGER 7.098.884-4, Electronic Civil Engineer 7.098.884-4, Electronic 11.471.960-9, Industrial Civil Engineer 11.471.960-9, Industrial ADMINISTRATION MANAGER Agustín Benavente Font de la Vall de la Font Benavente Agustín HUMAN RESOURCES MANAGER
ANNUAL REPORT ESVAL 2010 18 CONTENTS ANNUAL REPORT ESVAL 2010 ORGANIZATIONAL CHART ESVAL S.A.
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO BOARD OF
8 COMPANY INFORMATION DIRECTORS
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY GENERAL MANAGEMENT 14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION PUBLIC CORPORATE INTERNAL RELATIONS MANAGEMENT AUDITING 19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT COMMERCIAL AND PLANNING ADMINISTRATION REPORT OPERATIONS 39 DEVELOPMENT AND STUDIES MANAGEMENT MANAGEMENT 47 STATEMENT OF LIABILITY MANAGEMENT
49 FINANCIAL STATEMENTS FINANCE AND ENGINEERING HUMAN RESOURCES ADMISNITRATION LEGAL MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
ANNUALANNUAL REPORT REPORT ESVAL ESVAL 2010 2010 1919 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 20 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION MANAGEMENT
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUALANNUAL REPORT REPORT ESVAL ESVAL 2010 2010 2121 CONTENTS ANNUAL REPORT ESVAL 2010 INVESTMENTS 2010
4 LETTER FROM THE PRESIDENT During this financial year, the Company to increase the drinking water treatment Juan de Llo-Lleo Plant in 150 liters/second, kept expanding services of production and capacity of Concón Plant, in 250 liters/second, increasing its current design treatment distribution of drinking water, collection and 6 LETTER FROM THE CEO increasing during the summer its current capacity from 750 to 900 liters/second. The decontamination of waste waters, in addition treatment capacity from 1300 to 1550 liters/ investment reached $ 742 million. to maintaining the assets. Investments in second. 108,000 inhabitants receive this 8 COMPANY INFORMATION the amount of Th$ 18,640,370.- were made service and by the end of December 2010, in the Region of Valparaíso to reach the the plant was technically operative and in 10 HISTORICAL ACCOUNT aforementioned. working conditions. CONSTRUCTION AND START- UP OF EXTENSION OF WASTE 12 COMPANY’S EQUITY WATER PLANT OF CACHAGUA CAPACITY INCREASE FOR CAPACITY INCREASE FOR 14 LINE OF BUSINESS AND ACTIVITIES DRINKING WATER TREATMENT With an investment of $ 871 million DRINKING WATER TREATMENT the extension of the Waste Waster OF CONCÓN PLANT OF SAN JUAN DE LLO-LLEO Decontamination Plant of Cachagua was 16 BOARD OF DIRECTORS AND PLANT constructed and started up. This extension ADMINISTRATION Due to the needs caused by the population has a capacity for an average flow of 7.9 liters growth and water scarcity that has affected Similarly, work included in the 2011- per second and benefits 5,100 inhabitants. 19 ORGANIZATIONAL CHART the region for several years, the Company 2012 Investment Plant was advanced in advanced a work included for the investment order to start the capacity increase of The project was developed within the Esval plant of 2016 in the amount of $ 675 million, the drinking water treatment plant of San S.A. Environmental Management System, 21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 22 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT which led to a series of Instructions and Records control actions of all those activities that determine significant environmental 6 LETTER FROM THE CEO aspects, according to the instructions and records of ISO 14001. 8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT MODERNIZATION OF THE NETWORK RENEWAL to the Development Plan undertaken with 12 COMPANY’S EQUITY DRINKING WATER SYSTEM the authority, during 2010 financial year, VIÑA DEL MAR DOWNTONWN As the shareholders know, a few years ago investments for this item were around 14 LINE OF BUSINESS AND ACTIVITIES the company finished the construction of Th$7,471,313.-, for the modernization of large works that allowed the significant 54 thousand meters of network, and 10 “Mejoramiento Sistema Agua Potable Plan extension of the service coverage; therefore, thousand meters were added that correspond 16 BOARD OF DIRECTORS AND Viña del Mar” (Improvement Drinking Water the network renewal continues. According to an advance of the investments. ADMINISTRATION System Viña del Mar Downtown) project was carried out in 2009 and 2010 by means of two 19 ORGANIZATIONAL CHART contracts, the total being $ 220 million.
The work consisted in the supply and 21 MANAGEMENT REPORT installation of 102 quarter valves in different sectors downtown Viña del Mar with their INVESTMENT PER STAGE 39 ADMINISTRATION REPORT corresponding chambers and special parts. The immediate benefit of the project is the OF ESVAL PROCESS 47 STATEMENT OF LIABILITY creation of quarter or determination of sectors of the existing drinking water pipeline 49 FINANCIAL STATEMENTS network, which implies that in the repair in an emergency and/or maintenance of the 5.5% network, the affected population is reduced to a total of approximately 50 customers, 28.2% depending on the sector. In total, the favored 66.2% population is 13,000 customers, for whom downtown Viña del Mar is divided into 7
hydraulic sectors. Others C ollection Drinking Water Drinking Water Equipment, Technology, Equipment, Production and Distribution Production Waste Water Treatment and Treatment Water Waste
ANNUAL REPORT ESVAL 2010 23 CONTENTS ANNUAL REPORT ESVAL 2010 ESVAL AND ITS CUSTOMERS
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
As has been mentioned, Esval is especially account the needs and concerns expressed 10 COMMUNITY HISTORICAL ACCOUNT concerned about their customers and by the organized community through its actions are focused on continuously the communal councils of neighborhood INFORMATIVE 12 COMPANY’S EQUITY increasing service quality. For this, the existing committees, neighborhood health councils. MEETINGS REGARDING instruments and mechanisms have been In these meetings, professionals of the WORKS 14 LINE OF BUSINESS AND ACTIVITIES strengthened and the necessary dynamics Company answer to each requirement of the to keep the efficiency of the relationship community and commitments and deadlines During 2010, the actions to inform the processes with the customers have been for solutions are agreed. 16 BOARD OF DIRECTORS AND community and social organizations aimed generated in order to supervise every chance ADMINISTRATION at making known the works to be carried out aimed at assess, correct and consolidate the during the year intensified, especially those guidelines to follow taking into account the GUIDED TOURS TO THE related with the piping network replacement. 19 ORGANIZATIONAL CHART daily activities. DRINKING WATER AND WASTE In this way, on-site meetings programmed 21 MANAGEMENT REPORT WATER TREATMENT SYSTEMS by the neighborhood committees were WORKSHOP WITH THE encouraged. This allowed the communities 39 ADMINISTRATION REPORT In order to deepen the information provided to get clearly informed about the works LOCAL COMMUNITY AND in lectures and workshops during 2010, 250 that would take place, their benefits, AUTHORITIES leaders of neighborhood organizations and deadlines and amounts involved, as well as 47 STATEMENT OF LIABILITY customers interested in learning the drinking the mitigation measures taken to minimize In order to inform and to listen to the neighbors water production and waste water treatment the impact of the works development in the 49 FINANCIAL STATEMENTS from the several territories, Technical process were invited. They were guided by environment. Workshops are specially prepared taking into experts.
No. OF MEETINGS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL AREA
San Antonio 1 2 2 2 2 3 1 1 3 2 2 21 San Felipe - Los Andes 2 1 3 2 3 1 1 2 3 5 3 3 29 Quillota - Petorca 2 4 5 4 1 1 1 2 2 3 25 Valparaíso 2 2 3 2 1 6 7 5 6 5 1 40 Total RegiOn 6 8 13 10 6 5 11 12 9 16 13 6 115
ANNUAL REPORT ESVAL 2010 24 CONTENTS ANNUAL REPORT ESVAL 2010 WORKSHOPS AND ARRANGEMENTS CARRIED OUT BY AL DIA CON ESVAL
AREA No. WORKSHOPS AGREEMENTS SIGNED
Valparaíso 230 2,178 Quillota - Petorca 72 533 48 902 4 LETTER FROM THE PRESIDENT San Felipe - Los Andes San Antonio 77 361 Total YEAR 2010 427 3,974 6 LETTER FROM THE CEO Total YEAR 2009 2,002 16,637 ACCUMULATED TOTAL 2,429 20,611 8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT THEATER WORKSHOP AIMED AT THE FORMATION OF 12 COMPANY’S EQUITY COMMUNITY WORKERS
14 LINE OF BUSINESS AND ACTIVITIES This program was created in 2010 and will be implemented in the first days of 2011 with the participation of 20 leaders of neighborhood 16 BOARD OF DIRECTORS AND organizations of Valparaíso. The workshop is ADMINISTRATION a space for personal development that will enable community leaders and workers to 19 ORGANIZATIONAL CHART increase their self-esteem, potentiate their self-knowledge and develop their expressive 21 MANAGEMENT REPORT skills: language and communication. We expect to support their leadership within the community in a playful way in order to enrich 39 ADMINISTRATION REPORT the expression of the personal experiences and the stories of the neighborhood. 47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS AL DIA CON ESVAL (CATCH EARTHQUAKE damage of different magnitude to the facilities, UP WITH ESVAL) albeit there were large areas that never The Bicentennial year will undoubtedly be underwent water cut offs. Once the power This program, created in 2003, is a tool remembered not only by its own meaning, supply was restored, and thanks to a meticulous aimed at giving support to the most socially but also by a series of natural phenomena revision and execution of works by the technical vulnerable customers. It includes training that shook an important area of the country, and professional teams of the company – who sessions about basic notions to control as were the earthquake and tsunami. worked continuously immediately after the drinking water consumption and workshops catastrophe – almost 100% of the water supply to repair domestic sanitary artifacts. It also During the first hours after the earthquake, was restored four days after the earthquake provides economical benefits to regularize the operation of some of Esval’s systems was only with the exception of a hilly area in the debts. especially affected by water supply cut offs and Province of San Antonio.
ANNUAL REPORT ESVAL 2010 25 CONTENTS ANNUAL REPORT ESVAL 2010 Once the normal operation of the services was restored, Esval focused on the repair of a large breakage in Las Vegas Aqueduct, main pipeline that supplies the water to Gran Valparaíso. This pipeline is 84 Km long, 1 meter 20 centimeters of diameter and broke in several points. The largest damage was a leakage resulting in a loss of water of around 100 liters per second. The repair was carried 4 LETTER FROM THE PRESIDENT out between March 9, 10 and 11. This forced the interruption of the drinking water supply 6 LETTER FROM THE CEO for approximately 60 hours. These works represented a huge human and resource 8 COMPANY INFORMATION effort.
Subsequently, and also as a result of 10 HISTORICAL ACCOUNT February’s earthquake, another point of the same pipeline was repaired in August. This 12 COMPANY’S EQUITY entailed another cut off; this time it lasted 18 Especially in 2010, 10,941 of a total of 91,742 administrative and financial sustainability hours. expired in the region. For this purpose, to the people in charge of management. 14 LINE OF BUSINESS AND ACTIVITIES support was given to the municipalities In addition, a total of 118 unscheduled It is worth noting that, in both cases, the in terms of transportation and computer visits were carried out in order to deal 16 BOARD OF DIRECTORS AND work for the community was made easy by resources. In addition, the number of lectures with operational emergencies. A training ADMINISTRATION the important participation of the authorities in the communes that concentrate most workshop in the four provinces of the region, and, especially, of social organizations such as of the subsidies were increased and a radio with a total attendance of approximately the Communal Councils and Neighborhood campaign to encourage re-application was 450 people, stands out among the activities 19 ORGANIZATIONAL CHART Committees, which helped in spreading carried out. carried out during the year. the news about the cut off and reported 21 MANAGEMENT REPORT the location of the tanks. Also, hundreds of Regarding the Project Management, several voluntaries of the program Un Techo Para works and designs for an investment in the amount of 4,100 million pesos financed by 39 ADMINISTRATION REPORT Chile participated in the delivery of drinking RURAL DRINKING water. Likewise, we received the support of the Chilean State were conducted during the an Army, Navy and Police detachment. WATER SERVICE year. The construction on four tank towers 47 STATEMENT OF LIABILITY and seven semi-underground water tanks The services rendered by Esval to the Drinking stands out among the works conducted. 49 FINANCIAL STATEMENTS Water for Rural Areas cooperatives and During 2010, 62,000 meters of piping with ACTIONS TO SUPPORT committees (APR, in Spanish) are the result more than 600 new drinking water surge of a technical assessment and assistance tanks were built. THE SUBSIDIES covenant entered into by the Directorate of Hydraulic Works of the Ministry of Public Special consideration must be given to the Likewise, and aiming at cooperating with Works. technical unit after February 2010 earthquake. all the people that meet the requirements The unit visited the most affected service established by the regulation to apply for Technical assistance addresses 147 rural areas in order to prepare a preliminary the drinking water subsidies, Esval arranged drinking water systems that benefit an register of the damage aimed at informing a series of meetings with the Community estimated population of 153 thousand the authorities for a better decision making. Development offices (DIDECOS, in Spanish), inhabitants. In 2010, 263 scheduled visits Regarding the works management, ESVAL which address the relationships of the to the services were performed with the contributed with the structural redesign of organizations with the social programs of purpose of improving and consolidating their four tanks in compliance with the seismic each municipality. management as well as to provide technical, regulation in force in the country.
ANNUAL REPORT ESVAL 2010 26 CONTENTS ANNUAL REPORT ESVAL 2010 IMAGE AND COMMUNICATION
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION Many years ago, the Company undertook the 10 HISTORICAL ACCOUNT commitment to work closely with regional, provincial and communal authorities and 12 COMPANY’S EQUITY also with the social organizations grouped mainly in communal councils, neighborhood 14 LINE OF BUSINESS AND ACTIVITIES committees and their organizations, senior citizens groups, mother centers, among others. Esval also cooperates with several 16 BOARD OF DIRECTORS AND public bodies in the circulation of activities of ADMINISTRATION common interest.
19 ORGANIZATIONAL CHART To do this, the Company has several mechanisms. One of them is the Agua Sana 21 MANAGEMENT REPORT Vida Sana (Healthy Water Healthy Life) Campaign. 2010’s motto, “Contigo en Cada 39 ADMINISTRATION REPORT Gota” (With You in Each Drop), that reflects the importance of water in each and every expression of the human being and the 47 STATEMENT OF LIABILITY environment. In said campaign, carried out in 2010, 258 thousand people were directly 49 FINANCIAL STATEMENTS contacted.
With this insight, the Company entered into Agreements with the Ministerial Regional Secretariat of Education and the Ministerial
ANNUAL REPORT ESVAL 2010 27 CONTENTS ANNUAL REPORT ESVAL 2010 Regional Secretariat of Health to promote With the purpose of carrying out follow-up Bicentenario, which was presented for the healthy life and the creation of good and coordination actions, meetings were held use of the citizens in a beautiful natural hygiene and eating habits. He Company also with the Regional Housing Ministry, Planning environment overlooking the sea and the hills supported the “Manitos Limpias” (Clean Ministry and the Ministry of National Assets. of Valparaíso in the Yolanda area of Avenida Little Hands) Campaign carried out by the España. Regional Health Ministry in order to prevent At a provincial level, Esval participated the spread of infectious-contagious diseases together with public agencies in the program Like in former years, the Company organized such as cholera and others. Gobierno en Terreno (Government on a Christmas Painting Competition. The Site). This is a community-oriented activity best works were selected and printed as 4 LETTER FROM THE PRESIDENT Esval also collaborated with the Regional intended to resolve doubts and problems of Esval Christmas cards. In addition, for the Government in the program Territorios the community. sixth consecutive year, Esval sponsored the 6 LETTER FROM THE CEO Vulnerables (Vulnerable Territories) by Children’s Painting Competition of Municipal providing design studies with information to The support to the Regional and National Schools of the Commune of Valparaíso. 8 COMPANY INFORMATION develop the drinking water, sewage, paving sports activities complemented the and electricity generation infrastructure. aforementioned activities. The first one Another traditional activity of the Company was the sponsorship of the First under-12 10 HISTORICAL ACCOUNT is the Regional Technology and Science Regional Competition of Street Soccer. This School Convention. In 2010, 11 works encouraged the participation of more than were presented and the final results were 12 COMPANY’S EQUITY 450 children who play in the Soccer Schools exhibited in Universidad Técnica Federico created by the National Sports Institute. Santa María. This convention is organized 14 LINE OF BUSINESS AND ACTIVITIES In addition, Esval sponsored the National together with the Explora CONYCIT Program, Bicentennial University Championships, aimed at encouraging the scientific research, 16 BOARD OF DIRECTORS AND with the participation of around 2 thousand promoting learning and use of the scientific ADMINISTRATION students from 25 universities of the Council method among the students, linking science of Rectors of Chile. The championship took and technology professionals with school and place in the Valparaíso Region. strengthening the development of scientific 19 ORGANIZATIONAL CHART skills. The promotion of arts and culture was also 21 MANAGEMENT REPORT within the interests of the Company. Its Maybe, one of the most important challenges maximum expression was the support given that the company has imposed on itself is 39 ADMINISTRATION REPORT to the Short Story Contest carried out in the publication of a Sustainability Report, the Writers Meeting of the Third Universal second version of which was submitted to Forum of Cultures, Valparaíso, 2010. Around the authorities, social organizations and 47 STATEMENT OF LIABILITY 750 works were received by an especially media during the current financial year. This appointed jury and the best 100 stories were document shows in a very credible way how 49 FINANCIAL STATEMENTS published in a book that was distributed Esval is contributing to the development during the Third Forum. and quality of life of the inhabitants of the Valparaíso Region. Likewise, the Company We joined the celebration of theB icentennial reassures its commitment for transparent enthusiastically by supporting several management so that it can be a contribution activities. However, the Company and to the sustainable development, not only its employees are specially satisfied by with the current generations, but also with the sponsorship for the building of Plaza the future ones.
ANNUAL REPORT ESVAL 2010 28 CONTENTS ANNUAL REPORT ESVAL 2010 In the 2010 version, the Report was awarded with the highest grade, since the opinion of the representatives of community organizations of the Valparaíso Region was considered as a fundamental part in its preparation. Also, in accordance with the methodology established by the Global Reporting Initiative (GRI), new indicators regarding Human Rights associated with the behavioral code developed by the LETTER FROM THE PRESIDENT 4 water and sanitation company were added. Finally, Esval requested consulting company 6 LETTER FROM THE CEO Bureau Veritas for external verification of the report. 8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY NUMBER OF CONTACTS IN “AGUA SANA, VIDA SANA” CAMPAIGN 14 LINE OF BUSINESS AND ACTIVITIES PROVINCE COMMUNITY AREA EDUCATION AREA OFFICE DOOR TO DOOR TOTAL CONTACTS 16 BOARD OF DIRECTORS AND ADMINISTRATION Gran Valparaíso 93,529 51,738 13,059 1,545 159,871 Quillota 12,526 11,419 2,195 512 26,652 ORGANIZATIONAL CHART 19 San Felipe - Los Andes 10,377 17,276 1,334 700 29,687 Litoral Sur 27,586 12,355 2,430 292 42,663 21 MANAGEMENT REPORT Total 144,018 92,788 19,018 3,049 258,873
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY NUMBER OF ACTIVITIES IN “AGUA SANA, VIDA SANA” CAMPAIGN
49 FINANCIAL STATEMENTS PROVINCE COMMUNITY AREA EDUCATION AREA OFFICE DOOR TO DOOR TOTAL CONTACTS
Gran Valparaíso 209 264 106 14 593 Quillota 81 88 24 18 211 San Felipe - Los Andes 37 63 18 21 139 Litoral Sur 91 84 30 14 219 Total 418 499 178 67 1,162
ANNUAL REPORT ESVAL 2010 29 CONTENTS ANNUAL REPORT ESVAL 2010 HUMAN RESOURCES
4 LETTER FROM THE PRESIDENT STAFF
As at December 31st 2010, Esval staff was 6 LETTER FROM THE CEO made up by 355 employees. According to its distribution in levels, it was made up as 8 COMPANY INFORMATION follows:
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES 25%
16 BOARD OF DIRECTORS AND 2% ADMINISTRATION 73%
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT Managers Administration 39 ADMINISTRATION REPORT staff and operators staff
47 STATEMENT OF LIABILITY Professionals and technicians Professionals 49 FINANCIAL STATEMENTS PREVENTION These works, like those previously performed, the entrance to confined areas, mainly waste ended without accidents or complications water chambers. These support operations In 2010, Risk Prevention has continued its and as scheduled. This is the result of the are carried out with special equipment and task to prevent accidents and occupational commitment that each area made in relation personnel trained to perform these works. diseases among our employees as well as with the care of the employees in terms of it has continuously given support to works Safety and Occupational Health. Continuous on-site inspections and check- with more risk. This year, the repair works ups to several works were carried out in of several sections of Las Vegas Pipeline, Risk Prevention, like in previous years, order to: 1.- Verify compliance with the damaged by February's earthquake, stands continues to perform a solidarity surveillance safety standards, 2.- Notify the remarks to out. The largest work was carried out in job with the companies that render services the company and 3.- Follow up the remarks in August. by supporting works with more risk such as order to check the solutions implemented. All
ANNUAL REPORT ESVAL 2010 30 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES of this was carried out to achieve compliance Accident Event at San José Mine, The Well- TRAINING 16 BOARD OF DIRECTORS AND of the works with the requirements demanded Performed Job From the Perspective of the ADMINISTRATION by Esval in the contractual basis regarding risk Copiapó Mining Accident, Responsibility During 2010, 140 courses, seminars and prevention. of the Employer in Accidents at Work, Fire workshops were given, amounting to 16,732 19 ORGANIZATIONAL CHART Prevention andU se of Portable Extinguishers, man hours of training, corresponding to In 2010, 8 employees had accidents, resulting Safe Access to Confined Areas and First Aid. In 2.16% of the hours available in the year. This in 61 days lost because of accidents at work. addition, the Company started a workstation 21 MANAGEMENT REPORT means that every employee of Esval received, In all the cases, the employees received exercise plan called Pause Gymnastics in order as an average, 47.13 hours of training along timely and due medical attention, they had to create conscience about the benefits of the year. 39 ADMINISTRATION REPORT a satisfactory recovery and returned to their exercise and prevention of contractures and usual activities. malaise resulting from stress or poor posture. Of all the training hours, 32.54% took place 47 STATEMENT OF LIABILITY in the Occupational Health and Safety The accidents that resulted in more days This year, the amount of accidents by Management Integrated System area. This 49 FINANCIAL STATEMENTS lost were: a finger injury caused when the contractors decreased substantially.O ut of 64 department provided training such as the employee was reaching for some hanging accidents resulting in 458 days lost in 2009, programs Pause Gymnastics, Entrance to folders, resulting in 26 days of medical leave, in 2010 the amount of accidents decreased Confined Areas, First Aid and Prevention of and a fall from a bicycle that caused some to 52, resulting in 339 days lost. We must Fire and Use of Portable Extinguishers. scratches in the face of an employee who was add that in 2010, the number of contractors’ with medical leave for 12 days. The remaining employees increased in almost 50 people In second place, 30.21% of training was provided accidents did not result in more than 5 days of (average employees per year). in the Update department. In this area, the medical leave and were mostly caused by falls most important was the training in Construction or hits without serious consequences. We must highlight the contractors’ compliance Skill Leveling, Management by Skills, Seminar with the labor legislation as well as with in Strategic Planning, Software Use (Office, Along the year, 5,444 man hours were spent that regarding risk prevention. This clearly SAP, Oracle, Access, SharePoint and Twitter), training in Occupational Health and Safety, demonstrates the general results obtained Preparation and Presentation of Concrete and addressing topics as the Analysis of the regarding this matter. Persuasive Reports, among others.
ANNUAL REPORT ESVAL 2010 31 CONTENTS ANNUAL REPORT ESVAL 2010 In third place, with 18.25%, are the topics It is important to highlight that, within the leaders of neighborhood organizations of regarding the Quality and Environment actions aimed at Improving theO rganization’s Valparaíso. This activity became a space to Management Integrated System, with Environment in the Human Development potentiate their expression language and courses on Culture and Advanced Service Plan, a program including: Pause Gymnastics; communication skill and also to give them the Management, Industrial Solid Waste and Comprehensive Health Workshop: Pilates, tools to improve their community leadership Hazardous Waste, New Environmental Nutrition and Ergonometrics; Relaxation skills and enrich expression of their own life Institutional Policy, Regulations and Techniques and Body Posture, and Sports and experience and neighborhood stories. Technology for the Handling of Biosolids in Recreation for a Healthy Life was carried out. Chile and Management and Improvement of The topics mentioned above amounted to 4 LETTER FROM THE PRESIDENT Customer Service. 3,732 additional man hours. WELFARE LETTER FROM THE CEO 6 Training aimed at Personal Development Regarding Welfare, in 2010 Esval granted is in fourth place with 14.95%. They were SOCIAL SCHOLARSHIPS 2010 Educational Allowances to dependant 8 COMPANY INFORMATION mainly aimed at Creativity Innovation and students of Primary and Secondary School Development, Strategic Planning, Theory Regarding social responsibility and according and Technical-College Higher Education. to Solve Problems, Time Management 10 HISTORICAL ACCOUNT to the company’s insight to contribute in the and Management of Investment Projects development of the community where Esval Likewise, the employees and their children in Information Technology. On the other is located, a program to support the formation 12 COMPANY’S EQUITY could apply to beneficial Academic Excellence hand, the Teamwork Workshop allowed us of social leaders was supported jointly with Scholarships. to incorporate the concept of “networked the Chilean Chamber of Construction. 14 LINE OF BUSINESS AND ACTIVITIES thinking” using the blended learning method Regarding the administration of benefits, the and, as a transversal objective, it facilitated For this, a theater workshop aimed at the company has arranged dental and optical care 16 BOARD OF DIRECTORS AND the implementation and incorporation of a formation of community workers was built. allowances for its workers and their families ADMINISTRATION virtual platform for said learning and different as well as allowances for marriage, birth future training activities in the holding’s This program started in the last Trimester and death in coordination with the services companies. of 2010 with the participation of 20 rendered by Caja de Compensación 18 de 19 ORGANIZATIONAL CHART Septiembre.
21 MANAGEMENT REPORT In 2010, the Covenant with Clínica Reñaca was renewed. This alliance will allow increasing 39 ADMINISTRATION REPORT the benefits for medical care and cover for the employees and their families. 47 STATEMENT OF LIABILITY It will develop the Preventive medicine program. 49 FINANCIAL STATEMENTS
OUTSOURCING
Esval has included its commitment with the contractors in its Quality, Environment and Occupational Health Policy, establishing the need for: “Gradually committing its contractors and suppliers so that their performance
ANNUAL REPORT ESVAL 2010 32 CONTENTS Management standard ISO 14001 and ANNUAL REPORT ESVAL 2010 regarding quality, environment, occupational health and safety is consistent with the Occupational Health and Safety standard provisions of this policy in the activities and OSHAS 18001 are part of our Integrated services they render to the organization”. Management System, which is one of the strategy cornerstones of our company. Considering the importance of the relationship with contractors, the Company The certifications of these standards have gives clear and timely information regarding been reviewed on a semester basis by matters like bidding processes, requirements external auditors from an international 4 LETTER FROM THE PRESIDENT and compliance as well as performance certification company, Bureau Veritas, who assessments and requires from all the has kept and consolidated the certifications 6 LETTER FROM THE CEO companies rendering services that their of the Organization’s Integrated Management processes be measured according to quality System. 8 COMPANY INFORMATION standards, stipulating the termination of services and the requirements by the parties This year, some procedures were modified, the in a civil contract. most significant one being the modification of 10 HISTORICAL ACCOUNT the procedure for Hazard Identification and To guarantee proper performance of the work Risk Assessment. This is a turning point, since 12 COMPANY’S EQUITY plan with contractors, Esval has a Contract it does not only define the risks and hazards, Management System that centralizes the but also the control measures we are applying 14 LINE OF BUSINESS AND ACTIVITIES administration of contracts and demands for each one of them. from them special compliance with Esval's The work of the external auditors was 16 BOARD OF DIRECTORS AND Occupational Health and Safety Standards remarkable, since we could notice the degree ADMINISTRATION provided in the Special Regulation for Contractors and Subcontractors; in addition, of commitment they had during the audits the Company supports different training and performed, making a positive contribution 19 ORGANIZATIONAL CHART updating programs. to the system by timely detecting the deviations. This meant great support to 21 MANAGEMENT REPORT By means of on-site audits on compliance with continuous maintenance and improvement the labor and safety legislation, the contractors of the system. 39 ADMINISTRATION REPORT have greatly improved their administrative and risk prevention responsibility. We must also mention that during the last trimester of 2010, based on the 47 STATEMENT OF LIABILITY In 2010, Esval began a commercial relationship aforementioned management cornerstones, with 51 contractors, thus generating 1,329 the company started the implementation 49 FINANCIAL STATEMENTS indirect full-time jobs. of the project: Comprehensive Risk Management for Esval and Aguas del Valle based on the internal control model INTERNATIONAL STANDARDS COSO and standard ISO 31000, with a work insight focused on the strategic risks of both ISO 9001, ISO 14001 AND organizations. As strategic risk are those that OHSAS 18001 may have a significant impact on the strategic mission, insight or objectives or that may Certifications under Quality Management have a material effect upon the value of the standard ISO 9001, Environmental Organization”.
ANNUAL REPORT ESVAL 2010 33 CONTENTS ANNUAL REPORT ESVAL 2010 BRANCH COMPANY AGUAS DEL VALLE
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT INVESTMENTS INVESTMENT AS PER PROCESS STAGE AGUAS DEL VALLE 12 COMPANY’S EQUITY In 2010, Aguas del Valle invested a total of CLP 6,217,725. 14 LINE OF BUSINESS AND ACTIVITIES As part of Aguas del Valle’s 2010 Development Plan, important works to the drinking water 16 BOARD OF DIRECTORS AND and waste water were carried out, amounting 6.7% ADMINISTRATION to CLP 2,693 million totaling 97 works and 15 thousand meters in the piping replacement at 30.1% 19 ORGANIZATIONAL CHART a regional level. In La Serena and Coquimbo, 63.2% 8,216 meters were replaced; in Ovalle, 1,580 meters were replaced. This kind of 21 MANAGEMENT REPORT works were also carried out in other cities and towns of the region such as Andacollo, Others 39 ADMINISTRATION REPORT Tongoy, Guanaqueros, Canela Alta, Illapel, Los
Vilos, Salamanca, Vicuña, Chañaral Alto, El and C ollection 47 STATEMENT OF LIABILITY Palqui, Monte Patria, Sotaquí, Punitaqui and and Distribution Combarbalá. Equipment, Technology, Equipment, 49 FINANCIAL STATEMENTS Treatment Water Waste Regarding sanitation works in the city of Los Production Drinking Water Vilos, once the resolution by the Maritime Authority was obtained, the Company started SUBSIDIES requirements established by the regulations the works planned for constructing, launching have access to the Drinking Water Subsidy and connecting the submarine pipeline for In 2010, activities were coordinated (SAP, in Spanish). At the end of 2010, a 2011. This system has a vital importance, with the Planning Ministry, the Regional total of 39,184 subsidies were allocated, since it will allow reaching 100% of sanitation Government and the Municipalities so that representing 98.95% of the totality of in the coast of the Coquimbo Region. all the customers who comply with other subsidies authorized for the region.
ANNUAL REPORT ESVAL 2010 34 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT DEC 2004 DEC 2005 DEC 2006 DEC 2007 DEC 2008 DEC 2009 DEC 2010 12 COMPANY’S EQUITY SUBSIDies granted 35,646 35,132 35,972 36,380 37,321 37,791 39,184 14 LINE OF BUSINESS AND ACTIVITIES % SUBSIDies granted 99.71 96.86 97.70 96.08 97.87 98.95 98.95 % SUBSIDized customers 25.50 21.55 21.42 21.15 20.98 20.65 20.74 16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT THE PROGRAM 39 ADMINISTRATION REPORT “AL DÍA CON AGUAS DEL VALLE” 47 STATEMENT OF LIABILITY WORKSHOPS AND COVENANTS CARRIED OUT BY AL DÍA CON AGUAS DEL VALLE 49 FINANCIAL STATEMENTS “Al Día con Aguas del Valle” (Catch Up with Aguas del Valle) program provides several tools to regularize debts as well as basic PROVINCES No. WORKSHOPS AGREEMENTS SIGNED notions of administration and repair of domestic sanitary artifacts, aiming at teaching 31 259 the responsible consumption to customers. ELQUI LIMARÍ 11 71 In 2010, approximately 400 families benefited CHOAPA 10 57 from the program “Al Día con Aguas del Valle”. Total YEAR 2010 52 387
ANNUALANNUAL REPORT REPORT ESVAL ESVAL 2010 2010 3535 CONTENTS ANNUAL REPORT ESVAL 2010 HUMAN RESOURCES
STAFF
On December 31st 2010, the staff reached 154 4 LETTER FROM THE PRESIDENT employees distributed as follows:
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT 34% 12 COMPANY’S EQUITY This was complemented with check-up interviews in workstations (Ergonomics), 65% 1% evacuation drills and the performance of the 14 LINE OF BUSINESS AND ACTIVITIES “Ruta del Agua” (“Watercourse”), a program in which the company makes known the 16 BOARD OF DIRECTORS AND risks to which people entering our premises operators ADMINISTRATION Managers are exposed to (Universities, Public and Private Institutions, Schools, Neighborhood Committees, etc.). 19 ORGANIZATIONAL CHART
Administrative staff and staff Administrative In May, for the second year and together 21 MANAGEMENT REPORT with the Joint Committees, Aguas del Valle
Professionals and technicians Professionals participated in the “Month of Occupational 39 ADMINISTRATION REPORT Health and Safety”. PREVENTION the company and a public transport vehicle, 47 STATEMENT OF LIABILITY causing minor injuries to the two employees Several activities to improve the safety at driving the company’s vehicle. This resulted in TRAINING 49 FINANCIAL STATEMENTS work for both the in-house staff and the 6 days of medical leave for the driver and two contractors’ personnel were carried out days of medical leave for the co-pilot. In 2010, 96 courses, seminars and workshops during the year. were conducted, totaling 9,036 man hours of All the organization’s works under way in the training, corresponding to 2.72% of the hours In 2010, 4 employees had accidents with streets were inspected. Work was carried out available that year. This means that every minor injuries resulting in 30 days lost in the together with the Joint Committee for Works, employee of Aguas del Valle was trained, as year. In all the cases, the employees received visiting the premises that could be improved an average, 58.68 hours during the year. due medical attention, recovered satisfactorily and keeping a photographic record before and their cases generated preventive actions. and after the improvements. Of all the training, the higher concentration of hours of training, with 23.68%, was The accidents that caused more days lost Meetings with the Health andS afety Specialists conducted in the Personal Development were: An employee fell from a ladder, causing of the contractors were coordinated in order formational area. In this area, the training him tendinitis that resulted in 20 days of to standardize work criteria and methods courses on Team Work and Communication, medical leave; and a crash between a car of regarding Occupational Health and Safety. Leadership Skills, and Optimization of
ANNUAL REPORT ESVAL 2010 36 CONTENTS ANNUAL REPORT ESVAL 2010 courses on Software Operation (AUTOCAD, of the Ministry of Public Works, Aguas del Excel and Synergia 4J), Strategic Planning, Valle resumed the covenant started in 2006 Seminar on Valves and the Week of for “Technical Assessment and Project Construction stand up. Management in Rural Drinking Water Systems (RDWS)”.
INTERNATIONAL STANDARDS In the period 2009-2010, the company ISO 9001, ISO 14001 AND continued to support the Committees so that they could conduct their projects regarding LETTER FROM THE PRESIDENT 4 OHSAS 18001 Drinking Water for Rural Areas in an efficient manner. The total investment estimated for 6 LETTER FROM THE CEO In May and September 2010, two surveillance the period was CLP 4,400 millions. audits to the Integrated Management systems were conducted by the certification 8 COMPANY INFORMATION The agreement included technical assistance. company Bureau Veritas. In both occasions, That is, community, technical, legal and this company recommended to keep Aguas administrative/accounting supervision and 10 HISTORICAL ACCOUNT del Valle’s certifications in compliance with assessment to 180 organizations in charge of ISO 9001, ISO 14001 and OHSAS 18001. rural drinking water and responsible for the 12 COMPANY’S EQUITY Welfare and Financial Knowledge got the highest mark. management, operation and maintenance It is worth mentioning that during the of the systems, clearly promoting their self- surveillance carried out in September, Aguas 14 LINE OF BUSINESS AND ACTIVITIES In second place, with 21.51%, were the topics management. This benefited more than del Valle conducted its upgrade of standard 138,850 inhabitants of rural areas. We must related to Personal Development. Here, ISO 9001, from version 2001 to version 2008 16 BOARD OF DIRECTORS AND also mention Project Management, both training courses such as English Without of this standard. ADMINISTRATION Barriers, Monitor Formation Workshop, rd 3 in the technical and administrative areas. Seminar on Water Rights Licenses and Skill For this, third parties were hired to study, Management were also remarkable. design and build rural drinking water works 19 ORGANIZATIONAL CHART OUTSOURCING in the Coquimbo Region, developing the pre- In third place, with 20.24%, are the training investment and investment stages required Aguas del Valle began a commercial 21 MANAGEMENT REPORT courses on the Quality and Environmental for the execution of the Projects of the relationship with 55 contractors, generating Management Integrated System. Here we Program, achieving optimal solutions from 440 full-time indirect jobs. 39 ADMINISTRATION REPORT must mention the courses on Re-Introduction the technical and financial point of view. to the IMS, Interpretation and Analysis of the In 2011, the company wants to continue 47 STATEMENT OF LIABILITY ISO 9001:2008 Quality Management System, Internal Auditor for Integrated Systems and COLLECTIVE NEGOTIATION with the community, technical, legal and ISO 9001:2008 Update. administrative/accounting supervision and 49 FINANCIAL STATEMENTS In August and September, the collective assessment to existing and new systems. The negotiation process with both unions of In fourth place, with 17.62%, is the area of challenge for this year will be mainly focused the company was conducted, reaching two Occupational Health andS afety Management in developing investment initiatives to cope collective agreements, before the legal Integrated System, where the courses Pause with the effects of the drought in the area. negotiation deadline expires, which will be Gymnastics, Responsible Handling ofC hlorine These measures are included in a special valid until September 30th 2014. Gas (Oxiquim), Responsible Handling of agreement that would be implemented for Vehicles, OHSAS 18.001:2007 Tsunami - this purpose. Preventive Measures and Scape Routes, and Hazard Identification, Risk Assessment and DRINKING WATER FOR RURAL Control Determination were important. AREAS
Grouped with 16.94% are the training Within the context of the Covenant with courses aimed at Updating. Here the the Hydraulic Works Department (HWD)
ANNUALANNUAL REPORT REPORT ESVAL ESVAL 2010 2010 3737 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 38 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 39 CONTENTS ANNUAL REPORT ESVAL 2010 CONSOLIDATED ANNUAL REPORT
In 2010, the ordinary income slightly decreased in 0.1%, going from CLP109,658 million in 2009 to CLP109,553 million in 2010. This is due to a lower medium rate of 4 LETTER FROM THE PRESIDENT drinking water in Esval, which was not totally counteracted by a greater medium rate in 6 LETTER FROM THE CEO sewer systems.
The EBITDA (calculated as the incomes of 8 COMPANY INFORMATION the ordinary activities less the costs for raw materials and consumables used, for benefits 10 HISTORICAL ACCOUNT for the employees and other expenses, per nature) increased 0.5%, reaching CLP59,232 million. This EBITDA costs decreased 0.8%, 12 COMPANY’S EQUITY 1 where lower expenses in Energy and Fuels CONSOLIDATED ANNUAL REPORT 14 LINE OF BUSINESS AND ACTIVITIES were outstanding for CLP360 million (3.1% for lower electric rate), Services for CLP176 2 million (0.8%) and in Materials and Spare FINANCIAL YEAR OPERATIONAL RESULT FINANCIAL YEAR RESULT 16 BOARD OF DIRECTORS AND Parts for Operations for CLP 166 (18.2%). ADMINISTRATION 2000 24,963 13,721 The Non-Operational component of the 2001 28,389 15,481 19 ORGANIZATIONAL CHART Income Statement decreased 148.7%, going 2002 28,117 15,614 from CLP (7,513) million recorded in 2009 2003 30,302 15,867 to CLP (18,684) million in 2010, because of 21 MANAGEMENT REPORT a greater re-evaluation of the financial debt 2004 39,804 21,434 than the previous year. As at December 2010, 2005 41,241 22,823 39 ADMINISTRATION REPORT the UF increased 2.4% versus 2009, when 42,755 24,904 there was a 2.4% decrease. 2006 47 STATEMENT OF LIABILITY 2007 41,205 23,893 The Net Result of 2010 was CLP17,293 million, 2008 38,325 19,819 49 FINANCIAL STATEMENTS 34.3% lower than that recorded in 2009. 2009 39,977 26,333 2010 39,852 17,293
Figures of periods 2000 to 2008 under Accounting Principles Generally Accepted in Chile, in millions of Chilean pesos of December 2009.
Figures of 2009 and 2010 under IFRS in millions of ordinary Chilean pesos of each year.
1 Esval prepares Consolidated Financial Statements from December 2003. 2 In 2009 and 2010, the Operational Result is calculated as Ordinary Incomes less raw materials and consumables used, less benefits to the employees, less depreciation and amortization, and less other expense, per nature.
ANNUAL REPORT ESVAL 2010 40 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY AGUAS DEL VALLE ANNUAL REPORT 14 LINE OF BUSINESS AND ACTIVITIES OPERATIONAL In 2010, operational incomes reached FINANCIAL YEAR FINANCIAL YEAR RESULT RESULT3 16 BOARD OF DIRECTORS AND CLP26,168 million (0.1% more than 2009), ADMINISTRATION EBITDA was CLP12,336 million (-1.6% below 2004 8,139 4,841 2009), the Net Result, profits for CLP6,230 2005 8,570 5,301 19 ORGANIZATIONAL CHART million (19.0% less than 2009). 2006 9,159 6,181
21 MANAGEMENT REPORT 2007 8,958 6,346 2008 8,614 5,822 39 ADMINISTRATION REPORT 2009 9,058 7,691 2010 8,667 6,230 47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS Figures of periods 2004 to 2008 under Accounting Principles Generally Accepted in Chile, in millions of Chilean pesos of December 2009.
Figures of 2009 and 2010 under IFRS in millions of ordinary Chilean pesos of each year.
3 In 2009 and 2010, the Operational Result is calculated as Ordinary Incomes less raw materials and consumables used, less benefits to the employees, less depreciation and amortization, and less other expenses, per nature.
ANNUAL REPORT ESVAL 2010 41 CONTENTS ANNUAL REPORT ESVAL 2010 Ebitda FINANCING STRUCTURE EBITDA is calculated as the income of the ordinary activities, less the costs for raw materials and consumables used, per benefits to the employees and other expenses, per nature. NEGOTIABLE INSTRUMENTS
On February 25, 2009, the company recorded 58,916 59,232 in the Registry of Securities of the S.V.S., two 60,000 58,222 57,891 56,010 lines of negotiable instruments, under No. 53,636 55,309 4 LETTER FROM THE PRESIDENT 55,000 43 and No. 44. On November 25, 2010, the placing of Series 5A was carried out, charged 50,000 to line No. 43 for an amount of CLP12,850,000 6 LETTER FROM THE CEO 45,000 million, obtaining CLP12,137,376 million as a 41,037 37,765 result of said operation. This way, an average 40,000 37,637 8 COMPANY INFORMATION 35,539 interest of 0.49% per month is obtained. 35,000 These documents expire on November 22 10 HISTORICAL ACCOUNT 30,000 2011. 25,000 12 COMPANY’S EQUITY Subsequently, on December 14 2010, the 20,000 placing of Series 7A was carried out, charged 15,000 to line No. 44 for an amount of CLP12,850,000 14 LINE OF BUSINESS AND ACTIVITIES 10,000 million, obtaining CLP12,515,702 million as a result of said operation. This way, an average 16 BOARD OF DIRECTORS AND 5,000 interest of 0.46% per month is obtained. ADMINISTRATION
0 2009 pesos (Thch$) December In thousands of chilean These documents expire on June 08 2011.
19 ORGANIZATIONAL CHART 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
REMUNERATIONS AND INDEMNITIES 21 MANAGEMENT REPORT Figures of periods 2000 to 2008 under Accounting Principles Generally Accepted in Chile, in OF THE MANAGERS AND PRINCIPAL millions of Chilean pesos of December 2009. EXECUTIVES 39 ADMINISTRATION REPORT The remunerations and indemnities Figures of 2009 and 2010 under IFRS Norm, in millions of Chilean pesos of each year. received in 2010 by the managers and the 47 STATEMENT OF LIABILITY principal executives of the Company are CLP1,170,308,044. No indemnities were FINANCIAL STATEMENTS paid. 49
INCENTIVE PLANS Esval has, for their executives, an annual bonuses plan for the fulfillment of objectives and individual contribution to the company’s results. This plan includes a definition of bonuses rank, according to the executives’ hierarchy level. The bonuses that are eventually given consist of a certain number of monthly gross remunerations.
ANNUAL REPORT ESVAL 2010 42 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY SUBSIDIARIES AND AFFILIATES 14 LINE OF BUSINESS AND ACTIVITIES According to the concepts stipulated in articles 16 BOARD OF DIRECTORS AND 86 and 87 of Law No. 18.046, investments in ADMINISTRATION other companies; for the purposes of operating the franchises in the Region of Coquimbo, 99.00% of which ESSCO S.A., today ECONSSA CHILE ESVAL S.A. 19 ORGANIZATIONAL CHART S.A., was titular, on December 4 2003, Esval organized closed limited company Aguas del 21 MANAGEMENT REPORT Valle S.A., subsidiary that abides by the norms applied to open held corporations, with the 99.99% 39 ADMINISTRATION REPORT only purpose of producing and distributing Aguas drinking water; collect, treat and dispose del waste waters; and providing the other services 47 STATEMENT OF LIABILITY established in the current sanitary legislation. Valle S.A.
49 FINANCIAL STATEMENTS Esval S.A. participated in the formation of this company, with 99%, and Sociedad de Servicios Sanitarios Las Vegas Limitada, with 1%. The 1.00% Servicios latter is also subsidiary of Esval S.A., and was Sanitarios constituted on December 1 2003 for said Las Vegas purpose. In this case, Esval S.A. participated Ltda. with 99.99%.
ANNUAL REPORT ESVAL 2010 43 CONTENTS ANNUAL REPORT ESVAL 2010 Aguas del Valle
TYPE OF COMPANY: Closed Limited Company 4 LETTER FROM THE PRESIDENT SHARE OF ESVAL S.A. final disposal of said waters. Its coverage area comprises the urban areas of thirteen of the ID CARD NO.: 99.541.380-9 6 LETTER FROM THE CEO 99.00% fifteen communes of the Region ofC oquimbo.
EQUITY: CLP 63,951,670,000 8 COMPANY INFORMATION PROPORTION OF THE In order to comply with their functions, they operate eighteen productive systems SUBSCRIBED AND PAID UP INVESTMENT ON ASSETS OF that serve the same quantity of drinking 10 CAPITAL: CLP 20,441,842,000 DE ESVAL S.A. HISTORICAL ACCOUNT water distribution systems and have twenty two systems of treatment and disposal of 12 COMPANY’S EQUITY 9.59% waste waters that clean the residual waters collected from twenty two collection systems. 14 LINE OF BUSINESS AND ACTIVITIES COMMERCIAL RELATIONSHIP PURPOSE WITH ESVAL S.A. In 2010, 188,922 drinking water customers 16 BOARD OF DIRECTORS AND were served, with a sales volume of 34 ADMINISTRATION Produce and distribute drinking water; collect, Accounts payable to Esval S.A. correspond to millions of cubic meters. Regarding waste treat and dispose of waste waters, and provide money the Company has received from the waters, the figures reached 179,401 the other services established in the current Parent Company in order to cover their initial customers, with sales for 31 millions of cubic ORGANIZATIONAL CHART 19 sanitary legislation. operational and investment costs. meters.
21 MANAGEMENT REPORT BOARD OF DIRECTORS(1) DEEDS AND CONTRACTS WITH INVESTMENTS ESVAL S.A. ADMINISTRATION REPORT As at December 31, 2010, Aguas del Valle 39 CHAIRMAN: Pedro Pablo Errázuriz Domínguez made annual investments for an amount of VICE-PRESIDENT: Jorge Lesser García-Huidobro As from the taking control of the Franchise, CLP6,217,725 million. 47 STATEMENT OF LIABILITY Director: Olivia Penelope Steedman Esval S.A. provides administrative, commercial Director: Stacey Purcell and managerial services to Aguas del Valle RELATED COMPANIES 49 FINANCIAL STATEMENTS Director: Alexander Galetovic Pöstch S.A. This contract has an indefinite validity. Director: Nicolás Navarrete Hederra Aguas del Valle S.A. does not have any Director: Carlos Williamson Benapres MARKET investments in related companies. (1) All the Directors hold the same position in the Parent Company. Aguas del Valle S.A. is engaged in water RESULTS EXECUTIVES purification, comprising the processes of collection, treatment and distribution of the The net result of Aguas del Valle S.A. reached CEO: Gustavo González Doorman(2) product; as well as the purification of waste profits for CLP6,230 million for financial year IV REGION MANAGER: Ricardo Lalanne Sáez waters, including collection, treatment and 2010. (2) CEO of the Parent Company.
ANNUAL REPORT ESVAL 2010 44 CONTENTS ANNUAL REPORT ESVAL 2010 SANITARY SERVICES LAS VEGAS LTDA.
4 LETTER FROM THE PRESIDENT TYPE OF COMPANY: Limited Liability Company 6 LETTER FROM THE CEO EQUITY: CLP 639,516,000 8 COMPANY INFORMATION SUSCRIBED AND PAID UP CAPITAL: CLP 204,419,000 Thousand 10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES PROPORTION OF THE 16 BOARD OF DIRECTORS AND PURPOSE ADMINISTRATION INVESTMENT ON ASSETS OF Produce and distribute drinking water, collect, ESVAL S.A. treat and dispose waste waters and carry out 19 ORGANIZATIONAL CHART any other related activity, directly or indirectly, 0.1% operating or rendering said services.
21 MANAGEMENT REPORT ADMINISTRATION INVESTMENTS 39 ADMINISTRATION REPORT As at December 31, 2010 no investments are Gustavo González Doorman, Legal recorded. Representative of Las Vegas Ltda.(1) 47 STATEMENT OF LIABILITY (1) CEO of the Parent Company. RELATED COMPANIES
49 FINANCIAL STATEMENTS PARTICIPATION OF ESVAL S.A. Sociedad de Servicios Sanitarios Las Vegas Ltda. has a participation of 1.0% of Aguas del 99.99% Valle.
RESULTS
CLP62,300 Thousand
ANNUAL REPORT ESVAL 2010 45 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT HIGHLIGHTS 6 LETTER FROM THE CEO
8 COMPANY INFORMATION DATE DOCUMENT NUMBER MATTER 10 HISTORICAL ACCOUNT 21/10/2010 LETTER No. 09 REPORTS ON THE CESSATION OF THE DIRECTORS’ COMMITTEE, ACCORDING TO THE APPLICATION OF ART. 50 12 COMPANY’S EQUITY GENERAL MANAGEMENT BIS LAW OF LIMITED COMPANIES 03/03/2010 LETTER No. 049 REPORTS ON THE EFFECTS OF THE EARTHQUAKE OF FEBRUARY 27TH (OFF. CIRC. No. 574) GENERAL MANAGEMENT 14 LINE OF BUSINESS AND ACTIVITIES 10/03/2010 LETTER No. 060 REPORTS ON THE RESIGNATION OF A DIRECTOR GENERAL MANAGEMENT 16 BOARD OF DIRECTORS AND 30/04/2010 LETTER No. 132 REPORTS ON DISTRIBUTION OF DIVIDENDS AGREEMENT, ADOPTED DURING ORDINARY BOARD OF DIRECTORS’ ADMINISTRATION GENERAL MANAGEMENT SESSION 30/04/2010 LETTER No. 135 REPORTS ON AGREEMENTS ADOPTED DURING THE ORDINARY SHAREHOLDERS’ MEETING HELD ON APRIL 30TH 2010 19 ORGANIZATIONAL CHART GENERAL MANAGEMENT 13/05/2010 LETTER No. 154 REPORTS ON THE APPOINTMENT OF CHAIRMAN AND VICE CHAIRMAN OF THE BOARD OF DIRECTORS AND 21 MANAGEMENT REPORT GENERAL MANAGEMENT ATTACHES FORM ANNEX 1 OF OFF. CIRC. No. 3572 14/06/2010 LETTER No. 183 REPORTS ON RESIGNATION OF A DIRECTOR 39 ADMINISTRATION REPORT GENERAL MANAGEMENT 04/08/2010 LETTER No. 230 REPORTS ON DISTRIBUTION OF DIVIDENDS AGREEMENT, ADOPTED DURING ORDINARY BOARD OF DIRECTORS’ 47 STATEMENT OF LIABILITY GENERAL MANAGEMENT MEETING 25/11/2010 LETTER No. 357 REPORTS ON THE INVESTMENT OF NEGOTIABLE INSTRUMENTS SERIES 5A GENERAL MANAGEMENT 49 FINANCIAL STATEMENTS 03/12/2010 LETTER No. 361 REPORTS ON DISTRIBUTION OF DIVIDENDS, ADOPTED DURING ORDINARY BOARD OF DIRECTORS’ MEETING GENERAL MANAGEMENT 06/12/2010 LETTER No. 363 RECTIFIES INFORMATION OF LETTER No. 361 ABOUT THE DISTRIBUTION OF DIVIDENDS AGREEMENT GENERAL MANAGEMENT 14/12/2010 LETTER No. 357 REPORTS ON THE INVESTMENT ON NEGOTIABLE INSTRUMENTS SERIES 7A GENERAL MANAGEMENT
These facts have not influenced or affected the operation and results of the Company.
COMMENTS AND The shareholders representing 10% of more of the shares issued, with right to vote have not madeany PROPOSALS OF comments or proposals regarding the progress of the social businesses, so comments and proposals in said SHAREHOLDERS respect are not included in this memory.
ANNUAL REPORT ESVAL 2010 46 CONTENTS
ANNUAL REPORT ESVAL 2010 The undersigned declare under oath to STATEMENT OF be responsible for the truthfulness of the information contained in the Annual Report LIABILITY Esval corresponding to financial year 2010.
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT Jorge Lesser García-Huidobro Alexander Galetovic Pötsch PRESIDENT DIRECTOR 6.443.633-3 7.626.817-7 12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART Olivia Penelope Steedman Nicolás Navarrete Hederra DIRECTOR DIRECTOR 48.120.868-8 11.947.222-9 21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
Stacey Leanne Purcell Carlos Williamson Benaprés DIRECTOR DIRECTOR 48.121.218-9 6.065.778-5
Gustavo González Doorman CEO 7.098.884-4
ANNUAL REPORT ESVAL 2010 47 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 48 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION financial
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT statements
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 49 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT 47 STATEMENT OF LIABILITY ESVAL S.A. 49 FINANCIAL STATEMENTS AND SUBSIDIARIES
ANNUAL REPORT ESVAL 2010 50 CONTENTS 1 Poniente 123 ANNUAL REPORT ESVAL 2010 Floor 7 INDEPENDENT Viña del Mar Chile Telephone: (56-32) 246 6111 Fax: (56-32) 246 6086 AUDITORS’ REPORT e-mail: [email protected] www.deloitte.cl
Av. Providencia 1760 Floors 6, 7, 8, 9, 13 y 18 Providencia, Santiago 4 LETTER FROM THE PRESIDENT Chile Telephone: (56-2) 729 7000 Fax: (56-2) 374 9177 6 LETTER FROM THE CEO e-mail: [email protected] www.deloitte.cl 8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY To the Chairman and Members of the Board of Directors 14 LINE OF BUSINESS AND ACTIVITIES Esval S.A.
16 BOARD OF DIRECTORS AND ADMINISTRATION We have audited the accompanying We conducted our audits in accordance with In our opinion, the consolidated financial consolidated statements of financial auditing standards generally accepted in statements referred to above present position of Esval S.A. and subsidiaries at Chile. Those standards require that we plan fairly, in all material respects, the financial ORGANIZATIONAL CHART 19 December 31, 2010 and 2009, and the and perform the audit to obtain reasonable position of Esval S.A. as of December 31, consolidated opening statement of financial assurance about whether the consolidated 2010 and 2009, and as at January 01, 21 MANAGEMENT REPORT position at January 01, 2009 and the related financial statements are free of material 2009, the results of its operations and its consolidated statements of comprehensive misstatements. An audit includes examining, on cash flows for the years ended December 39 ADMINISTRATION REPORT income, changes in equity and cash flows a test basis, evidence supporting the amounts 31, 2010 and 2009, in conformity for the years ended December 31, 2010 and disclosures in the consolidated financial with International Financial Reporting and 2009. These consolidated financial statements. An audit also includes assessing Standards. 47 STATEMENT OF LIABILITY statements (including the related notes) the accounting principles used and significant are the responsibility of the Management estimates made by management, as well as The translation of the consolidated 49 FINANCIAL STATEMENTS of Esval S.A. Our responsibility is to express evaluating the overall financial statement statements into English has been made an opinion on these consolidated financial presentation. We believe that our audits provide solely for the convenience of readers outside statements, based on our audits. a reasonable basis for our opinion. Chile.
MARCH 8, 2011 ALBERTO LEMAITRE V.
ANNUAL REPORT ESVAL 2010 51 CONTENTS ANNUAL REPORT ESVAL 2010 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT AS OF DECEMBER 31, 2010 AND 2009 AND JANUARY 1, 2009 IN THOUSANDS OF CHILEAN PESOS (ThCh$) 12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES NOTE 31/DEC/10 31/DEC/09 01/JAN/09 ASSETS No. ThCh$ ThCh$ ThCh$ 16 BOARD OF DIRECTORS AND Assets, current ADMINISTRATION Cash and cash equivalent 5 17,073,589 23,237,580 2,229,172 Other current non-financial assets 1,814,016 1,274,642 1,603,685 19 ORGANIZATIONAL CHART Trade debtors and other receivable, current, net 7 26,888,436 26,358,882 25,163,595 Accounts receivable from related parties - current 8 - - 3,683 21 MANAGEMENT REPORT Inventories 9 453,903 408,493 442,635 Current tax accounts receivable 20 1,683,081 16,448 1,398,744 39 ADMINISTRATION REPORT Assets, current, total 47,913,025 51,296,045 30,841,514
47 STATEMENT OF LIABILITY Assets, non-current
49 FINANCIAL STATEMENTS Other assets, non-current 14,626,951 14,395,688 16,251,159 Trade debtors and other receivables, net, non-current 7 29,514 36,244 41,485 Intangible assets, net 10 121,634,794 119,609,537 114,499,072 Property, plant and equipment, net 11 470,849,917 468,141,231 467,042,272 Deferred tax assets 20 4,828,542 3,145,017 1,548,373 Assets, Non-current, total 611,969,718 605,327,717 599,382,361
Assets, total 659,882,743 656,623,762 630,223,875
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT ESVAL 2010 52 CONTENTS ANNUAL REPORT ESVAL 2010
AS OF DECEMBER 31, 2010 AND 2009 AND JANUARY 1, 2009 IN THOUSANDS OF CHILEAN PESOS (ThCh$)
NOTE 31/DEC/10 31/DEC/09 01/JAN/09 4 LETTER FROM THE PRESIDENT NET EQUITY AND LIABILITIES, CURRENT No. ThCh$ ThCh$ ThCh$
6 LETTER FROM THE CEO Liabilites, current
Other financial liabilities, current 6 47,885,459 33,516,218 25,735,141 8 COMPANY INFORMATION Trade creditors and other payables, current 6 10,957,968 8,442,099 8,558,112 Accounts due to related entities, current 8 646 3,811 - 10 HISTORICAL ACCOUNT Provisions, current 13 434,297 355,038 344,761 Current tax accounts payable 20 788,214 222,773 18,364 12 COMPANY’S EQUITY Provisions for employee benefits, current 13 3,008,656 2,946.013 2,599,749 Other non-financial liabilities, current 14,324,587 8,035,686 4,863,695 14 LINE OF BUSINESS AND ACTIVITIES Liabilities, current, total 77,399,827 53,521,638 42,119,822
16 BOARD OF DIRECTORS AND Liabilities, Non-current ADMINISTRATION Interest-accruing loans, non-current 6 231,756,666 244,998,629 240,105,409 19 ORGANIZATIONAL CHART Other payables, non-current - 639,456 - Deferred tax liabilities 20 51,695,339 46,924,671 40,021,269 Provisions for employee benefits, non-current 13 535,123 485,253 442,044 21 MANAGEMENT REPORT Liabilities, non-current, total 283,987,128 293,048,009 280,568,722
39 ADMINISTRATION REPORT Net Equity STATEMENT OF LIABILITY 47 Issued capital 14 196,207,284 196,207,284 200,824,952 Retained earnings 14 86,323,943 97,882,276 95,472,368 49 FINANCIAL STATEMENTS Issuance premiums 14 11,150,887 11,150,887 11,150,887 Treasury shares in portfolio 14 - - (108,868) Other reserves 14 4,813,610 4,813,610 195,942 Equity attributable to equity holders of parent 298,495,724 310,054,057 307,535,281 Minority interests 15 64 58 50 Net equity, total 298,495,788 310,054,115 307,535,331
Net Equity and Liabilities, total 659,882,743 656,623,762 630,223,875
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT ESVAL 2010 53 CONTENTS ANNUAL REPORT ESVAL 2010 CONSOLIDATED PROFIT AND
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 LOSS STATEMENT BY NATURE IN THOUSANDS OF CHILEAN PESOS (ThCh$)
FROM 01/jan/10 FROM 01/jan/09 NOTE TO 31/DeC/10 TO 31/DeC/09 4 LETTER FROM THE PRESIDENT Income statement No. ThCh$ ThCh$
6 LETTER FROM THE CEO Ordinary income, total 17 109,552,694 109,658,030 8 COMPANY INFORMATION Consumption of raw materials and secondary materials (13,455,298) (14,059,597) Personnel expenses (10,125,797) (9,991,844) 10 HISTORICAL ACCOUNT Depreciation and amortization (19,379,699) (18,939,046) Other sundry operating expenses 2.6 (26,739,653) (26,690,552) 12 COMPANY’S EQUITY Financial costs (non financial activities) 2.6 (476,730) (833,829) Investment income 401,246 854,983 (12,301,097) 14 LINE OF BUSINESS AND ACTIVITIES Financial costs (14,042,846) Income from adjustment units (6,307,116) 6,508,803 Gain before tax 21,168,550 32,464,102 16 BOARD OF DIRECTORS AND Income tax expense 20 (3,875,357) (6,131,168) ADMINISTRATION Gain from continued OPERATIONS 17,293,193 26,332,934 Gain from discontinued OPERATIONS - - 19 ORGANIZATIONAL CHART Gain, net 17,293,193 26,332,934
21 MANAGEMENT REPORT Gain from
39 ADMINISTRATION REPORT Ganancia from owners of Parent Company 17,293,187 26,332,926 Gain attributable to minority interests 15 6 8 47 STATEMENT OF LIABILITY Gain, net 17,293,193 26,332,934
FINANCIAL STATEMENTS 49 Gains per share (Presentation) Common shares (Presentation)
Basic gains per share 21 0.0012 0.0018 Gain per basic share in continued operations 0.0000 0.0000 Gainanancias per basic por share Acció inn discontinued operations 0.0012 0.0018 Diluted gain from shares
Diluted gain from share from continued operations 0.0012 0.0018 Diluted gain from share from discontinued operations 0.0000 0.0000 Diluted gain per share 0.0012 0.0018
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT ESVAL 2010 54 CONTENTS ANNUAL REPORT ESVAL 2010
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 IN THOUSANDS OF CHILEAN PESOS (ThCh$)
FROM 01/jan/10 FROM 01/jan/09 TO 31/DeC/10 TO 31/DeC/09 4 LETTER FROM THE PRESIDENT CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ThCh$ ThCh$
6 LETTER FROM THE CEO Gain, net 17,293,193 26,332,934 8 COMPANY INFORMATION Total comprehensive income 17,293,193 26,332,934
10 HISTORICAL ACCOUNT Comprehensive income, attributable to:
12 COMPANY’S EQUITY Owners of Parent Company 17,293,187 26,332,926 Minority interests 6 8 14 LINE OF BUSINESS AND ACTIVITIES Comprehensive income, total 17,293,193 26,332,934 16 BOARD OF DIRECTORS AND
ADMINISTRATION The accompanying notes are an integral part of these consolidated financial statements.
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 55 CONTENTS ANNUAL REPORT ESVAL 2010 CONSOLIDATED - DIRECT
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 STATEMENT OF CASH IN THOUSANDS OF CHILEAN PESOS (ThCh$)
FLOWS FROM 01/jan/10 FROM 01/jan/09 NOTE TO 31/DeC/10 TO 31/DeC/09 4 LETTER FROM THE PRESIDENT No. ThCh$ ThCh$
6 LETTER FROM THE CEO Net cash flows provided by (used in) operating activities, direct method Cash flows provided by (used in) operating activities, direct method
8 COMPANY INFORMATION Amounts collected from clients 130,450,360 130,765,510 Other inflows (outflows) from other operating activities 2,442,135 1,724,531 10 HISTORICAL ACCOUNT Kind of payments per operating:
12 COMPANY’S EQUITY Payments to suppliers (48,067,342) (48,670,247) Remunerations paid (9,578,885) (9,276,748) 14 LINE OF BUSINESS AND ACTIVITIES Other payments for operation activities (13,229,660) (11,686,119) Payments of interest classified as operating interest (10,700,645) (11,391,051) 16 BOARD OF DIRECTORS AND Amounts received from interest classified as operating interest 169,008 580,488 ADMINISTRATION Cash flows provided by (used in) other operating activities, total 51,484,971 52,046,364
19 ORGANIZATIONAL CHART Cash flows provided from (used in) investing activities
Amounts from issue of other equity instruments - 28,665 21 MANAGEMENT REPORT Amounts received from issuing other financial liabilities (28,350,588) (27,170,750) Repayments of loans (259,467) (323,044) 39 ADMINISTRATION REPORT Total amounts from loans (28,610,055) (27,465,129)
47 STATEMENT OF LIABILITY Cash flows provided from (used in) financing activities
49 FINANCIAL STATEMENTS Amounts from long-term loans - 65,367,364 Amounts from short-term loans 479,960 5,983,991 Total importes procedentes de préstamos 479,960 71,351,355 Repayment of loans (32,391,582) (55,972,369) Payments of dividends by the reporting entity (22,487,725) (20,182,450) Other cash entries (disbursements) 25,360,440 1,230,637 Cash flows provided by (used in) financing activities (29,038,907) (3,572,827) Net increase (decrease)in cash and cash equivalents (6,163,991) 21,008,408 Cash and cash equivalents at beginning of the period 23,237,580 2,229,172 Cash and cash equivalents, cash flow statement, ending balance 5 17,073,589 23,237,580
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT ESVAL 2010 56 CONTENTS ANNUAL REPORT ESVAL 2010 STATEMENT OF CHANGES
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 IN NET EQUITY IN THOUSANDS OF CHILEAN PESOS (ThCh$)
4 LETTER FROM THE PRESIDENT Changes in Retained the net equity attributable earnings / to owners of Share Issuance Treasury Other Total Net 6 LETTER FROM THE CEO (Accumulated Controlling Minority capital premiums shares in reserves deficit) company interests Equity ThCh$ ThCh$ portfolio ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ 8 COMPANY INFORMATION Opening balance current period 01/01/2010 196.207.284 11.150.887 - 4.813.610 97.882.276 310.054.057 58 310.054.115
10 HISTORICAL ACCOUNT Net gain - - - - 17,293,187 17,293,187 - 17,293,187 Dividends - - - - (28,851,520) (28,851,520) - (28,851,520) 12 COMPANY’S EQUITY Increase (decrease) for transfers and other ------6 6 changes 14 LINE OF BUSINESS AND ACTIVITIES Total changes in equity - - - - (11,558,333) (11,558,333) 6 (11,558,327) CLOSING BALANCE CURRENT PERIOD AT 12/31/2010 196,207,284 11,150,887 - 4,813,610 86,323,943 298,495,724 64 298,495,788 16 BOARD OF DIRECTORS AND ADMINISTRATION Opening balance current period at 01/01/2009 200,824,952 11,150,887 (108,868) 195,942 95,472,368 307.535.281 50 307.535.331
19 ORGANIZATIONAL CHART Net gain - - - - 26,332,926 26,332,926 - 26,332,926 Dividends - - - - (23,923,018) (23,923,018) - (23,923,018) 21 MANAGEMENT REPORT Increase (decrease) for transfers and other (4,617,668) - - 4,617,668 0 - 8 8 changes 39 ADMINISTRATION REPORT Increase (decrease) for transactions of - - 108,868 - - 108,868 - 108,868 treasury shares Total changes in equity (4,617,668) - 108,868 4,617,668 2,409,908 2,518,776 8 2,518,784 47 STATEMENT OF LIABILITY CLOSING BALANCE PRIOR PERIOD AT 12/31/2009 196,207,284 11,150,887 - 4,813,610 97,882,276 310,054,057 58 310,054,115 49 FINANCIAL STATEMENTS
The accompanying notes are an integral part of these consolidated financial statements.
ANNUAL REPORT ESVAL 2010 57 CONTENTS ANNUAL REPORT ESVAL 2010 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION 4 LETTER FROM THE PRESIDENT Esval S.A. and its subsidiaries make up the Esval Group. Its legal domicile is Cochrane 751, Valparaiso, Chile and its taxpayer number is 89.900.400-0 6 LETTER FROM THE CEO Esval SA. was incorporated as a corporation by means of a public deed dated June 12, 1989, inS antiago, drawn up and executed before Notary Public 8 COMPANY INFORMATION Raúl Undurraga Laso. An excerpt of its by-laws was published in the OfficialG azette on June 15, 1989, and it was registered on page (verso) 449, No. 469 of the 1989 Business Register. It is also registered with the Superintendency of Securities and Insurance under registration number 0348, and, therefore, it is subject to inspection by that Superintendency. 10 HISTORICAL ACCOUNT The Company’s corporate purpose is to produce and distribute drinking water and collect, treat and dispose of sewage, and it also render other 12 COMPANY’S EQUITY services related to such activities, in the manner and subject to the terms and conditions stipulated in the law that authorized its incorporation and any other applicable regulations. The current concession area is distributed in the urban areas of the Valparaiso Region that the Region’s previous 14 LINE OF BUSINESS AND ACTIVITIES Sanitary Company serviced at January 27, 1986 – except for sectors given under concession to private or municipal services – plus those expansion zones considered in the development plans approved by the Superintendency of Sanitary Services, as stipulated in Law 18777 and decree 2166/78 16 BOARD OF DIRECTORS AND and 69/89, both from the Ministry of Public Works. It also includes urban locations whose sanitary concessions have been awarded to Esval S.A. ADMINISTRATION by the Authorities after that date, either by regularizing the expansion areas considered in its development plans or by expanding its concession zones. The Company also provides drinking water services in other locations, outside the concession area, in the Community of Algarrobo, based on agreements signed with the communities of Algarrobo Norte, Mirasol and Las Brisas. 19 ORGANIZATIONAL CHART On November 25, 2003, in a competitive bidding theC ompany was awarded the right to exploit the concessions held by ECCONSA CHILE S.A. (at that 21 MANAGEMENT REPORT time SSCOE S.A.), the sanitary company in the Region of Coquimbo, for 30 years. To that end, it incorporated a closely-held subsidiary corporation called Aguas del Valle S.A., on December 4, 2003, under number 816 of the Securities Register of the Superintendency of Securities and Insurance, 39 ADMINISTRATION REPORT being, therefore, subject to inspection by that Superintendency. Aguas del Valle produces and distributes drinking water, collects, treats and disposes of sewage, for which it also renders other services related to such activities, under the terms and conditions stipulatedS in tatutory Decree 382 of 1988 by the Ministry of Public Works, and other applicable regulations. 47 STATEMENT OF LIABILITY For the purposes of preparing the consolidated financial statements, a group is understood to exist when the parent has one or more subsidiaries, 49 FINANCIAL STATEMENTS with these being entities over which the parent has control either directly or indirectly.
The subsidiaries included in these financial statements are:
- Aguas del Valle S.A. – Direct Subsidiary - Servicios Sanitarios Las Vegas Ltda. – Direct Subsidiary
The accounting policies applied in preparing the Company’s consolidated financial statements are specified in Note 2.4.
ANNUAL REPORT ESVAL 2010 58 CONTENTS ANNUAL REPORT ESVAL 2010 The direct controlling entity is Inversiones OTPPB Chile III Limitada, which in its turn is controlled by Inversiones Southwater Limitada (“ISL”), subsidiary of AndesCan SpA., investment vehicle in Chile of the Canadian institution Ontario Teachers’ Pension Plan Board (OTPPB).
Esval S.A. and subsidiaries have a staff of 512 workers, of which 62 are managers, assistant managers and department heads.
The composition of the workers forming part of the collective contracts at consolidated level is 335 workers (209 in Esval and 126 in Aguas del Valle).
These consolidated financial statements are presented in thousands of Chilean pesos (unless otherwise specified) because this is the functional currency of the primary environment in which Esval S.A. and its subsidiaries operate. 4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO 2. BASES OF PREPARATION AND ACCOUNTING POLICIES
8 COMPANY INFORMATION 2.1 Bases of Preparation
10 HISTORICAL ACCOUNT The consolidated financial statements of Esval S.A. and subsidiaries as at December 31, 2010 have been prepared in conformity with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (hereinafter “IASB”), and approved by its Board of 12 COMPANY’S EQUITY Directors during the meeting held on March 8, 2011. The Company has complied implicitly and unreserved with IFRS. These consolidated financial statements reflect faithfully the financial position of the Esval S.A. and subsidiaries at December 31, 2010 and the 14 LINE OF BUSINESS AND ACTIVITIES results of its operations, changes in net equity and cash flows for the year then ended.
16 BOARD OF DIRECTORS AND The Company and its subsidiaries comply with all legal conditions of the environment in which it performs its operations, these present normal ADMINISTRATION operating conditions in every area in which the activities are developed, its projections shows a profitable operation and it has the ability to access the financial system to finance its operations, which in the opinion of the management determines its ability to continue as a going concern, as established by the accounting standards under which these financial statements are issued. 19 ORGANIZATIONAL CHART The statements of financial position at December 31, 2009 and January 1, 2009, and the comprehensive income, the net equity and the cash flows 21 MANAGEMENT REPORT for the year ended December 31, 2009, which are included in these consolidated financial statements for comparative purposes, were also prepared in conformity with IFRS, and the accounting principles and criteria were applied consistently with those used during year-end 2010. 39 ADMINISTRATION REPORT Functional currency The entries included in the financial statements of each of the consolidated companies are valued using the currency of the main economic 47 STATEMENT OF LIABILITY environment in which the entity operates (Functional currency), as stipulated in IAS 21.
49 FINANCIAL STATEMENTS The consolidated financial statements are presented in Chilean pesos, which is the Company’s functional and presentation currency.
Changes to Accounting Standards As of 2010, the Group has adopted the International Financial Reporting Standards (IFRS) for the first time and this is the first presentation of the preliminary comparatives financial statements under these standards.
These consolidated financial statements for the year ended December 31, 2010 and 2009 comply with each of the international financial reporting standards in force at this date.
ANNUAL REPORT ESVAL 2010 59 CONTENTS ANNUAL REPORT ESVAL 2010 2.2 New accounting pronouncements a) The following new Standards and Interpretations have been adopted in these financial statements.
Amendments to IFRs Mandatory application date
IFRS 1 (Reviewed), First adoption of International Financial Annual periods starting as of July 1, 2009. 4 LETTER FROM THE PRESIDENT Reporting Standards IFRS 2 – Share-based payment Annual periods started on or after January 01, 2010 6 LETTER FROM THE CEO IFRS 3 (Reviewed) – Business Combination Annual periods starting as of July 1, 2009.
8 COMPANY INFORMATION IAS 27 (Reviewed), Consolidated and Individual Financial Annual periods starting as of July 1, 2009. Statements 10 HISTORICAL ACCOUNT IAS 39 – Financial Instruments Recognition and Retrospective application for annual periods starting on or Measurement – Eligible covered items after July 1, 2009 12 COMPANY’S EQUITY Improvements to IFRS April 2009 – set of amendments to Annual periods started on or after January 01, 2010 14 LINE OF BUSINESS AND ACTIVITIES twelve International Financial Reporting Standards
16 BOARD OF DIRECTORS AND ADMINISTRATION New Interpretations Mandatory application date 19 ORGANIZATIONAL CHART IFRIC 17 – Distribution of non-cash assets to owners Annual periods started on or after July 01, 2009
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
Their adoption has had no significant impact on the amounts reported in these financial statements; however, they could affect the accounting for 47 STATEMENT OF LIABILITY future transactions or agreements.
49 FINANCIAL STATEMENTS b) The following new Standards and Interpretations have been issued, although their application date is not yet valid.
New IFRS Mandatory application date
IFRS 9, Financial Instruments Annual periods started on or after January 01, 2013
ANNUAL REPORT ESVAL 2010 60 CONTENTS ANNUAL REPORT ESVAL 2010 Amendments to IFRs Mandatory application date
IFRS 1 (Reviewed), First time adoption of International Annual periods started on or after July 01, 2011 Financial Reporting Standards – (i) Elimination of Established Dates for First Time Adopters - (ii) Severe Hyperinflation
IAS 12, Deferred taxes - Recovery of Underlying Assets Annual periods started on or after January 01, 2012 LETTER FROM THE PRESIDENT 4 IAS 24 – Disclosure of Related Parties Annual periods started on or after January 01, 2011
6 LETTER FROM THE CEO IAS 32 – Classification of Issuance Rights Annual periods started on or after February 01, 2010
Improvements to IFRS May 2010 – set of amendments to Annual periods started on or after January 01, 2011 8 COMPANY INFORMATION seven International Financial Reporting Standards
10 HISTORICAL ACCOUNT IFRS 7 – Financial Instruments: Disclosures – Disclosures Annual periods started on or after July 01, 2011 – Transfers of Financial Assets
12 COMPANY’S EQUITY IFRS 9, Financial Instruments – Additions to IFRS 9 for the Annual periods started on or after January 01, 2013 accounting of Financial Liabilities 14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND New Interpretations Mandatory application date ADMINISTRATION IFRIC 19 - Extinguishing financial liabilities with equity Annual periods started on or after July 01, 2010 19 ORGANIZATIONAL CHART instruments
21 MANAGEMENT REPORT Amendments to Interpretations Mandatory application date 39 ADMINISTRATION REPORT IFRIC 14 – The limit on a defined benefit asset, minimum funding Annual periods started on or after January 01, 2011 requirements and their interaction 47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
The Management of Esval S.A. and subsidiaries estimates that the future adoption of regulations and interpretations described above will not have a significant impact in the Group’s consolidated financial statements.
2.3 Responsibility for the Information and Estimates
The information contained in these preliminary consolidated financial statements is the responsibility of the Company’s Board of Directors who expressly states that the totality of the principles and criteria included in IFRS have been applied.
ANNUAL REPORT ESVAL 2010 61 CONTENTS ANNUAL REPORT ESVAL 2010 Such estimates as the following have been used in preparing these financial statements: • useful life of fixed assets and intangibles • Asset impairment losses • Hypotheses used in the actuarial calculation of the employee termination benefits • Income from supplies with invoicing pending • Provisions for commitments made to third parties • Risks arising from current litigation LETTER FROM THE PRESIDENT 4 These estimates were made and opinions issued based on the best information available about the events analyzed at December 31, 2010 and 2009. Any event that may occur in the future that forces them to be changed (upwards or downwards) in future years will be recorded when they 6 LETTER FROM THE CEO are known and the effects of such changes on the respective financial statements will be recognized in the statement of income or equity accounts, as applicable. 8 COMPANY INFORMATION 2.4 Accounting policies 10 HISTORICAL ACCOUNT The interim consolidated financial statement of the Company and its subsidiaries have been prepared in conformity with IFRS.
12 COMPANY’S EQUITY The financial statements of the Company and its subsidiaries corresponding to December 31, 2009 were approved by its Board of Directors at the meeting held on January 27, 2010. These consolidated financial statements were prepared in conformity with accounting principles generally 14 LINE OF BUSINESS AND ACTIVITIES accepted in Chile and, therefore, they do not coincide with the balances of the year 2009 which have been included in these consolidated financial statements, which have been prepared in conformity with International Financial Reporting Standards (hereinafter IFRS). In Note 3 is detailed the 16 BOARD OF DIRECTORS AND reconciliation of net equity and profit or loss for the period. ADMINISTRATION A. Basis for consolidation Subsidiaries are those entities over which the Company has the power to direct their financial and operating policies. Such power is generally 19 ORGANIZATIONAL CHART accompanied by ownership of more than 50% of the voting stock.
21 MANAGEMENT REPORT The consolidated financial statements include the assets, liabilities and results of the parent and the subsidiaries Aguas del Valle S.A. and Servicios Sanitarios Las Vegas Limitada. 39 ADMINISTRATION REPORT As of December 31 2010 and 2009, the parent owned a 99% ownership interest in Aguas del Valle S.A., and 99.99% ownership interest in Servicios Sanitarios Las Vegas Limitada. Similarly, Servicios Sanitarios Las Vegas Limitada has an ownership interest of 1% in Aguas del Valle S.A. 47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
participation percentage tax id name country of origen functional currency DIRECT INDIRECT TOTAL
99.541.380-9 Aguas del Valle S.A. Chile Pesos Chilenos 99.00 0.99 99.99
76.027.490-9 Servicios Sanitarios Chile Pesos Chilenos 99.99 0 99.99 Las Vegas Ltda.
ANNUAL REPORT ESVAL 2010 62 CONTENTS ANNUAL REPORT ESVAL 2010 The effects of transactions between the companies being consolidated have been eliminated and the ownership interest of the MinorityS hareholders is presented in the consolidated financial statements under Minority Interests.
The accounting policies adopted by the Parent are in line with the policies adopted by the subsidiaries.
B. Transactions and minority interests The Group applies the policy of considering transactions with minority interests as transactions with third parties outside the Company.
C. Operating segments LETTER FROM THE PRESIDENT 4 The Group discloses information by segments as provided for in IFRS 8, OperatingS egments, which stipulates the reporting standards for operating segments and disclosures involving products and services. Operating segments are defined as components of an entity for which there is separate 6 LETTER FROM THE CEO financial information regularly reviewed by Management for making decisions, such as assigning resources and evaluating their performance. The Group manages and measures the performance of its operations by business segment. The following are the operating segments reported internally: 8 COMPANY INFORMATION • Operations involving transactions in the Valparaiso Region. • Operations involving transactions in the Coquimbo Region. 10 HISTORICAL ACCOUNT D. Intangibles 12 COMPANY’S EQUITY Esval S.A. and its subsidiaries record their intangible assets using the cost model defined in IAS 38, except for the water rights that have been accounted in conformity with the revaluation model defined in IAS 38. 14 LINE OF BUSINESS AND ACTIVITIES The main indefinite-lived intangible assets are water rights and easements, whereas the main finite-lived intangible assets are the right to exploit 16 BOARD OF DIRECTORS AND the sanitary concession in the Coquimbo Region and computer applications and other rights. ADMINISTRATION In evaluating the indefinite-lived water rights, Esval and its subsidiaries opted for the alternative of valuating them at their market value at December 31, 2008, defining it as its fair value at the convergence date to IFRS. 19 ORGANIZATIONAL CHART For the rest of the indefinite-lived intangible assets the option was chosen to value them at price-level restated acquisition cost net of amortization 21 MANAGEMENT REPORT at December 31, 2008, which became the attributed cost, under the exemption allowed in IFRS 1.
39 ADMINISTRATION REPORT The intangible assets of definite useful life are stated at acquisition cost plus price-level restatement net of amortization at December 31, 2008, which constitutes the attributed cost in accordance with the exemption allowed in SIFR 1. 47 STATEMENT OF LIABILITY For service concessions, according to the concession contract signed by Aguas del Valle S.A. and Econssa Chile Ltda., since the initial payment has been considered an intangible asset according to IFRIC 12 (Service Concession Agreement), the part of all investments in assets made during the 49 FINANCIAL STATEMENTS concession period (30 years) that, according to the contract, might not be recovered through the tariffs due to non-recovery via the use of those assets, which it has not been possible to determine, is presented incorporated into the value of the intangible asset.
As of January 1, 2009, according to IAS 38, only finite-lived intangible assets are amortized within the estimated period of return on the investment. Indefinite-lived intangible assets cease to be amortized, but an annual impairment test is applied.
The following factors, among others, should be considered for estimating the useful life:
• Legal, regulatory or contractual limitations. • Predictable life of the business or industry. • Economic factors (obsolescence of the products, changes in demand). • Natural, climate and technology change factors affecting the ability to generate benefits.
ANNUAL REPORT ESVAL 2010 63 CONTENTS ANNUAL REPORT ESVAL 2010 The useful life may require modifications over time due to changes in the estimates as a result of changes in the assumptions about the above factors.
The main finite-lived asset is the right to exploit the sanitation concession in the Coquimbo Region. Its initial useful life is for the term of the concession contract, which is 30 years as of December 2003; other finite-lived assets are computer applications, which are assigned a 4-year useful life.
The costs of some intangibles include direct remunerations, consultancy services and other identifiable, inherent costs. 4 LETTER FROM THE PRESIDENT Service concessions 6 LETTER FROM THE CEO The Subsidiary Aguas del Valle S.A. owns exploitation rights of the sanitary concessions of the region of Coquimbo, awarded through public tender by Empresa de Servicios Sanitarios de Coquimbo (ESSCO) (currently ECONSSA CHILE Ltda.). These concession arrangements are stated in conformity 8 COMPANY INFORMATION with the requirements of IFRIC 12, Service Concession Arrangements, as they correspond to public-private concession services agreements, in which: (i) the grantor controls or regulates which services the infrastructure operator has to provide, to whom and at what price, and; (ii) the grantor controls through property, the benefit assigned or any other significant residual interest in the infrastructure upon termination of the agreement. 10 HISTORICAL ACCOUNT The infrastructure under the scope of this interpretation is not recognized as property, plant and equipment of the operator (Aguas del Valle S.A.), 12 COMPANY’S EQUITY independent from the degree to which the operator assumes the incidental risks and benefits to the property and independently of which of the parts of the contracts has a legal right over the property during the termination agreement, as the asset is “controlled” by the grantors. In its place, the 14 LINE OF BUSINESS AND ACTIVITIES operator recognized a financial asset when it has an unconditional right of receiving a retribution in cash or any financial assets of the grantor ("Financial Asset Model"), and/or an intangible assets when it has a right to collect to the users of the public service (“Intangible Asset Model”). In both models, the 16 BOARD OF DIRECTORS AND operator records the income and expenses related with the construction services in conformity with IAS 11: ConstructionC ontracts. ADMINISTRATION The income and expenses for the operating services are accounted for in conformity with the established in IAS 18 – Recognition of Revenues. Furthermore, the contract obligations establish that the operator of the granted concession has to comply with the following conditions: (a) maintain 19 ORGANIZATIONAL CHART the infrastructure at an operating level, or (b) restore the infrastructure to a specific condition before it is transferred to the grantor upon termination of the concession. These contract obligations of maintaining or restoring the infrastructure shall be recognized and measured in conformity with IAS 21 MANAGEMENT REPORT 37, i.e. to the best estimation of expense that would be necessary to settle the present obligation upon termination of the reporting period. Finally, in conformity with IAS 23, the financing costs attributable to the agreement shall be recognized in the statement of income in the periods in which 39 ADMINISTRATION REPORT they are incurred, unless the operator has a contractual right to receive an intangible asset (right to charge the users of the public utility). In this case, the financing costs attributable to the agreement shall be capitalized during the construction stage. In conformity with the concession contract signed with the Company, it will have the right to recover the value of the investments which will not be paid upon termination of the concession. 47 STATEMENT OF LIABILITY Nevertheless, and in conformity with the determination ofC ompany Management, it has been estimated that the value of the accounts receivable from ECONSSA CHILE S.A. to Aguas del Valle S.A. at December 31, 2010 is not significant, considering the remaining term of the contract, reason 49 FINANCIAL STATEMENTS why no record has been established of such accounts receivable. For the investments performed upon termination of the term of the concession contract, 30 years as of December 2003, an intangible asset has been recorded.
E. Property, plant and equipment Esval and its subsidiaries opted to record property, plant and equipment using the cost model defined in IAS 16.
The property, plant and equipment of the company and subsidiaries is valued at price-level restated acquisition cost according to standards in force in Chile until December 31, 2008, under the exemption allowed in IFRS 1.
On the IFRS transition date, Esval S.A. opted for the alternative of keeping its assets valued at the price-level restated acquisition cost deducting accumulated depreciation, when applicable, according to Chilean standards at December 31, 2008, except for land, which was valued at its market
ANNUAL REPORT ESVAL 2010 64 CONTENTS ANNUAL REPORT ESVAL 2010 value, opting for the provisions of paragraph 16 of IFRS 1 and applying the attributed cost; in other words, theG roup has considered the cost of land to be its fair value obtained by revaluating the market value at the transition date.
Expansion, modernization and improvement costs representing an increase in productivity, capability or efficiency or an extension to the useful life of the assets are booked as a higher cost for the respective assets.
Direct remunerations, consultancy costs and other inherent and identifiable expenses are included in the cost of some works. Financing costs are also included. LETTER FROM THE PRESIDENT 4 Repair and maintenance costs are recorded as an expense in the year in which they are incurred.
6 LETTER FROM THE CEO Construction in progress is transferred to working assets once the test period when they become available for use has been completed, which is the starting point for their depreciation. 8 COMPANY INFORMATION Based on the result of the impairments tests explained in note 2.2.f), the Company and its subsidiaries consider that the carrying value of the assets does not exceed their recoverable value. 10 HISTORICAL ACCOUNT Useful Lives 12 COMPANY’S EQUITY The useful lives considered for calculating depreciation are based on specialist technical studies, which are reviewed as new information arises that could mean that the useful live of an asset has been changed. 14 LINE OF BUSINESS AND ACTIVITIES Total useful life of the assets is assigned based on several factors, including the nature of the equipment. These factors generally include: 16 BOARD OF DIRECTORS AND ADMINISTRATION • Nature of the material components of the equipment or constructions • Means of operation of the equipment • Intensity of use 19 ORGANIZATIONAL CHART • Legal, regulatory or contractual limitations.
21 MANAGEMENT REPORT The Companies depreciate their assets using the straight-line method over the estimated useful life, as explained in detail in note 11.
39 ADMINISTRATION REPORT The recoverability of fixed assets is estimated according to IAS 16. Assets are assessed to detect any possible impairment on a permanent basis by estimating whether sufficient income will be generated to cover all of the costs included in the depreciation of the fixed asset, as stipulated inIAS 36 47 STATEMENT OF LIABILITY Assets for Urbanizations Under the item property, plant and equipment are included the urbanizations performed and financed by third parties in the development of its 49 FINANCIAL STATEMENTS projects, in order for its clients to connect themselves to the sanitary services network of Esval S.A.
These assets correspond mainly to the networks of drinking water and sewage waters, which are required to provide the sanitary services to the newly incorporated clients and according to the Sanitary Services Law these assets do not constitute assets of the sanitary companies for the establishing of the tariffs, nor do they generate for the company an obligations with those in charge of the urbanizations.
In Articles 36 to 43 and 53 of Law Decree Nr. 382/1998 of the Public Works Department (General Law on Sanitary Services) is established that the responsibilities regarding the installation, by the urbanizer, establishing that it is the responsibility of the service provider the maintenance and repair services of this area.
The Company records such assets at fair value with credit to a complementary assets accounts financed by urbanizers in the same amount. The assets recorded as property, plant and equipment and its complementary accounts is amortized in the same period of the useful life which correspond to these assets.
ANNUAL REPORT ESVAL 2010 65 CONTENTS ANNUAL REPORT ESVAL 2010 F. Impairment in the value of assets Impairment in the value of the assets is determined in light of the level of their contribution to generating financial resources for the company.
It has been stipulated in this regard that the capacity to generate financial resources in the Company, given its condition of continuous service, is indivisible from the operating assets, with these forming jointly the “cash generating unit” of Esval and Aguas del Valle, respectively.
For evaluating the level of impairment of the above Cash Generating Unit, the value of the company’s Future Cash Flows is obtained using the discount rate that reflects both the temporary value of the cash and the specific risk associated with the asset. This amount obtained is compared to the carrying value of the assets making up the cash generating unit. 4 LETTER FROM THE PRESIDENT Based on the comparison of values referred to in the previous paragraph, the carrying value of the assets making up the cash generating unit has 6 LETTER FROM THE CEO been determined to be less than the present value of the company’s future cash flows.
8 COMPANY INFORMATION When the recoverable value of an asset is estimated to be less than its net carrying amount, the difference is charged to “gain (loss) from impairment of assets” in the profit and loss statement. The impairment losses recognized in this way are reversed when a change occurs in the estimates of the recoverable amount, increasing the value of the asset with a credit to income whose ceiling is the carrying value of the asset had the accounting 10 HISTORICAL ACCOUNT adjustment not been made.
12 COMPANY’S EQUITY G. Financial assets Both current and non-current financial investments are classified in the following categories: 14 LINE OF BUSINESS AND ACTIVITIES Financial assets held for trade 16 BOARD OF DIRECTORS AND These are assets acquired for the main purpose of generating a benefit as a result of fluctuations in their value. Assets included in this category are ADMINISTRATION stated in the Consolidated Balance Sheet at their fair value. The fluctuation in their value is recorded as a financial expense or income in the income statement account, as applicable.
19 ORGANIZATIONAL CHART Loans and receivables Initially are valued at amortized cost using the effective interest rate method. 21 MANAGEMENT REPORT Investments held to maturity 39 ADMINISTRATION REPORT These are financial investments held by the Company to their maturity. They are booked at their amortized cost, using the effective rate.
Financial assets available for sale 47 STATEMENT OF LIABILITY These are all of Esval’s financial assets not included in the three previous categories. These investments are stated in the Balance Sheet at their year-end market value. Highly liquid short-term investments easily convertible into given cash amounts and subject to insignificant changes in their 49 FINANCIAL STATEMENTS value, such as time deposits, covenants and mutual funds, are considered as cash equivalents, as specified in IAS 7.
H. Inventories Materials are shown at their price-level restated acquisition cost, always provided it does not exceed their respective net realizable value at each year-end.
I. Trade debtors and other receivables The trade debtors and other receivables are recognized initially at their fair value, subsequently they are valued at amortized cost. This item includes a provision for impairment losses of the uncollectibility value of these accounts receivable from third parties.
ANNUAL REPORT ESVAL 2010 66 CONTENTS ANNUAL REPORT ESVAL 2010 Uncollectibility policy The amount of the provision is determined in light of the following factors:
• Age of the unpaid balance • Type of client • Compliance with repayment agreements
The analysis of the behavior of the different types of debt segments is affected by: i) Division between subsidized and non-subsidized debtors and ii) the fact that the Company is legally empowered to suspend the supply of the service to clients who do not pay. 4 LETTER FROM THE PRESIDENT The carrying amount of the asset is written down as the provision account is used up and the loss is recognized in the statement of income in 6 LETTER FROM THE CEO “financial costs of non-financial activities”. When an account receivable is declared to be uncollectible, it is written off against the provision account for uncollectible accounts. 8 COMPANY INFORMATION J. Bases of translation Assets and liabilities in Unidades de Fomento (UF = inflation index-linked unit of account) and/or foreign currencies are shown at their respective 10 HISTORICAL ACCOUNT values and/or exchange rates at each year-end, at the following rates:
12 COMPANY’S EQUITY
31/DeC/10 31/DeC/09 14 LINE OF BUSINESS AND ACTIVITIES ThCh$ ThCh$
Currency 16 BOARD OF DIRECTORS AND ADMINISTRATION Unidad de Fomento 21,455.55 20,942.88
19 ORGANIZATIONAL CHART US dollar 468.01 507.10
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT Exchange rate differences are recorded in income for the year in which they accrue, using the “Income from adjustment unit”.
K. Financial obligations 47 STATEMENT OF LIABILITY Loans and obligations with the general public and others of a similar nature are recorded initially at their cash value, net of costs incurred in the transaction. They are then valued at amortized cost, using the effective interest rate. 49 FINANCIAL STATEMENTS L. Derivative financial instruments and hedge accounting The Company does not have any financial derivative or hedge instruments.
M. Provisions and contingent liabilities Provisions are quantified taking into account the best information available on the event and its consequences, and they are re-estimated at every period-end. The Company records a provision when there is a commitment or obligation towards third parties resulting from past events and its settlement will presuppose a disbursement of resources involving an amount and/or deadline that are not known with certainty but may be reasonably estimated.
ANNUAL REPORT ESVAL 2010 67 CONTENTS ANNUAL REPORT ESVAL 2010 Contingent liabilities refer to all possible obligations arising as a result of past events, whose future concretion and associated damage to the equity is considered to be not very probable. These are not recognized in the books according to current regulations.
N. Deferred income This item basically includes amounts received from clients or government agencies to finance the construction or acquisition of given facilities and, in some cases, received directly from the assign of facilities under regulations in force in each country.
These amounts are recorded as deferred income under liabilities in the balance sheet and credited to income under "Other operating income” in the comprehensive profit and loss statement during the useful life of the asset, thereby offsetting the depreciation expense. 4 LETTER FROM THE PRESIDENT O. Income tax and deferred taxes 6 LETTER FROM THE CEO Income tax expense for the year includes both current tax from applying the tax regulations on the tax base for the year, once the admissible tax deductions or additions have been made, and the variation in deferred tax assets and liabilities and tax credits resulting from negative tax bases. 8 COMPANY INFORMATION Deferred tax assets and liabilities include temporary differences considered to be recoverable or payable, arising from the differences between the carrying value of the assets and liabilities and their tax value, as well as tax credits resulting from negative tax bases whose offsetting is pending and 10 HISTORICAL ACCOUNT other tax deductions whose application is pending. These values are recorded by applying the tax rate at which they are expected to be recovered or paid to such temporary differences. 12 COMPANY’S EQUITY Deferred tax liabilities are recognized for all temporary differences that will be liable in future, and deferred tax assets are only recognized when it 14 LINE OF BUSINESS AND ACTIVITIES is considered probable that the entities will have sufficient tax profits in future against which to cash them.
16 BOARD OF DIRECTORS AND Similarly, deferred tax assets are only recognized when it is considered probable that the entities will have sufficient tax profits in future against ADMINISTRATION which to cash them.
P. Employee benefits 19 ORGANIZATIONAL CHART The Company recognizes obligations issuing from personnel benefits contained in collective or individual work contracts in the financial statements.
21 MANAGEMENT REPORT The severance indemnity obligation recognized as a liability in the Company’s financial statements corresponds to employees whose individual work contracts recognize this all event severance indemnity and it is recorded at its actuarial value. The positive or negative effect on severance 39 ADMINISTRATION REPORT indemnities caused by changes in estimates or deviations in the turnover, mortality, advanced retirement due to dismissal, wage increase, inflation, discount rate or employee rate is recorded directly in profit or loss. 47 STATEMENT OF LIABILITY Q. Income and expense Income and expenses are recognized on an accrual basis, in other words when the transfer of the assets or provision of the services takes place, 49 FINANCIAL STATEMENTS irrespective of when payment is made.
Income from regulated sales is booked based on consumption read and billed to each client, valued using the rate stipulated in the respective decrees. It is applied over five years plus an estimate of unbilled sales at year-end.
The Company’s service area is divided into billing groups, which determine the dates for reading the meters and subsequent billing. This process is carried out based on a monthly calendar.
ANNUAL REPORT ESVAL 2010 68 CONTENTS ANNUAL REPORT ESVAL 2010 R. Information on the Environment Assets of an environmental nature are considered to be those that are used lastingly in the activity of the Company and whose main purpose is to minimize adverse environmental impacts and protect and improve the environment, including the reduction or elimination of any future contamination by the Group’s operations. To that end, the Company has ISO 14.001 environmental certification.
S. Gains per share The basic gain per share is calculated as the quotient between the net gain for the year attributed to the ParentC ompany and the number of shares at year-end. LETTER FROM THE PRESIDENT 4 During the years ended of December 31, 2010, and 2009 the Group has not performed any kind of operation with a potentially dilutive effect that presupposes a diluted gain per share that is different to the basic benefit per share. 6 LETTER FROM THE CEO T. Interest costs 8 COMPANY INFORMATION Interest costs incurred for constructing any qualified asset are capitalized over the period of time required to complete and prepare the asset for use. Other interest costs are recorded in profit (loss). 10 HISTORICAL ACCOUNT U. Dividends Article 79 of the Chilean Law on Corporations stipulates that, unless otherwise agreed unanimously in the respective shareholders’ meeting by 12 COMPANY’S EQUITY all of the shares issued, corporations shall distribute a cash dividend to their shareholders every year, on a pro rata basis to their shares or in the proportion stipulated in the by-laws if there are any preferential shares, equivalent to at least 30% of the net profits from each year, except when 14 LINE OF BUSINESS AND ACTIVITIES accumulated losses from prior years need to be absorbed.
16 BOARD OF DIRECTORS AND Interim and final dividends are recorded as a charge to “Net equity” when approved by the respective body, which normally is theC ompany’s Board ADMINISTRATION of Directors and, as a second option, the General Ordinary Shareholders’ Meeting.
For 2010, the interim dividends policy consists in that it is possible to distribute up to a maximum of two interim dividends of Ch$0.00025 per share, 19 ORGANIZATIONAL CHART on each occasion, under the condition that such interim dividends do not exceed 80% of the revenues from 2010 and that these have been verified at the closings of June and September 2010, Respectively. In case the distribution of dividends is appropriate, these will be paid in August 2010 21 MANAGEMENT REPORT and February 2011. In relation to the interim dividends related to the results of 2010, the Board has the intention to distribute at least 80% of the income for the year 2010, without detriment that it will correspond to the corresponding Ordinary Meeting to decide over the distribution of such 39 ADMINISTRATION REPORT final dividends.
V. Consolidated Statement of Cash Flows 47 STATEMENT OF LIABILITY The cash flow statement uses the terms defined below
49 FINANCIAL STATEMENTS Cash and cash equivalent flows: inflows and outflows of cash and cash equivalents, with the latter being understood to be short-term, highly liquid investments subject to a low risk of changes in value.
Operating activities: Typical activities of the normal operation of Esval and subsidiaries, and also other activities not classified asinvestingor financing activities.
Financing activities: Activities producing changes in the amount and make-up of the equity and liabilities not forming part of ordinary activities.
ANNUAL REPORT ESVAL 2010 69 CONTENTS ANNUAL REPORT ESVAL 2010 Investing activities: the acquisition, sale or disposal by other means of non-current assets and other investments not included in cash and cash equivalents.
2.5 Capital and net equity
The Company’s capital is divided into 14,962,276,336,000 registered, no-par-value shares distributed as follows:
4 LETTER FROM THE PRESIDENT No. of SHARES SERIES SUBSCRIBED PAID-IN WITH VOTING RIGHT 6 LETTER FROM THE CEO A 2,656,575,659 2,656,575,659 2,656,575,659 B 1,083,993,425 1,083,993,425 1,083,993,425 8 COMPANY INFORMATION C 14,958,535,766,916 14,958,535,766,916 14,958,535,766,916 TOTAL 14,962,276,336,000 14,962,276,336,000 14,962,276,336,000 10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY There are no treasury shares in portfolio. 14 LINE OF BUSINESS AND ACTIVITIES Dividend policy 16 BOARD OF DIRECTORS AND The Company manages its capital to ensure constant, easy access to the financial markets to be able to accomplish its growth, solvency and ADMINISTRATION profitability objectives. No changes in the capital management objectives or policies have been recorded in the year reported. Thedividend payment policy is determined every year. The payment has been agreed and made in Esval S.A. in 2009 and 2010, as follows:
19 ORGANIZATIONAL CHART The Ordinary Shareholders’ Meeting held on April 24, 2009 agreed to distribute 100% of the net profits from 2008, deducting the interim dividend paid in August, 2008 and the final dividend paid as of February 23, 2009. The amount was paid to the shareholders as of May 18, 2009 to complete 21 MANAGEMENT REPORT a total of ThCh$20,285,627, equivalent to Ch$ 0.001355785 per Company share.
39 ADMINISTRATION REPORT The Ordinary Meeting of Shareholders held on April 30, 2010 agreed to distribute 100% of net income for the year 2009, which is equivalent to Ch$0.00150221 per share of the Company, deducting interim dividends paid on August 20, 2009and the final dividend paid as of February 2, 2010. The remainder was paid to the shareholders as of May 24, 2010, completing the total amount of ThCLP$22,476,481, equivalent to CLP$0.00150221 47 STATEMENT OF LIABILITY per Company share.
49 FINANCIAL STATEMENTS In regard to the net income for the year 2010, the Meeting was informed about the agreement of the Board of Directors of Esval S.A. about the interim dividend policy. This agreement will allow the Company to distribute a maximum of two interim dividends of Ch$0.00025 per share – each time– on condition that interim dividends do not exceed 80% of net income for the year 2010 and have been observed at year-end in June and September 2010, respectively. When such dividends should be distributed, they will be paid in August 2010 and February 2011. The first of these interim dividends was paid on August 27, 2010 (ThCh$3,740,569), and for the second a provision according to the established dividends policy (ThCh$3,740,569).
Regarding the final dividends related to the net income of year-end 2010, theS hareholders were informed that the purpose of the Board of Directors is to distribute at least 80% of the income for the year 2010, without detriment that it will correspond to the corresponding Ordinary Meeting to decide over the distribution of such final dividends. For such purposes a provision has been accrued at December 31, 2010 of ThCh$6,363,816, in addition to the ThCh$3,740,569 accrued as interim dividends at September 30, 2010. Considering the previously established, at December 31,
ANNUAL REPORT ESVAL 2010 70 CONTENTS ANNUAL REPORT ESVAL 2010 2010, are presented under the item “Other non financial liabilities, current” the amount of ThCh$10,104,385 as interim dividends for 2010, in compliance with the dividends policy informed for 2010.
Information to be Disclosed regarding Retained Earnings The following reserves are included in this item:
1. Revaluation of land and intangibles 2. contributions from third parties 3. Share premium LETTER FROM THE PRESIDENT 4 4. other reserves due to the first time adjustments to IFRS
6 LETTER FROM THE CEO The reserve for revaluation have restrictions to their distribution, as it corresponds to apply such amounts through the use or sale in order the distribute such reserve, as indicated in IASs 16, IFRS 7 and Official Letter No 456 June 29, 2008 of the Securities and Insurance Superintendency. 8 COMPANY INFORMATION Information to Be Disclosed on Other Reserves This item includes the price-level restatement of the capital account for the year 2009 in the amount of ThC$4,617,668. 10 HISTORICAL ACCOUNT 2.6 Other income and expenses 12 COMPANY’S EQUITY Additional information to be disclosed as specified in IAS 1, with regard to other non-operating and expenses: 14 LINE OF BUSINESS AND ACTIVITIES
FROM 01/jan/10 FROM 01/jan/09 16 BOARD OF DIRECTORS AND TO 31/DeC/10 TO 31/DeC/09 ADMINISTRATION ThCh$ ThCh$
Other income and expenses 19 ORGANIZATIONAL CHART Other expenses per nature (26,739,653) (26,690,552) 21 MANAGEMENT REPORT Services (21,154,929) (21,331,369) Overhead (5,025,483) (4,984,000) Doubtful accounts (559,241) (375,183) 39 ADMINISTRATION REPORT Other income (expenses) (476,730) (833,829) 47 STATEMENT OF LIABILITY Other non-operating income 1,528,225 923,857 49 FINANCIAL STATEMENTS (-) Other non-operating expenses (2,004,955) (1,757,686)
2.7 Classification of current and non-current balances
In the accompanying consolidated statement of financial position, the balances are classified according to their maturities; this is, as current those with a maturity equal or inferior to twelve months and as non-current those with a greater maturity.
In case there exist obligations whose maturity is less than twelve months, but whose long-term refinancing is insured upon decision of theC ompany, through credit agreements available unconditionally with long-term maturity, these could be classified as non-current liabilities.
ANNUAL REPORT ESVAL 2010 71 CONTENTS ANNUAL REPORT ESVAL 2010 3. FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
Until year-end 2009, Esval S.A. and its subsidiaries prepared their financial statements under local standards (Accounting Principles Generally Accepted in Chile) As of that same year-end (December 31, 2009) started the preparation of the financial statements under International Financial Reporting Standards (IFRS) under the pro-forma method, not comparative with the previous year. As of year-end 2010 started the full preparation, comparative with year-end 2009 of the financial statements under IFRS.
As stipulated in IFRS 1, the various disclosures required are presented below, paying particular attention to the reconciliations of the equity and profit and loss from one standard to the other at December 31, 2009. The Statement of Direct Cash Flows does not evidence any significant differences in 4 LETTER FROM THE PRESIDENT cash and cash equivalent to that presented under Chilean standards in 2009, except for the effect of the application of monetary correction in the various items making up the statement of cash flows. 6 LETTER FROM THE CEO IFRS 1 allows certain exemptions to the overall requirements for those who adopt IFRS for the first time. The main exemptions applied by the 8 COMPANY INFORMATION Company and its subsidiaries are:
10 HISTORICAL ACCOUNT • Valuation of Property, Plant and Equipment: The company uses the fair value of the land as the attributed cost at the date of adoption of SIFR • Valuation of Intangibles: The company used the fair value of the water rights and easements as the attributed cost at the date of adoption of SIFR . • The intangible assets generated by the Exploitation Right of theS anitary Concessions in the Coquimbo Region is valued at the contract revalued 12 COMPANY’S EQUITY amount, and it is amortized over a 30 year period, which is the term for which this right has been assigned according to the terms and conditions of the respective contract. 14 LINE OF BUSINESS AND ACTIVITIES Preparation of the consolidated financial statements of EsvalS .A. under IFRS meant changing the presentation and valuation of certain items under 16 BOARD OF DIRECTORS AND the standards applied prior to the transition (December 31, 2008), since certain principles and disclosures required by IFRS are substantially different ADMINISTRATION to local accounting principles.
Main differences between GAAP and IFRS: 19 ORGANIZATIONAL CHART a) Reconciliation of equity at December 31, 2009: 21 MANAGEMENT REPORT 31/DeC/09 01/jan/09 39 ADMINISTRATION REPORT Adjustments (disminuciones) to initial equity ThCh$ ThCh$
Net equity at December 31, 2010 as per GAAP standards 47 STATEMENT OF LIABILITY 272,732,344 280,461,208 Initial adjustments IFRS application - 01-01-2009:
49 FINANCIAL STATEMENTS Adjustment due to revaluation of land 23,084,472 23,084,472 Adjustment due to revaluation of water rights 20,993,433 20,993,433 Adjustment due to fixed and intangible assets 308,044 308,044 Decrease in Equity: Adjustment due to applying effective rate to bonds (775,680) (775,680) Adjustment due to deferred taxes (10,663,498) (10,663,498) Deflation termination Litoral Sur contract (5,494,166) (5,494,166) Adjustment due to depreciation of fixed assets (378,532) 27,074,073 (378,532) 27,074,073
Price-level adjustment of total equity 6,391,259 0 Difference of results GAAP-IFRS at September 2009 3,856,381 0 Variation of minority interest 58 50 Net equity at December 31, 2010 as per IFRs standards 310,054,115 307,535,331
ANNUAL REPORT ESVAL 2010 72 CONTENTS b) Reconciliation of profit or loss at December 2009: ANNUAL REPORT ESVAL 2010 FROM 01/jan/09 TO 31/DeC/09 RECONCILIATION OF RESULTS ThCh$
Amount in Chilean GAAP 22.476.545 Adjustments from conversion to IFRS
Monetary correction 6,667,102 4 LETTER FROM THE PRESIDENT Deferred tax (2,221,394) Depreciation and amortization (342,349) 6 LETTER FROM THE CEO Change to effective rate Bonds and associated costs (503,791) Lower amortization End of Aguas Quinta Contract 256,810 Other 3 8 COMPANY INFORMATION Total adjustments 3,856,381
10 HISTORICAL ACCOUNT Amount in IFRS 26,332,926
12 COMPANY’S EQUITY
c) Reconciliation of the Statement of Cash Flows at December 2009: 14 LINE OF BUSINESS AND ACTIVITIES FROM 01/jan/09 TO 31/DeC/09 16 BOARD OF DIRECTORS AND CASH FLOW RECONCILIATION ThCh$ ADMINISTRATION Net variation of Flow under Chilean GAAP 21,059,679
19 ORGANIZATIONAL CHART Difference due to GAAP update of the operating flow 129,471 Difference due to GAAP update of the financing flow 471,588 21 MANAGEMENT REPORT Difference due to GAAP update of the investing flow (81,148) GAAP inflation effect over cash and cash equivalents (571,182) 39 ADMINISTRATION REPORT (51,271)
47 STATEMENT OF LIABILITY Net variation of flow under IFRS 21,008,408
49 FINANCIAL STATEMENTS
Monetary Correction: Monetary correction recognized according to the former Chilean accounting standard is eliminated. Under IFRS, inflation indexed adjustments are only accepted in hyperinflationary countries. Chile does not rate as such, as stipulated in IAS 29 “Financial reporting in hyperinflationary countries”.
Deferred Taxes: Under the local standard above, calculation of deferred taxes was governed by Technical Bulletin 60 and its supplements of the Chilean Institute of Accountants, which allowed deferred tax effects to be recognized only as of January 1, 2000, recognizing the accumulated effects from years prior to 2000 in a supplementary account that had to be amortized in the period during which the components making it up were in existence. Under IFRS, all deferred tax effects must be recognized immediately; hence, at December 31, 2008, the balance of the supplementary accounts created in 2000 not amortized against the Company’s equity had to be reversed.
Amortization of Intangibles:U nder IFRS, indefinite-lived intangible assets are not amortized. Revaluation of Assets: Notes 2.2 D and E explain the first-time adoption criteria applied.
ANNUAL REPORT ESVAL 2010 73 CONTENTS ANNUAL REPORT ESVAL 2010 Debt Issue Expenses: Under the former Chilean accounting standard, initial debt issue expenses, such asS tamp Taxes, bank commissions, risk rating fees and goodwill on placement of the bonds, were activated and amortized on the straight line basis over the term of the loan. Under IFRS, these payments are discounted from the initial amount of the loan and amortized regularly using the amortized cost with effective interest rate method.
Finally, a relevant fact is that, as of this presentation, the individual financial statements of the Companies presenting consolidated financial statements, as is the case with Esval S.A., will cease to be issued publicly.
4. CONSOLIDATED AND INDIVIDUAL FINANCIAL STATEMENTS 4 LETTER FROM THE PRESIDENT The Company considers investments in subsidiaries to be those investments made in other companies regarding which there exists the intent to keep them as a long-term investment and over which it exercises control or significant influence. 6 LETTER FROM THE CEO The Company does not present individual financial statements as allowed by IFRS. 8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT Summary of financial information of subsidiary at 12.31.2010
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
Current Non-current Current Non-current 16 BOARD OF DIRECTORS AND assets assets liabilities liabilities Equity ADMINISTRATION 31/DEC/10 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Subsidiaries 19 ORGANIZATIONAL CHART Aguas del Valle S.A. 6,040,067 94,033,577 7,010,940 29,111,033 63,951,671 21 MANAGEMENT REPORT Servicios Sanitarios Las Vegas Ltda. - 639,516 60 - 639,456
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY Profit or loss Ordinary Ordinary (-) Other expenses for the year income expenses (+) Other income 49 FINANCIAL STATEMENTS 31/DEC/10 ThCh$ ThCh$ ThCh$ ThCh$
Subsidiaries
Aguas del Valle S.A. 6,230,013 26,168,429 (8,837,461) (8,408,345) Servicios Sanitarios Las Vegas Ltda. 62,300 0 0 0
ANNUAL REPORT ESVAL 2010 74 CONTENTS ANNUAL REPORT ESVAL 2010 Summary of financial information of subsidiary at 12.31.2009
Current Non-current Current Non-current assets assets liabilities liabilities Equity 31/DEC/09 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Subsidiaries 4 LETTER FROM THE PRESIDENT Aguas del Valle S.A. 6,125,860 92,254,125 5,996,602 34,661,726 57,721,657 Servicios Sanitarios Las Vegas Ltda. - 577,217 60 - 577,157 6 LETTER FROM THE CEO
8 COMPANY INFORMATION Other income 10 HISTORICAL ACCOUNT Profit or loss Ordinary Ordinary Other expense (-) for the year income expenses non-operating 31/DEC/09 ThCh$ ThCh$ ThCh$ ThCh$ 12 COMPANY’S EQUITY Subsidiaries 14 LINE OF BUSINESS AND ACTIVITIES Aguas del Valle S.A. 7,691,441 26,133,096 (8,767,810) (7,681,481) Servicios Sanitarios Las Vegas Ltda. 76,914 - - - 16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT Summary of financial information of subsidiary at 01.01.2009 39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY Current Non Current Current Non Current Assets Assets Liabilities Liabilities Equity 49 FINANCIAL STATEMENTS 01/JAN/09 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Subsidiaries
Aguas del Valle S.A. 6,144,897 89,974,503 6,060,450 40,028,734 50,030,216 Servicios Sanitarios Las Vegas Ltda. - 500,302 60 - 500,242
ANNUAL REPORT ESVAL 2010 75 CONTENTS ANNUAL REPORT ESVAL 2010 5. CASH AND CASH EQUIVALENT Details are as follows:
31/DeC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$
Cash and cash EQUIVALENT LETTER FROM THE PRESIDENT 4 Cash and banks 158,500 150,006 174,425 6 LETTER FROM THE CEO Mutual fund units - 12,151,269 - Repurchase agreements 16,915,089 10,936,305 2,054,747 8 COMPANY INFORMATION TOTAL 17,073,589 23,237,580 2,229,172
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES There are no restrictions in the availability or use of cash and cash equivalent.
16 BOARD OF DIRECTORS AND No investing or financing transactions were carried out that do not require the use of cash and cash equivalent. ADMINISTRATION The cash equivalent is fixed assets, time deposits, marketable securities, agreements maturing within less than 90 days after the date of presentation 19 ORGANIZATIONAL CHART of the financial statements. Details of some items of the cash flow statement are as follows 21 MANAGEMENT REPORT • other inflows or outflows from other operating activities: these are auxiliary services to the operation of the business. 39 ADMINISTRATION REPORT • Income from financing sources: These correspond to the issue of Reimbursable FinancialC ontributions used in the construction of infrastructure 47 STATEMENT OF LIABILITY works, which will be reimbursed in the short and long term, as stipulated in current legislation (Statutory Decree 70 of 1988).
• Reimbursement of other financial liabilities: Payment and prepayment of promissory notes issued as Reimbursable Financial Contributions. 49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 76 CONTENTS ANNUAL REPORT ESVAL 2010 6. FINANCIAL INSTRUMENTS
I. Financial instrument policy The Group’s financial instruments consist of:
31/dEc/10 31/dEc/09 01/JAN/09 CATEGORY 4 LETTER FROM THE PRESIDENT ThCh$ ThCh$ ThCh$
6 LETTER FROM THE CEO Kind of financial instruments ASSETS
8 COMPANY INFORMATION Cash and cash equivalents 158,500 150,006 174,425 Cash and checking accounts Financial Investments 16,915,089 23,087,574 2,054,747 10 HISTORICAL ACCOUNT Investments in Mutual Funds - 12,151,269 - Financial assets at fair value with changes in profit or loss
12 COMPANY’S EQUITY Resale AGREEMENTS 16,915,089 10,936,305 2,054,747 Loans and accounts receivable 14 LINE OF BUSINESS AND ACTIVITIES Trade debtors 26,917,950 26,395,126 25,205,080 16 BOARD OF DIRECTORS AND Trade and other receivables, current 26,888,436 26,358,882 25,163,595 Loans and accounts receivable ADMINISTRATION Trade and other receivables, non-cuRRENT 29,514 36,244 41,485 Loans and accounts receivable 19 ORGANIZATIONAL CHART Due from related companies - - 3,683 Loans and accounts receivable 21 MANAGEMENT REPORT LIABILITIES
Loans 39 ADMINISTRATION REPORT Current 47,885,459 33,516,218 25,735,141 Bank loans, current - - - Financial liabilities measured 47 STATEMENT OF LIABILITY at amortized cost
Other loans, CURRENT 47,885,459 33,516,218 25,735,141 Financial liabilities measured 49 FINANCIAL STATEMENTS at amortized cost Non-Current 231,756,666 244,998,629 240,105,409
Bank loans, current - - - Financial liabilities measured at amortized cost Other loans, CURRENT 231,756,666 244,998,629 240,105,409 Financial liabilities measured at amortized cost
Trade accounts payable 10,957,968 8,442,099 8,558,112 Trade and other accounts payable, current 10,957,968 8,442,099 8,558,112 Financial liabilities measured at amortized cost
Trade and other accounts payable, non-cuRRENT - - - Due to related companies Financial liabilities measured at amortized cost 646 3,811 -
ANNUAL REPORT ESVAL 2010 77 CONTENTS ANNUAL REPORT ESVAL 2010 II. Financial Instrument Accounting Policies A. Hedge Instrument Policy The Group does not have any hedge instruments.
B. Trade debtors and other receivables policy Trade debtors, corresponding to invoicing for consumption of drinking water, sewerage services, sewage treatment and other services, are recorded at the net value of the estimate of uncollectible accounts or accounts with a low probability of collection. LETTER FROM THE PRESIDENT 4 The trade debtor policy is subject to the credit policy, which stipulates the terms and conditions of payment, and also the various scenarios to be covenanted with delinquent clients. Interest is also charged as stipulated in the law on delinquent debtors. 6 LETTER FROM THE CEO C. Policy for uncollectible accounts or accounts whose recovery is improbable 8 COMPANY INFORMATION The estimate of uncollectible accounts is made through an analysis of the age of the debts, of their historical recovery, and collection of accounts receivable from clients and other debtors, all of which are specifically identified. 10 HISTORICAL ACCOUNT The analysis of the behavior of the different types of debt segments is affected by: i) the type of client; ii) division of debtors with and without a covenant; and iii) age of the debt. A provision of 100% has been made for withdrawn or suspended clients. 12 COMPANY’S EQUITY D. Cash and cash equivalent policy 14 LINE OF BUSINESS AND ACTIVITIES Cash surpluses are invested in instruments with a high risk rating standard, safeguarded by the Company’s’ equity.
16 BOARD OF DIRECTORS AND E. Bank overdraft policy ADMINISTRATION The Company keeps lines of credit and overdraft facilities and/or working capital in banking institutions for any possible cash imbalances and to finance short-term working capital.
19 ORGANIZATIONAL CHART There is also planning, supervision and follow up in place of strategic and budgetary objectives, both short and long term, to detect and, if applicable, correct any risks arising from deviations that could affect achievement of the objectives. 21 MANAGEMENT REPORT The company invests in low risk instruments that meet the rating standards stipulated in its investment policies. Thus, mutual investment funds 39 ADMINISTRATION REPORT must have an AAfm / M1 rating (Units with a high protection against loss, associated with credit risks / units with the lowest sensitivity to changes in economic conditions). Fixed term deposits and agreements contracted are N-1 rated instruments (Instruments with the highest capacity to pay capital and interest under the conditions and terms agreed to). 47 STATEMENT OF LIABILITY The institutions issuing these instruments areB anks or Bank subsidiaries with N-1 risk rating, and their instruments have at least an AA rating (with a 49 FINANCIAL STATEMENTS very high capacity to pay the capital and interest under the conditions and terms agreed to, which would not be significantly affected by any possible changes in the issuer, the industry to which it belongs or the economy).
F. Dividend policy The dividend policy is approved every year by the Ordinary Shareholders’ Meeting.
G. Financial instrument policy The Group’s financial instruments consist of:
ANNUAL REPORT ESVAL 2010 78 CONTENTS ANNUAL REPORT ESVAL 2010 • Financial assets: Mutual funds are valued at fair value (fund unit), while fixed term deposits, covenants and trade debtors and other receivables are valued using the amortized cost method. • Financial Liabilities: B ank debt, commercial papers, bonds, reimbursable financial contributions (AFR) and trade creditors and other payables are valued at amortized cost using the effective rate method.
Financial instruments are subject to risk control policies, as specified below:
i. As far as liquidity risk is concerned, the Company keeps a reasonable debt level, complying with the financial safeguards stipulated in its debt contracts. It maintains a local market risk rating equivalent to AA- and AA for Bonds and N1 for commercial papers. 4 LETTER FROM THE PRESIDENT ii. Interest rate risk, resulting from possible impact on profit or loss of changes in the interest rates, is mitigated by the Company’s debt structure, 6 LETTER FROM THE CEO which consists of a fixed rate.
8 COMPANY INFORMATION H. Bases for recognizing and measuring income and expenses resulting from financial assets and liabilities Instruments traded actively in the market, whose market price is observable and which are available to the general public, are valued at fair value. 10 HISTORICAL ACCOUNT Instruments with no active market are valued at cost.
12 COMPANY’S EQUITY I. Criterion to determine whether there is any objective evidence of impairment loss Financial assets are assessed every year to determine whether there is any objective evidence of impairment. A financial asset is considered to be 14 LINE OF BUSINESS AND ACTIVITIES impaired if there is objective evidence determining that one or more events have had a negative effect on the future cash flow estimate for this asset. 16 BOARD OF DIRECTORS AND ADMINISTRATION III. Information to Be Disclosed on Financial Assets and Liabilities
A. Financial Liabilities 19 ORGANIZATIONAL CHART Reimbursable Financial Contributions, current portion:
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
Carrying VALUE 47 STATEMENT OF LIABILITY Registration No. Currency Nominal amount U.F. Placement Issuing or identif. adjustment 31/DEC/10 31/DEC/09 01/JAN/09 Nominal in Chile company or instrument index 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$ rate or abroad (si/no) 49 FINANCIAL STATEMENTS Promissory note UF 7,214.71 6,669.07 151,097 143,069 1.69% ESVAL S.A. NO Promissory note UF 18,386.72 394,497 1.99% ESVAL S.A. NO Promissory note UF 1,623.68 34,832 2.39% ESVAL S.A. NO Promissory note UF 1,687.82 59,100.39 36,213 1,267,855 2.58% ESVAL S.A. NO Promissory note UF 5,299.23 113,682 3.96% ESVAL S.A. NO 20,074.54 7,214.71 72,692.36 430,710 151,097 1,559,438
ANNUAL REPORT ESVAL 2010 79 CONTENTS ANNUAL REPORT ESVAL 2010 Reimbursable Financial Contributions, non-current portion:
VALOR CONTABLE Regis. Nr. Currency Monto Nominal U.F.
or ident. Adjustment 31/DEC/10 31/DEC/09 01/JAN/09 TASA Empresa Garantizada of Instrum. rate 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$ NOMINAL Issuer (YES/NO)
Promissory Note UF 7,094.11 152,187 1.69% ESVAL S.A. NO 4 LETTER FROM THE PRESIDENT Promissory Note UF 18,026.20 17,672.74 377,521 379,126 1.99% ESVAL S.A. NO Promissory Note UF 75,686.43 69,141.84 67,653.47 1.623,894 1,448,029 1,451,341 2.19% ESVAL S.A. NO 6 LETTER FROM THE CEO Promissory Note UF 10,015.99 9,787.92 9,565.06 214,899 204,987 205,195 2.32% ESVAL S.A. NO Promissory Note UF 2,907.86 2,841.37 2,776.40 62,390 59,506 59,561 2.33% ESVAL S.A. NO 8 COMPANY INFORMATION Promissory Note UF 104.63 102.22 99.86 2,245 2,141 2,142 2.35% ESVAL S.A. NO Promissory Note UF 5,794.52 5,659.82 5,528.26 124,325 118,533 118,595 2.37% ESVAL S.A. NO 10 HISTORICAL ACCOUNT Promissory Note UF 51,546.77 43,512.18 42,492.36 1,105,964 911,270 911,570 2.39% ESVAL S.A. NO Promissory Note UF 10,658.59 10,146.97 228,686 217,679 2.47% ESVAL S.A. NO 12 COMPANY’S EQUITY Promissory Note UF 11,461.82 10,399.64 245,920 217,798 2.48% ESVAL S.A. NO Promissory Note UF 3,861.36 3,766.81 3,674.58 82,848 78,888 78,829 2.49% ESVAL S.A. NO Promissory Note UF 5,053.70 4,927.08 4,803.63 108,430 103,187 103,050 2.55% ESVAL S.A. NO 14 LINE OF BUSINESS AND ACTIVITIES Promissory Note UF 1,645.06 1,603.37 34,452 34,396 2.58% ESVAL S.A. NO Promissory Note UF 4,235.53 4,127.39 4,022.02 90,876 86,439 86,283 2.60% ESVAL S.A. NO 16 BOARD OF DIRECTORS AND Promissory Note UF 50,348.45 49,043.98 47,773.13 1,080,254 1,027,122 1,024,856 2.64% ESVAL S.A. NO ADMINISTRATION Promissory Note UF 5,045.48 4,913.81 4,785.55 108,254 102,909 102,662 2.66% ESVAL S.A. NO Promissory Note UF 35,284.73 30,907.73 30,095.14 757,053 647,297 645,618 2.68% ESVAL S.A. NO 19 ORGANIZATIONAL CHART Promissory Note UF 11,240.49 8,228.38 8,011.28 241,171 172,326 171,863 2.69% ESVAL S.A. NO Promissory Note UF 2,150.93 2,092.96 2,036.55 46,149 43,833 43,689 2.75% ESVAL S.A. NO 21 MANAGEMENT REPORT Promissory Note UF 12,616.00 12,272.37 7,158.55 270,683 257,019 153,569 2.78% ESVAL S.A. NO Promissory Note UF 6,924.98 6,735.06 6,550.34 148,579 141,052 140,522 2.80% ESVAL S.A. NO 39 ADMINISTRATION REPORT Promissory Note UF 2,763.38 2,687.33 2,613.36 59,290 56,280 56,063 2.81% ESVAL S.A. NO Promissory Note UF 2,124.39 2,065.31 2,007.88 45,580 43,254 43,074 2.84% ESVAL S.A. NO 47 STATEMENT OF LIABILITY Promissory Note UF 54,077.46 52,553.39 51,072.27 1,160,262 1,100,619 1,095,631 2.88% ESVAL S.A. NO Promissory Note UF 3,606.08 3,503.10 3,403.05 77,371 73,365 73,004 2.92% ESVAL S.A. NO Promissory Note UF 207,322.80 195,020.87 124,734.25 4,448,225 4,084,316 2,675,870 2.98% ESVAL S.A. NO 49 FINANCIAL STATEMENTS Promissory Note UF 7,282.98 7,058.53 6,840.98 156,260 147,826 146,757 3.16% ESVAL S.A. NO Promissory Note UF 16,484.01 14,895.97 353,673 319,557 3.17% ESVAL S.A. NO Promissory Note UF 15,372.64 321,947 3.18% ESVAL S.A. NO Promissory Note UF 4,289.85 4,154.01 4,022.47 92,041 86,997 86,292 3.24% ESVAL S.A. NO Promissory Note UF 4,102.10 3,971.82 3,845.68 88,013 83,181 82,500 3.25% ESVAL S.A. NO Promissory Note UF 66,714.88 64,583.62 62,520.48 1,431,404 1,352,567 1,341,225 3.27% ESVAL S.A. NO Promissory Note UF 4,164.62 4,030.41 3,900.53 89,354 84,408 83,676 3.30% ESVAL S.A. NO Promissory Note UF 2,894.10 2,798.94 2,706.91 62,095 58,618 58,070 3.37% ESVAL S.A. NO Promissory Note UF 1,946.64 1,881.91 1,819.33 41,766 39,413 39,029 3.41% ESVAL S.A. NO Promissory Note UF 2,056.48 1,987.52 1,920.87 44,123 41,624 41,208 3.44% ESVAL S.A. NO Promissory Note UF 34,996.53 33,813.05 21,052.49 750,870 708,143 451,630 3.47% ESVAL S.A. NO Promissory Note UF 2,557.22 2,470.04 2,385.81 54,867 51,730 51,182 3.50% ESVAL S.A. NO
ANNUAL REPORT ESVAL 2010 80 CONTENTS ANNUAL REPORT ESVAL 2010
VALOR CONTABLE Regis. Nr. Currency Monto Nominal U.F.
or ident. Adjustment 31/DEC/10 31/DEC/09 01/JAN/09 TASA Empresa Garantizada of Instrum. rate 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$ NOMINAL Issuer (YES/NO)
Promissory Note UF 6,782.41 6,548.62 6,322.90 145,520 137,147 135,642 3.54% ESVAL S.A. NO 4 LETTER FROM THE PRESIDENT Promissory Note UF 4,130.33 3,983.73 3,842.34 88,619 83,431 82,428 3.65% ESVAL S.A. NO Promissory Note UF 10,558.47 10,181.76 9,818.48 226,538 213,235 210,632 3.67% ESVAL S.A. NO 6 LETTER FROM THE CEO Promissory Note UF 3,970.42 3,827.66 3,690.02 85,188 80,162 79,160 3.70% ESVAL S.A. NO Promissory Note UF 5,366.01 5,172.57 4,986.09 115,131 108,329 106,964 3.71% ESVAL S.A. NO 8 COMPANY INFORMATION Promissory Note UF 2,333.18 2,248.41 2,166.73 50,060 47,088 46,482 3.74% ESVAL S.A. NO Promissory Note UF 6,167.15 5,724.96 132,320 122,815 3.75% ESVAL S.A. NO 10 HISTORICAL ACCOUNT Promissory Note UF 5,941.95 124,442 3.76% ESVAL S.A. NO Promissory Note UF 2,217.65 47,581 3.80% ESVAL S.A. NO 12 COMPANY’S EQUITY Promissory Note UF 4,560.25 4,387.39 4,221.07 97,843 91,885 90,553 3.90% ESVAL S.A. NO Promissory Note UF 8,543.61 8,212.64 7,894.49 183,308 171,996 169,357 3.99% ESVAL S.A. NO Promissory Note UF 2,120.56 2,034.89 1,952.68 45,498 42,616 41,890 4.17% ESVAL S.A. NO 14 LINE OF BUSINESS AND ACTIVITIES Promissory Note UF 1,237.82 1,187.58 1,139.39 26,558 24,871 24,443 4.19% ESVAL S.A. NO Promissory Note UF 3,489.29 3,347.05 3,210.60 74,865 70,097 68,876 4.21% ESVAL S.A. NO 16 BOARD OF DIRECTORS AND Promissory Note UF 3,423.92 3,148.03 73,462 67,533 4.24% ESVAL S.A. NO ADMINISTRATION Promissory Note UF 3,283.08 68,757 4.25% ESVAL S.A. NO Promissory Note UF 5,868.04 5,617.49 5,377.65 125,902 117,646 115,364 4.41% ESVAL S.A. NO 19 ORGANIZATIONAL CHART Promissory Note UF 3,371.20 3,220.87 3,075.91 72,331 67,454 65,986 4.64% ESVAL S.A. NO Promissory Note UF 2,539.44 2,424.75 54,485 50,781 4.68% ESVAL S.A. NO 21 MANAGEMENT REPORT Promissory Note UF 1,291.43 1,230.64 27,708 25,773 4.88% ESVAL S.A. NO Promissory Note UF 2,633.14 2,507.98 2,388.78 56,496 52,524 51,246 4.93% ESVAL S.A. NO 39 ADMINISTRATION REPORT Promissory Note UF 1,461.52 1,389.94 1,321.87 31,358 29,109 28,357 5.09% ESVAL S.A. NO Promissory Note UF 4,107.05 3,899.96 3,703.32 88,119 81,676 79,446 5.24% ESVAL S.A. NO 47 STATEMENT OF LIABILITY Promissory Note UF 24,079.96 22,837.60 21,659.35 516,649 478,285 464,649 5.37% ESVAL S.A. NO Promissory Note UF 4,923.83 4,669.35 4,428.03 105,643 97,790 94,993 5.38% ESVAL S.A. NO Promissory Note UF 17,725.40 16,782.25 15,889.25 380,308 351,469 340,865 5.54% ESVAL S.A. NO 49 FINANCIAL STATEMENTS Promissory Note UF 10,664.01 10,087.98 9,543.08 228,802 211,271 204,724 5.63% ESVAL S.A. NO Promissory Note UF 22,400.24 21,176.26 20,019.14 480,609 443,492 429,462 5.70% ESVAL S.A. NO Promissory Note UF 11,500.87 10,826.39 10,191.46 246,757 226,736 218,633 6.14% ESVAL S.A. NO Promissory Note UF 4,311.77 4,047.85 3,800.09 92,511 84,774 81,522 6.42% ESVAL S.A. NO Promissory Note UF 8,155.52 7,600.67 7,083.56 174,981 159,180 151,961 7.17% ESVAL S.A. NO Promissory Note UF 7,274.23 6,731.67 6,229.56 156,073 140,981 133,640 7.90% ESVAL S.A. NO Promissory Note UF 2,323.00 2,122.63 1,939.54 49,841 44,454 41,608 9.23% ESVAL S.A. NO
921,853.48 873,615.90 768,054,06 19,778,874 18,296,050 16,476,734
ANNUAL REPORT ESVAL 2010 81 CONTENTS ANNUAL REPORT ESVAL 2010 Commercial papers, current:
CARRRYING VALUE NOMINAL MATURITY PLACEMENT IN
Instrument ADJ. VALUE PROMISSORY NOTE INTEREST 31/DeC/10 31/DeC/09 01/jan/09 CHILE OR Reg. No. SERIE UNIT ThCh$ OR LINE OF CREDIT RATE ThCh$ ThCh$ ThCh$ ABROAD
43 5A - 12,850,000 22/11/11 0.49 12,208,245 12,173,862 - DOMESTIC - 4 LETTER FROM THE PRESIDENT 44 7A 12,850,000 08/06/11 0.46 12,547,992 - - DOMESTIC 25,700,000 24,756,237 12,173,862 6 LETTER FROM THE CEO
8 COMPANY INFORMATION Bonds
Total Current Portion 10 HISTORICAL ACCOUNT
CURRENT NOMINAL VALUE PERIODICITY CARRYING VALUE 12 COMPANY’S EQUITY NOMIN. EFECT. PLACEMENT
REGIS. NR. 31/DeC/10 31/DeC/09 01/jan/09 ADJST INTS. INTS. MATURITY PAYMENT PAYMENT 31/DEC/10 31/DEC/09 01/JAN/09 IN CHILE INSTRUMENT SERIES UF UF UF UNIT RATE RATE DATE OF INTER AMORTIZ. ThCh$ ThCh$ ThCh$ OR ABROAD 14 LINE OF BUSINESS AND ACTIVITIES 232 A 35,094 33,080 31,181 UF 7.00% 8.04% 15/10/21 SEMESTER SEMESTER 1,050,646 916,979 868,409 DOMESTIC 293 C - 150,000 300,000 UF 5.50% 5.32% 01/06/10 SEMESTER SEMESTER - 1,269,554 6,358,446 DOMESTIC 16 BOARD OF DIRECTORS AND 293 D 82,779 78,027 73,548 UF 6.00% 7.10% 01/06/27 SEMESTER SEMESTER 2,370,610 1,995,853 1,817,350 DOMESTIC ADMINISTRATION 348 E 537,500 537,500 537,500 UF 3.80% 4.24% 15/07/12 SEMESTER SEMESTER 12,069,618 11,917,386 12,350,942 DOMESTIC 419 H 83,333 - - UF 3.50% 3.79% 15/02/26 SEMESTER SEMESTER 2,712,470 791,398 754,155 DOMESTIC 493 J 121,053 121,053 60,526 UF 3.40% 3.82% 15/03/28 SEMESTER SEMESTER 3,323,933 3,135,591 1852,243 DOMESTIC 19 ORGANIZATIONAL CHART 561 K - - - UF 4.95% 4.88% 27/01/14 SEMESTER SEMESTER 237,193 237,492 - DOMESTIC 562 M - - - UF 4.90% 4.77% 27/01/30 SEMESTER SEMESTER 934,042 927,006 - DOMESTIC 859,759 919,660 1,002,755 22.698,512 21.191.259 24,001,545 21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY Total Non-Current Portion 49 FINANCIAL STATEMENTS
CURRENT NOMINAL VALUE PERIODICITY CARRYING VALUE NOMIN. EFECT. PLACEMENT
REGIS. NR. 31/DEC/10 31/DEC/09 01/JAN/09 ADJST INTS. INTS. MATURITY PAYMENT PAYMENT 31/DEC/10 31/DEC/09 01/JAN/09 IN CHILE INSTRUMENT SERIES UF UF UF UNIT RATE RATE DATE OF INTER AMORTIZ. ThCh$ ThCh$ ThCh$ OR ABROAD
232 A 492,822 527,916 560,996 UF 7.00% 8.04% 15/10/21 SEMESTER SEMESTER 10,113,885 10,598,723 11,534,853 DOMESTIC 293 C - - 150,000 UF 5.50% 5.32% 01/06/10 SEMESTER SEMESTER - - 3,333,580 DOMESTIC 293 D 2,163,165 2,245,944 2,323,971 UF 6.00% 7.10% 01/06/27 SEMESTER SEMESTER 43,537,922 46,058,691 46,409,369 DOMESTIC 348 E 537,500 1,075,000 1,612,500 UF 3.80% 4.24% 15/07/12 SEMESTER SEMESTER 11,374,730 22,355,968 34,332,267 DOMESTIC 419 H 2,416,667 2,500,000 2,500,000 UF 3.50% 3.79% 15/02/26 SEMESTER SEMESTER 50,926,309 51,432,595 52,645,754 DOMESTIC 493 J 1,997,368 2,118,421 2,239,474 UF 3.40% 3.82% 15/03/28 SEMESTER SEMESTER 41,574,613 43,085,689 46,678,625 DOMESTIC 561 K 500,000 500,000 - UF 4.95% 4.88% 27/01/14 SEMESTER SEMESTER 10,767,233 10,511,348 - DOMESTIC 562 M 2,000,000 2,000,000 - UF 4.90% 4.77% 27/01/30 SEMESTER SEMESTER 43,683,100 42,659,565 - DOMESTIC 10,107,522 10,967,281 9,386,941 211,977,792 226,702,579 194,934,449
ANNUAL REPORT ESVAL 2010 82 CONTENTS ANNUAL REPORT ESVAL 2010 Summary Financial Liabilities Current Portion
Carrying VALUE Registrion or Currency Nominal amount U.F.
identification Nr. adjustment 31/DEC/10 31/DEC/09 01/JAN/09 Nominal of instrument index 31/DEC/10 31/DEC/09 01/JAN/09 M$ M$ M$ rate 4 LETTER FROM THE PRESIDENT Bank borrowings M$ - - - - - 174,158 9.16% Promissory note AFR UF 20,074.54 7,214.71 72,692.36 430,710 151,097 1,559,438 2.42% 6 LETTER FROM THE CEO Commercial paper M$ - - - 24,756,237 12,173,862 - 0.47% Bonds UF 859,758.93 919,660.00 1,002,755.00 22,698,512 21,191,259 24,001,545 4.19% 8 COMPANY INFORMATION 879,833.47 926,874.71 1,075,447.36 47,885,459 33,516,218 25,735,141
10 HISTORICAL ACCOUNT Non-current Portion 12 COMPANY’S EQUITY
Carrying value 14 LINE OF BUSINESS AND ACTIVITIES Registrion or Currency Nominal amount U.F.
identification Nr. adjustment 31/DeC/10 31/DeC/09 01/jan/09 Nominal of instrument index rate 16 BOARD OF DIRECTORS AND 31/DeC/10 31/DeC/09 01/jan/09 M$ M$ M$ ADMINISTRATION Bank borrowings M$ - - - - - 28,694,226 9.16% Promissory note AFR UF 921,853.48 873,615.90 768,054.06 19,778,874 18,296,050 16,476,734 3.32% 19 ORGANIZATIONAL CHART Bonds UF 10,107,522.20 10,967,281.00 9,386,941.00 211,977,792 226,702,579 194,934,449 4.53% 11,029,375.68 11,840,896.90 10,154,995.06 231,756,666 244,998,629 240,105,409 21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT The company has complied with the payment of the liabilities according to the corresponding maturities and there have been no debt negotiations.
47 STATEMENT OF LIABILITY B. Risks
49 FINANCIAL STATEMENTS B.1 Business Risk The sanitary market is a regulated market, including pricing processes for potable water distribution and sewer system. The authority, in addition to pricing, announces product and operation quality regulations that are necessary to render these services. This business risks are related to the current regulatory framework, where the authority establishes prices after a process searching for top-quality operating and investing in each system, with prices allowing the initial investment recovery and the necessary costs to operate in agreement with current regulations.
B.2 Financial Risk The principal objectives of the financial risk management are ensuring availability of funds for the compliance of financial commitments, and protecting financial flow values of the Group’s assets and liabilities.
Such management is implemented by identifying risks, determining each risk’s tolerance, hedges of such financial risks and control over established hedge operations. In order to achieve the objectives, financial risk management is based on hedging all significant exposures, always provided there are adequate instruments and the cost is reasonable.
ANNUAL REPORT ESVAL 2010 83 CONTENTS ANNUAL REPORT ESVAL 2010 In addition, there exist financial risks, related to the financing of the investments, the recovery periods of these, as well as the costs of funds.
i. Credit Risk The credit risk refers to the possibility of financial loss from non-fulfillment of their obligations by our counterparts (clients).
The Company has a dispersed market, which means that the credit risk of a particular client is not significant.
The objective is to maintain minimum levels of uncollectibility. There is a credit policy in place stipulating the terms and conditions and methods of LETTER FROM THE PRESIDENT 4 payment, and also the terms and conditions for reaching agreements with delinquent clients. Management processes are to control, estimate and evaluate uncollectible accounts with a view to taking corrective actions to achieve the proposed fulfillments.O ne of the main actions and measures 6 LETTER FROM THE CEO to maintain low levels of uncollectibility is to cut off the supply. The method of analysis is based on historical records of accounts receivable from clients and other debtors. 8 COMPANY INFORMATION
31/dec/10 31/dec/09 01/jan/09 10 HISTORICAL ACCOUNT ThCh$ ThCh$ ThCh$
Current plus non-current credit RISK 12 COMPANY’S EQUITY Exposure according to Balance Sheet for the following risks: 14 LINE OF BUSINESS AND ACTIVITIES Trade and other Receivables, (gross) 34,547,183 33,465,117 31,899,888 Estimates for uncollectible accounts -7,629,233 -7,069,991 -6,694,808 16 BOARD OF DIRECTORS AND Net exposure, risk CONCENTRATIONS 26,917,950 26,395,126 25,205,080 ADMINISTRATION
31/dec/10 19 ORGANIZATIONAL CHART 31/dec/09 01/jan/09 ThCh$ ThCh$ ThCh$
21 MANAGEMENT REPORT Trade accounts receivable and other accounts receivable (by aging)
Under three MONTHS 26,672,404 27,236,226 26,248,443 ADMINISTRATION REPORT 39 Between three and twelve MONTHS 7,845,265 6,192,647 5,609,960 Over twelve MONTHS 29,514 36,244 41,485 47 STATEMENT OF LIABILITY Estimates for uncollectible accounts -7,629,233 -7,069,991 -6,694,808 TOTAL 26,917,950 26,395,126 25,205,080 49 FINANCIAL STATEMENTS
ii. Liquidity risk Liquidity risk is the possibility of adverse market situations not allowing the Group to have access to sources of financing and not being able to finance its acquired commitments, such as long-term investments and working capital needs, at reasonable market prices.
Management follows up on provisions for the Group’s liquidity reserve in light of expected cash flows.
Various preventive measures, such as diversifying financing sources and instruments, are used to manage the liquidity risk.
The liquidity risk is controlled regularly, so as to perceive, detect and correct deviations to minimize any possible effects on profit or loss.
ANNUAL REPORT ESVAL 2010 84 CONTENTS ANNUAL REPORT ESVAL 2010 Maturity profiles Other Financial assets
Unguaranteed obligations (commercial bills) that accrue interests at 31/dec/2010:
4 LETTER FROM THE PRESIDENT tax number name registration interest effective 1 to 90 91 days to 1 company issuing issuing nominal number rate interest final payment of days year creditor company company instrument currency value svs contract rate term interests thch$ thch$ company 6 LETTER FROM THE CEO 89.900.400-0 ESVAL S.A. COMMERCIAL BILLS Ch$ pesos not 12,850,000 43 0.49% 0.49% 22/11/11 AnNual 0 12,850,000 Chile indexed 8 COMPANY INFORMATION 89.900.400-0 ESVAL S.A. COMMERCIAL BILLS Ch$ pesos not 12,850,000 44 0.46% 0.46% 08/06/11 SemestER 0 12,850,000 Chile indexed 25,700,000 25,700,000 10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
Unguaranteed obligations (commercial bills) that accrue interests at 31/dec/2009: 14 LINE OF BUSINESS AND ACTIVITIES tax number name registration interest effective 1 to 90 91 days to 1 company issuing issuing nominal number rate interest final payment of days year creditor 16 BOARD OF DIRECTORS AND company company instrument currency value svs contract rate term interests thch$ thch$ company ADMINISTRATION 89.900.400-0 ESVAL S.A. COMMERCIAL BILLS Ch$ pesos not 12,500,000 43 0.24% 0.24% 03/12/10 AnNual 12,500,000 Chile indexed 19 ORGANIZATIONAL CHART 12,500,000 12,500,000
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY Unguaranteed obligations (BONDS) that accrue interests at 31/dec/2010:
TAX NUMER NAME NOMINAL REGISTRATION INTEREST EFFECTIVE 1 TO 90 91 days to 1 company 49 FINANCIAL STATEMENTS ISSUING ISSUING VALUE NUMBER RATE INTEREST FINAL PAYMENT OF dAYS year creditor COMPANY COMPANY INSTRUMENT CURRENCY SVS CONTRACT RATE TERM INTERESTS ThCh$ ThCh$ company
89.900.400-0 ESVAL S.A. BonDS Serie A OF 15/10/2000 U.F. 70,829 232 7.00% 8.04% 15/10/21 SemestER 0 1,519,668 Chile 89.900.400-0 ESVAL S.A. BonDS Serie C OF 01/06/2002 U.F. - 293 5.50% 5.32% 01/06/10 SemestER 0 0 Chile 89.900.400-0 ESVAL S.A. BonDS Serie D OF 01/06/2002 U.F. 214,367 293 6.00% 7.10% 01/06/27 SemestER 0 4,599,358 Chile 89.900.400-0 ESVAL S.A. BonDS Serie E OF 15/07/2004 U.F. 572,952 348 3.80% 4.24% 15/07/12 SemestER 6,203,924 6,089,086 Chile 89.900.400-0 ESVAL S.A. BonDS Serie H OF 15/02/2005 U.F. 170,081 419 3.50% 3.79% 15/02/26 SemestER 930,608 2,718,568 Chile 89.900.400-0 ESVAL S.A. BonDS Serie J OF 15/03/2007 U.F. 191,457 493 3.40% 3.82% 15/03/28 SemestER 2,064,854 2,042,963 Chile 89.900.400-0 ESVAL S.A. BonDS Serie K OF 27/01/2009 U.F. 24,451 561 4.95% 4.88% 27/01/14 SemestER 262,305 262,305 Chile 89.900.400-0 ESVAL S.A. BonDS Serie M OF 27/01/2009 U.F. 96,828 562 4.90% 4.77% 27/01/30 SemestER 1,038,749 1,038,749 Chile 1,340,965 10,500,439 18,270,697
ANNUAL REPORT ESVAL 2010 85 CONTENTS Unguaranteed obligations (BONDS) that accrue interests at 31/dec/2009: ANNUAL REPORT ESVAL 2010 TAX NUMER NAME NOMINAL REGISTRATION INTEREST EFFECTIVE 1 TO 90 91 days to 1 company ISSUING ISSUING VALUE NUMBER RATE INTEREST FINAL PAYMENT OF dAYS year creditor COMPANY COMPANY INSTRUMENT CURRENCY SVS CONTRACT RATE TERM INTERESTS ThCh$ ThCh$ company
89.900.400-0 ESVAL S.A. BonDS Serie A OF 15/10/2000 U.F. 71,125 232 7.00% 8.04% 15/10/21 SemestER 0 1,489,556 Chile 89.900.400-0 ESVAL S.A. BonDS Serie C OF 01/06/2002 U.F. 154,070 293 5.50% 5.32% 01/06/10 SemestER 0 3,226,665 Chile 89.900.400-0 ESVAL S.A. BonDS Serie D OF 01/06/2002 U.F. 214,298 293 6.00% 7.10% 01/06/27 SemestER 0 4,488,010 Chile 89.900.400-0 ESVAL S.A. BonDS Serie E OF 15/07/2004 U.F. 593,187 348 3.80% 4.24% 15/07/12 SemestER 6,269,328 6,153,718 Chile 4 LETTER FROM THE PRESIDENT 89.900.400-0 ESVAL S.A. BonDS Serie H OF 15/02/2005 U.F. 86,748 419 3.50% 3.79% 15/02/26 SemestER 908,371 908,371 Chile 89.900.400-0 ESVAL S.A. BonDS Serie J OF 15/03/2007 U.F. 195,538 493 3.40% 3.82% 15/03/28 SemestER 2,058,255 2,036,883 Chile 89.900.400-0 ESVAL S.A. BonDS Serie K OF 27/01/2009 U.F. 24,451 561 4.95% 4.88% 27/01/14 SemestER 256,037 256,037 Chile SemestER 6 LETTER FROM THE CEO 89.900.400-0 ESVAL S.A. BonDS Serie M OF 27/01/2009 U.F. 96,828 562 4.90% 4.77% 27/01/30 1,013,929 1,013,929 Chile 1,436,244 10,505,920 19,573,168 8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART Unguaranteed obligations (BONDS) that accrue interests at 01/JAN/2009:
21 MANAGEMENT REPORT TAX NUMER NAME NOMINAL REGISTRATION INTEREST EFFECTIVE 1 TO 90 91 days to 1 company ISSUING ISSUING VALUE NUMBER RATE INTEREST FINAL PAYMENT OF dAYS year creditor COMPANY COMPANY INSTRUMENT CURRENCY SVS CONTRACT RATE TERM INTERESTS ThCh$ ThCh$ company 39 ADMINISTRATION REPORT 89.900.400-0 ESVAL S.A. BonDS Serie A OF 15/10/2000 U.F. 71,404 232 7.00% 8.04% 15/10/21 SemestER 0 1,531,793 Chile 89.900.400-0 ESVAL S.A. BonDS Serie C OF 01/06/2002 U.F. 320,349 293 5.50% 5.32% 01/06/10 SemestER 0 6,872,308 Chile 47 STATEMENT OF LIABILITY 89.900.400-0 ESVAL S.A. BonDS Serie D OF 01/06/2002 U.F. 214,232 293 6.00% 7.10% 01/06/27 SemestER 0 4,595,834 Chile 89.900.400-0 ESVAL S.A. BonDS Serie E OF 15/07/2004 U.F. 613,422 348 3.80% 4.24% 15/07/12 SemestER 6,640,748 6,518,722 Chile 49 FINANCIAL STATEMENTS 89.900.400-0 ESVAL S.A. BonDS Serie H OF 15/02/2005 U.F. 86,748 419 3.50% 3.79% 15/02/26 SemestER 930,478 930,478 Chile 89.900.400-0 ESVAL S.A. BonDS Serie J OF 15/03/2007 U.F. 147,529 493 3.40% 3.82% 15/03/28 SemestER 933,219 2,231,664 Chile 89.900.400-0 ESVAL S.A. BonDS Serie K OF 27/01/2009 U.F. 12,226 561 4.95% 4.88% 27/01/14 SemestER 0 262,268 Chile 89.900.400-0 ESVAL S.A. BonDS Serie M OF 27/01/2009 U.F. 48,414 562 4.90% 4.77% 27/01/30 SemestER 0 1,038,605 Chile 1,514,323 8,504,445 23,981,674
ANNUAL REPORT ESVAL 2010 86 CONTENTS ANNUAL REPORT ESVAL 2010 REIMBURSABLE FINANCIAL CONTRIBUTIONS (PROMISSORY NOTES) AT 31/DEC/2010:
TAX NUMBER NAME IDENTIFICATION AVERAGE EFFECTIVE 1 TO 90 91 dAYS TO company DEBTOR ISSUING OF KIND OF INTEREST INTEREST dAYS 1 YEAR creditor COMPANY COMPANY INSTRUMENT CURRENCY RATE BaSIS RATE RATE ThCh$ ThCh$ company
89.900.400-0 ESVAL S.A. promissory notes U.F. Fixed half-year 2.04% 2.04% 0 434,263 Chile 434,263
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT REIMBURSABLE FINANCIAL CONTRIBUTIONS (PROMISSORY NOTES) AT 31/DEC/2009:
12 COMPANY’S EQUITY TAX NUMBER NAME IDENTIFICATION AVERAGE EFFECTIVE 1 TO 90 91 dAYS TO company DEBTOR ISSUING OF KIND OF INTEREST INTEREST dAYS 1 YEAR creditor COMPANY COMPANY INSTRUMENT CURRENCY RATE BaSIS RATE RATE ThCh$ ThCh$ company 14 LINE OF BUSINESS AND ACTIVITIES 89.900.400-0 ESVAL S.A. Promissory notes U.F. Fixed half-year 1.70% 1.70% 151,718 - Chile 16 BOARD OF DIRECTORS AND 151,718 ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
REIMBURSABLE FINANCIAL CONTRIBUTIONS (PROMISSORY NOTES) AT 01/jan/2009: 47 STATEMENT OF LIABILITY
TAX NUMBER NAME IDENTIFICATION AVERAGE EFFECTIVE 1 TO 90 91 dAYS TO company 49 FINANCIAL STATEMENTS DEBTOR ISSUING OF KIND OF INTEREST INTEREST dAYS 1 YEAR creditor COMPANY COMPANY INSTRUMENT CURRENCY RATE BaSIS RATE RATE ThCh$ ThCh$ company
89.900.400-0 ESVAL S.A. PROMISSORY NOTES U.F. FiXED HALF-YEAR 2.60% 2.60% 474,171 1,098,649 Chile 474,171 1,098,649
ANNUAL REPORT ESVAL 2010 87 CONTENTS ANNUAL REPORT ESVAL 2010 LOANS FROM FINANCIAL ENTITIES AT 01/JAN/2009: TAX NUMBER NAME COUNTRY TAX NR. NAME AVERAGE EFFECTIVE 1 TO 90 91 dAYS TO company DEBTOR ISSUING DEBTOR CREDITOR CREDITOR KIND OF INTEREST INTEREST dAYS 1 YEAR creditor COMPANY COMPANY COMPANY INSTITUTION INSTITUTION CURRENCY RATE BaSIS RATE RATE ThCh$ ThCh$ company
89.900.400-0 ESVAL S.A. CHILE 97.018.000-1 BanK Scotiabank Ch$ pesos not indexed Fixed quarter 9.67% 9.67% 102,367 Chile 89.900.400-0 ESVAL S.A. CHILE 97.018.000-1 BanK Scotiabank Ch$ pesos not indexed Fixed quarter 10.92% 10.92% 109,200 Chile 89.900.400-0 ESVAL S.A. CHILE 76.645.030-K BanK Itaú Ch$ pesos not indexed Fixed quarter 9.67% 9.67% 34,154 Chile 89.900.400-0 ESVAL S.A. CHILE 97.004.000-5 BanK Chile Ch$ pesos not indexed Fixed quarter 7.85% 7.85% 169,187 Chile BanK Chile Ch$ pesos not indexed Fixed quarter 10.02% 354,332 Chile 4 LETTER FROM THE PRESIDENT 89.900.400-0 ESVAL S.A. CHILE 97.004.000-5 10.02% 245,721 523,519
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT OTHER NON-CURRENT FINANCIAL LIABILITIES:
UNGUARANTEED OBLIGATIONS (BONDS) THAT ACCRUE INTERESTS AT 31/DEC/2010: 12 COMPANY’S EQUITY
TAX NUMBER NAME NOMINAL REGISTRATION INTEREST EFFECTIVE MORE THAN 1 MORE THAN 3 MORE THAN company 14 LINE OF BUSINESS AND ACTIVITIES ISSUING ISSUING VALUE NUMBER RATE INTEREST FINAL PAYMENT OF YEAR TO 3 YEAR TO 5 5 YEAR creditor COMPANY COMPANY INSTRUMENT CURRENCY SVS CONTRACT RATE TERM INTEREST ThCh$ ThCh$ ThCh$ company
16 BOARD OF DIRECTORS AND 89.900.400-0 ESVAL S.A. BonDS Serie A OF 15/10/2000 U.F. 687,440 232 7.00% 8.04% 15/10/21 SemestER 3,018,714 2,988,354 8,742,342 Chile ADMINISTRATION 89.900.400-0 ESVAL S.A. BonDS Serie C OF 01/06/2002 U.F. - 293 5.50% 5.32% 01/06/10 SemestER Chile 89.900.400-0 ESVAL S.A. BonDS Serie D OF 01/06/2002 U.F. 3,335,505 293 6.00% 7.10% 01/06/27 SemestER 9,203,538 9,210,637 53,150,924 Chile 89.900.400-0 ESVAL S.A. BonDS Serie E OF 15/07/2004 U.F. 552,746 348 3.80% 4.24% 15/07/12 SemestER 11,859,467 Chile 19 ORGANIZATIONAL CHART 89.900.400-0 ESVAL S.A. BonDS Serie H OF 15/02/2005 U.F. 3,045,587 419 3.50% 3.79% 15/02/26 SemestER 10,564,069 10,067,749 44,712,916 Chile 89.900.400-0 ESVAL S.A. BonDS Serie J OF 15/03/2007 U.F. 2,569,786 493 3.40% 3.82% 15/03/28 SemestER 7,952,920 7,602,650 39,580,599 Chile 89.900.400-0 ESVAL S.A. BonDS Serie K OF 27/01/2009 U.F. 561,128 561 4.95% 4.88% 27/01/14 SemestER 1,049,219 10,990,080 Chile 21 MANAGEMENT REPORT 89.900.400-0 ESVAL S.A. BonDS Serie M OF 27/01/2009 U.F. 3,282,971 562 4.90% 4.77% 27/01/30 SemestER 4,154,996 4,154,996 62,127,965 Chile 14,035,163 47,802,923 45,014,465 208,314,745 39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
UNGUARANTEED OBLIGATIONS (BONDS) THAT ACCRUE INTERESTS AT 31/DEC/2009: 49 FINANCIAL STATEMENTS
TAX NUMBER NAME NOMINAL REGISTRATION INTEREST EFFECTIVE MORE THAN 1 MORE THAN 3 MORE THAN company ISSUING ISSUING VALUE NUMBER RATE INTEREST FINAL PAYMENT OF YEAR TO 3 YEAR TO 5 5 YEAR creditor COMPANY COMPANY INSTRUMENT CURRENCY SVS CONTRACT RATE TERM INTEREST ThCh$ ThCh$ ThCh$ company
89.900.400-0 ESVAL S.A. Bonds Serie A of 15/10/2000 U.F. 758,269 232 7.00% 8.04% 15/10/21 Semester 2,960,137 2,932,203 9,987,995 Chile 89.900.400-0 ESVAL S.A. Bonds Serie C of 01/06/2002 U.F. - 293 5.50% 5.32% 01/06/10 Semester 0 0 Chile 89.900.400-0 ESVAL S.A. Bonds Serie D of 01/06/2002 U.F. 3,549,872 293 6.00% 7.10% 01/06/27 Semester 8,980,455 8,986,987 56,377,103 Chile 89.900.400-0 ESVAL S.A. Bonds Serie E of 15/07/2004 U.F. 1,125,698 348 3.80% 4.24% 15/07/12 Semester 23,575,365 0 0 Chile 89.900.400-0 ESVAL S.A. Bonds Serie H of 15/02/2005 U.F. 3,215,667 419 3.50% 3.79% 15/02/26 Semester 8,778,365 10,069,410 48,497,558 Chile 89.900.400-0 ESVAL S.A. Bonds Serie J of 15/03/2007 U.F. 2,761,243 493 3.40% 3.82% 15/03/28 Semester 7,933,844 7,591,939 42,302,596 Chile 89.900.400-0 ESVAL S.A. Bonds Serie K of 27/01/2009 U.F. 585,579 561 4.95% 4.88% 27/01/14 Semester 1,024,149 11,239,552 0 Chile 89.900.400-0 ESVAL S.A. Bonds Serie M of 27/01/2009 U.F. 3,379,799 562 4.90% 4.77% 27/01/30 Semester 4,055,714 4,055,714 62,671,305 Chile 15,376,127 57,308,029 44,875,804 219,836,557
ANNUAL REPORT ESVAL 2010 88 CONTENTS UNGUARANTEED OBLIGATIONS (BONDS) THAT ACCRUE INTERESTS AT 01/jan/2009: ANNUAL REPORT ESVAL 2010
TAX NUMBER NAME NOMINAL REGISTRATION INTEREST EFFECTIVE MORE THAN 1 MORE THAN 3 MORE THAN company ISSUING ISSUING VALUE NUMBER RATE INTEREST FINAL PAYMENT OF YEAR TO 3 YEAR TO 5 5 YEAR creditor COMPANY COMPANY INSTRUMENT CURRENCY SVS CONTRACT RATE TERM INTEREST ThCh$ ThCh$ ThCh$ company
89.900.400-0 ESVAL S.A. Bonds Serie A of 15/10/2000 U.F. 829,394 232 7.00% 8.04% 15/10/21 Semester 3,045,265 3,018,294 11,729,066 Chile 89.900.400-0 ESVAL S.A. Bonds Serie C of 01/06/2002 U.F. 154,070 293 5.50% 5.32% 01/06/10 Semester 3,305,193 0 0 Chile 89.900.400-0 ESVAL S.A. Bonds Serie D of 01/06/2002 U.F. 3,764,170 293 6.00% 7.10% 01/06/27 Semester 9,195,954 9,202,260 62,352,900 Chile 89.900.400-0 ESVAL S.A. Bonds Serie E of 15/07/2004 U.F. 1,718,885 348 3.80% 4.24% 15/07/12 Semester 25,016,690 11,857,819 0 Chile 89.900.400-0 ESVAL S.A. Bonds Serie H of 15/02/2005 U.F. 3,302,415 419 3.50% 3.79% 15/02/26 Semester 5,509,626 10,562,602 54,773,056 Chile 4 LETTER FROM THE PRESIDENT 89.900.400-0 ESVAL S.A. Bonds Serie J of 15/03/2007 U.F. 2,956,781 493 3.40% 3.82% 15/03/28 Semester 8,302,047 7,951,816 47,176,695 Chile 89.900.400-0 ESVAL S.A. Bonds Serie K of 27/01/2009 U.F. 610,030 561 4.95% 4.88% 27/01/14 Semester 1,049,074 1,049,074 10,988,553 Chile 89.900.400-0 ESVAL S.A. Bonds Serie M of 27/01/2009 U.F. 3,476,627 562 4.90% 4.77% 27/01/30 Semester 4,154,419 4,154,419 66,273,755 Chile 6 LETTER FROM THE CEO 16,812,372 59,578,268 47,796,284 253,294,025
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT REIMBURSABLE FINANCIAL CONTRIBUTIONS (PROMISSORY NOTES) AT 31/DEC/2010: 12 COMPANY’S EQUITY
TAX NUMBER NAME IDENTIFICATION INTEREST EFFECTIVE MORE THAN MORE THAN MORE THAN COMPANY 14 LINE OF BUSINESS AND ACTIVITIES DEBTOR ISSUING OF THE KIND OF RATE INTEREST 1 YEAR TO 3 3 YEARS TO 5 5 YEARS CREDITOR COMPANY COMPANY INSTRUMENTS CURRENCY RATE BASIS CONTRACT RATE thch$ thch$ thch$ COMPANY
16 BOARD OF DIRECTORS AND 89.900.400-0 ESVAL S.A. PROMISSORY NOTES U.F. FiXED HALF-YEAR 3.33% 3.33% 3,964,375 6,133,979 13,890,866 Chile ADMINISTRATION 3,964,375 6,133,979 13,890,866
19 ORGANIZATIONAL CHART REIMBURSABLE FINANCIAL CONTRIBUTIONS (PROMISSORY NOTES) AT 31/DEC/2009: 21 MANAGEMENT REPORT TAX NUMBER NAME IDENTIFICATION INTEREST EFFECTIVE MORE THAN MORE THAN MORE THAN COMPANY ADMINISTRATION REPORT DEBTOR ISSUING OF THE KIND OF RATE INTEREST 1 YEAR TO 3 3 YEARS TO 5 5 YEARS CREDITOR 39 COMPANY COMPANY INSTRUMENTS CURRENCY RATE BASIS CONTRACT RATE thch$ thch$ thch$ COMPANY
3.31% 3,032,083 3,894,760 15,935,376 Chile 47 STATEMENT OF LIABILITY 89.900.400-0 ESVAL S.A. PROMISSORY NOTES U.F. FiXED HALF-YEAR 3.31% 3,032,083 3,894,760 15,935,376 49 FINANCIAL STATEMENTS
REIMBURSABLE FINANCIAL CONTRIBUTIONS (PROMISSORY NOTES) AT 01/jan/2009:
TAX NUMBER NAME IDENTIFICATION INTEREST EFFECTIVE MORE THAN MORE THAN MORE THAN COMPANY DEBTOR ISSUING OF THE KIND OF RATE INTEREST 1 YEAR TO 3 3 YEARS TO 5 5 YEARS CREDITOR COMPANY COMPANY INSTRUMENTS CURRENCY RATE BASIS CONTRACT RATE thch$ thch$ thch$ COMPANY
89.900.400-0 ESVAL S.A. PROMISSORY NOTES U.F. Fixed HALF-YEAR 3.31% 3.31% 589,613 3,963,825 16,754,996 Chile 589,613 3,963,825 16,754,996
ANNUAL REPORT ESVAL 2010 89 CONTENTS ANNUAL REPORT ESVAL 2010 LOANS FROM FINANCIAL ENTITIES AT 01/JAN/2009:
TAX NUMBER NAME COUNTRY TAX NR. NAME INTEREST EFFECTIVE MORE THAN MORE THAN MORE THAN COMPANY DEBTOR ISSUING DEBTOR CREDITOR CREDITOR KIND OF RATE INTEREST 1 YEAR TO 3 3 YEARS TO 5 5 YEARS CREDITOR COMPANY COMPANY COMPANY INSTITUTION INSTITUTION CURRENCY RATE BASIS CONTRACT RATE ThCh$ ThCh$ ThCh$ COMPANY
89.900.400-0 ESVAL S.A. CHILE 97.018.000-1 BanK Scotiabank Ch$ pesos not indexed Fixed quarter 9.67% 9.67% 4,187,865 Chile 89.900.400-0 ESVAL S.A. CHILE 97.018.000-1 BanK Scotiabank Ch$ pesos not indexed Fixed quarter 10.92% 10.92% 4,000,000 Chile 89.900.400-0 ESVAL S.A. CHILE 76.645.030-K BanK Itaú Ch$ pesos not indexed Fixed quarter 9.67% 9.67% 1,397,282 Chile 89.900.400-0 ESVAL S.A. 97.004.000-5 BanK Chile Ch$ pesos not indexed Fixed quarter 7.85% 7.85% 8,918,256 Chile 4 LETTER FROM THE PRESIDENT CHILE 89.900.400-0 ESVAL S.A. CHILE 97.004.000-5 BanK Chile Ch$ pesos not indexed Fixed half-year 10.02% 10.02% 10,350,000 Chile 19,935,147 8,918,256 0 6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT iii. Interest Rate Risk 12 COMPANY’S EQUITY The Company has a debt structure with fixed rates as specified in the table below:
14 LINE OF BUSINESS AND ACTIVITIES 31/dec/10 31/dec/09 01/jan/09 % % %
16 BOARD OF DIRECTORS AND Debt INSTRUMENTS Interest RATE ADMINISTRATION Bank Borrowings Fixed 0.00% 0.00% 10.86% 19 ORGANIZATIONAL CHART Commercial Papers Fixed 8.85% 4.37% 0.00% Bonds Fixed 83.92% 89.01% 82.36% 21 MANAGEMENT REPORT AFR Fixed 7.23% 6.62% 6.78% TOTAL 100.00% 100.00% 100.00% 39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS Total other financial assets by company are:
31/dec/10 31/dec/09 01/jan/09 ThCh$ ThCh$ ThCh$
COMPANY INSTRUMENTS
Esval S.A. Cash and banks 158,500 150,006 174,425 Esval S.A. Mutual Fund - 12,151,269 - Esval S.A. Covenants 16,915,089 10,936,305 2,054,747 Total Investments (other assets) 17,073,589 23,237,580 2,229,172
ANNUAL REPORT ESVAL 2010 90 CONTENTS ANNUAL REPORT ESVAL 2010 iV. Risk UF variation 95.5% of the financial debt is structured in UF, which is consistent with the flows of the Company.
The revenues of the Company correspond 100% to Chilean pesos and are mostly related with the variations of the indexation of the tariff. The sales tariffs include in their indicators factors associated to the economy (CPI and IPMN), which indicates an adequate hedging between revenues and liabilities.
C. Derivative instruments LETTER FROM THE PRESIDENT 4 The Company does not have any hedge instruments at year-end.
6 LETTER FROM THE CEO D. Fair Value of Financial Instruments Fair Value of Financial Instruments Booked at Amortized Cost 8 COMPANY INFORMATION
31/DeC/10 31/DeC/09 01/jan/09 10 HISTORICAL ACCOUNT Amort. Cost Fair Value Amort. Cost Fair Value Amort. Cost Fair Value ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ 12 COMPANY’S EQUITY Financial ASSETS
Investments held at amortized COST 43,803,525 43,803,526 49,446,456 49,446,456 27,218,342 27,218,342 14 LINE OF BUSINESS AND ACTIVITIES I nvestments in marketable SECURITIES - - 12,151,269 12,151,269 - - Trade and other accounts receivable, NET 26,888,436 26,888,436 26,358,882 26,358,882 25,163,595 25,163,595 16 BOARD OF DIRECTORS AND ADMINISTRATION Resale AGREEMENTS 16,915,089 16,915,090 10,936,305 10,936,305 2,054,747 2,054,747
19 ORGANIZATIONAL CHART Financial LIABILITIES Financial liabilities held at amortized COST 290,600,093 290,600,093 286,956,946 286,956,946 274,398,662 274,398,662 21 MANAGEMENT REPORT B ank BORROWINGS - - - - 28,868,385 28,868,385 10,957,968 10,957,968 8,442,099 8,442,099 8,558,112 8,558,112 39 ADMINISTRATION REPORT Trade and other accounts PAYABLE
Commercial PAPERS 24,756,237 24,756,237 12,173,862 12,173,862 - - 47 STATEMENT OF LIABILITY BONDS 234,676,303 234,676,303 247,893,841 247,893,841 218,935,994 218,935,994 AFR 20,209,585 20,209,585 18,447,144 18,447,144 18,036,171 18,036,171 49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 91 CONTENTS ANNUAL REPORT ESVAL 2010 Methodology and suppositions used in calculating the Fair Value. The Fair Value of Financial Assets and Liabilities is determined using the following methodology:
The amortized cost of investments in marketable securities involves mutual funds, which are presented at the year-end value of the respective unit, with such, therefore, being the fair value of these securities.
The Amortized Cost of the Repurchase Agreements is a good approximation of the Fair Value, since they are very short-term operations.
The Amortized Cost of Commercial Papers is a good approximation of the Fair Value, since they are operations with very little market liquidity. 4 LETTER FROM THE PRESIDENT Since the level of the transactions in the market is irrelevant, bonds are stated at their par value, plus the respective accrued effective rate at 6 LETTER FROM THE CEO period-end.
8 COMPANY INFORMATION The Amortized Cost of the AFR liabilities is a good approximation of the Fair Value, since they are operations with very little market liquidity.
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY 7. TRADE DEBTORS AND OTHER ACCOUNTS RECEIVABLE, NET The detail of this item is as follows: 14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION 31/DeC/10 31/DeC/09 01/jan/09
AGUAS DEL AGUAS DEL AGUAS DEL ORGANIZATIONAL CHART ESVAL S.A. VALLE S.A. TOTAL ESVAL S.A. VALLE S.A. TOTAL ESVAL S.A. VALLE S.A. TOTAL 19 CURRENT ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
21 MANAGEMENT REPORT Trade accounts receivable 23,547,484 6,386,475 29,933,959 23,228,132 6,522,649 29,750,781 22,907,828 6,270,773 29,178,601 Provision for uncollectible accounts (5,127,210) (1,141,746) (6,268,956) (4,794,006) (1,109,953) (5,903,959) (4,387,994) (1,145,368) (5,533,362) Trade accounts receivable, net 18,420,274 5,244,729 23,665,003 18,434,126 5,412,696 23,846,822 18,519,834 5,125,405 23,645,239 39 ADMINISTRATION REPORT Notes receivable 83,032 38,628 121,660 184,329 32,797 217,126 104,503 31,242 135,745 Provision for uncollectible accounts (45,610) (29,242) (74,852) (53,065) (14,022) (67,087) (53,065) (14,022) (67,087) 47 STATEMENT OF LIABILITY Notes receivable, net 37,422 9,386 46,808 131,264 18,775 150,039 51,438 17,220 68,658
49 FINANCIAL STATEMENTS Sundry debtors 4,044,489 240,206 4,284,695 3,222,413 238,554 3,460,967 2,355,581 188,477 2,544,058 Provision for uncollectible accounts (1,084,941) (23,129) (1,108,070) (1,075,817) (23,129) (1,098,946) (1,073,731) (20,629) (1,094,360) Sundry debtors, net 2,959,548 217,077 3,176,625 2,146,596 215,425 2,362,021 1,281,850 167,848 1,449,698
Total trade receivables and other receivables, non current, net 21,417,244 5,471,192 26,888,436 20,711,986 5,646,896 26,358,882 19,853,122 5,310,473 25,163,595
NON CURRENT
Long-term accounts receivable 206,869 0 206,869 213,599 0 213,599 218,840 0 218,840 Provision for uncollectible accounts (177,355) 0 (177,355) (177,355) 0 (177,355) (177,355) 0 (177,355)
Total trade receivables 29,514 0 29,514 36,244 0 36,244 41,485 0 41,485 and other receivables, non current, net
ANNUAL REPORT ESVAL 2010 92 CONTENTS ANNUAL REPORT ESVAL 2010 Generally speaking, balances included in this item do not accrue interest. There are no significant amount restrictions on disposing of this kind of account receivable.
Individually no client maintains significant balances in relation to the Group’s total sales or accounts receivable.
See Note 8 for amounts, and terms and conditions related to accounts receivable from related parties.
LETTER FROM THE PRESIDENT 4 Average period of collection
6 LETTER FROM THE CEO Esval S.A = 1.75 (months) 8 COMPANY INFORMATION Aguas del Valle S.A. = 1.49 (months)
10 HISTORICAL ACCOUNT At each year-end, the analysis of trade debtors and other accounts receivable is as follows: 12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
31/dec/10 31/dec/09 01/jan/09 16 BOARD OF DIRECTORS AND ThCh$ ThCh$ ThCh$ ADMINISTRATION
19 ORGANIZATIONAL CHART Aged less than one month 6,831,758 5,954,971 7,754,146 Aged from one to three months 3,110,469 3,236,490 3,427,504 21 MANAGEMENT REPORT Aged from four to six months 474,852 490,918 646,946 Aged from seven to eleven months 697,449 733,388 655,699 39 ADMINISTRATION REPORT Aged more than twelve months 7,146,662 6,963,114 6,741,991 Suspended clients 1,106,756 895,035 733,784 47 STATEMENT OF LIABILITY Clients from other services 15,149,723 15,154,957 11,898,333 Total 34,517,669 33,428,873 31,858,403 49 FINANCIAL STATEMENTS Changes in the debtor impairment provision were as follows:
Initial balance al January 1, 2009 7,069,992 6,694,808 6,081,650 Increase in the provision during the year 559,241 375,183 613,158 Final balance 7,629,233 7,069,991 6,694,808
Trade and Other Receivables, Net, Current 26,888,436 26,358,882 25,163,595
ANNUAL REPORT ESVAL 2010 93 CONTENTS ANNUAL REPORT ESVAL 2010 8. INFORMATION TO BE DISCLOSED ON RELATED PARTIES
IDENTIFICATION OF SUBSIDIARIES
DIREC INDIREC TOTAL 2010 TOTAL 2010 % % (%) (%)
Taxpayer No. Name of company
4 LETTER FROM THE PRESIDENT 99.541.380-9 Aguas del Valle S.A. 99.0000 0.9999 99.9999 99.9999 76.027.490-9 Servicios Sanitarios Las Vegas Ltda. 99.9900 0.0000 99.9900 99.9900 6 LETTER FROM THE CEO 17.073.589 23.237.580 2.229.172 2.229.172
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT Balances and Transactions with related parties Transactions between the Company and its subsidiaries are adjusted to market conditions. These transactions have been eliminated in the process 12 COMPANY’S EQUITY of consolidation and are not broken down in this note.
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND Accounts Receivable to Related Parties ADMINISTRATION
Taxpayer No. Name of Nature of Country of Nature of transaction Tipe of Current (TcCh$) 19 ORGANIZATIONAL CHART related party company relationship origen with related parties currency Term Guarantees 31/DEC/10 31/DEC/09 01/JAN/09
96.846.610-0 Lago Peñuelas S.A. Common shareholder CL Purchase of water CLP 30 days No garantess 0 0 3,683 21 MANAGEMENT REPORT
ADMINISTRATION REPORT 39 Accounts Payable to Related Parties
47 STATEMENT OF LIABILITY Taxpayer No. Name of Nature of Country of Nature of transaction Tipe of Current (TcCh$) related party company relationship origen with related parties currency Term Guarantees 31/DEC/10 31/DEC/09 01/JAN/09 49 FINANCIAL STATEMENTS 96.846.610-0 Lago Peñuelas S.A. Common shareholder CL Purchase of water CLP 30 days No garantess 646 3,811 0
Transactions with related companies
Current (Thousands of CH$) Tax ID Name of Nature of 31/DEC/10 31/DEC/09 01/JAN/09 Description of Related Party Related Party relationship Effects on income Effects on income Effects on income the transaction Amount (Charge / Credit) Amount (Charge / Credit) Amount (Charge / Credit)
96.846.610-0 Lago Peñuelas S.A. Common Shareholder Inteconnection tariff 37,584 -31,583 44,469 -37,369 35,907 -30,174
ANNUAL REPORT ESVAL 2010 94 CONTENTS ANNUAL REPORT ESVAL 2010 Remuneration Paid to Directors and Directors Committee
31/DEC/10 31/DEC/09 ThCh$ ThCh$
Detail
Board of Directors 219,457 192,719 4 LETTER FROM THE PRESIDENT Commitee of Directors 18,310 18,390 Fees 15,087 18,840 6 LETTER FROM THE CEO TOTAL 252,854 229,949
8 COMPANY INFORMATION The fees paid to Directors and Directors Committee are presented in the Statements of Income under the item Other Sundry Operating Expenses by nature. 10 HISTORICAL ACCOUNT Details of Related Parties and Transactions with Related Parties between Directors and Executives 12 COMPANY’S EQUITY The Company’s management is not aware of any transactions between related parties and directors and/or executives. 14 LINE OF BUSINESS AND ACTIVITIES Key management personnel incentives plans 16 BOARD OF DIRECTORS AND Esval S.A. has set up an annual bonus plan for its executives keyed to accomplishing goals and the level of their individual contribution to the ADMINISTRATION company’s profit or loss.
19 ORGANIZATIONAL CHART 9. INVENTORIES 21 MANAGEMENT REPORT Inventory Measuring Policy 39 ADMINISTRATION REPORT Inventories are presented at acquisition cost, which does not exceed their net realizable value. The cost method is the weighted average cost. 47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$
Classes of inventories
Domestic material in warehouse 317,139 307,451 314,367 Chemical products 82,920 83,950 91,259 Fuel (petrol cards) 20,587 9,007 12,841 Fuel (petroleum cards) 34,583 9,102 25,185 Provision for obsolescence -1,326 -1,017 -1,017 Total inventories 453,903 408,493 442,635
The cost of inventories recognized as an expense during el period ended December 31, 2010 was ThCh$2,091,414, while it was ThCh$2,079,775 at December 31, 2009.
ANNUAL REPORT ESVAL 2010 95 CONTENTS ANNUAL REPORT ESVAL 2010 10. INTANGIBLE ASSETS
Intangible assets policy
The Company recognizes an identifiable intangible asset when it can show that the future economic benefits attributed to it will probably flow to the entity and the cost may be correctly valued.
31/DEC/10 31/DEC/09 01/JAN/09 4 LETTER FROM THE PRESIDENT ThCh$ ThCh$ ThCh$
INTANGIBLES 6 LETTER FROM THE CEO WATER RIGHTS (Indefinite useful life) 25,139,666 24,997,555 24,956,965 8 COMPANY INFORMATION EASEMENT RIGHTS (Indefinite useful life) 2,775,142 2,753,489 2,679,369 10 HISTORICAL ACCOUNT SOFTWARE AND LICENCES 5,277,421 5,165,035 4,694,772 12 COMPANY’S EQUITY ACCUMULATED AMORTIZATION SOFTWARE AND LICENCES (4,338,370) (3,622,325) (2,992,274) SOFTWARE AND LICENCES, NET 939,051 1,542,710 1,702,498 14 LINE OF BUSINESS AND ACTIVITIES OTHER INTANGIBLES 6,404,054 5,972,411 5,231,891 ACCUMULATED AMORTIZATION OTHER INTANGIBLES 16 BOARD OF DIRECTORS AND (3,884,532) (3,541,747) (3,299,894) OTHER INTANGIBLES NET ADMINISTRATION 2,519,522 2,430,664 1,931,997
INTANGIBLES SANITATION CONCESION COQUIMBO - (Initial payment) 55,833,991 55,833,991 55,833,991 ORGANIZATIONAL CHART 19 ACCUMULATED AMORTIZATION SANITATION CONCESSION (13,084,020) (11,176,245) (9,937,842) INTANGIBLES SANITATION CONCESSION COQUIMBO NET 42,749,971 44,657,746 45,896,149 21 MANAGEMENT REPORT INTANGIBLES SANITATION CONCESION COQUIMBO (Operating Assets) 51,115,389 46,273,149 39,933,151 39 ADMINISTRATION REPORT ACCUMULATED AMORTIZATION SANITATION CONCESSION (3,603,947) (3,045,776) (2,601,057) INTANGIBLES SANITATION CONCESSION COQUIMBO NET 47,511,442 43,227,373 37,332,094 47 STATEMENT OF LIABILITY TOTAL INTANGIBLES 121,634,794 119,609,537 114,499,072 49 FINANCIAL STATEMENTS
Bases of recognition and measurement of identifiable intangible assets:
The basis for recognition and measurement will be the cost method. Nevertheless, as indicated in IFRS 1, first-time adoption, certain Water Rights and Easements were revalued and such values were used as the attributed cost.
Amortization method for computer programs:
The amortization method applied by the Company reflects the pattern with which the asset’s future economic benefits are expected to be used by the entity. To that end, the Company uses the straight-line method of depreciation.
ANNUAL REPORT ESVAL 2010 96 CONTENTS ANNUAL REPORT ESVAL 2010 Estimated useful lives or amortization rates used for finite-lived identifiable intangible assets Software’s estimated useful life is 4 years. For other finite-lived assets, the useful life period in which they are amortized is the period as defined in the contracts or rights giving rise to them.
Indefinite-lived intangibles
These are mainly water rights and easements, which were obtained on an indefinite basis.
4 LETTER FROM THE PRESIDENT Information to be disclosed on internally generated intangible assets:
6 LETTER FROM THE CEO The Company does not have any internally-generated intangible assets.
8 COMPANY INFORMATION Details of revalued identifiable intangible assets:
Despite the fact that the Company adopted the cost valuation model under IFRS 1, first-time adoption, the Water Rights were revalued, with the 10 HISTORICAL ACCOUNT market value at that date being recorded (attributed cost).
12 COMPANY’S EQUITY Both the Water Rights and Easements are rights owned by the Company, for which a finite useful life cannot be stipulated; in other words, the term of the economic benefits associated with these assets is indefinite. 14 LINE OF BUSINESS AND ACTIVITIES The main finite-lived asset is the right to exploit the sanitary concession in the Coquimbo Region. Its initial useful life is the term of the concession 16 BOARD OF DIRECTORS AND contract, which is 30 years. ADMINISTRATION Assets subject to the right to exploit the sanitary concession in the Coquimbo region are also recognized as intangible assets and they are amortized in light of each one's particular technical specifications and use. 19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT 11. PROPERTY, PLANT AND EQUIPMENT
39 ADMINISTRATION REPORT Basics for measuring property, plant and equipment
47 STATEMENT OF LIABILITY The Company uses the cost method for valuing Property, Plant and Equipment. Nevertheless, for first-time application of SIFR certain plots of land were revalued and this value was recorded as the attributed cost, as specified in Note 3. The historical cost includes expenses directly attributable to the acquisition of the asset. 49 FINANCIAL STATEMENTS Subsequent costs are included in the value of the initial asset or are recognized as a separate asset, only when the future economic benefits associated with the fixed asset elements will probably flow to theC ompany and the cost of the element may be calculated reliably. The value of the replaced component is written off in the books. The rest of the repairs and maintenance are charged to profit or loss for the year in which they occur.
Increases in the carrying value as a result of the revaluation of the fixed asset are charged to other reserves in equity. Decreases offsetting prior increases in the same asset are charged to fair value reserves directly in equity; the remaining decreases are charged to profit or loss.
Depreciation method for property, plant and equipment
The depreciation method applied by theC ompany reflects the pattern with which the entity is expected to use the assets during the period in which they generate economic benefits. To that end, theC ompany uses the straight-line method of depreciation over the technical useful life of the asset, which is based on studies made by independent experts. The salvage value and useful life of the assets are reviewed and adjusted if necessary at each year-end.
ANNUAL REPORT ESVAL 2010 97 CONTENTS ANNUAL REPORT ESVAL 2010 Estimated useful lives or depreciation rates for property, plant and equipment
The useful life applied by the Company corresponds to the technical useful lives of the assets.
Minimum useful Maximum useful life (in Years) life (in Years) 4 LETTER FROM THE PRESIDENT ITEM 6 LETTER FROM THE CEO Useful life for buildings 20 80 Useful life for plant and equipment 5 50 8 COMPANY INFORMATION Useful life for information technology equipment 4 5 Useful life for fixed installations and accessories 5 80 10 HISTORICAL ACCOUNT Useful life for motor vehicles 7 10 Useful life for other property, plant and equipment 10 50 12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND Due to the nature of the assets built in the company and since there are no contractual obligations in place such as those mentioned by IFRS, the ADMINISTRATION concept of dismantling costs does not apply to the Company.
Fixed asset sale policy 19 ORGANIZATIONAL CHART Profit or loss from the sale of fixed assets is calculated by comparing the income obtained with the carrying value and booked in the profit and loss 21 MANAGEMENT REPORT statement. When revalued assets are sold, the values included in the revaluation reserves are transferred to retained earnings.
39 ADMINISTRATION REPORT Reconciliation of changes to property, plant and equipment by class
As specified in IAS 16, paragraph 73, information is provided for each class of the entity’s Property, Plant and Equipment. 47 STATEMENT OF LIABILITY Capitalization costs during the period January to December 2010 and for year 2009. 49 FINANCIAL STATEMENTS Year 2010: Esval S.A. ThCh$ 309,242 Aguas del Valle S.A. ThCh$ 211,454
Year 2009: Esval S.A. ThCh$ 278,559 Aguas del Valle ThCh$ 274,936
ANNUAL REPORT ESVAL 2010 98 CONTENTS ANNUAL REPORT ESVAL 2010 Net values 31/DIC/10 31/DIC/09 01/ENE/09 ThCh$ ThCh$ ThCh$
PROPERTY, PLANT AND EQUIPMENT
Construction in Progress, Net 20,253,389 13,740,671 16,671,247 Land, Net 29,906,296 29,799,851 29,796,736 Buildings, Net 14,241,139 12,616,828 12,891,143 4 LETTER FROM THE PRESIDENT Plant and Equipment, Net 17,498,251 18,522,309 18,665,638 IT Equipment, Net 471,827 622,792 732,019 6 LETTER FROM THE CEO Fixtures and Fittings, Net 384,750,250 388,217,403 383,333,208 Motor Vehicles, Net 371,651 422,147 329,196 Plant and Equipment, Net 1,229,370 1,245,876 1,177,300 8 COMPANY INFORMATION Other Property, Plant and Equipment, Net 1,079,993 1,634,903 1,725,325 Other Allocations Support Activities 1,047,751 1,318,451 1,720,460 10 HISTORICAL ACCOUNT Property, Plant and Equipment, Net 470,849,917 468,141,231 467,042,272
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES Gross values 16 BOARD OF DIRECTORS AND 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$ ADMINISTRATION PROPERTY, PLANT AND EQUIPMENT 19 ORGANIZATIONAL CHART Construction in Progress, Gross 20,253,389 13,740,671 16,671,247 Land, gross 29,906,296 29,799,851 29,796,736 21 MANAGEMENT REPORT Buildings, gross 20,422,559 17,253,769 17,117,892 Plant and Equipment, gross 40,502,545 38,844,975 36,565,687 39 ADMINISTRATION REPORT IT Equipment, gross 2,668,084 2,515,328 2,299,490 Fixtures and Fittings, gross 551,648,382 545,208,311 529,312,312 47 STATEMENT OF LIABILITY Motor Vehicles, gross 1,578,425 1,598,181 1,508,992 Plant and Equipment, gross 4,316,844 4,140,634 3,865,631 49 FINANCIAL STATEMENTS Other Property, Plant and Equipment, gross 1,520,366 2,469,670 2,548,745 Other Allocations Support Activities 1,047,751 1,318,452 1,720,460 Property, Plant and Equipment, gross 673,864,641 656,889,842 641,407,192
ANNUAL REPORT ESVAL 2010 99 CONTENTS ANNUAL REPORT ESVAL 2010 Detail of the Accumulated depreciation: 31/DEC/2010 31/DEC/2009 01/JAN/09 ThCh$ ThCh$ ThCh$
PROPERTY, PLANT AND EQUIPMENT
Buildings, 6,181,420 4,636,941 4,226,749 Plant and Equipment 23,004,294 20,322,667 17,900,050 IT Equipment, 2,196,257 1,892,536 1,567,471 4 LETTER FROM THE PRESIDENT Fixtures and Fittings, 166,898,132 156,990,908 145,979,103 Motor Vehicles, 1,206,774 1,176,034 1,179,796 6 LETTER FROM THE CEO Furniture and Equipment, 3,087,474 2,894,758 2,688,331 Other Property, Plant and Equipment 440,372 834,767 823,420 8 COMPANY INFORMATION Accumulated Depreciation 203,014,723 188,748,611 174,364,920
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND MOVEMENT CHART CONSOLIDATED FIXED ASSETS JANUARY AND DECEMBER 2010 ADMINISTRATION
ORGANIZATIONAL CHART 19 Initial Additions Transfers Netting sales Depreciation Other increases Changes Final balance ThCh$ ThCh$ Urbanizations ThCh$ expenses (decreases) Total Balance Concept ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ 21 MANAGEMENT REPORT Construction in Progress, Net 13,740,670 14,337,401 (7,809,483) 0 0 0 (15,200) 6,512,718 20,253,388 Land, Net 29,763,200 141,766 1,331 0 0 0 0 143,097 29,906,297 39 ADMINISTRATION REPORT Buildings, Net 12,616,819 141,101 1,908,776 0 0 (416,496) (9,061) 1,624,320 14,241,139 Plant and Equipment, Net 18,285,008 1,297,054 488,301 0 0 (2,525,816) (46,296) (786,757) 17,498,251 IT Equipment, Net 488,250 152,757 22,089 0 0 (305,217) 0 (130,371) 357,879 47 STATEMENT OF LIABILITY Fixes installations and accessories, Net 388,629,665 12,765,142 6,891,887 (12,786,894) 0 (10,645,142) (104,408) (3,879,415) 384,750,250 Motor vehicles, Net 338,989 36,758 20,201 0 0 (87,429) (1,227) (31,697) 307,292 Furniture and equipment, Net 938,610 180,472 49,049 0 0 (211,800) (1,214) 16,507 955,117 49 FINANCIAL STATEMENTS Other property, plant and equipment, Net 1,634,904 0 (237,978) 0 0 (316,932) 0 (554,910) 1,079,994 Other Charges Supporting Activities 898,448 1,096,471 (1,284,148) 0 0 0 0 (187,677) 710,771 Total Operating Assets in Concession Coquimbo 806,668 161,049 (50,025) 0 0 (128,152) 0 (17,128) 789,540 TOTAL ASSETS ESVAL 468,141,231 30,309,971 0 (12,786,894) 0 (14,636,984) (177,406) 2,708,687 470,849,917
ANNUAL REPORT ESVAL 2010 100 CONTENTS ANNUAL REPORT ESVAL 2010 MOVEMENT CHART CONSOLIDATED FIXED ASSETS JANUARY AND DECEMBER 2009
Initial Additions Transfers Netting sales Depreciation Other increases Changes Final balance ThCh$ ThCh$ Urbanizations ThCh$ expenses (decreases) Total Balance Concept ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
Construction in Progress, Net 16,455,718 11.539,993 (14.075,308) 0 0 0 (179,733) (2,715,048) 13,740,670 Land, Net 29,868,204 0 (8,576) 0 0 0 (96,428) (105,004) 29,763,200 Buildings, Net 12,891,140 80,692 65,163 0 0 (410,436) (9,740) (274,321) 12,616,819 Plant and Equipment, Net 18,431,225 1.892,543 395,072 0 0 (2,432,808) (1,023) (146,217) 18,285,008 4 LETTER FROM THE PRESIDENT IT Equipment, Net 643,305 117,322 0 0 0 (272,377) 0 (155,055) 488,250 Fixes installations and accessories, Net 383,445,209 4.975,371 14.222,059 (2,869,429) 0 (11,031,379) (112,166) 5,184,456 388,629,665 Motor vehicles, Net 258,718 132,730 2,274 0 0 (54,733) 0 80,271 338,989 6 LETTER FROM THE CEO Furniture and equipment, Net 924,343 136,405 29,567 0 0 (151,626) (79) 14,267 938,610 Other property, plant and equipment, Net 2,173,926 0 (533,713) 0 0 (5,309) 0 (539,022) 1,634,904 Other Charges Supporting Activities 994,986 0 (96,538) 0 0 0 0 (96,538) 898,448 8 COMPANY INFORMATION Total Operating Assets in Concession Coquimbo 955,498 0 0 0 (20,781) (128,049) 0 (148,830) 806,668 TOTAL ASSETS ESVAL 467,042,272 18,875,056 0 (2,869,429) (20,781) (14,486,717) (399,169) 1,098,958 468,141,231 10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY The fixed assets contributed by third parties and which are associated to urbanizations, at each year-end, are stated net of the complementary 14 LINE OF BUSINESS AND ACTIVITIES account associated with its capitalization.
16 BOARD OF DIRECTORS AND ADMINISTRATION 12. IMPAIRMENT IN THE VALUE OF THE ASSETS
19 ORGANIZATIONAL CHART Information to be disclosed on impairment of the value of the assets by cash generating unit
21 MANAGEMENT REPORT Each Company separately, i.e. Esval S.A. y Aguas del Valle S.A., is defined as a Cash Generating Unit, since each is individually capable of generating future economic benefits. As specified in the standard, the Company will assess whether there is any indication of impairment of the value of any asset at each year-end. If there is any such indication, theC ompany will estimate the recoverable amount of the asset. Indefinite-lived assets will be ADMINISTRATION REPORT 39 impairment tested at each year-end.
47 STATEMENT OF LIABILITY According to the impairment tests performed on first-time adoption of the international standards, there was no impairment of either of the two companies.
49 FINANCIAL STATEMENTS Esval S.A. y Aguas del Valle S.A. perform annual impairment tests on their indefinite-lived intangible assets, property, plant and equipment.
The respective impairment tests were performed at December 31, 2010 and 2009 based on the estimates and projections available to theC ompany, with no impairment occurring in either of the Company’s two Cash Generating Units.
ANNUAL REPORT ESVAL 2010 101 CONTENTS ANNUAL REPORT ESVAL 2010 COMPARISON OF THE VALUE OF THE FIXED ASSETS AND THE PROJECTED FUTURE FLOWS 31/DeC/10 31/DeC/09 ThCh$ ThCh$
PROJECTED FUTURE FLOWS 722,034 610,235
Fixed assets gross 673,865 656,890 Accumulated depreciations -203,015 -188,749 Carrying value 470,850 468,141 4 LETTER FROM THE PRESIDENT Intangible assets gross 150,124 141,522 6 LETTER FROM THE CEO Accumulated amortization -26,244 -21,913 Carrying values 123,880 119,610 8 COMPANY INFORMATION ASSETS IFRS 594,729 587,750 10 HISTORICAL ACCOUNT Construction in progress -33,405 -24,947 IMPAIRMENT ADJUSTED ASSETS 561,324 562,803 12 COMPANY’S EQUITY 29% 8% Difference (if negative, there is impairment) 160,710 47,432 14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION 13. PROVISIONS AND CONTINGENT LIABILITIES
19 ORGANIZATIONAL CHART A. Provisions The breakdown of this item is as follows: 21 MANAGEMENT REPORT 31/DeC/10 31/DeC/09 01/jan/09 39 ADMINISTRATION REPORT Classes of provision ThCh$ ThCh$ ThCh$
47 STATEMENT OF LIABILITY other provisions, current Provision for legal claims 141,702 126,702 33,363 49 FINANCIAL STATEMENTS Other provisions, current 292,595 228,336 311,398 Total other provisions 434,297 355,038 344,761
Provisions for employee benefits, current Participation in income and expenses 3,008,656 2,946,013 2,599,749 Total provisions for employee benefits, CURRENT 3,008,656 2,946,013 2,599,749
Provisions for employee benefits, non-current
Severance indemnity provision 535,123 485,253 442,044 Total provisions for employee benefits, non-CURRENT 535,123 485,253 442,044
ANNUAL REPORT ESVAL 2010 102 CONTENTS ANNUAL REPORT ESVAL 2010 Table of movements of short-term provisions
Legal Other Interests claims provisions in profits and Total ThCh$ ThCh$ ThCh$ ThCh$
Initial balance provisions 126,702 228,336 2,946,013 3,301,051 4 LETTER FROM THE PRESIDENT Changes to provisions - - - - Increases (decreases) in existing 15,000 64,259 2,036,880 2,116,139 6 LETTER FROM THE CEO provisions Provision used - - -1,984,504 -1,984,504 8 COMPANY INFORMATION Other increase (decrease) - 0 10,267 10,267 Total changes to provisions 15,000 64,259 62,643 141,902 10 HISTORICAL ACCOUNT End balance provisions 141,702 292,595 3,008,656 3,442,953
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART B. Contingent liabilities ESVAL S.A. 21 MANAGEMENT REPORT Lawsuits or other legal actions in which the Company is involved The Company is involved in lawsuits that, altogether, could result in an estimated loss of ThCh$141,702 at December 31, 2010 and ThCh$126,702 at 39 ADMINISTRATION REPORT December 31, 2009 (ThCh$33,363 at January 1, 2009), which has been provided in accordance with A in this note.
47 STATEMENT OF LIABILITY The Company has several civil and labor suits mainly due to compensation for damages that are being processed. The most significant lawsuits represent a possible contingency of ThCh$5,548,614 approximately altogether. 49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 103 CONTENTS ANNUAL REPORT ESVAL 2010 The most significant proceedings are the following:
Case No. Court Parties Amount Origin Current Status and Evaluation
350-2000 1st Civil Euro América 5.765 UF Compensation First appealable sentence Valparaíso Seguros vs. There are for damages favorable. Appeal for annulment Esval S.A. insurance for alleged in the form and appeal lodged by the plaintiff covers with drop in pressure dismissed and first appealable sentence confirmed. a deductible of in fire hydrants Appeal for annulment in form and substance filed 350 UF in a fire by the plaintiff. The sentence appealed against 4 LETTER FROM THE PRESIDENT is expected to be validated
6 LETTER FROM THE CEO 1952-2002 1st Civil Herrera and ThCh$1011857 Compensation First appealable sentence Valparaíso others vs. plus interest, for damages favorable. Appeal for annulment in the form and Esval indexation and costs. for alleged appeal lodged by the plaintiff dismissed and first There are insurance non-contractual appealable sentence confirmed. 8 COMPANY INFORMATION covers with liability in Appeal for annulment in form and substance filed a deductible of a fire by the plaintiff. The sentence appealed against UF 350. is expected to be validated 10 HISTORICAL ACCOUNT
3027-2010 2º Civil Municipality ThCh$111,092,505, plus Executive lawsuits In first instance 12 COMPANY’S EQUITY Valparaìso of Viña del Mar interests for charges of filed execution exceptions with Esval S.A. (Arts. 47 and 48 L. municipal which are pending of resolution Municipal Income rights due 14 LINE OF BUSINESS AND ACTIVITIES in relation to Arts. 53, to breakdown of 54 and 55 of the Tax pavement and Code). occupation of public road 16 BOARD OF DIRECTORS AND ADMINISTRATION 2550-2006 5th Civil Fernández ThCh$105.000 Compensation Valparaíso Toro vs. plus indexation, for damages In first instance and the Esval S.A. interest and costs non-contractual period of discussion liability in is ongoing. 19 ORGANIZATIONAL CHART presence of sewer Probable sentence favorable to Esval S.A. in premises of plaintiff 21 MANAGEMENT REPORT
2108-2002 2nd Civil Selame vs. ThCh$274.116 plus Compensation In first instance. Perìodo probatorio extraordinario 39 ADMINISTRATION REPORT Viña del Mar Constructora indexation, interest for damages en desarrollo. CRY and others and costs, with for flooding Sentence probably favourable to Esval S.A. insurance of houses 47 STATEMENT OF LIABILITY covers with a deductible of US$10.000. 49 FINANCIAL STATEMENTS 1946-2008 1st Civil Lea (Cubillos) ThCh$774.529 Compensation In first instance Valparaíso vs. plus indexation, for damages Probable sentence favorable Esval S.A. interest and costs for non-contractual to Esval S.A. liability stemming from alleged non-performance by Esval S.A.
2026-2007 4th Civil Riberas del ThCh$394.517 Compensation In first instance Valparaíso Aconcagua plus indexation, for damages the discussion stage has been vs interest and costs for damage completed. Evidence stage being Esval S.A. plus affirmative to property developed. Probable sentence covenant. There are from overflow favorable to ESVAL S.A. insurance covers of sewer with a deductible of 10% of the loss with a minimum of UF 1400
ANNUAL REPORT ESVAL 2010 104 CONTENTS ANNUAL REPORT ESVAL 2010
Case No. Court Parties Amount Origin Current Status and Evaluation
49737-2009 1st Civil Agricola El The main petition is On the substance In first instance. In extraordinary Quillota Molino Ltda, for repair of summary lawsuit proof development period. Probable vs Esval S.A. the "environment for repair to the sentence favorable to Esval S.A. damaged" for an environment and indeterminate amount first accessory petition and the first accessory summary lawsuit 4 LETTER FROM THE PRESIDENT petition seeks for compensation compensation for environmental for damages for damage filed by 6 LETTER FROM THE CEO $500,000,000,- plus the owner of the indexation, interest El Molino Farm for and costs. There are discharges of sewage insurance covers occurred on 26-07-06 8 COMPANY INFORMATION for the claim and 16-08-08 with a deductible and complaint of 10% of the loss with about bad smells 10 HISTORICAL ACCOUNT a minimum of UF 2800. from the operation of the PTAS installed in the area 12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES 49736-2009 1st Civil Agricola ThCh$335,461-plus Ordinary In first instance. Disussion stage has ended. Quillota El Molino indexation, interest lawsuit Parties have been summoned for Ltda. and for compensation conciliation hearing. Probable 16 BOARD OF DIRECTORS AND vs. Esval S.A. costs. There are for damages sentence favorable to Esval S.A. ADMINISTRATION insurance covers outside the community for the claim from the same with a deductible discharges of of 10% sewage 19 ORGANIZATIONAL CHART of the loss with a occurred on minimum of UF 2800, 26-07-06 and 16-08-08 inside 21 MANAGEMENT REPORT the El Molino Farm
39 ADMINISTRATION REPORT 1304-2009 5th Civil Stella S.A. ThCh$3.765.972, plus compensation In first instance. Probable Valparaiso vs. interest, indexation for damages sentence favorable to Esval S.A. Esval S.A. and costs for alleged 47 STATEMENT OF LIABILITY non-performance of contract
49 FINANCIAL STATEMENTS $485.189.877, plus Executive lawsuit, Appeals have been files to the execution, with are 3011- 2010 1st Civil of Municipality of interests, indexation for municipal rights currently pending resolution. Valparaíso Viña del Mar vs. and costs due to rupture Esval S.A. and replacement of pavement.
4375-2009 5th Civil of Pérez Romero $167.000.000, plus Ordinary lawsuits In first instance. Extraordinary proof period Valparaíso Valentina vs. Esval interests, indexation for compensation of pending. Probable sentence favorable to Esval S.A.. S.A. and costs. There are damages for the death insurance covres in a traffic accident of for the claim with a company employee, a deductible of 10% Mr. Jaime Santibáñez of the loss with a Campos minimum of UF 1400.
ANNUAL REPORT ESVAL 2010 105 CONTENTS ANNUAL REPORT ESVAL 2010 In addition, there are the following lawsuits for minor amounts, regarding which sentences favorable to the company are expected, and which can be grouped by subject matter as follows:
MATTER AMOUNT PROCEDURAL STAGE TOTAL AMOUNT INVOLVED
Compensation 20 18 in first instance ThCh$931,930,366 for damages 2 in second instance plus and undetermined amount 4 LETTER FROM THE PRESIDENT 4 All in first instace Ch$400,845,905 pluse an Easements undetermined amount 6 LETTER FROM THE CEO Municipal Fees 3 2 in first instance and 1 under appeal ThCh$198,783,404 Restitution 7 All in first instace 5 of undetermined 8 COMPANY INFORMATION of property amount and 2 for ThCh$48,700,000 Collection of pesos 3 2 in first instance and 1 under appeal ThCh$160,754 Environmental action 1 In first instance undetermined amount 10 HISTORICAL ACCOUNT Labor 1 1 in first instance undetermined amount TOTAL CASES 39 12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES TOTAL AMOUNTS INVOLVED Ch$1,741,014,022
16 BOARD OF DIRECTORS AND ADMINISTRATION In addition, at December 31, 2010, theC ompany is subject to the following embargos and precautionary measures under the terms and conditions 19 ORGANIZATIONAL CHART specified in each particular case:
21 MANAGEMENT REPORT a) ordinary proceedings entitles “Illustrious Municipality of Limache vs. SE VAL S.A.”, being heard by the Fourth Civil Court of Valparaiso, case number 3.069-2003, for collection of municipal fees for execution of works on public thoroughfares. In this proceeding – where nolle prosequi 39 ADMINISTRATION REPORT was declared – Ch$75,194,142 in funds deposited in a current account held by Esval S.A. in Banco Santiago were embargoed. b) ordinary proceedings entitled “Le Roy vs. Esval S.A.” for restitution of a property. A precautionary measure prohibiting acts or contracts being 47 STATEMENT OF LIABILITY entered into on the same property, which forms part of the El Rebaño Farm, in Quilpue, was decreed. These proceedings have concluded and Esval S.A. petitioned for, and the Court granted, the lifting of the precautionary measure. It needs to be registered in the Real Estate Register in 49 FINANCIAL STATEMENTS Quilpue.
AGUAS DEL VALLE S.A.
Currently the Company faces three civil lawsuits and one labor lawsuits for compensation of damages for an approximate amount of ThCh$772,200 and a civil lawsuits of undetermined amount.
If an unfavorable decision is handed down in these lawsuits – which are identified in the two tables below – and always provided such resolution is final and enforceable, the application of the results of these lawsuits to the equity ofSS E AN S.A.- today ECONSSA CHILE – or Aguas del Valle S.A. will be determined at the time as provided for in the “Contract of Transfer of the Right to Exploit Sanitary Concessions" and its respective appendices, signed by Empresa de Servicios Sanitarios de Coquimbo S.A., ESSCO S.A.- today ECONSSA CHILE - and Aguas del Valle S.A., on December 22, 2003.
ANNUAL REPORT ESVAL 2010 106 CONTENTS ANNUAL REPORT ESVAL 2010 The significant lawsuits with a determined amount that are included in the regulation indicated in the foregoing paragraph, except for the last one, are as follows:
REPORT ON PROCEEDINGS AGUAS DEL VALLE S.A.
Case No. Court Parties Amount Origin Current Status and Evaluation
4 LETTER FROM THE PRESIDENT 1369-2007 1st Civil Inmobiliaria Ch$1,869,886,984 Compensation In first and second instance La Serena El Sol de plus indexation for damages in non- sentence is pronounced which rejects Peñuelas vs interest and contractual setting the lawsuits 6 LETTER FROM THE CEO Aguas del Valle costs due to existence of Terminated with favorable sentence. S.A. drinking water piping on the premises of the 8 COMPANY INFORMATION plaintiff.
oct-07 3rd Civil Valdés Chirinos vs Ch$100,000,000 Compensation Unfavorable first appealable 10 HISTORICAL ACCOUNT Coquimbo Aguas del Valle plus insurance for for damages sentence issued. Appeal sentence S.A. 30,000 UF and in non-contractual reduces compensation to be paid be costs setting due to Aguas del Valle S.A. from Ch$142,560,000, to 12 COMPANY’S EQUITY existence of drinking Ch$100,000,000 Aguas del Valle S.A. water piping on the filed an appeal for annulment. premises of the The appeal is expected to 14 LINE OF BUSINESS AND ACTIVITIES plaintiff. be accepted.
16 BOARD OF DIRECTORS AND 452-2010 3rd Court of González Saint Ch$265,000,000 Adjustment of Pending discussion period. Ovalle Loup easement ADMINISTRATION vs. Aguas del Valle and compensation for damages.
19 ORGANIZATIONAL CHART 22-2009 Civil court of Hernández Juarez, Ch$407,200,000.- Damage indemnity for Awaiting for notification to the main defendant. Illapel Teresa vs. Rojas labor accident. 21 MANAGEMENT REPORT Espinoza and other
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY In addition, there exists the following lawsuit with an undetermined amount, to which also corresponds the application of the same standard of the mentioned paragraph and regarding which is expected a favorable result for the company. 49 FINANCIAL STATEMENTS
Easement 1 In the first instance Undetermined
ANNUAL REPORT ESVAL 2010 107 CONTENTS ANNUAL REPORT ESVAL 2010 Also, the following table identifies the lawsuits whose results will only affect Aguas del Valle S.A. Under this scenario, there is a lawsuit for an insig- nificant amount, which is expected to have a result favorable for the Company’s interests.
MATTER AMOUNT PROCEDURAL STAGE AMOUNT INVOLVED
Damage Indemnity 1 In first instance Ch$32,000,000 4 LETTER FROM THE PRESIDENT Total Lawsuits 1 $ 32,000,000.- Total Amount Ch$32,000,000 6 LETTER FROM THE CEO
8 COMPANY INFORMATION In some debt contracts with the Parent Company there exists a prohibition that Aguas del ValleS .A. constitutes a pledge over the contract of transfer of exploitation rights of the sanitary concessions of Essco S.A.- currently ECONSSA CHILE – and also over the rights derived from such contract 10 HISTORICAL ACCOUNT regarding the use and benefit of the exploitation rights, as those from current or future revenues or flows.
12 COMPANY’S EQUITY 14. Net equity 14 LINE OF BUSINESS AND ACTIVITIES 14.1 Net Equity of the Parent 16 BOARD OF DIRECTORS AND ADMINISTRATION 14.1.1 Subscribed and paid-in capital and number of shares At December 31, 2010, the capital stock of Esval S.A. is ThCh$196,207,284, represented by 14,962,276,336,000 fully subscribed and paid-in, no-par-value shares being traded on the Santiago Stock Exchange, the Chilean Electronic Stock Exchange and the Valparaiso Stock Exchange. These figures have 19 ORGANIZATIONAL CHART not suffered any changes during the period finally at September 30, 2010.
21 MANAGEMENT REPORT 14.2 Dividends
39 ADMINISTRATION REPORT The General Ordinary Shareholders' Meeting of Esval held on April 30, 2010, approved distributing a final dividend for an amount equivalent to 100% of the net profits from 2009. 47 STATEMENT OF LIABILITY Details of dividends paid at December 31, 2010 and 2009 are as follows:
49 FINANCIAL STATEMENTS
Dividend No Type of Dividend Date of Payment Pesos per Share Charged to Year Amount paid ThCh$
YEAR 2009 27 FINAL 23/02/09 0,000250000 2008 3,740,569 28 FINAL 18/05/09 0,000848889 2008 12,701,312 29 Interim 20/08/09 0,000250000 2009 3,740,569
YEAR 2010 30 Interim 02/02/10 0,000250000 2009 3,740,569 31 Final 24/05/10 0,001002960 2009 15,006,565 32 Interim 27/08/10 0,000250000 2010 3,740,569
ANNUAL REPORT ESVAL 2010 108 CONTENTS ANNUAL REPORT ESVAL 2010 At the closing of the financial statements at December 31, 2010, we observed the recording of the interim dividend of Ch$0.000250000 per share, for the total amount of ThCh$3,740,569, which will be paid with charge to net income of 2010 during February 2011. In addition are recorded interim dividends for ThCh$6,363,816, in order to comply with the agreement of the Board to distribute as final dividend, the equivalent amount to 80% of the net income of 2010. The commitment with the shareholders is recorded in the item "Other financial liabilities, current”, in the total amount of ThCh$10,104,385.
14.3 Other reserves
The nature and destiny of the Other reserves is as follows: 4 LETTER FROM THE PRESIDENT 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$ 6 LETTER FROM THE CEO
8 COMPANY INFORMATION Initial BALANCE 4,813,610 195,942 0 Adjusment for price-level restatement of capital year 2009 0 4,617,668 195,942 10 HISTORICAL ACCOUNT Total Other RESERVES 4,813,610 4,813,610 195,942
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES 14.4 Retained earnings 16 BOARD OF DIRECTORS AND The movement of the retained earnings is as follows: ADMINISTRATION 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$ 19 ORGANIZATIONAL CHART
MANAGEMENT REPORT 21 Initial balance 97,882,276 95,472,368 68,398,295 Initial adjustments for IFRS implementation (1) 0 0 (9,510,588) 39 ADMINISTRATION REPORT Initial adjustments for IFRS implementation (2) 0 0 36,584,661 Dividends (28,851,520) (23,923,018) 0 47 STATEMENT OF LIABILITY Income for the period 17,293,187 26,332,926 0 Total Retained Earnings 86,323,943 97,882,276 95,472,368 49 FINANCIAL STATEMENTS
(1) Corresponds to the adjustment determined at the convergence date to IFRS (January 01, 2009), as detailed in note 3, except for the revaluations of property, plant and equipment and intangible assets, which are presented under the item “Other reserves”.
(2) Corresponds to the adjustment determined at the convergence date to IFRS (January 01, 2009), corresponding to the revaluation of fixed assets and intangible assets, net of deferred taxes. This amount is not distributable to the shareholders, until its realization. The detail is as follows:
ANNUAL REPORT ESVAL 2010 109 CONTENTS 31/DEC/10 31/DEC/09 01/JAN/09 ANNUAL REPORT ESVAL 2010 ThCh$ ThCh$ ThCh$
Initial adjustments for IFRS IMPLEMENTATION 27,074,073 27,074,073 27,074,073 Update of paid-in cAPITAL 4,617,668 4,617,668 0 Other reserves (third party contributions) 195,942 195,942 195,942 Total for Revaluation of ASSETS 31,887,683 31,887,683 27,270,015 4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION 14.5 Issuance premiums 10 HISTORICAL ACCOUNT Under this item are recorded ThCLP$11,150,887 and its detail is as follows:
12 COMPANY’S EQUITY 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$
14 LINE OF BUSINESS AND ACTIVITIES
Initial balance 11,150,887 11,150,887 11,150,887 16 BOARD OF DIRECTORS AND Movements 0 0 0 ADMINISTRATION Total issuance PREMIUMS 11,150,887 11,150,887 11,150,887
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT 14.6 Treasury shares in portfolio 39 ADMINISTRATION REPORT Corresponds to an amount of shares of dissident shareholders originated by the increase of the number of shares of the company as agreed on December 12, 2007. 47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$
Initial balance 0 -108,868 -108,868 Movements 0 108,868 0 Total issuance premiums 0 0 -108,868
ANNUAL REPORT ESVAL 2010 110 CONTENTS ANNUAL REPORT ESVAL 2010 15. Minority interest
Minority interest is as follows:
Rodrigo Bezanilla Pumarino Taxpayer Number: 7.658.247-5 Ownership interest in Servicios Sanitarios Las Vegas Limitada: 0.01% 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$ 4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO Minority interest of equity 64 58 50 Minority interest of profit or lossTotal Primas de 6 8 6 8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY 16. Guarantees and Restrictions
14 LINE OF BUSINESS AND ACTIVITIES 16.1 Direct guarantees
16 BOARD OF DIRECTORS AND Guarantee policies and performance bonds have been issued to various institutions, including the following main ones: The Superintendency of ADMINISTRATION Sanitary Services to guarantee the conditions for providing the services and development programs in the Company’s concession areas, SERVIU to guarantee replacement of pavements, and to other institutions, in the amount of ThCh$12.347,161 at September 30, 2010, ThCh$13.772.494 at 19 ORGANIZATIONAL CHART December 31 2009 and ThCh$13.894.623 at January 01, 2009. The grantors of these performance bonds do not have the power to sell or pledge these documents 21 MANAGEMENT REPORT Details of the direct guarantees furnished are as follows: 39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 111 CONTENTS ANNUAL REPORT ESVAL 2010 31/DEC/10 31/DEC/09 01/JAN/09 ThCh$ ThCh$ ThCh$ Creditor of the Guarantee Name of Debtor Type of Guarantee
S.I.S.S. Esval S.A. Performance bond 5,075,954 4,016,174 6,633,955 SERVIU V REGION Esval S.A. Performance bond 620,139 207,301 288,736 DIRECC.REG.VIALIDAD Esval S.A. Performance bond 10,728 52,944 49,534 DIRECTOR OBRAS HIDR. Esval S.A. Performance bond 187,336 197,241 131,430 4 LETTER FROM THE PRESIDENT DIRECC. REG. GENDARM. Esval S.A. Performance bond - 50 - I. MUNIC. QUILPUE Esval S.A. Performance bond 2,462 15,252 20,074 6 LETTER FROM THE CEO SENADO REP. CHILE Esval S.A. Performance bond - 500 - I. MUNIC. ALGARROBO Esval S.A. Performance bond - - 3,432 8 COMPANY INFORMATION DIRECC. OBRAS PUBLICAS Esval S.A. Performance bond - - 85,856 EMP. DE FERROCARRILES Esval S.A. Performance bond 6,437 - - S.I.S.S. Aguas del Valle S.A. Performance bond 2,307,308 2,210,081 2,616,358 10 HISTORICAL ACCOUNT SERVIU IV REGION Aguas del Valle S.A. Performance bond 653,959 580,428 742,423 ESSAN S.A. Aguas del Valle S.A. Performance bond 3,185,879 6,219,508 3,185,436 12 COMPANY’S EQUITY DIRECC.REG.VIALIDAD Aguas del Valle S.A. Performance bond 17,551 88,320 8,131 DIRECTOR OBRAS HIDR. Aguas del Valle S.A. Performance bond 158,195 161,807 102,207 14 LINE OF BUSINESS AND ACTIVITIES SERV.SALUD.COQMBO. Aguas del Valle S.A. Performance bond 10,162 22,888 5,598 CIA. MINERA DEL PACIFICO Aguas del Valle S.A. Performance bond - - 21,453 16 BOARD OF DIRECTORS AND Total in Thousands of Ch$ 12,236,110 13,772,494 13,894,623 ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT 16.2 ) Restriction on bond issues:
47 STATEMENT OF LIABILITY La Sociedad mantiene restricciones y obligaciones producto de las emisiones de bonos efectuadas en el mercado nacional y son las siguientes:
a) Send to the representative of the Bond Holders, in the same term in which these have to be delivered to the Superintendence of Securities and FINANCIAL STATEMENTS 49 Insurances, a copy of its quarterly and annual financial statements, and all other public information, non reserved, that needs to be send to such institution.
b) Send the bond-holders’ representative a copy of the risk rating reports, within no more than ten working days after having received them from the risk rating agencies.
c) Inform the bond-holders’ representative of the sale, assign, transfer, contribution or disposal in any other way, whether for valuable consideration or not, of the Essential Assets, as soon as such occurs.
d) Send the bond-holders’ representative information on any reduction in its share in the capital of the subsidiaries, within no more than thirty working days after such reduction is made.
ANNUAL REPORT ESVAL 2010 112 CONTENTS ANNUAL REPORT ESVAL 2010 e) Maintain in its financial statements, a ratio between Net Consolidated Financial Debt and the Consolidated Adjusted EBITDA of the last twelve months lower than five point seventy five times during 2010 and lower than five point fifty times as of 2012 and after (applicable to the bond series K and M).
f) Maintain a current liability to equity ratio of not more than one point five in the individual balance sheet. (applicable to the bond series A, E, H, J).
g) Maintain and current liability to equity plus minority interest ratio of not more than one point five in the consolidated balance sheet when, pursuant to the provisions of article ninety of the Law on Corporations, it has to prepare that kind of balance sheet. (applicable to the bond series LETTER FROM THE PRESIDENT 4 A, E, H, J).
6 LETTER FROM THE CEO h) Maintain a Coverage Ratio of Net Financial Expenses, not less than two point zero and aC overage Ratio of Financial Expenses not lower than two point zero in the financial statements. 8 COMPANY INFORMATION i) Send to the bond-holders’ representative, together with the information specified in letter a) above, the information to be able to verify compliance with the financial indicators specified in letters e), f), g) and h). 10 HISTORICAL ACCOUNT j) Inform the bond-holders’ representative of any breach of the obligations specified in the above letters, as soon as the event or infraction occurs 12 COMPANY’S EQUITY or is made known.
14 LINE OF BUSINESS AND ACTIVITIES k) Not perform transactions with persons related to Esval S.A. in conditions of equality other than those habitually prevailing in the market, as provided for in article eighty nine of the Law on Corporations. 16 BOARD OF DIRECTORS AND ADMINISTRATION l) Maintain insurance covers that protect the operating assets of EsvalS .A., with such being understood to be the fixed assets subject to the sanitary concessions where Esval S.A. is the holder or which are exploited by Esval S.A.
19 ORGANIZATIONAL CHART m) Make provisions for all adverse contingencies that might occur, which shall be reflected in the financial statements of EsvalS .A. and any possible subsidiaries, according to generally accepted accounting criteria. 21 MANAGEMENT REPORT n) Esval S.A. or its subsidiaries must not become insolvent or be in a situation where they have to recognize their inability to pay their obligations at 39 ADMINISTRATION REPORT their respective maturities, or reach agreements with their creditors to avoid bankruptcy.
o) With regard to Aguas del Valle S.A., /i/ maintain, directly or indirectly, ownership of at least two thirds of its shares or of each of the series of 47 STATEMENT OF LIABILITY shares, if applicable; and /ii/ maintain control of the company;
49 FINANCIAL STATEMENTS p) Not furnish collateral or liens or prohibitions of any kind on the shares of Aguas del Valle S.A. owned by the Issuer, without the prior consent of the bond-holders’ representative.
q) Aguas del Valle S.A. must not furnish collateral or liens or prohibitions of any kind on /i/ the SSCOE Contract; /ii/ the right to exploit the sanitary concessions acquired by Aguas del Valle pursuant to the ESSCO Contract; /iii/ the use and enjoyment of the right to exploit the sanitary concessions acquired by Aguas del Valle pursuant to the ESSCO Contract; and /iv/ the rights issuing for Aguas del Valle S.A. from the ESSCO Contract, with regard to present or future cash flows or revenues from the collection of tariffs and the income earned and/or that might be earned by Aguas del ValleS .A. by reason of the ESSCO Contract;
r) Not contract preferential obligations with regard to those originating by reason of the Bond Issues, unless the Bond Holders participate in the guarantees furnished under the same terms and conditions and with the same degree of preference as the other creditors.
ANNUAL REPORT ESVAL 2010 113 CONTENTS ANNUAL REPORT ESVAL 2010 16.3 Restriction due to the issue of the Commercial Papers
a) Maintain in its financial statements, a ratio between Net Consolidated Financial Debt and the Consolidated Adjusted EBITDA of the last twelve months lower than five point seventy five times during 2010 and lower than five point fifty times as of 2012 and after. This ration is verified inthe quarterly financial statements, as of the date of the Issuance Deed.
b) Maintain a Coverage Ratio of Net Financial Expenses, not less than two point zero and aC overage Ratio of Financial Expenses not lower than two LETTER FROM THE PRESIDENT 4 point zero in the financial statements.
6 LETTER FROM THE CEO c) Maintain insurance covers protecting the operating assets of EsvalS .A., with such being understood to be the fixed assets subject to the sanitary concessions where Esval S.A. is the holder or which Esval S.A. exploits, insofar as such insurance covers are available and their cost is economically 8 COMPANY INFORMATION reasonable in light of the value of the asset, the cover and the insurable risk.
d) Not perform transactions with persons related to Esval S.A. in conditions of equality other than those habitually prevailing in the market, as 10 HISTORICAL ACCOUNT provided for in article eighty nine of the Law on Corporations.
12 COMPANY’S EQUITY e) With regard to Aguas del Valle S.A. /i/ maintain, directly or indirectly, ownership of at least two thirds of its shares or of each of the series of shares, if applicable; and /ii/ maintain control of the company; 14 LINE OF BUSINESS AND ACTIVITIES f) Aguas del Valle S.A. must not furnish collateral or liens or prohibitions of any kind on /i/ the SSCOE Contract; /ii/ the right to exploit the sanitary 16 BOARD OF DIRECTORS AND concessions acquired by Aguas del Valle pursuant to the ESSCO Contract; /iii/ the use and enjoyment of the right to exploit the sanitary concessions ADMINISTRATION acquired by Aguas del Valle pursuant to the ESSCO Contract; and /iv/ the rights issuing for Aguas del Valle S.A. from the ESSCO Contract, with regard to present or future cash flows or revenues from the collection of tariffs and the income earned and/or that might be earned by Aguas del ValleS .A. by reason of the ESSCO Contract; 19 ORGANIZATIONAL CHART 16.4 Compliance of covenants 21 MANAGEMENT REPORT Based on the information at December 31, 2010, the Company is in compliance with each and every one of the safeguards established in the 39 ADMINISTRATION REPORT referred contracts related to the issuance of bonds and contracts for the issuance of commercial papers, in conformity with the provisions of each of the corresponding contracts and their modifications. 47 STATEMENT OF LIABILITY 17. ORDINARY INCOME 49 FINANCIAL STATEMENTS Income from all normal operations and other events is recorded at the fair value of the payment received or receivable, considering the terms and conditions of payment, deductions and credit memorandums.
Income from the sale of services is measured at fair value. Invoicing is done based on actual consumption or work performed, net of returns, trade discounts and deductions. So income is recognized when it is transferred to the buyer, recovery is considered probable, associated costs and possible discounts for erroneous charges may be estimated reliably.
Information based on metered consumption read is available for the various different billing groups and the respective rate is applied to such consumption. When actual days of consumption are left out of the reading at month-end, an estimate is made based on the physical data from the prior month valued at the current rate, for which the rate for normal or excess consumption is considered, as applicable. Any difference between current and estimated consumption is corrected in the following month.
ANNUAL REPORT ESVAL 2010 114 CONTENTS ANNUAL REPORT ESVAL 2010 Policy for recognizing ordinary income from sales of Drinking Water and Sewerage services:
from 01/jan/2010 from 01/jan/2009 to 31/DeC/2010 to 31/DeC/2009 Classes of Ordirnary INCOME ThCh$ ThCh$ 4 LETTER FROM THE PRESIDENT Ordinary INCOME
6 LETTER FROM THE CEO Sale of Drinking Water 63,873,836 67,545,047 Sewage System Service 42,243,509 37,951,298 8 COMPANY INFORMATION Other Ordinary Income 3,435,349 4,161,685 TOTAL 109,552,694 109,658,030 10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND 18. EMPLOYEE BENEFITS ADMINISTRATION The company, at consolidated level, has a workforce of 514 employees, and 18 of these correspond to Managers and executives.
19 ORGANIZATIONAL CHART The employees that participate in collective agreements at consolidated level are 335 (Esval 209 and ADV 126).
21 MANAGEMENT REPORT Information to be disclosed on benefits upon termination of the contractual relationship
39 ADMINISTRATION REPORT Severance indemnities for termination of the labor relationship are governed by the provisions of the Labor Code, except for those special clauses of the respective collective or individual work contracts. STATEMENT OF LIABILITY 47 Actuarial assumptions related to the individual terms and conditions of the employees were used for calculating the severance indemnity provision.
49 FINANCIAL STATEMENTS The collective and individual work contracts of the non-executive personnel of Esval and Aguas del Valle do not consider an all-event severance indemnity.
19. BORROWING COSTS
Policy of interest-accruing loans
The borrowing costs directly attributable to the acquisition, construction or production of assets that comply with the conditions for qualification are capitalized, forming part of the cost of such assets.
Capitalization policy: Interest paid or accrued from debts that finance exclusively qualified assets is capitalized, as stipulated in IAS 23.
ANNUAL REPORT ESVAL 2010 115 CONTENTS ANNUAL REPORT ESVAL 2010 31/dec/10 31/dec/09 Capitalized interest costs, Property, plant and EQUIPMENT
Interest cost capitalization rate Capitalized, Property, plant and EQUIPMENT 4.23% 4.42%
Amount of capitalized interest costs, Property, plant and EQUIPMENT ThCh$ 520,696 ThCh$ 553,495
109.552.694
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION 20. INCOME TAX
10 HISTORICAL ACCOUNT Income tax and deferred taxes Income tax is booked based on the net taxable income calculated as stipulated in the Income Tax Law. Deferred taxes are recognized based on 12 COMPANY’S EQUITY current regulations, considering all of the existing temporary differences, tax loss benefits and other events.
14 LINE OF BUSINESS AND ACTIVITIES Income tax
16 BOARD OF DIRECTORS AND At December 31, 2010, Esval S.A. has recorded a provision for income taxes of ThCh$30,891. ADMINISTRATION At December 31, 2010, Aguas del Valle S.A. has recorded a provision for income taxes of ThCh$715,314.
19 ORGANIZATIONAL CHART At December 31, 2010, the company Servicios Sanitarios Las Vegas Ltda. does not present a Net Taxable Income.
21 MANAGEMENT REPORT The detail of recoverable taxes is as follows:
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY 31/DeC/10 31/DeC/09 01/jan/09 ThCh$ ThCh$ ThCh$
49 FINANCIAL STATEMENTS Concepts
Monthly provisional payments, net 1,626,280 0 990,790 Credits for training expenses 56,801 16,448 52,944 Remainder VAT fiscal credit 0 0 355,010 Total Recoverable Taxes 1,683,081 16,448 1,398,744
ANNUAL REPORT ESVAL 2010 116 CONTENTS ANNUAL REPORT ESVAL 2010 Income tax payable is summarized as follows: 31/DeC/10 31/DeC/09 01/jan/09 ThCh$ ThCh$ ThCh$
Concepts
Provision for income tax, net 746,205 214,799 0 Other taxes payable 42,009 7,974 18,364
4 LETTER FROM THE PRESIDENT Total recoverable taxes 788,214 222,773 18,364
6 LETTER FROM THE CEO
8 COMPANY INFORMATION Deferred taxes 10 HISTORICAL ACCOUNT Balances of assets and liabilities:
12 COMPANY’S EQUITY
Deferred tax assets Deferred tax liabilities 14 LINE OF BUSINESS AND ACTIVITIES CONCEPTS 31/DeC/10 31/DeC/09 01/jan/09 31/DeC/10 31/DeC/09 01/jan/09 Temporary differences thch thch thch thch thch thch 16 BOARD OF DIRECTORS AND ADMINISTRATION Trade and other Receivables, 1,268,064 1,201,899 1,168,267 - - - net, current 19 ORGANIZATIONAL CHART Inventories 226 173 173 - - - Intangible Assets, net - - - 11,808,408 8,483,068 11,267,496 Property, Plant and Equipment, net - - - 36,829,487 32,091,402 25,288,437 21 MANAGEMENT REPORT Other non current assets - - - 2,301,001 2,180,430 - Interest-bearing Borrowings, current - - - 756,443 89,531 36,847 ADMINISTRATION REPORT 39 Trade and Other Payables, 187,686 - 138,514 - - - current 47 STATEMENT OF LIABILITY Provisions, current 497,263 238,457 212,279 - - - Tax loss ------49 FINANCIAL STATEMENTS Interest-bearing Borrowings, ------non-current Interest to capitalize - - - - 3,483,729 3,428,489 Other not current liabilities 2,609,328 674,079 - - - - Other events 265,975 1,030,409 29,140 - 596,511 - Total 4,828,542 3,145,017 1,548,373 51,695,339 46,924,671 40,021,269
ANNUAL REPORT ESVAL 2010 117 CONTENTS ANNUAL REPORT ESVAL 2010 Reconciliation of tax expense using the legal rate and tax expense using the effective rate.
31/DeC/10 31/DeC/09 ThCh$ ThCh$
Current and deferred income tax expense (income)
Current income tax expense 746,205 785,787 4 LETTER FROM THE PRESIDENT Income tax on disallowed expenses 42,009 26,197 Current income tax expense, net, total 788,214 811,984 6 LETTER FROM THE CEO Adjustment to Prior Period Current Tax 0 0 Deferred income tax expense 3,087,143 5,319,184 8 COMPANY INFORMATION Total tax expense 3,875,357 6,131,168
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY Numerical reconciliation of the tax expense (income) and the result of multiplying accounting gains by applicable tax rate or rates. 14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND 31/DeC/10 31/DeC/09 ADMINISTRATION ThCh$ ThCh$
19 ORGANIZATIONAL CHART Tax expenses using the legal rate 3,598,654 5,518,897 21 MANAGEMENT REPORT Adjustments to tax expenses using the legal rate, total 276,703 612,271 Tax expenses using the effective rate 3,875,357 6,131,168 39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY Reconciliation of the legal tax rate and the effective tax rate. 49 FINANCIAL STATEMENTS 31/DeC/10 31/DeC/09 % %
Legal tax rate 17.0% 17.0% Other increases (decreases) in the legal tax rate 1.3% 1.9% Effective tax rate 18.3% 18.9%
ANNUAL REPORT ESVAL 2010 118 CONTENTS ANNUAL REPORT ESVAL 2010 21. GAINS PER SHARE
The basic gain per share is calculated as the quotient between the net gain for the period attributed to theC ontrolling Company and the number of its ordinary shares in circulation during the same period.
Information to be disclosed on diluted gains (losses) per share
The Company has not performed any kind of operation with a potential dilutive effect that presupposes a diluted gain per share different to the basic benefit per share. 4 LETTER FROM THE PRESIDENT
31/DeC/10 31/DeC/09 6 LETTER FROM THE CEO ThCh$ ThCh$
8 COMPANY INFORMATION
Net profit or loss for the year ThCh$ 17,293,187 26,332,926 10 HISTORICAL ACCOUNT Number of shares at year-end 14,962,276,336,000 14,962,276,336,000 Gains (losses) per share ThCh$ 0.00000116 0.00000176 12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND 22. BUSINESS SEGMENTS ADMINISTRATION Description of the types of products and services providing the ordinary income of each reportable segment: 19 ORGANIZATIONAL CHART The Coquimbo Region Segment includes sanitary services that deliver drinking water production and distribution Products andS ervices, together with collection and treatment of sewage, developed operationally in Region IV. It also includes other services such as Cut-off and Restoration, 21 MANAGEMENT REPORT Fixed Charge for Standpipes, Dispatch by Post, Sales of Drinking Water in Water Trucks, Treatment of Excess Liquid Industrial Waste, sales of sanitary solutions (for people, companies and institutions) etc. Aguas del Valle S.A. is classified in this segment. 39 ADMINISTRATION REPORT The Valparaiso Region Segment includes sanitary services that deliver drinking water production and distribution Products and Services, together 47 STATEMENT OF LIABILITY with collection and treatment of sewage, developed operationally in Region V. It also includes other services such as Cut-off and Restoration, Fixed Charge for Standpipes, Dispatch by Post, Sales of Drinking Water in Water Trucks, Treatment of Excess Liquid Industrial Waste, sales of sanitary solutions (for people, companies and institutions) etc. Esval S.A. is classified in this segment. 49 FINANCIAL STATEMENTS Significant Income and Expense Items by segments
Coquimbo Region and Valparaiso Region Segment Significant items of ordinary income and expenses are mainly those related to the activity of the segment; there are also relevant sums involving depreciation, personnel and other sundry expenses, where Power and Utilities are relevant.
ANNUAL REPORT ESVAL 2010 119 CONTENTS ANNUAL REPORT ESVAL 2010 Income Our income mainly derives from the regulated services that we provide involving: Production and distribution of drinking water and the collection, treatment and disposal of sewage
Rates
The most important factor in determining the results of our operations and our financial situation are the rates set for our regulated sales and 4 LETTER FROM THE PRESIDENT services. As a natural monopoly, we are regulated by the SISS, and our rates are set in accordance with the Sanitary Services Rates Law - Statutory Decree 70 of 1988. 6 LETTER FROM THE CEO Our rate levels are reviewed every five years and, during that period, they are subject to additional adjustments linked to an indexation polynomial, if the accumulated change since the previous adjustment is 3.0 % or more (rate increase), or -3-0% or less (rate decrease), according to calculations 8 COMPANY INFORMATION made as a function of various inflation indices.
10 HISTORICAL ACCOUNT Tarifs Segment Region of Coquimbo
12 COMPANY’S EQUITY In 2005 concluded a tariff negotiation process of Aguas del Valle for the period 2006-2011. The tariffs were approved through Decree Nr. 277 (04.09.2006) of the Ministry for Economy, Promotion and Tourism, and starting as of September 15, 2006 and ending on September 14, 2011. At current a new tariff process is being discussed, which will establish the tariffs for the following period of five years. 14 LINE OF BUSINESS AND ACTIVITIES Valparaiso Region Segment Rates 16 BOARD OF DIRECTORS AND ADMINISTRATION In 2010, the rate negotiation process for the 2010-2015 period was concluded. The new rates approved by Decree 59 (29.01.2010) for EsvalS .A., by the Ministry of Economy, Development and Reconstruction came into effect on March 01, 2010. 19 ORGANIZATIONAL CHART Details of significant expense items 21 MANAGEMENT REPORT Coquimbo Region Segments The significant expense items are mainly those related to Payroll, Utilities and Amortization of Intangibles. 39 ADMINISTRATION REPORT Valparaiso Region Segment 47 STATEMENT OF LIABILITY The significant expense items are mainly those related to Payroll, Power, Depreciation of Fixed Assets and Financial Expenses.
49 FINANCIAL STATEMENTS Details of the explanation of measurements of profit or loss, assets and liabilities of each segment The measurement applicable to the segments corresponds to the company directly related to the respective region.
ANNUAL REPORT ESVAL 2010 120 CONTENTS ANNUAL REPORT ESVAL 2010 The accounting criterion is the accounting record of the economic events from which rights and obligations arise in the same way as they arise in economic relations with third parties. In particular, such records will generate committed balances in an asset and liability account according to the spirit of the transaction in each related company, in light of the segment in which it participates. This account is known as Account due to or from Related Companies and under consolidation it must be netted according to the same consolidation rules explained in IAS 27.
There are no differences in the nature of the measurement of the profit or loss in the various operating segments.
There are no differences in the nature of the measurement of assets and liabilities in the various operating segments. LETTER FROM THE PRESIDENT 4 Information to be disclosed on the entity as a whole
6 LETTER FROM THE CEO Information on the main clients: The information on main clients is not relevant, because they are dispersed in a very large number of clients in both segments. 8 COMPANY INFORMATION Types of products Coquimbo Region – Valparaiso Region Segments 10 HISTORICAL ACCOUNT Coquimbo Region Segment
12 COMPANY’S EQUITY The types of products and services for the Water segment are:
14 LINE OF BUSINESS AND ACTIVITIES • Production and distribution of drinking water. • collection and treatment of sewage. 16 BOARD OF DIRECTORS AND • Segment made up of Aguas del Valle S.A. ADMINISTRATION Valparaiso Region Segment
19 ORGANIZATIONAL CHART The types of products and services for the Water segment are:
21 MANAGEMENT REPORT • Production and distribution of drinking water. • collection and treatment of sewage. 39 ADMINISTRATION REPORT • Segment made up of Esval S.A.
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 121 CONTENTS ANNUAL REPORT ESVAL 2010 At December 31, 2010:
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO Financial situation statement per VALPARAISO COQUIMBO LAS VEGAS ESVAL business segment REGION REGION INVESTMENT ADDITION ADJUSTMENTS CONSOLIDATED 8 COMPANY INFORMATION Financial situation statement ASSETS 10 HISTORICAL ACCOUNT Total current assets 42,004,991 6,040,067 0 48,045,057 -132,033 47,913,024 Total non-current assets 602,508,067 94,033,577 639,516 697,181,160 -85,211,441 611,969,718 12 COMPANY’S EQUITY Total assets 644,513,057 100,073,644 639,516 745,226,217 -85,343,474 659,882,743
14 LINE OF BUSINESS AND ACTIVITIES Equity and liabilities Liabilities 16 BOARD OF DIRECTORS AND ADMINISTRATION Total current liabilities 70,520,859 7,010,941 60 77,531,860 -132,033 77,399,827 Total non-current liabilities 275,496,474 29,111,032 0 304,607,506 -20,620,379 283,987,127 Total liabilities 346,017,333 36,121,973 60 382,139,366 -20,752,412 361,386,954 19 ORGANIZATIONAL CHART Shareholders' equity 21 MANAGEMENT REPORT Issued capital stock 196,207,284 20,441,842 209,232 216,858,358 -20,651,074 196,207,284 Accrued gain (losses) 59,249,870 43,028,598 396,239 102,674,707 -43,424,837 59,249,870 11,150,887 39 ADMINISTRATION REPORT Premiums issued 0 0 11,150,887 0 11,150,887 Shares in portfolio 0 0 0 0 0 0 Other ownership in equity 0 0 0 0 0 0 47 STATEMENT OF LIABILITY Other reserves 31,887,683 481,231 33,985 32,402,899 -515,216 31,887,683 Equity atributable to owners of the controlling company 298,495,725 63,951,670 639,456 363,086,851 -64,591,126 298,495,725 49 FINANCIAL STATEMENTS Ownership not controlling 0 0 0 0 64 64 Total shareholders' equity 298,495,725 63,951,670 639,456 363,086,851 -64,591,062 298,495,788 Total liabilities and shareholders' equity 644,513,057 100,073,644 639,516 745,226,217 -85,343,474 659,882,743
ANNUAL REPORT ESVAL 2010 122 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO Statemet of income result per business segment VALPARAISO COQUImBO LAS VEGAS ESVAL In thousand of Chilean pesos REGION REGION INVESTMENT ADDITION ADJUSTMENTS CONSOLIDATED
8 COMPANY INFORMATION Statement of income DEC/10 DEC/10 DEC/10 DEC/10 DEC/10 DEC/10 Gains (losses) 10 HISTORICAL ACCOUNT Income fromordinary activities 83,384,264 26,168,429 0 109,552,694 0 109,552,694 Raw material and consumables used -10,714,933 -2,740,366 0 -13,455,298 0 -13,455,298 12 COMPANY’S EQUITY Expense from employees' benefits -7,697,566 -2,428,231 0 -10,125,797 0 -10,125,797 Expense from depreciation and amortization -15,710,835 -3,668,864 0 -19,379,699 0 -19,379,699 14 LINE OF BUSINESS AND ACTIVITIES Other expenses -19,970,349 -8,663,853 0 -28,634,202 1,894,549 -26,739,653 Other gains (losses) 1,162,311 255,508 0 1,417,819 -1,894,549 -476,730 Financial income 1,068,782 0 0 1,068,782 -667,536 401,246 16 BOARD OF DIRECTORS AND Financial costs -12,168,484 -800,148 0 -12,968,633 667,536 -12,301,097 ADMINISTRATION Gain (loss) in associates and joint-ventures accounted 6,230,007 0 62,300 6,292,307 -6,292,307 0 for using the equity method of accounting 19 ORGANIZATIONAL CHART Exchange differences Income from readjustment units -5,760,441 -546,674 0 -6,307,115 0 -6,307,115 Gain (loss) before taxes 19,822,757 7,575,800 62,300 27,460,857 -6,292,307 21,168,550 21 MANAGEMENT REPORT Expense from income tax -2,529,570 -1,345,787 0 -3,875,357 0 -3,875,357 Gain (loss) from continuing operations 17,293,187 6,230,013 62,300 23,585,500 -6,292,307 17,293,192 39 ADMINISTRATION REPORT Gain (loss) from minoritary interest 0 0 0 0 -6 -6 Gain (loss) 17,293,187 6,230,013 62,300 23,585,500 -6,292,313 17,293,187 47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 123 CONTENTS ANNUAL REPORT ESVAL 2010 At December 31, 2009:
Financial situation statement per VALPARAISO COQUImBO LAS VEGAS ESVAL business segment REGION REGION INVESTMENT ADDITION ADJUSTMENTS CONSOLIDATED
Financial situation statement DeC/09 DeC/09 DeC/09 DeC/09 DeC/09 DeC/09 assets
Total current assets 45,307,859 6,125,860 0 51,433,719 -137,675 51,296,045 4 LETTER FROM THE PRESIDENT Total non-current assets 596,591,960 92,254,125 639,516 689,485,601 -84,157,884 605,327,717 Total assets 641,899,819 98,379,985 639,516 740,919,320 -84,295,558 656,623,762 6 LETTER FROM THE CEO Equity and liabilities 8 COMPANY INFORMATION liabilities
Total current liabilities 47,662,651 5,996,602 60 53,659,313 -137,675 53,521,638 10 HISTORICAL ACCOUNT Total non-current liabilities 284,183,112 34,661,726 0 318,844,838 -25,796,828 293,048,010 Total liabilities 331,845,763 40,658,328 60 372,504,150 -25,934,503 346,569,648 12 COMPANY’S EQUITY Shareholders' equity
Issued capital stock 14 LINE OF BUSINESS AND ACTIVITIES 196,207,284 20,441,842 209,232 216,858,358 -20,651,074 196,207,284 Accrued gains (losses) 70,808,202 36,798,584 396,239 108,003,025 -37,194,823 70,808,202 Premiums issued 11,150,887 0 0 11,150,887 0 11,150,887 16 BOARD OF DIRECTORS AND Shares in portfolio 0 0 0 0 0 0 ADMINISTRATION Other ownership in equity 0 0 0 0 0 0 Other reserves 31,887,683 481,231 33,985 32,402,899 -515,216 31,887,683 Equity atributable to owners of the controlling company 19 ORGANIZATIONAL CHART 310,054,057 57,721,657 639,456 368,415,170 -58,361,113 310,054,057 Ownership not controlling 0 0 0 0 58 58 Total shareholders' equity 310,054,057 57,721,657 639,456 368,415,170 -58,361,056 310,054,114 21 MANAGEMENT REPORT Total liabilities and shareholders' equity 641,899,819 98,379,985 639,516 740,919,320 -84,295,558 656,623,762
39 ADMINISTRATION REPORT
Consolidation Statement of Income per Nature AGUAS ESVAL 47 STATEMENT OF LIABILITY In thousand of Chilean pesos - ThCh$ ESVAL DEL VALLE LAS VEGAS SUM Adjustments CONSOLIDATED
Statement of Income DEC/09 DEC/09 DEC/09 DEC/09 DEC/09 DEC/09 49 FINANCIAL STATEMENTS Income (loss) Revenues from ordinary activities 83,524,935 26,133,095 0 109,658,030 0 109,658,030 Used raw material and supplies -11,184,947 -2,874,651 0 -14,059,597 0 -14,059,597 Expenses for employee benefits -7,578,660 -2,413,183 0 -9,991,844 0 -9,991,844 Expense for depreciation and amortization -15,459,070 -3,479,976 0 -18,939,046 0 -18,939,046 Other expenses, per function: -20,402,663 -8,307,466 0 -28,710,130 2,019,578 -26,690,552 Other income (losses) 827,947 357,802 0 1,185,749 -2,019,578 -833,829 Financial income 1,695,223 0 0 1,695,223 -840,240 854,983 Financial expenses -13,942,468 -940,618 0 -14,883,086 840,240 -14,042,846 Participation in income (losses) of investees and 7,691,433 0 62,300 7,753,733 -7,753,733 0 joint ventures that are recorded using the equity method Results per adjustment units 5,746,086 762,716 0 6,508,803 0 6,508,803 Income (loss) before taxes 30,917,816 9,237,719 62,300 40,217,835 -7,753,733 32,464,102 Income tax expense -4,584,890 -1,546,278 0 -6,131,168 0 -6,131,168 Income (loss) from continued operations 26,332,926 7,691,441 62,300 34,086,667 -7,753,733 26,332,934 Income (loss) of minority interest 0 0 0 0 -8 -8 Income (loss) 26,332,926 7,691,441 62,300 34,086,667 -7,753,741 26,332,926
ANNUAL REPORT ESVAL 2010 124 CONTENTS ANNUAL REPORT ESVAL 2010 23. ENVIRONMENT
From 2005 Esval S.A. certified its processes under standard ISO 14001:2004, whose environmental management system includes capturing and distributing drinking water up to collection, treatment and final disposal of waste water, including trading and support processes for rendering services.
The compliance of environmental sustainability objectives in the Company depends on all its areas, which through its management are directly responsible for then actions to reach goals in theC ompany’s commitments in this matter. Esval's voluntary commitment has allowed improvements in its environmental performance. 4 LETTER FROM THE PRESIDENT Actions taken to improve the Environmental Performance are: 6 LETTER FROM THE CEO • Adopting a permanent improvement strategy in the Company’s processes. 8 COMPANY INFORMATION • Avoiding pollution by pouring residual liquids from the Company’s processes. 10 HISTORICAL ACCOUNT • Avoiding pollution by controlling residuals by recycling or disposing properly.
12 COMPANY’S EQUITY The Environmental Management System is part of the Integrated System of management of quality, environment, Safety and Occupational health. There are based on Management Integral System Policy (SIG). 14 LINE OF BUSINESS AND ACTIVITIES To comply with commitments in SIG policy the Company established objectives associated with a number of indicators, goals and control points, 16 BOARD OF DIRECTORS AND which allow to monitor and evaluate their compliance. ADMINISTRATION For environmental objectives and goals the Company established programs to be developed, including the assignment of responsibilities, means and terms. 19 ORGANIZATIONAL CHART For the significance for the environment, Esval was recognized with Premio al Mejoramiento del Medio Ambiente 2010 (environmental award) , given by Asociación de Industrias de la Región de Valparaíso, ASIVA. 21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT Disbursements committed in environmental material.
47 STATEMENT OF LIABILITY Esval S.A. Adjustment of fuel ponds: About 25 million Adjustments to be made for environmental aspects: About 30 million 49 FINANCIAL STATEMENTS Aguas del Valle Handling of sludge generated in Sewage Water Treatment Plants: 288 (millions approximately)
Environmental Monitoring
The Company performs regular controls over the sanitation systems of the various coastal towns and locations with treatment based on ocean outfalls. The environmental monitoring campaigns defined by the Maritime Authorities are performed on a monthly basis and include taking samples and performing analyses in: Effluents, in the sea water by taking samples at different depths, on beaches and the sea coast, as well as taking samples of the benthonic communities and sediments on the sea floor, in order to determine how the diversity, uniformity and richness of the species have changed. Oceanographic studies are also performed in the areas where the outfalls discharge into the sea. All of this monitoring and analyses are performed in order to ensure compliance with the environmental quality standards stipulated by the authorities. The cost of these contracts is at December 31, 2010 ThCh$406,860 (ThCh$420,179 at December 31, 2009).
ANNUAL REPORT ESVAL 2010 125 CONTENTS ANNUAL REPORT ESVAL 2010 Furthermore, control of the existing sewage treatment plants in locations and towns located mainly inland in the region, based on activated sludge and full mixture aerated ponds, includes the implementation of monthly monitoring campaigns, which are defined by the Superintendency of Sanitary Services and the Regional Committee for the Environment (Conama), in order to check compliance with the effluents discharged into surface water courses, as stipulated in Supreme Decree 90/00.
Likewise, control is exercised over liquid industrial waste entering our sewage collectors to control and verify compliance with Supreme Decree 609/98. To that end, the company has rates approved by the Superintendency of Sanitary Services for monitoring these effluents, which are paid by industrial clients. 4 LETTER FROM THE PRESIDENT The Company has a modern laboratory equipped for microbiological and physical-chemical analyses both of the drinking water mains and the 6 LETTER FROM THE CEO sewage collectors. The lab is accredited under the INN-SISS Agreement as a Testing Lab according to NCh-ISO 17025 Of.2001.
8 COMPANY INFORMATION 24. EVENTS OCCURRING AFTER THE DATE OF THE BALANCE SHEET 10 HISTORICAL ACCOUNT Between January 01, 2011 and the date of issue of these financial statements, there have been no subsequent events of a financial or other nature 12 COMPANY’S EQUITY that could significantly affect their consolidated balances or interpretation.
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
Rodolfo Toro Carrasco Gustavo González Doorman GENERAL ACCOUNTANT CEO
ANNUAL REPORT ESVAL 2010 126 CONTENTS ANNUAL REPORT ESVAL 2010
Aguas del Valle’s Main Offices Commercial Offices
General Management IV Región LA SERENA 350 BRASIL 935 Colo Colo, La Serena COQUIMBO 1499 VARELA Telephone (51) 2060000, Fax (51) 206100 VICUÑA 200 GABRIELA MISTRAL ANDACOLLO 66 SIMÓN BOLIVAR TONGOY 29 TAMAYA 4 LETTER FROM THE PRESIDENT GUANAQUEROS 100 ARTURO PRAT OVALLE 497 BENAVENTE Service Telephone Number MONTE PATRIA 102 PONIU 6 LETTER FROM THE CEO 600 400 4444 COMBARBALÁ 7 MANUEL MORENO ILLAPEL 213 ESMERALDA www.aguasdelvalle.cl LOS VILOS 353 TALCAHUANO 8 COMPANY INFORMATION [email protected] SALAMANCA 280 MATILDE SALAMANCA
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
ANNUAL REPORT ESVAL 2010 127 CONTENTS ANNUAL REPORT ESVAL 2010
4 LETTER FROM THE PRESIDENT
6 LETTER FROM THE CEO
8 COMPANY INFORMATION
10 HISTORICAL ACCOUNT
12 COMPANY’S EQUITY
14 LINE OF BUSINESS AND ACTIVITIES
16 BOARD OF DIRECTORS AND ADMINISTRATION
19 ORGANIZATIONAL CHART
21 MANAGEMENT REPORT
39 ADMINISTRATION REPORT
47 STATEMENT OF LIABILITY
49 FINANCIAL STATEMENTS
www.esval.cl