2015 ANNUAL REPORT 2015 Annual Report 1 Index > Letter from the Chairman | 4 > Highlights 2015 | 10 > Main Financial and Operating Data | 16 > Identification of the Company and Documents of Incorporation | 20 > Ownership and Control | 26 > Human Resources | 42 > Stock Markets Transactions | 58 > Dividends | 64 > Investment and Financing Policy | 76 > Risk Factors | 84 > Company Restructuring | 104 > Regulatory Framework of the Electricity Industry | 110 > Company Businesses | 134 > Environment and Sustainable Development | 168 > Research, Development and Innovation | 176 > Shareholdings Chart | 182 > Significant Events | 190 > Identification of Subsidiaries and Associates | 216 > Declaration of Responsibility | 234 > Consolidated Financial Statements | 238 > Management Analysis of Consolidated Financial Statements | 450 > Summarized Financial Statements of Subsidiaries | 472 3 Letter from the Chairman Dear Shareholders, the purpose of the next few lines is to through our outstanding presence in Argentina, Brazil, introduce the Endesa Chile 2015 Annual Report and financial Colombia, and Peru, making us one of the largest generators statements. Detailed information on the highlights and main in the region. This leading position was attained by a structure trends that portray the company’s performance last year based on a stream of privatization, mergers and acquisition may be found within the following sections. processes which allowed us to grow and consolidate. However, pursuing this organizational format gave way to a 2015 was remarkable among Endesa Chile’s 72 years of series of complexities and challenges, such as conflicts of existence as a company. It was a year of great progress in interest between investment vehicles, inefficient decision- terms of the consolidation of achievements of generations making processes, and a lack of industrial focus, which of employees that have worked for the Company. More required the adoption of new approaches in order to take importantly, new grounds have been established to continue advantage of company potential and improve its capacity to into the future, carrying out Endesa Chile’s mission of react to market changes. serving as a driver of development and source of wellbeing in Chile and each and every market in which we operate. This was coupled by the need to adapt our organization to the deep transformations taking place in Chile, its society, The quality, effort, and commitment of Endesa Chile and in the areas in which we have operate. This is how we employees over time, represent the invaluable assets that knew we had to implement a new and clear, forward-looking have laid the groundwork to follow this path. They have been vision for our business. We had to learn from what could critical to overcome the challenges that arise with each have done differently and improve our practices and stage of development, including those faced in 2015. I know procedures; capture maximum synergies and the capabilities they are also crucial for future progress. On behalf of the that have built Enel Group into one of the most relevant Board of Directors, that I have the honor to preside, I would energy corporations in the world. like to take this opportunity to express our most sincere appreciation for this year’s performance to every individual Dear shareholders, the task we have ahead of us is to forge that works for this Company. a more open firm, a company that is in permanent and continuous dialogue with its surroundings, and knows how Promoting development by generating electricity to feed to gather and tune in to its settings, needs and expectations. the motors of the economy and improve the quality of life A company that continues to embody a driver of growth of individuals has always implied knowing how to adapt to and wellbeing, based on a clear development path for an ever-changing market and society. To talk about energy upcoming decades. is to talk about movement, and to know how to deliver the adequate amount of energy safely, timely, while respecting the environment, requires anticipating people, companies’ and society’s desires and requests. All this without losing Corporate restructuring sight of our business challenge to do so efficiently and profitably, ensuring growth for the Company in order to add Given the context described above, our main shareholder, significant value to our shareholders, employees, and the Enersis, proposed to the remaining shareholders a corporate societies we serve. restructuring that would simplify the complex corporate structure allowing to optimize and sharpen decision-making Throughout its long history, Endesa Chile has risen to an and the implementation of our projects and activities. undeniable position of leadership in Chile and Latin America, Consequently, the main focus of the restructuring proposal, 4 Endesa Chile 2015 Annual Report approved by the Extraordinary Shareholder’s Meeting held Details on these subjects can be reviewed in their respective on December 18th, 2015, is the separation of assets in Chile chapters that form this Annual Report and Financial from those located in Peru, Colombia, Argentina, and Brazil, Statements. transferring the latter to a new firm called Endesa Américas. Subsequently, this new entity will merge with the assets In this regard, it is worth noting that throughout 2015, the and international holdings of Enersis and Chilectra, under installed capacity of Endesa Chile experienced a significant the umbrella of Enersis Américas. With this approach, we increase compared to 2014, amounting to 15,149 MW by are advancing in the creation of an operator exclusively year-end, 2.9% above the 14,715 MW of the previous year. dedicated to Chile, which will be the greatest electricity player in the country, and owned by an investment vehicle in Likewise, in 2015 the net energy generation of the company Chile, with a simple and agile structure in other Latin grew by 4% with respect to 2014, reaching 51,622 GWh. American countries. This rise can be primarily explained by greater thermal generation, mainly due to the combined cycles in Argentina The benefits we will reap from this process are multifold, and the coal production plants in Colombia and Chile. among them, having a nimble and efficient decision-making Additionally, hydroelectric generation rose by 2%, mostly process, interest alignment, and consolidated income; shining stemming from operations in Chile and Argentina. a light on Chile business requirements; raise operational efficiency through real cost reduction, and improve profitability for our shareholders by means of a new dividend policy. We are confident that this new organizational structure to take on our tasks will not only be beneficial for the company, but for the country, since it allows us to have a clear focus on strategic development to continue fulfilling our historical vocation: provide the required energy to fuel Chile’s growth and development drivers. Evidently, this is not a simple endeavor, and growing in a profitable and sustainable fashion with an appropriate production mix that is able to quickly react to market shifts is key. 2015 Results Dear shareholders, 2015 was a year in which the company continued to move forward in its multiple tasks and purposes. I would like to take a moment in the following paragraphs to make a brief summary of the results achieved by our operation during this fiscal year. Enrico Viale Chairman L etter from the Chairman 5 Physical energy revenues increased 8% by the end of year. I would like to highlight some of the most important 2015, coming to 61,046 GWh, increasing 4,354 GWh milestones, and reiterate, that these were brought about compared to 2014 results. This increase can be mainly through the joint efforts of all employees, both professional attributed to greater regulated customer sales essentially and technical. in Chile and Colombia, as well as a boost in sales in the spot market in Argentina and Chile. In April of last year, the thermoelectric plant Bocamina was bestowed with a new environmental qualification resolution The aforementioned factors, in line with the effective (esp. RCA) by the authorities, which, besides permitting commercial management and operation of Endesa Chile’s the operation of the second unit of the power plant, production installations, gave way to an aggregate 16% paralyzed since December, 2013, laid the groundwork for growth in revenues, amounting to Ch$2,846,926 million. the advent of a significant improvement plan and the This figure is predominantly rooted in the higher average incorporation of additional technology, meeting the highest prices of energy sales in Chile, greater physical sales in environmental standards. Chile, Argentina, and Colombia, and a Ch$69,941 million increase in revenue captured through GasAtacama, entity Among the diverse actions implemented, advanced that consolidates in its entirety since May, 2014. technology high-efficiency filters for the seawater cooling system were introduced, aiming to minimize its impact on This setting led to a 9% growth in Endesa Chile’s the marine environment. After working very hard, we were consolidated EBITDA as of December, 2015, summing up able to begin operations with the filters 2 months before to Ch$1,191,661 million. One of the most significant factors the date set by authorities. influencing this results was the increase in energy sales, which grew by 18%, which were compensated by a Moreover, we launched important works to cover coal Ch$243,180 million rise in services and procurement