Filed by Bowne Pure Compliance

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F


o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o		SHELL COMPANY REPORT PURSUANT TO SECTION 23 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission file number: 001-12440

ENERSIS S.A.

(Exact name of Registrant as specified in its charter)


ENERSIS S.A.		CHILE

(Translation of Registrant’s name into English)		(Jurisdiction of incorporation or organization)

Avenida Santa Rosa 76, Santiago
Santiago, Chile

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered

American Depositary Shares representing Common Stock		New York Stock Exchange
Common Stock, no par value *		New York Stock Exchange
$ 350,000,000 7.40% Notes due December 1, 2016		New York Stock Exchange
$ 150,000,000 6.60% Notes due December 1, 2026		New York Stock Exchange


*		Listed, not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
$ 350,000,000 7.375% Notes due January 15, 2014

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: Shares of Common Stock: 32,651,166,465

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act:

YES þ NO o

If this Report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:

YES o NO þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


o U.S. GAAP		o		International Financial Reporting Standards as issued by the International Accounting Standards Board		þ Other

Indicate by check mark which financial statement item the registrant has elected to follow:

ITEM 17 o ITEM 18 þ

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

YES o NO þ

GLOSSARY


Acciona	ACCIONA, S.A.	Spanish construction holding company.

AESGener	AES Gener S.A.	Chilean generation company that competes with us in Chile, Argentina, Brazil and Colombia.

AFP	Administradora de Fondos de Pensiones	Chilean private pension funds.

Ampla	Ampla Energía e Serviços S.A.	Brazilian distribution company operating in Rio do Janeiro, owned by Endesa Brasil, a subsidiary of Enersis.

ANEEL	Agéncia Nacional de Energia Elétrica	Brazilian governmental agency for electric energy.

Betania	Central Hidroeléctrica de Betania S.A. E.S.P.	Endesa Chile’s Colombian subsidiary which merged with Emgesa in 2007.

Bureau Veritas	Bureau Veritas	International independent certification company.

Cachoeira Dourada	Centrais Elétricas Cachoeira Dourada S.A.	Brazilian generating company owned by Endesa Brasil, a subsidiary of Enersis.

CAM	Compañía Americana de Multiservicios Ltda.	Enersis’ subsidiary engaged in the electrical parts procurement business.

Cammesa	Compañía Administradora del Mercado Mayorista Eléctrico S.A.	Argentine autonomous entity in charge of the operation of the Mercado Eléctrico Mayorista (Wholesale Electricity Market), or MEM. Cammesa’s stockholders are generation, transmission and distribution companies, large users and the Secretariat of Energy.

CDEC	Centro de Despacho Económico de Carga	Autonomous entity in two Chilean electric systems in charge of coordinating the efficient operation and dispatch of units to satisfy the demand at any time.

CELTA	Compañía Eléctrica Tarapacá S.A.	Endesa Chile’s subsidiary that operates in the SING with thermal plants.

CEMSA	Compañía de Energía del Mercosur S.A.	Energy trading company with operations in Argentina, a subsidiary of Endesa Chile.

Chilectra	Chilectra S.A.	Chilean electricity distribution company operating in the Santiago metropolitan area owned by Enersis.

CIEN	Companhia de Interconexão Energética S.A.	Brazilian transmission company wholly-owned by Endesa Brasil, Enersis’ subsidiary.

CNE	Comisión Nacional de Energía	Chilean National Energy Commission; governmental entity with responsibilities under the Chilean regulatory framework.

Codensa	Codensa S.A. E.S.P.	Colombian distribution company controlled by Enersis that operates mainly in Bogotá and Cundinamarca.


Coelce	Companhia Energética do Ceará S.A.	Brazilian distribution company operating in the state of Ceará; Coelce is controlled by Endesa Brasil, a subsidiary of Enersis.

CREG	Comisión de Regulación de Energía y Gas	Colombian Commission for the Regulation of Energy and Gas.

CTM	Compañía de Transmisión del Mercosur	Endesa Brasil’s subsidiary transmission company with operations in Argentina.

Edegel	Edegel S.A.A.	Peruvian generation company, a subsidiary of Endesa Chile.

Edelnor	Empresa de Distribución Eléctrica de Lima Norte S.A.A.	Peruvian distribution company with concession area in the northern part of Lima.

Edesur	Empresa Distribuidora Sur S.A.	Argentine distribution company with concession area in the south of the Buenos Aires larger metropolitan area.

El Chocón	Central Hidroeléctrica El Chocón S.A.	Endesa Chile’s subsidiary with two hydroelectric plants, El Chocón and Arroyito, both located in the Limay River, Argentina.

Elesur	Elesur S.A.	A former Chilean subsidiary of Enersis that absorbed Chilectra, and later changed its name to Chilectra.

Emgesa	Emgesa S.A. E.S.P.	Colombian generation company controlled by Endesa Chile.

Endesa Brasil	Endesa Brasil, S.A.	Brazilian holding company, a subsidiary of Enersis, created in 2005.

Endesa Chile	Empresa Nacional de Electricidad S.A.	Our generation subsidiary with operations in four countries in South America.

Endesa Costanera	Endesa Costanera S.A.	Argentine generation company controlled by Endesa Chile.

Endesa Fortaleza	Central Geradora Termelétrica Fortaleza S.A.	Endesa Fortaleza owns a combined cycle generating plant, located in the state of Ceará. Endesa Fortaleza is fully owned by Endesa Brasil, a subsidiary of Enersis.

Endesa Internacional	Endesa Internacional S.A.	A subsidiary of Endesa Spain and our direct controller.

Endesa Spain	ENDESA, S.A.	A Spanish electricity generation and distribution company with a 60.6% beneficial interest in Enersis.

Enel	ENEL S.p.A.	A large power company in Italy.

ENRE	Ente Nacional Regulatorio de la Energía	Argentine national regulatory authority of the energy sector.

GasAtacama	GasAtacama S.A.	Company involved in gas transportation and electricity generation in the north of Chile, an affiliate of Endesa Chile.

IFRS	International Financial Reporting Standards	Reporting standards that the company will adopt starting on January 1, 2009.


IMV	Inmobiliaria Manso de Velasco Limitada	Enersis’ wholly-owned subsidiary dedicated to the real estate business.

MEM	Mercado Eléctrico Mayorista	Wholesale Electricity Market in Argentina.

MME	Ministério de Minas e Energia	Ministry of Mines and Energy of Brazil.

NIS	Sistema Interconectado Nacional	National interconnected electric system. There are such systems in Argentina, Brazil and Colombia.

ONS	Operador Nacional do Sistema Elétrico	Electric System National Operator. Brazilian non-profit private entity responsible for the planning and coordination of operations in interconnected systems.

Osinergmin	Organismo Supervisor de la Inversión en Energía y Minería	Energy and Mining Investment Supervisor Authority, or the Osinergmin, the Peruvian regulatory electricity authority.

Pangue	Empresa Eléctrica Pangue S.A.	Chilean electricity company, owner of the Pangue power station. Pangue is an Endesa Chile subsidiary.

Pehuenche	Empresa Eléctrica Pehuenche S.A.	Chilean electricity company, owner of three power stations in the Maule basin. Pehuenche is an Endesa Chile subsidiary.

San Isidro	Compañía Eléctrica San Isidro S.A.	Chilean electricity company, owner of a thermal power station. San Isidro is wholly-owned by Endesa Chile.

SEF	Superintendencia de Electricidad y Combustible	Governmental entity in charge of supervising the Chilean electricity industry.

SEIN	Sistema Eléctrico Interconectado Nacional	Peruvian interconnected electric system.

SIC	Sistema Interconectado Central	Chilean central interconnected electric system.

SING	Sistema Interconectado del Norte Grande	Electric system operating in northern Chile.

SVS	Superintendencia de Valores y Seguros	Chilean authority in charge of supervising public companies, securities and insurance.

Synapsis	Synapsis Soluciones y Servicios IT Ltda.	Wholly-owned subsidiary of Enersis engaged in the computer services business.

TESA	Transportadora del Energía de Mercosur S.A.	Endesa Brasil’s transmission company subsidiary with operations in Argentina.

UNIREN	Unidad de Renegociación y Análisis de Contratos de Servicios Públicos	Argentine institution in charge of renegotiating public service contracts.

UTA	Unidad Tributaria Anual	Chilean annual tax unit. One UTA equals 12 UTM.

UTM	Unidad Tributaria Mensual	Chilean monthly tax unit used to define fines, among other purposes.

VAD	Valued Added Distribution	Value added from distribution of electricity.

VNR	Valor Nuevo de Reemplazo	The net replacement value, in its Spanish acronym.

INTRODUCTION

As used in this annual Report on Form 20-F, first person personal pronouns such as “we,” “us” or “our” refer to ENERSIS S.A. (“Enersis” or the “Company”) and our consolidated subsidiaries unless the context indicates otherwise. Unless otherwise indicated, our interest in our principal subsidiaries and affiliates is expressed in terms of our economic interest as of December 31, 2007.

We are a holding company with subsidiaries engaged in the generation, transmission and distribution of electricity in Chile, Argentina, Brazil, Colombia and Peru. As of the date of this annual report, we beneficially owned, directly or indirectly, 60.0% of Endesa Chile’s outstanding capital stock and 99.1% of Chilectra’s outstanding capital stock. ENDESA, S.A. (“Endesa Spain”), a Spanish electricity generation and distribution company, owned a 60.06% beneficial interest in Enersis as of December 31, 2007. Since October 10, 2007, the Italian energy company, Enel, and the Spanish construction company, ACCIONA, S.A., jointly hold 92.06% of the share capital of Endesa Spain.

Financial Information

In this annual report on Form 20-F, unless otherwise specified, references to “dollars” or “$” are to dollars of the United States of America; references to “pesos” or “Ch$” are to Chilean pesos, the legal currency of Chile; references to “Ar$” or “Argentine pesos” are to the legal currency of Argentina; references to “R$” or “reais” are to the Brazilian real, the legal currency of Brazil; references to “soles” are to Peruvian soles, the legal currency of Peru; references to “CPs” or Colombian pesos are to the legal currency of Colombia; and references to “UF” are to Unidades de Fomento. The Unidad de Fomento is a Chilean inflation-indexed, peso-denominated monetary unit. The UF rate is set daily in advance based on changes in the previous month’s inflation rate. As of December 31, 2007, 1 UF was equivalent to Ch$19,622.66. The dollar equivalent of 1 UF was $39.49 at December 31, 2007, using the Observed Exchange Rate, reported by the Banco Central de Chile (the “Chilean Central Bank” or the “Central Bank”) as of December 31, 2007, of Ch$496.89 per $1.00. As of May 31, 2008, 1 UF was equivalent to Ch$20,061.03. The dollar equivalent of 1 UF was $41.83 as of May 31, 2008, using the Observed Exchange Rate reported by the Central Bank of Ch$479.54 per $1.00.

Our audited consolidated financial statements and, unless otherwise indicated, other financial information concerning us and our subsidiaries included in this annual report are presented in constant pesos in conformity with Chilean generally accepted accounting principles (“Chilean GAAP”) and the rules of the Superintendencia de Valores y Seguros, or SVS. Data expressed in pesos for all periods in the Company’s audited consolidated financial statements for the three fiscal years ended December 31, 2007 are expressed in constant pesos as of December 31, 2007 (see note 2(c) to our consolidated financial statements). For Chilean accounting purposes, inflation adjustments are calculated based on a “one-month lag” convention using an inflation adjustment factor based on the Indice de Precios al Consumidor (Chilean consumer price index, or “Chilean CPI”). The Chilean CPI is published monthly by Chile’s Instituto Nacional de Estadísticas (the “National Bureau of Statistics”). For example, the inflation adjustment applicable for the 2007 calendar year is the percentage change between the November 2006 Chilean CPI and the November 2007 Chilean CPI, which was 7.4%. Chilean GAAP differs in certain important respects from accounting principles generally accepted in the United States (“U.S. GAAP”). See note 36 to our consolidated financial statements for a description of the principal differences between Chilean GAAP and U.S. GAAP, as they relate to us, and for a reconciliation to U.S. GAAP of stockholders’ equity and net income as of and for the three years in the period ended December 31, 2007.

Under Chilean GAAP, we consolidate the results of operations of a company defined as a “subsidiary” under Law 18,046 (the “Chilean Companies Act”). In order to consolidate a company, we must generally satisfy one of two criteria: control, directly or indirectly, more than a 50% voting interest in that company; or nominate or have the power to nominate a majority of the Board of Directors of that company.

As of December 31, 2007, we consolidated Empresa Nacional de Electricidad S.A., or Endesa Chile, Chilectra S.A., or Chilectra, Inversiones Distrilima S.A. (which in turn consolidated Empresa de Distribución Eléctrica de Lima Norte S.A.A., or Edelnor), Empresa Distribuidora Sur S.A., or Edesur, Inmobiliaria Manso de Velasco Limitada, or IMV, Synapsis Soluciones y Servicios IT Ltda., or Synapsis, Compañía Americana de Multiservicios Ltda., or CAM, and Codensa S.A. E.S.P., or Codensa. Through Endesa Brasil, S.A., or Endesa Brasil, we consolidated Ampla Energía e Serviços S.A., or Ampla, Investluz (which in turn consolidated Companhia Energética do Ceará S.A., or Coelce), Central Geradora Termelétrica Fortaleza S.A., or Endesa Fortaleza, Centrais Eléctricas Cachoeira Dourada S.A., or Cachoeira Dourada, and Companhia de Interconexão Energética S.A., or CIEN (which in turn consolidated Compañía de Transmisión del Mercosur, or CTM, and Transportadora del Energía de Mercosur S.A., or TESA).

Endesa Chile, in turn, consolidated all of its operational Chilean subsidiaries. In Argentina, Endesa Chile consolidated Central Hidroeléctrica El Chocón S.A., or El Chocón, and Endesa Costanera S.A., or Endesa Costanera. In Colombia, Endesa Chile consolidated Emgesa S.A. E.S.P., or Emgesa. Endesa Chile also consolidated Edegel S.A.A., or Edegel, in Peru.

For the convenience of the reader, this annual report contains translations of certain peso amounts into dollars at specified rates. Unless otherwise indicated, the dollar equivalent for information in pesos is based on the Observed Exchange Rate, as defined in “Item 3. Key Information — A. Selected Financial Data — Exchange Rates” at December 31, 2007. No representation is made that the peso or dollar amounts shown in this annual report could have been or could be converted into dollars or pesos, as the case may be, at such rate or at any other rate. See “Item 3. Key Information — A. Selected Financial Data — Exchange Rates.”

Technical Terms

References to “GW” and “GWh” are to gigawatts and gigawatt hours, respectively; references to “MW” and “MWh” are to megawatts and megawatt hours, respectively; references to “kW” and “kWh” are to kilowatts and kilowatt hours, respectively; and references to “kV” are to kilovolts. Unless otherwise indicated, statistics provided in this annual report with respect to electricity generation facilities are expressed in MW, in the case of the installed capacity of such facilities, and in GWh, in the case of the aggregate annual electricity production of such facilities. One GW = 1,000 MW, and one MW = 1,000 kW. Statistics relating to aggregate annual electricity production are expressed in GWh. Statistics relating to installed capacity and production of the electricity industry do not include electricity of self-generators. Statistics relating to our production do not include electricity consumed by our generators.

Energy losses are calculated by:

	•		subtracting the number of GWh of energy sold from the number of GWh of energy purchased and self-generated within a given period; and

	•		calculating the percentage that the resulting quantity bears to the aggregate number of GWh of energy purchased and self-generated within the same period.

Calculation of Economic Interest

References are made in this annual report to the “economic interest” of Enersis in its subsidiaries or affiliates. In circumstances where we do not directly own an interest in a subsidiary or affiliate, our economic interest in such ultimate subsidiary or affiliate is calculated by multiplying the percentage economic interest in a directly held subsidiary or affiliate by the percentage economic interest of any entity in the ownership chain of such subsidiary or affiliate. For example, if we own 60% of a directly held subsidiary and that subsidiary owns 40% of an affiliate, our economic interest in such affiliate would be 24%. References are also made in this annual report to the economic interest of Endesa Chile in its subsidiaries and affiliates. Calculation of Endesa Chile’s economic interest is made based on the same method used to calculate our economic interest.

Forward-Looking Statements

This annual report contains statements that are or may constitute forward-looking statements. These statements appear throughout this annual report and include statements regarding our intent, belief or current expectations, including but not limited to any statements concerning:

	•		our capital investment program;

	•		trends affecting our financial condition or results from operations;

	•		our dividend policy;

	•		the future impact of competition and regulation;

	•		political and economic conditions in the countries in which we or our affiliates operate or may operate in the future;

	•		any statements preceded by, followed by or that include the words “believes,” “expects,” “predicts,” “anticipates,” “intends,” “estimates,” “should,” “may” or similar expressions; and

	•		other statements contained or incorporated by reference in this annual report regarding matters that are not historical facts.

Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to:

	•		changes in the regulatory framework of the electric industry in one or more of the countries in which we operate;

	•		our ability to implement proposed capital expenditures, including our ability to arrange financing where required;

	•		the nature and extent of future competition in our principal markets;

	•		political, economic and demographic developments in the emerging market countries of South America where we conduct our business; and

	•		the factors discussed below under “Risk Factors.”

You should not place undue reliance on such statements, which speak only as of the date that they were made. Our independent public accountants have not examined or compiled the forward-looking statements, and, accordingly, do not provide any assurance with respect to such statements. You should consider these cautionary statements together with any written or oral forward-looking statements that we may issue in the future. We do not undertake any obligation to release publicly any revisions to forward-looking statements contained in this annual report to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

For all these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable

Item 2. Offer Statistics and Expected Timetable

Not applicable

Item 3. Key Information

A. Selected Financial Data.

The following summary of consolidated financial data should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, included in this annual report. Our consolidated financial statements are prepared in accordance with Chilean GAAP and the related rules of the SVS, which together differ in certain important respects from U.S. GAAP. Note 36 to our consolidated financial statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP and a reconciliation to U.S. GAAP of net income and shareholders’ equity for the periods indicated therein. Financial data as of and for each of the five years ended December 31, 2007 in the following table have been restated in constant pesos as of December 31, 2007.

In general, amounts are in millions except for ratios, operating data, shares and ADS data. For the convenience of the reader, all data presented in dollars in the following summary, as of and for the year ended December 31, 2007, are converted at the Observed Exchange Rate for December 31, 2007 of Ch$496.89 per $1.00. No representation is made that the peso or dollar amounts shown in this annual report could have been or could be converted into dollars or pesos, at such rate or at any other rate. For more information concerning historical exchange rates, see “ — Exchange Rates” below.

The information detailed in the following table includes changes in certain accounting policies for the five years ended and as of December 31, 2007, which affect the comparability of the data presented below. See Note 3 to our consolidated financial statements for a description of changes in our accounting policies.


	As of and for the year ended December 31,
	2003			2004			2005			2006			2007			2007(1)
	(constant Ch$ millions as of December 31, 2007,															(Millions of $)
	except Share and ADS data)
CONSOLIDATED INCOME STATEMENT DATA

Chilean GAAP

Revenues from Operations		2,766,712			3,101,986			3,533,450			4,155,845			4,686,676			9,432
Cost of Sales		(1,929,243	)		(2,158,247	)		(2,399,516	)		(2,782,687	)		(3,163,865	)		(6,367	)
Administrative and Selling Expenses		(197,499	)		(200,855	)		(243,971	)		(241,527	)		(267,244	)		(538	)

Operating Income		639,970			742,884			889,963			1,131,631			1,255,567			2,527
Equity in Income of Related Companies		20,397			35,383			7,397			5,412			(54,761	)		(110	)
Goodwill Amortization		(61,981	)		(60,437	)		(60,515	)		(60,045	)		(59,814	)		(120	)
Interest (Expense), net		(411,014	)		(327,072	)		(290,075	)		(280,336	)		(290,878	)		(585	)
Price Level Adjustment		(12,289	)		15,485			(12,267	)		7,029			(4,017	)		(8	)
Other Non-Operating Income (loss), net		(80,546	)		(104,570	)		(100,050	)		(111,089	)		(149,389	)		(301	)

Income (loss) before Income Taxes, Minority Interest and Amortization of Negative Goodwill		94,537			301,673			434,453			692,602			696,708			1,403
Income taxes		(48,406	)		(155,910	)		(190,984	)		(102,257	)		(253,148	)		(509	)
Extraordinary Items		—			—			—			—			—			—
Minority Interest		(91,204	)		(114,861	)		(185,879	)		(289,750	)		(259,606	)		(522	)
Amortization of Negative Goodwill		59,591			19,434			16,993			6,527			4,422			9

Net Income (loss)		14,518			50,336			74,583			307,122			188,376			381
Net Income (loss) $ per Share		0.66			1.54			2.28			9.41			5.77			—
Net Income (loss) $ per ADS		20.70			77.08			114.21			470.31			288.47			1

U.S. GAAP

Operating Income		525,528			754,842			904,496			1,093,538			1,015,880			2,044
Equity in Income (loss) of Related Companies		50,784			35,384			(28,929	)		10,213			(52,620	)		(106	)
Income taxes		(25,326	)		(140,834	)		(199,330	)		(109,426	)		(250,415	)		(504	)
Net Income (loss) from continuing operations		34,327			172,420			134,162			388,951			188,054			378
Income (loss) from discontinued operations net of tax and minority interest		82			—			—			—			—			—
Net Income (loss)		34,409			172,420			134,162			388,951			188,054			378
Net Income (loss) from continuing operations per Share		1.68			5.18			4.11			11.91			5.76			—
Net Income (loss) from continuing operations per ADS		83.85			75.49			205.45			595.62			287.97			1
Net Income (loss) per Share		1.66			5.18			4.11			11.91			5.76			—
Net Income (loss) per ADS		83.26			75.49			205.45			595.62			287.97			1
Cash Dividends per Share		—			—			0.47			2.29			5.72			—
Cash Dividends per ADS		—			—			23.55			114.55			285.91			1
Capital stock		2,778,877			2,778,877			2,778,877			2,778,877			2,778,877			5,593
Number of shares of common stock (thousands)		32,651,166			32,651,166			32,651,166			32,651,166			32,651,166			—
Number of American Depository Shares (thousands)		55,111			66,345			61,384			61,384			61,384			—

CONSOLIDATED BALANCE SHEET DATA

CHILEAN GAAP

Total Assets		12,476,895			11,918,028			11,256,598			11,884,104			11,437,767			23,019
Long-Term Debt		4,296,974			4,324,529			3,707,065			4,213,035			4,052,531			8,156
Minority Interest		3,900,008			3,550,101			3,070,395			3,082,340			2,741,767			5,518
Stockholders’ Equity		2,967,427			2,907,729			2,846,513			3,082,253			2,903,210			5,843

U.S. GAAP

Total Assets		12,299,246			11,992,938			11,386,446			12,051,650			11,741,381			23,630
Long-Term Debt		4,432,414			4,537,823			3,898,130			4,415,885			4,324,556			8,703
Minority Interest		3,642,042			3,295,797			2,850,938			2,877,075			2,469,074			4,969
Stockholders’ Equity		2,925,657			2,992,920			3,006,539			3,258,858			3,157,633			6,355


	As of and for the year ended December 31,
	2003			2004			2005			2006			2007
OPERATING DATA OF SUBSIDIARIES

Chilectra
Electricity Sold (GWh)(1)		10,518			11,317			11,851			12,377			12,923
Number of Customers (thousands)		1,341			1,371			1,404			1,437			1,483
Total Energy Losses (%)(2)		5.6	%		5.2	%		5.5	%		5.4	%		5.9	%

Edesur
Electricity Sold (GWh)		12,656			13,322			14,018			14,837			15,833
Number of Customers (thousands)		2,117			2,139			2,165			2,196			2,228
Total Energy Losses (%)(2)		11.8	%		11.8	%		11.4	%		10.5	%		10.7	%

Ampla
Electricity Sold (GWh)		7,276			7,628			8,174			8,668			8,985
Number of Customers (thousands)		2,012			2,115			2,216			2,316			2,379
Total Energy Losses (%)(2)		23.6	%		22.8	%		22.4	%		21.9	%		21.4	%

Coelce
Electricity Sold (GWh)		5,905			6,141			6,580			6,769			7,227
Number of Customers (thousands)		2,109			2,334			2,438			2,543			2,689
Total Energy Losses (%)(2)		13.5	%		13.9	%		14.0	%		13.0	%		12.5	%

Codensa
Electricity Sold (GWh)		9,254			9,656			10,094			10,755			11,441
Number of Customers (thousands)		1,972			2,015			2,073			2,138			2,209
Total Energy Losses (%)(2)		10.2	%		9.7	%		9.4	%		8.9	%		8.7	%

Edelnor
Electricity Sold (GWh)		3,968			4,250			4,530			4,874			5,201
Number of Customers (thousands)		892			912			925			952			986
Total Energy Losses (%)(2)		8.4	%		8.4	%		8.6	%		8.2	%		8.1	%


Endesa Chile
Installed capacity in Chile (MW)		3,763			4,477			4,477			4,477			4,779
Installed capacity in Argentina (MW)		3,622			3,623			3,623			3,639			3,644
Installed capacity in Colombia (MW)		2,589			2,609			2,657			2,779			2,829
Installed capacity in Brazil (MW)		658			658			—			—			—
Installed capacity in Peru (MW)		967			967			969			1,426			1,468
Production in Chile (GWh)(4)		16,524			16,797			18,764			19,973			18,773
Production in Argentina (GWh)(4)		7,997			11,290			12,333			13,750			12,117
Production in Colombia (GWh)(4)		10,794			11,881			11,864			12,564			11,942
Production in Brazil (GWh)(4)(5)		3,024			3,262			2,645			0			—
Production in Peru (GWh)(4)		4,287			4,136			4,516			6,662			7,654

Endesa Brasil
Installed capacity in Brazil (MW)(3)		—			—			1,039			980			987
Production in Brazil (GWh)(4)		—			—			3,954			4,489			3,954


(1)		Energy sold by Chilectra includes sales to Río Maipo in 2003, when we sold this distribution company.

(2)		Energy losses are calculated by (a) subtracting the number of GWh of energy sold from the aggregate GWh of energy purchased and self-generated within a period and (b) calculating the percentage that the resulting sum bears to the aggregate number of GWh of energy purchased and self-generated within the same period. Energy losses arise from illegally tapped energy as well as technical failures.

(3)		As a result of the creation of Endesa Brasil, Cachoeira Dourada became a subsidiary of Enersis as of October 2005. As of the same date, Enersis also started to consolidate Endesa Fortaleza. Ampla had generation facilities which were sold in 2006.

(4)		Energy production is defined as total generation minus energy consumption and technical losses within our own power plants.

(5)		Endesa Chile consolidated Cachoeira Dourada’s generation only through September 2005.

Exchange Rates

Fluctuations in the exchange rate between the peso and the dollar will affect the dollar equivalent of the peso price of our shares of common stock, without par value (the “Shares” or the “Common Stock”), on the Bolsa de Comercio de Santiago (the “Santiago Stock Exchange”), the Bolsa Electrónica de Chile (the “Electronic Exchange”) and the Bolsa de Corredores de Valparaíso (the “Valparaíso Stock Exchange”) (collectively, the “Chilean Exchanges”). These fluctuations will likely affect the price of the Company’s American Depositary Shares (“ADSs”) and will also affect conversion of cash dividends relating to the Shares represented by ADSs from pesos to dollars.

In Chile, the Ley Orgánica del Banco Central de Chile 18,840 (the “Central Bank Act”), enacted in 1989, made it easier to buy and sell foreign currency in Chile. The Central Bank Act provides that the Central Bank may require that certain purchases and sales of foreign currency be carried out in the Mercado Cambiario Formal (the “Formal Exchange Market”), a market formed by banks and other entities explicitly authorized by the Central Bank. Purchases and sales of foreign currency, which are generally permitted outside the Formal Exchange Market, can be carried out in the Mercado Cambiario Informal (the “Informal Exchange Market”), which is a recognized currency market in Chile, even though it operates through entities that are not expressly authorized to operate in the Formal Exchange Market (e.g., certain foreign exchange houses, travel agencies and others). Free market forces drive both the Formal and Informal Exchange Markets. Foreign currency for payments and distributions with respect to the ADSs may be purchased in either the Formal Exchange Market or the Informal Exchange Market, but such payments and distributions must be remitted through the Formal Exchange Market.

The Central Bank publishes daily the dólar observado (the “Observed Exchange Rate”), which is computed by taking the weighted average of the previous business day’s transactions in the Formal Exchange Market.

Since 1993, the Observed Exchange Rate and the Informal Exchange Rate have typically been within less than 1% of each other. The Informal Exchange Rate means the average rate at which transactions are made in the Informal Exchange Market. On December 31, 2007, the Informal Exchange Rate was Ch$498.10, or 0.24% higher than the published Observed Exchange Rate of Ch$496.89 per $1.00. On May 31, 2008, the informal exchange rate was Ch$480.50 per $1.00, 0.20% higher than the Observed Exchange Rate corresponding to such date of Ch$479.54 per $1.00. Unless otherwise indicated, amounts translated to dollars were calculated based on the exchange rates in effect as of December 31, 2007.

The following table sets forth, for the periods and dates indicated, certain information concerning the Observed Exchange Rate reported by the Central Bank. The Federal Reserve Bank of New York does not report a rate for pesos.


	Observed Exchange Rate(1)
	(Ch$ per U.S.$)
							Period-
Year	Low(2)		High(2)		Average(3)		end
2003		593.10		758.21		686.89		593.80
2004		557.40		649.45		611.11		557.40
2005		509.70		592.75		558.06		512.50
2006		511.44		549.63		529.64		532.39
2007		493.14		548.67		521.06		496.89


	Observed Exchange Rate(1)
	(Ch$ per U.S.$)
							Period-
Last six months	Low(2)		High(2)		Average(3)		end
2007
December		495.49		506.79		—		496.89
2008
January		463.58		498.05		—		465.34
February		453.95		476.44		—		453.95
March		431.22		454.94		—		437.71
April		433.98		461.49		—		461.49
May		464.83		479.66		—		479.54


Source: Chilean Central Bank.

(1)		Reflects pesos at historical values rather than in constant pesos.

(2)		Exchange rates are the actual high and low, on a day-by-day basis, for each period.

(3)		The average of the exchange rates on the last day of each month during the period. This is not applicable to monthly data.

B. Capitalization and indebtedness.

Not applicable

C. Reasons for the offer and use of proceeds.

Not applicable

D. Risk factors.

Since our business depends heavily on hydrological conditions, drought conditions may hurt our profitability.

Approximately 63% of our consolidated installed capacity in Chile, Argentina, Brazil, Colombia and Peru is hydroelectric. Accordingly, extreme hydrological conditions affect our business and may have a substantial influence over our results.

During periods of drought, thermal plants, such as ours that use natural gas, fuel oil or coal as a fuel are dispatched more frequently. Our operating expenses increase during these periods, and depending on the size of our commitments, we may have to buy electricity from other generators in order to comply with our contractual supply obligations. The cost of these electricity purchases in the spot market may exceed the price at which we sell contracted electricity, thus producing losses from those contracts.

Our generation subsidiaries have a commercial policy in place to limit the potential impact of interruptions to our ability to supply electricity to their customers, including those caused by droughts, interruptions in gas supply and prolonged plant stoppages. Pursuant to this policy, a volume of contracts is determined for each generation company by reducing the hydrological risk to acceptable levels, assured by a degree of statistical reliability of 95%. Any contracts for volumes that exceed this 95% level are required to include clauses transferring the risk of interruptions and its related costs to the customers. Notwithstanding this risk-reduction policy, a prolonged drought will adversely affect our results.

Regulatory authorities may impose fines on our subsidiaries.

In Chile, our electricity businesses may be subject to regulatory fines for any breach of current regulations, including energy supply failure. Such fines may range from 1 Unidad Tributaria Mensual (“UTM”), or $69, to 10,000 Unidades Tributarias Anuales (“UTA”), or $8.3 million using the UTM, UTA and foreign exchange rate as of December 31, 2007. Any electricity company supervised by the Superintendencia de Electricidad y Combustibles (the Chilean Superintendence of Electricity and Fuels), or SEF, may be subject to these fines in cases where, in the opinion of the SEF, operational failures that affect the regular energy supply to the system are the fault of the company, for instance, when the coordination duty of the system agents is not fulfilled, even when it is not within the company’s control to prevent such failures. These fines may be appealed.

Our generation and distribution subsidiaries may be required to pay fines or to compensate customers if those subsidiaries are unable to deliver electricity to them even if such failure is due to forces outside of our control.

In 2003, the SEF imposed fines on some of our Chilean generation subsidiaries in an aggregate amount of 5,330 UTA, or $4.4 million, because of their failure to transmit energy in the Metropolitan Region on September 23, 2002. In 2004, the SEF imposed fines on both Endesa Chile and Chilectra in an aggregate amount of 3,860 UTA due to a blackout that occurred in the Metropolitan Region on January 13, 2003. As a result of an administrative resolution, these fines have since been reduced to 3,440 UTA, or $2.8 million. In 2005, the SEF imposed fines of 1,260 UTA, or $1.0 million, on Endesa Chile due to a blackout that occurred in the Metropolitan Region on November 7, 2003. Our subsidiaries are currently appealing these fines, but these appeals may be unsuccessful.

Governmental regulations may impose additional operating costs which may reduce our profits.

We are subject to extensive regulation of tariffs and other aspects of our business in the countries in which we operate, and these regulations may adversely affect our profitability. In addition, changes in the regulatory framework, including changes that if adopted would significantly affect our operations, are often submitted to the legislators and administrative authorities in the countries in which we operate and could have a material adverse impact on our business.

For instance, the Chilean government can impose electricity rationing during drought conditions or prolonged failures in power facilities. If, during rationing, we are unable to generate enough electricity to comply with our contractual obligations, we may be forced to buy electricity in the pool market at the spot price, since even a severe drought does not constitute a force majeure event. The spot price may be significantly higher than our costs to generate the electricity and can be as high as the “cost of failure” set by the Comisión Nacional de Energía (National Energy Commission), or the CNE. The “cost of failure” is determined semiannually by the CNE’s economic models as the highest cost of electricity during periods of electricity deficit. If we are unable to buy enough electricity in the pool market to comply with all of our contractual obligations, then we would have to compensate our regulated customers for the volume we failed to provide at the rationed price. If material rationing policies are imposed by regulatory authorities in Chile, our business, financial condition and results from operations may be affected adversely in a material way.

Similarly, if material rationing policies are imposed by any regulatory authority as a result of adverse hydrological conditions in the countries in which we operate, our business, financial condition and results from operations may be affected adversely in a material way. Rationing periods may occur in the future, and consequently our generation subsidiaries may be required to pay regulatory penalties if such subsidiaries fail to provide adequate service under such conditions.

Environmental regulations in the countries in which we operate may increase our costs of operations.

Our operating subsidiaries are also subject to environmental regulations, which, among other things, require us to perform environmental impact studies for future projects and obtain permits from both local and national regulators. Approval of these environmental impact studies may be withheld by governmental authorities. In addition, public opposition may cause delays or modifications to any proposed project and laws or regulations may change or be interpreted in a manner that could adversely affect our operations or our plans for companies in which we hold investments. See “Item 4. Information on the Company — B. Business Overview — Electricity Industry Regulatory Framework.”

Foreign exchange risks may adversely affect our results from operations and financial condition.

Over the last five years, the peso has appreciated against the dollar. The peso and the other South American currencies in which we operate have been subject to large devaluations and appreciations against the dollar in the past and may be subject to significant fluctuations in the future. Historically, a significant portion of our consolidated indebtedness has been denominated in dollars, and although a substantial portion of our revenues are linked in part to dollars, we generally have been and will continue to be materially exposed to fluctuations of our local currencies against the dollar because of time lags and other limitations in the indexation of our tariffs to the dollar; in addition, to the extent financial liabilities of the Company are denominated in foreign currencies, exchange rate fluctuations may have a significant impact on our earnings.

Because of this exposure, for instance, the cash generated by our subsidiaries can be diminished materially when the local currencies devalue against the dollar. Future volatility in the exchange rate of the peso, and the other currencies in which we receive revenues or incur expenditures, to the dollar, may affect our financial condition and results from operations. For more information on the risks associated with foreign exchange rates, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

As of December 31, 2007, using a financial instead of accounting convention, Enersis had total consolidated indebtedness of $8,353 million, which includes the effect of currency hedging instruments. Of this amount, $3,081 million, or 37%, was denominated in dollars and $1,457 million in pesos. In addition to the dollar and the peso, our foreign-currency denominated consolidated indebtedness included the equivalent of $1,803 million in Brazilian reais (including the effect of a $/R$ swap contract), $1,452 million in Colombian pesos, $471 million in Peruvian soles and $89 million in Argentine pesos for an aggregate of $3,815 million in currencies other than pesos and dollars.

For the twelve-month period ended December 31, 2007, our revenues amounted to $10,579 million (before consolidation adjustments), of which $661 million, or 6%, was denominated in dollars, and $1,874 million, or 18%, was linked in some way to the dollar. In the aggregate, 24% of our revenues (before consolidation adjustments) were either in dollars or tied to dollars through some form of indexation. On the other hand, $2,097 million was attributable to revenues in pesos, which represent 20% of our 2007 revenues before consolidation adjustments. At the same time, revenues before consolidation adjustments in these other currencies for the twelve-month period ended December 31, 2007 included the equivalent of $2,781 million in Brazilian reais, $1,457 million in Colombian pesos, $1,126 million in Argentine pesos and $583 million in Peruvian soles. Despite the fact that we have revenues and debt in these four currencies, we believe that we are subject to risk in terms of our foreign exchange exposure to these four currencies. The most material case is that of Argentina, where most of our debt is denominated in dollars while our revenues are mostly in Argentine pesos.

We may be subject to refinancing risk.

As of December 31, 2007, on a consolidated basis, we had $1,259 million of indebtedness maturing in 2008, $1,668 million in 2009, $2,390 million maturing in the period 2010-2012 and $3,036 million thereafter. Of the $1,259 million maturing in 2008, $77 million is in Argentina, $354 million in Brazil, $165 million in Colombia, $220 million in Peru and $443 million in Chile.

We are subject to certain fairly standard types of financial covenants including maximum ratios of indebtedness to adjusted cash flow, indebtedness to EBITDA, debt-to-equity and minimum ratios of adjusted cash flow to interest expense as defined in debt agreements. In addition, most of our indebtedness contains cross-default provisions, generally triggered by default on other indebtedness in amounts exceeding $30 million on an individual basis. In the event that any of our cross-default provisions are triggered and our existing creditors demand immediate repayment, a significant portion of our indebtedness could become due and payable. For more information on covenants and relevant provisions for these credit facilities, see “Item 5 — Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”

We may be unable to refinance our indebtedness or obtain such refinancing on terms acceptable to us. In the absence of such refinancing, we could be forced to dispose of assets in order to make up for any shortfall in the payments due on our indebtedness under circumstances that might not be favorable to obtaining the best price for such assets. Furthermore, assets may not be sold quickly enough, or for amounts sufficient to enable us to make such payments.

As of the date of this report, our subsidiaries in Argentina are exposed to the greatest refinancing risk. As of December 31, 2007, the third-party financial debt of our Argentine subsidiaries amounted to $412 million. As a matter of policy for all of our Argentine subsidiaries and as long as fundamental issues concerning the electricity sector remain unsolved, we are rolling over some of their outstanding debt. If our creditors do not continue to accept rolling over debt principal when it becomes due, we may be unable to refinance such indebtedness on terms that would otherwise be acceptable to us.

We are a holding company and depend on payments from our subsidiaries and affiliates to meet our payment obligations.

We are a holding company with no significant assets other than the stock of our subsidiaries. In order to pay our obligations, we rely on cash from dividends, loans, interest payments, capital reductions and other distributions from our subsidiaries and equity affiliates, as well as cash from proceeds of the issuance of new securities. Our ability to pay our obligations will depend on the receipt of distributions from our subsidiaries. The ability of our subsidiaries and equity affiliates to pay dividends, interest payments, loans and other distributions to us is subject to legal constraints such as dividend restrictions, fiduciary duties, contractual limitations and foreign exchange controls that may be imposed in any of the five countries where they operate.

Historically, we have been able to access the cash flows of our Chilean subsidiaries, but we have not been similarly able to access at all times the cash flows of our non-Chilean operating subsidiaries due to government regulations, strategic considerations, economic conditions and credit restrictions.

Our future results from operations outside Chile may continue to be subject to greater economic and political uncertainties than what we have experienced in Chile, thereby reducing the likelihood that we will be able to rely on cash flows from operations in those entities to repay our debt.

Dividend Limits and Other Legal Restrictions. Some of our non-Chilean subsidiaries are subject to legal reserve requirements and other restrictions on dividend payments. In addition, the ability of any of our subsidiaries which are not wholly owned to distribute cash to us may be limited by the fiduciary duties of the directors of such subsidiaries to their minority shareholders. As a consequence of such duties, our subsidiaries could, under certain circumstances, be prevented from distributing cash to us.

Contractual Constraints. Distribution restrictions in our subsidiaries’ contractual agreements include the following: prohibitions against dividend distributions by many companies in the case of default, and Empresa Eléctrica Pangue S.A., or Pangue, our Chilean generation subsidiary, if it is not in compliance with certain debt-to-equity ratio and debt coverage ratio requirements (in each case, as defined in Pangue’s credit agreements that mature in January 2010); and prohibitions against dividend distributions, capital reductions, intercompany interest payments and debt repayment by Ampla and Coelce in Brazil, and Endesa Costanera and El Chocón in Argentina, in the case of default and if not in compliance with certain financial ratios.

Operating Results of Our Subsidiaries. The ability of our subsidiaries and equity affiliates to pay dividends or make loan payments or other distributions to us is limited by their operating results. To the extent that the cash requirements at any of our subsidiaries exceed available cash, such subsidiary will not be able to make cash available to us.

Foreign Currency Controls. The ability of our non-Chilean subsidiaries and equity affiliates to pay dividends and make loan payments or other distributions to us may be subject to restrictions that may be imposed by Central Banks or other governmental authorities in the various jurisdictions in which they operate. For example, during the economic crisis in Argentina, the Central Bank of Argentina imposed restrictions on the transfer of funds outside such country.

The Argentine natural gas crisis has increased the vulnerability of the electricity sector in Chile.

In Argentina, the low price imposed by regulators on natural gas has directly affected production and investment in natural gas fields, which has impacted the short- and medium-term availability of this fuel both in Chile and in Argentina. A natural gas shortage may force electricity generation companies, including ours, to use more expensive fuel oil, thus substantially increasing production costs. Demand for electricity in Chile’s central region increased by 6.6% in 2007 and is expected to continue to increase significantly in the foreseeable future. Increasing demand, combined with a low level of mid-term investment in the electricity sector, particularly exposes the Chilean electricity sector to the adverse effects of the Argentine natural gas crisis. Since 2004, Chile has been affected by increasing restrictions in the supply of natural gas from Argentina despite the existence of long-term contracts.

Our San Isidro combined cycle plant and both units in the Taltal power plant operate with natural gas and diesel oil. The units of our related company, GasAtacama, also operate with natural gas and diesel oil. Each company has gas contracts with Argentine suppliers and has been affected adversely by restrictions on natural gas from Argentina, reaching to zero levels. In the case of GasAtacama, because of the additional generating costs, with associated losses, we took an investment impairment provision of $48.9 billion ($29.3 billion, net of minority interest) in 2007 because of this problem. The degree of the future impact will depend on the level of natural gas restrictions from Argentina and the contractual commitments of each company. For more information on such impairment provision, see “Item 4. Information on the Company — A. History and Development of the Company — Recent Developments.”

South American economic fluctuations are likely to affect our results from operations.

All of our operations are located in South America. In 2007, we generated 68% of our consolidated operating revenues and 62% of our consolidated operating income outside Chile (before consolidation adjustments). Accordingly, our consolidated revenues are sensitive to the performance of South American economies as a whole. If local, regional or worldwide economic trends adversely affect the economy of any of the countries in which we have investments or operations, our financial condition and results from operations could be affected adversely.

The South American financial and securities markets are, to varying degrees, influenced by economic and market conditions in other emerging market countries. Although economic conditions are different in each country, investor reaction to developments in one country may have a significant effect on the securities of issuers in other countries, including Chile. Chilean financial and securities markets may be affected adversely by events in other countries and such effects may affect the value of our securities. Moreover, we have significant investments in relatively risky non-Chilean countries such as Argentina, Brazil, Colombia and Peru. Generation and distribution of cash from subsidiaries in these countries have proven to be volatile.

Certain South American economies have been characterized by frequent and occasionally drastic intervention by governmental authorities, which may adversely affect our business.

Governmental authorities have changed monetary, credit, tariff and other policies to influence the course of the economies of Argentina, Brazil, Colombia and Peru. These governments’ actions intended to control inflation and affect other policies have often involved wage, price and tariff rate controls as well as other interventionist measures, which have included freezing bank accounts and imposing capital controls, as was the case in Argentina in 2001. Changes in the policies of these governmental authorities with respect to tariff rates, exchange controls, regulations and taxation could adversely affect our business and financial results, as could inflation, devaluation, social instability and other political, economic or diplomatic developments, including the response by governments in the region to these circumstances. If governmental authorities intervene materially in any of the countries in which we operate, it could cause our business to become less profitable, and our results from operations may be adversely affected.

Construction of new facilities may be adversely affected by factors associated with these projects.

Factors that may adversely affect our ability to build new facilities include: delays in obtaining regulatory approvals, including environmental permits; shortages or increases in the price of equipment, materials or labor; opposition by local or international political, environmental and ethnic groups; strikes; adverse changes in the political and regulatory environment in the countries where we and our affiliates operate; adverse weather conditions, which may delay the completion of power plants or substations; natural disasters, accidents or other unforeseen events; and the inability to obtain financing at affordable rates.

Any of these factors may cause delays in the completion of all or part of our capital investment program and may increase the cost of the projects.

Lawsuits against us brought outside of Chile or complaints against us based on foreign legal concepts may be unsuccessful.

All of our assets are located outside of the United States. All of our directors and officers reside outside of the United States and most of their assets are located outside the United States as well. If any shareholder were to bring a lawsuit against our directors, officers or experts in the United States, it may be difficult for them to effect service of legal process within the United States upon these persons or to enforce against them, in United States courts or Chilean courts, judgments obtained in United States courts based upon the civil liability provisions of the federal securities laws of the United States. In addition, there is doubt as to whether an action could be brought successfully in Chile on the basis of liability based solely upon the civil liability provisions of the United States federal securities laws.

Our controlling shareholders may have conflicts of interest relating to our business.

Endesa Spain currently owns 60.6% of Enersis’ share capital, and ENEL and Acciona jointly hold 92.06% of Endesa Spain’s share capital (Endesa Spain, ENEL and Acciona, collectively, the “Controllers”). The Controllers have the power to determine the outcome of most material matters that require shareholder vote, such as the election of the majority of our board members and, subject to contractual and legal restrictions, the distribution of dividends. The Controllers also can exercise influence over our operations and business strategies. Our Controllers’ interests may differ from those of our other shareholders. The Controllers conduct their business in South America primarily through us and our subsidiaries and, for less important activities, through entities not consolidated by us or in which we have no interest.

We have outstanding credit facilities with “change of control” provisions which could result in some acceleration rights on such indebtedness.

Approximately 32% of our consolidated debt outstanding obligations have “change of control” contractual provisions. As of December 31, 2007, $2.0 billion of Enersis’ consolidated indebtedness (excluding Endesa Chile on a consolidated basis) and $674 million of Endesa Chile’s consolidated indebtedness featured some kind of “change of control” provision either in the form of a negative covenant, a mandatory prepayment or otherwise. However, in $100 million of Enersis’ subsidiaries’ contracts certain previous conditions must be met, typically a merger or spin-off that would then result in a change of control before triggering a change of control provision. Similarly, $316 million in Endesa Chile’s subsidiaries’ contracts either (a) require a preliminary merger or spin-off prior to triggering such change of control provision or (b) the change of control does not apply to Endesa Spain but to other companies instead.

A total of $880 million in Enersis’ and its consolidated subsidiaries’ indebtedness, other than Endesa Chile, and a total of $358 million in bank indebtedness incurred by Endesa Chile have “change of control provisions” which specifically refer to Endesa Spain, directly or indirectly, as the controlling entity. In order to make possible the completion of Enel & Acciona’s take-over of Endesa Spain, we obtained the necessary consents in advance to avoid triggering those provisions. If a change of control were to occur, and we are not successful in obtaining certain waivers or amendments, then the lenders under these facilities would have the ability to accelerate such debt and make it immediately due and payable.

Approximately $216 million of Endesa Chile debt and $350 million of Enersis debt are to be found in revolving credit facilities governed by the laws of the State of New York, under which lenders under both facilities, on an individual basis, have rights to accelerate payment if Endesa Spain is no longer, directly or indirectly, the ultimate controlling parent, and the new controlling entity would have a lower rating (including with respect to outlook) than the unsecured long-term foreign currency rating of Endesa Spain, as rated by each of S&P and Moody’s immediately prior to giving effect to a transaction involving a change of control, as defined. Endesa Spain’s applicable ratings as of the date of this report are “A3 with negative outlook” according to Moody’s, “A- with negative outlook” according to S&P, and “A- with negative outlook” according to Fitch.

Enersis’ subsidiaries in Brazil have credit facilities for an aggregate of $530 million with some kind of “change of control” language, some of them involving standard BNDES clauses. BNDES, Banco Nacional de Desenvolvimento Economico e Social, is a state-owned development bank.

If a tender offer for Endesa Spain is successful, and if another change of control were to take place, we would not be able to give assurances that our lenders and relevant governmental entities such as BNDES in Brazil would waive any acceleration rights that they might otherwise have under such credit agreements. For more detailed information on Enersis and Endesa Chile contractual provisions, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”

The values of our subsidiaries’ long-term energy supply contracts are subject to fluctuations in the market prices of certain commodities.

We have economic exposure to fluctuations in the market prices of certain commodities as a result of the long-term energy sales contracts we have entered into. Our subsidiaries have material obligations under long-term fixed-price electricity sales contracts, the values of which fluctuate with the market price of electricity. In addition, our generation subsidiaries have material obligations as selling parties under long-term energy supply contracts with prices that vary in accordance with the market price of electricity, which, in turn, depend on water levels in reservoirs, the market prices of commodities such as natural gas, oil, coal and other energy-related products, as well as the dollar exchange rate. Changes in the market price of these commodities and in the dollar exchange rate do not always correlate with changes in the market price of electricity or with our cost of production of electricity. Accordingly, there may be times when the price paid to us under these contracts is less than our cost of production or acquisition of electricity. We do not carry out transactions in commodity derivative instruments to manage our exposure to commodity price fluctuations. Under Chilean GAAP, our income statement does not reflect fluctuations in the fair value of our long-term energy contracts, although we are required to do so under U.S. GAAP. For further discussion, please refer to “Item 11. Quantitative and Qualitative Disclosures about Market Risk — Commodity Price Risk.”

Our business is dependent on the Chilean economy, and our revenues are sensitive to its performance.

A substantial portion of our assets and operations are located in Chile and, accordingly, our financial condition and results of operations are to a certain extent dependent upon economic conditions prevailing in Chile. In 2007, the Chilean economy grew by an estimated 5.1% compared to a 4.3% increase in 2006. The latest Chilean Central Bank estimate for growth in 2008, however, is in the 4.0%-5.0% range. There is no assurance that such growth will be achieved, that the growth trend will continue in the future, or that future developments in the Chilean economy will not impair our ability to proceed with our strategic plans or adversely impact our financial condition or results of operations. Our financial condition and results of operations could also be affected by changes in economic or other policies of the Chilean government, which has exercised and continues to exercise a substantial influence over many aspects of the private sector. In addition, our financial condition and results of operations could also be affected by other political or economic developments in Chile, a well as regulatory changes or administrative practices of Chilean authorities, over which we have no control. Finally, the Chilean economy may also be affected by developments in more developed countries, including the “subprime mortgage crisis” that started in the United States.

Foreign exchange risks may adversely affect the dollar amount of dividends payable to holders of our ADSs.

Chilean trading in the shares of our common stock underlying American Depositary Shares (“ADSs”) is conducted in pesos. Our depositary bank will receive cash distributions that we make with respect to the shares underlying the ADSs in pesos. The depositary bank will convert such pesos to dollars at the then-prevailing exchange rate in order to make dividend and other distribution payments in respect of ADSs. If the peso depreciates against the dollar, the value of the ADSs and any dollar distributions ADS holders receive from the depositary bank will decrease.

The relative illiquidity and volatility of Chilean securities markets could adversely affect the price of our ADSs and common stock.

Chilean securities markets are substantially smaller and less liquid than the major securities markets in the United States. In addition, Chilean securities markets may be affected materially by developments in other emerging markets. The low liquidity of the Chilean market may impair the ability of holders of ADSs to sell shares of our common stock withdrawn from the ADS program into the Chilean market in the amount and at the price and time they wish to do so.

Item 4. Information on the Company

A. History and Development of the Company.

Description of Business

Enersis was originally organized as Compañía Chilena Metropolitana de Distribución Eléctrica S.A., as recorded in a public deed on June 19, 1981. The existence of our company was authorized, and its bylaws were approved, pursuant to Resolution 409-S on July 17, 1981, issued by the Chilean SVS. The bylaws have been amended subsequently. The existence of our company under its current name, ENERSIS S.A., or Enersis, dates back to August 1, 1988. Enersis is a publicly held limited liability stock company domiciled in Santiago, Chile, and operates under Chilean law and regulations.


Main office:		Avenida Santa Rosa 76, Santiago, Chile
Mailing Address:		Casilla 1392
Telephone:		(562) 353-4400
Fax:		(562) 378-4789
Web Site:		www.enersis.cl

The Company’s authorized representative in the United States of America is Puglisi & Associates, whose contact information is:


Main office:		850 Library Avenue, Suite 204, Newark, Delaware
Mailing Address:		P.O. Box 885, Newark, Delaware 19711
Telephone:		(302) 738-6680
Fax:		(302) 738-7210

We are an electric utility holding company primarily engaged, through our subsidiaries and affiliates, in the generation and distribution of electricity in Chile, Argentina, Colombia and Peru, and in the generation, transmission and distribution of electricity in Brazil. We have over 11.9 million customers on a consolidated basis, and as of December 31, 2007, our consolidated assets were Ch$11,438 billion and our consolidated operating revenues were Ch$4,687 billion. Through Endesa Chile and Endesa Brasil, we have 13,707 MW of installed capacity with 52 power plants in the five countries where we operate. Endesa Spain, acquired control of our company in April 1999 and owned 60.6% of our outstanding shares as of December 31, 2007. On October 10, 2007, Enel Energy Europe S.R.L., a subsidiary of Enel S.p.A., or Enel, a company constituted under the laws of Italy, and ACCIONA, S.A., or Acciona, a company constituted under the laws of the Kingdom of Spain, jointly and concurrently acquired 92.06% of the shares issued by ENDESA, S.A., or Endesa Spain.

We are one of the largest private companies involved in the electricity sector in Chile, measured by consolidated assets and consolidated operating revenues. We trace our origin to Compañía Chilena de Electricidad Ltda., or CCE, which was formed in 1921 as a result of the merger of Chilean Electric Tramway and Light Co., founded in 1889, and Compañía Nacional de Fuerza Eléctrica, with operations dating back to 1919. In 1970, the Chilean government nationalized CCE. In 1981, CCE’s operations were divided into one generation company, the current AESGener S.A (“AESGener”), and two distribution companies, one with a concession in the Fifth Region, the current Chilquinta S.A., and the other with a concession in the Santiago Metropolitan Region, Compañía Chilena Metropolitana de Distribución Eléctrica S.A. From 1982 to 1987, the Chilean electric utility sector went through a process of re-privatization. On August 1, 1988, Compañía Chilena Metropolitana de Distribución Eléctrica S.A. changed its name to ENERSIS S.A. and became the new parent company of Distribuidora Chilectra Metropolitana S.A., later renamed Chilectra S.A. In the 1990s, we diversified into electricity generation and transmission through our increasing equity stakes in Endesa Chile. We began our international operations with the 1992 investment in Edesur, the Argentine electricity distribution company. We then expanded primarily into electricity generation, transmission and distribution businesses in four South American countries: Argentina, Brazil, Colombia and Peru. We remain focused on the electricity sector, although we also have small operations in other businesses.

In 2005, Endesa Brasil was formed as a holding company to manage all generation, transmission and distribution assets that Endesa Internacional, Enersis, Endesa Chile and Chilectra held in Brazil, namely, through Ampla, Endesa Fortaleza, Investluz, CIEN, Cachoeira Dourada and Coelce. Enersis began consolidating Endesa Brasil in October 2005. In 2006, the International Finance Corporation (“IFC”) became a new shareholder in Endesa Brasil, contributing $50 million in the Brazilian holding company, or 2.7%, and as of December 31, 2007, Enersis directly and indirectly controlled 53.6% of the capital stock and voting rights of Endesa Brasil.

In order to simplify the organizational structure, diminish corporate costs, improve performance and optimize taxes, on April 2006, Enersis decided to merge Elesur S.A. (“Elesur”) and Chilectra, in Chile. As a consequence of this merger, Elesur absorbed Chilectra; the surviving company retained the name of Chilectra.

In order to achieve synergies in Peru, in 2006, we conducted the merger of Edegel and Empresa de Generación Termoeléctrica Ventanilla S.A. (“Etevensa,” 60%-owned by Endesa Spain), which had a 457 MW thermoelectric generation company.

In September 2007, we merged our subsidiaries in Colombia, Emgesa S.A. E.S.P. and Betania S.A. E.S.P., resulting in a new company which retained the name Emgesa S.A. As a consequence of this merger, the direct and indirect participation of our subsidiary Endesa Chile in this new company is 26.9%.

We continually evaluate potential reorganizations with the purpose of optimizing operating, financing and tax considerations. We expect to undertake such transactions, with a focus on the reorganization of Enersis, Endesa Chile and our subsidiaries.

Recent Developments

On October 10, 2007, Enel Energy Europe S.R.L., a subsidiary of Enel S.p.A., or Enel, a company organized under the laws of Italy, and ACCIONA, S.A., or Acciona, a company organized under the laws of the Kingdom of Spain, jointly and concurrently acquired 92.06% of the shares issued by ENDESA, S.A., or Endesa Spain, in turn, is the controller of 60.6% of the share capital of Enersis S.A, through its Spanish subsidiary Endesa Internacional, S.A.

GasAtacama Generación S.A. (“GAG”), a wholly-owned generation subsidiary of Inversiones Gas Atacama Holding Limitada (“GAT”), in turn, a 50%-owned affiliate of Endesa Chile (Southern Cross Group, or “Southern Cross”, a Chilean fund, holds the other 50%), owns a 781 MW combined cycle thermal plant, located 50 kms north of Antofagasta, designed originally to burn Argentine natural gas, came on stream in 1999. Its installed capacity accounts for 21.7% of the SING system, in northern Chile, where many of the country’s most important copper mines are located. Currently, the SING has capacity needs of approximately 1,900 MW, of which on average, 900 MW come from coal plants, and the balance from combined cycle plants.

Natural gas restrictions from Argentina began in 2004 and increased over time, leading to a complete natural gas interruption as of the second quarter of 2007. Since then, GAG and other generators have been burning diesel instead of natural gas, and thereby incurring much higher operating costs. The substitution of natural gas with diesel, compounded with the escalating costs of the latter fuel, has increased the production cost by approximately fifteen times between 2004 and 2008.

GAG has long-term regulated contracts at regulated node prices expiring in December 2011, with Empresa Eléctrica de Arica S.A., Empresa Eléctrica de Iquique S.A., and Empresa Eléctrica de Antofagasta S.A., all of them distribution companies servicing residential customers, and belonging to EMEL, a Chilean holding company. The contracts were entered into at a time during which GAG could count on an uninterrupted Argentine natural gas supply. The gas supply shortfall has led to increases in generation costs in the SING, and these costs are not fully covered by the node price. The energy node price in the SING had been under $100/MWh until the last price setting in April 2008, when the CNE set it at $115.9/MWh at the Crucero node. On the other hand, spot prices (as a reference for generation costs with diesel as fuel) in the system averaged $185/MWh during the first quarter of 2008.

In 2006, GAG applied to an arbiter to put an end to its contract with EMEL. The adverse financial effect of this so-called “EMEL deficit” led to severe liquidity constraints. Current GAT forecasts for such deficit for the 2008-2011 period, at which time the EMEL contract expires, are in the range of $600-900 million, assuming diesel prices in the range of $90-120/bbl.

During the second half of 2007, GAG lost all of its net worth and the possibility of filing for bankruptcy increased for several reasons, including the continuing increase in the price of diesel, the complete and sustained interruption of all natural gas coming from Argentina, economic consequences of earthquakes that took place in October and November, and the cash shortfalls derived from the non-recoverability of a tax specifically levied on diesel. In addition, in September 2007, the Chilean government promulgated Law 20,220, which among other things, provides that in the event of a court-ordered revocation of a contract between a generation company and a distribution company with regulated clients, the generation company would be required to continue supplying energy to its client in the same contractual terms, for an 18-month period. In practice, this means that even in the event that GAG had been able to obtain a favorable court judgment against EMEL, GAG would have had to continue in all events to service the contract for an 18-month period, even in the case of bankruptcy. In January 2008, the result of the arbitrage against EMEL was unfavorable to GAG, though we are in the process of appealing the decision to the Supreme Court. As a consequence of all the foregoing, Endesa Chile recorded a Ch$48,890 million investment impairment provision for GAT to better reflect the value of the company.

Notwithstanding the foregoing, the option to file for GAG’s bankruptcy was at least temporarily abandoned after GAG signed a Memorandum of Understanding (“MOU”) with several important northern mining companies and its owners, Endesa Chile and Southern Cross, allowing GAG to continue operations while seeking a permanent solution to the company’s situation.

The MOU called for a definitive contract covering a substantial part of the EMEL deficit, which has been growing over time. This back-up contract, Contrato de Servicio de Respaldo, was signed on April 29, 2008, with the participation of mining companies representing 85.93% of the 1,554 MW (maximum demand at peak hour in the SING, excluding demand arising from distribution companies). Among the principal objectives of the contract, are the following: (1) continuity of electricity supply in the SING, with a back-up of up to 600 MW operating continuously through December 31, 2013, with diesel if necessary, so as to minimize the risk of electricity rationing, and the concurrent losses to production for the copper mines; and (2) the achievement of a generation capacity cushion until 2013 which would permit failure of other operating units or delays in the beginning of operations of new coal-burning plants. The mining companies that were parties to the agreement include BHP Billiton (Escondida, Spence, Cerro Colorado) Codelco (Chuquicamata, Radomiro Tomic and Gabriela Mistral), Collahuasi, Freeport (El Abra), Barrick (Zaldívar), Anglo American (Mantos Blancos), Xstrata (Lomas Bayas), SQM, Antofagasta Minerals (El Tesoro), Teck-Cominco (Quebrada Blanca) and Yamana (Meridian Gold). In a parallel manner, GAT entered into a long-term contract with Compañía de Petróleos de Chile Copec S.A., a large Chilean distributor of petroleum-derived hydrocarbons, in order to secure the availability of diesel through the end of 2013, for a daily consumption of up to 3,400 cubic meters.

The recent contract with the mining companies requires that the latter pay a price for the back-up service that accounts for approximately 71% of the EMEL deficit and the remaining 29% is to be financed by GAT, Southern Cross and Endesa Chile, with caps of $50 million each for the latter two owners. The mining companies cap their price at $650 million, and if oil prices exceed $120/bbl during the period, or for any other reason, this capped amount should be reached, they have a right to an early termination of the contract. This solution, although reducing significantly the probability of bankruptcy of GAG, implies certain risks and costs to GAT and its owners. In addition, the price of diesel, as of the time of this report, has shown an upward trend, already exceeding the $120/bbl reference level, making the operating monthly cost exceed the amount which allows the cap to be extended beyond December 2011. Therefore, there is no reason, as of the date of this report, to expect a reversal of the investment impairment provision taken in the 2007 financial statements, in connection with GAT, our affiliate.

For additional information relating to GAT’s investment impairment taken for the 12-month period ended December 31, 2007, see “Item 5. Operating and Financial Review and Prospects” included in this annual report.

Capital Investment Program

We coordinate the overall financing strategy of our subsidiaries and intercompany advances to optimize debt management as well as the terms and conditions of our financing. Our operating subsidiaries independently develop capital expenditure plans financed by internally generated funds or direct financings. One of our goals is to focus on investments that will provide a long-term benefit such as energy loss reduction projects. Additionally, by focusing on Enersis as a whole and seeking to provide services across the group of companies, we are aiming to reduce the level of investment necessary at the individual subsidiary level in items such as procurement, telecommunication and information systems. Although we have considered how these investments will be financed as part of the Company’s budget process, we have not committed to any financial structure, and investments will depend on the market conditions at the time the cash flows are needed.

For the period between 2008 and 2012, we expect to make capital expenditures of Ch$4,524 billion (approximately $10 million) in our majority-owned subsidiaries, including Endesa Chile.

The table below sets forth the capital expenditures made by our subsidiaries between 2005 and 2007 and the expected capital expenditures for the period 2008-2012.


	Capital Expenditure
	(in billion of Ch$)
							(expected)
	2005		2006		2007		2008-2011
Electricity Generation/Transmission(1)		60		219		217		2,454
Electricity Distribution		266		360		385		2,033
Other Businesses		6		6		5		38

Total		332		586		608		4,524


(1)		Since October 2005, we include investments corresponding to Endesa Fortaleza and CIEN. These companies are subsidiaries of Endesa Brasil, which, in turn, is consolidated by Enersis.

Electricity Generation and Transmission

The electricity generation and transmission businesses had total capital expenditures of Ch$217 billion in 2007. For the period between 2008 and 2012, we expect to make further capital expenditures of Ch$2,454 billion on maintenance of existing operating plants and expanding installed capacity.

Endesa Chile constructed San Isidro II, a 377 MW thermal power plant operating with liquid natural gas, which is located beside San Isidro I. San Isidro II started commercial operations in open cycle in April 2007; today it is operating at 353 MW in combined cycle. The investment cost has been $229 million.

Endesa Chile finished the construction of the 32 MW Palmucho pass-through hydroelectric plant, which started operations in November 2007. The total investment cost came to $45 million. Palmucho takes advantage of the ecological flow that the Ralco plant releases, pursuant to Ralco’s Environmental Impact Assessment.

In September 2006, Endesa Eco began the construction of Ojos de Agua, a mini-hydroelectric plant located 100 kilometers from the city of Talca, close to the Cipreses power plant, downstream from the La Invernada Lagoon. This plant will have a capacity of 9 MW, the investment is expected to be $25 million and the commissioning is expected to occur in the first half of 2008.

In September 2006, Endesa Chile formed the company Centrales Hidráulicas de Aysén S.A, in which Endesa Chile has a 51% shareholding and Colbún S.A (“Colbún”) owns the remaining 49%. The purpose of this company is the development of the Aysén power plants to be located in the 11^th Region, southern Chile. These Aysén plants, involving a total installed capacity of 2,750 MW, would require an investment of around Ch$1.2 trillion.

In December 2007, Endesa Eco started operations of the Canela wind farm totaling a capacity of 18 MW. This project is located 295 kms north of Santiago, in the district of Canela, in Chile’s 4^th Region. Total investment cost reached to $43 million. An expansion of the Canela wind farm is expected to start up operations in October 2009. It will add 60 MW to the existing wind farm, and the total investment is planned to achieve $141 million.

Endesa Chile is also participating with a 20% stake in GNL Quintero, or GNLQ, the company in charge of the government-sponsored initiative to increase the diversification of the country’s energy matrix through the LNG project, a re-gasification terminal, together with Enap, Metrogas and British Gas. The project comprises a re-gasification capacity of 9.5 million cubic meters per day, the construction of a 1,500-meter pier, and two LNG storage tanks with a capacity of 160,000 cubic meters each. The total investment of the plant will reach $940 million and it is planned to come into service by mid-2009. Endesa Chile’s capital commitment should be approximately $37 million.

On September 28, 2007 Endesa Chile approved the construction of the Quintero thermal generation plant on a land adjoining the location of the future GNL plant. The plant will consist of two gas turbines in open cycle which will begin operations using diesel oil and liquefied natural gas once the Quintero re-gasification plant starts commercial operations. The project will have a capacity of 240 MW and its operational start-up is estimated for the first quarter of 2009. The total project investment amounts to $120 million.

In September 2007 Endesa Chile started the construction of the Bocamina Plant Expansion. This project consists of the construction and commissioning of a second electricity generating unit of approximately 350 MW, the total cost of the project will be approximately $625 million. The start-up of the second unit is expected by mid-2010.

On June 5, 2007 Endesa Chile submitted Los Cóndores project to the System of Environmental Impact, which was approved on April 16, 2008. The cost of the 150 MW pass-through hydro plant project will be approximately $185 million, and it is expected to start operations in 2012.

In Peru, Edegel’s Santa Rosa thermal plant will expand its capacity with an open cycle plant of 183 MW. The project will use natural gas from Camisea. The investment required is $90 million, and it is planned to come into service by June of 2009.

Electricity Distribution

All of our distribution companies expect to fund capital expenditures through internally generated funds. In 2007, we incurred total capital expenditures of Ch$385 billion, principally to better service demographic growth and new clients, as well as to reduce energy losses, to maintain equipments and lines, to improve security and quality service. The capital expenditures incurred by our subsidiaries in 2007, billions of Ch$, is shown in the table below:


Distribution company	2007 Capex (Ch$ billion)
Chilectra		59.5
Edesur		42.0
Ampla		111.2
Coelce		102.1
Codensa		48.8
Edelnor		21.6

In 2007, Chilectra incurred capital expenditures of Ch$59.5 billion, principally to serve demographic growth and new clients. Edesur incurred capital expenditures of Ch$42.0 billion, principally due to maintenance and expansion of existing facilities to serve new clients, improve security and quality. Codensa incurred capital expenditures of Ch$48.8 billion, principally to serve demographic growth, new clients and improve security. Edelnor incurred capital expenditures of Ch$21.6 billion, principally to serve demographic growth and new clients. During 2007, Endesa Brasil’s distribution companies incurred capital expenditures of Ch$213.3 billion, including Ampla with capital expenditures of Ch$111.2 billion, to expand existing facilities and reduce energy losses, and Coelce with capital expenditures of Ch$102.1 billion to serve new clients, reduce energy losses and to satisfy regulatory requirements.

Capital expenditures for the period 2008 — 2012 are expected to reach to Ch$2,033 billion.

B. Business Overview.

Business Strategy

We believe that there is long-term potential for significant growth in per capita energy demand in South America, as well as for significant growth attributable to demographic trends. We seek to take advantage of our know-how and market position as a leading private sector electricity company in the region to:

	•		enhance earnings through expansion of our unregulated client base;

	•		reduce our exposure to hydrological risk with commercial policies that reduce contracted sales to a level that may be satisfied with a 95% of hydrological certainty, thus increasing sales in the spot markets;

	•		improve our operating margins by reducing the operating costs of our existing businesses; and

	•		take advantage of the continued demographic growth in the regions where we operate.

We believe that we have considerable expertise in managing utilities, including:

	•		reducing energy losses associated with distribution businesses over the long term;

	•		building and operating efficient generation facilities;

	•		implementing proprietary billing and accounts receivable management systems;

	•		increasing workforce productivity while maintaining good labor relations;

	•		operating under a range of tariff and regulatory frameworks that reward efficient operations; and

	•		maximizing our return on actively managed subsidiaries.

Electricity Generation

Our electricity generation business is conducted primarily through Endesa Chile, which has operating subsidiaries in Chile, Argentina, Colombia and Peru. Since October 2005, the generation business in Brazil has been managed through our holding company, Endesa Brasil. As a whole, total installed capacity reached 13,708 MW as of December 31, 2007.

Our consolidated electricity production reached 54,440 GWh in 2007, 5.5% less than the 57,439 GWh produced in 2006. In the electricity industry it is common to segment the business into hydroelectric and thermoelectric generation, because each method of generation has different variable costs. Thermoelectric generation requires the purchase of fuel rather than the use of water from reservoirs or rivers, thereby increasing the variable costs of generation. Of our total consolidated generation, 67% was from hydroelectrical sources while the remaining 33% came from thermal sources.

The following table summarizes the information relating to Enersis’ total electricity generation, which, for the first time, includes the generation from a wind farm, Canela:


	Year ended December 31,
	2005				2006				2007
	(GWh)		%		(GWh)		%		GWh		%
Hydroelectric generation		41,675		77.07		42,858		74.61		36,575		67.18
Thermal generation		12,401		23.93		14,581		25.39		17,862		32.81
Other Sources (wind)		0		0		0		0		3		0.01

Total generation		54,076		100		57,439		100		54,440		100

Operations in Chile

The Chilean electricity system is divided into four systems. The main systems that cover the most populated areas of Chile are the Sistema Interconectado Central, or SIC, that covers the central and south-central portion of the territory, and the Sistema Interconectado del Norte Grande, or SING, which operates in the northern portion of the country. In addition to the SIC and the SING, there are two other isolated systems in southern Chile that provide electricity in remote areas, in Aysén and Magallanes.

Endesa Chile’s main business is electricity generation; it is the largest electricity company in Chile measured by installed capacity. It also participates in engineering services. The low proportion of non-generation revenues does not justify the breakdown of revenues per activity. We own 60% of Endesa Chile.

Endesa Chile and its subsidiaries: Empresa Eléctrica Pehuenche S.A., or Pehuenche, Empresa Eléctrica Pangue S.A., or Pangue, Compañía Eléctrica San Isidro S.A., or San Isidro, Compañía Eléctrica Tarapacá S.A., or Celta, and Endesa Eco, own and operate a total of twenty-five generation plants in Chile. Fifteen of these plants are hydroelectric plants, with a total installed capacity of 3,452 MW. This represents 72.2% of our total installed capacity in Chile. Nine plants are gas-, coal- or oil-fired thermal plants with a total installed capacity of 1,309 MW; i.e., 27.4% of Endesa Chile installed capacity in Chile. The remaining plant is wind powered, with a capacity of 18 MW (or 0.4% of the capacity). Our power plants are connected to the country’s major interconnected electricity systems, SIC and SING, which together supply energy to over 98% of Chile’s population.

The following table sets forth the installed generation capacity for each of the Company’s Chilean subsidiaries:

INSTALLED CAPACITY PER SUBSIDIARY IN CHILE (MW)


	Year ended December 31,
	2005		2006		2007
Endesa		2,754		2,754		3,034
Pehuenche(1)		695		695		699
Pangue		467		467		467
San Isidro		379		379		379
Celta		182		182		182
Eco		—		—		18

Total		4,477		4,477		4,779


(1)		The installed capacity was certified during 2007 by Bureau Veritas, according to Norm 038 of Endesa Chile.

Our total electricity generation in Chile (both the SIC and the SING) reached 18,773 GWh in 2007, 6.0 % less than in 2006, and accounted for 33.7% of total electricity production in Chile in 2007. Our generation market share in Chile for 2007, 2006 and 2005 was approximately 37%.

The following table sets forth the electricity generation for each of our Chilean subsidiaries:

ELECTRICITY GENERATION IN CHILE (GWh)


	Year ended December 31,
	2005		2006		2007
Endesa		10,903		11,642		11,093
Pehuenche		4,060		4,345		3,437
Pangue		2,241		2,432		1,351
San Isidro		1,178		802		1,956
Celta		383		751		933
Eco						3

Total		18,765		19,973		18,773

Hydroelectric generation in 2007 was 23% lower than in 2006 because of drought conditions during 2007. The potential energy in dammed water as of December 31, 2007 at the reservoirs in the SIC was 40% less than at December 31, 2006, as shown in the following table:

RESERVOIRS IN CHILE (GWh)


	Year ended December 31,
	2006		2007
	Reservoir		Reservoir		Change
	(GWh)		(GWh)		%

Laja		4,754		3,028		(36.3	)
Maule		1,573		1,307		(16.9	)
Chapo		577		119		(79.3	)
Colbún		533		283		(46.9	)
Invernada		315		116		(63.1	)
Rapel		72		53		(26.3	)
Melado		15		6		(60.0	)
Ralco		531		147		72.3

Total Reservoir		8,370		5,059		(39.6	)

Low-cost hydroelectric generation accounted for 70.2 % of Endesa Chile’s total electricity generation in 2007, as shown in the following table:

ENDESA CHILE HYDRO/THERMAL GENERATION IN CHILE (GWh)


	Year ended December 31,
	2005				2006				2007
	Generation				Generation				Generation
	(GWh)		%		(GWh)		%		(GWh)		%
Hydroelectric generation		15,762		84.0		17,148		85.9		13,179		70.2
Thermal generation		3,003		16.0		2,825		14.1		5,591		29.8
Other sources (wind)		0		0.0		0		0.0		3		0.0

Total generation		18,765		100.0		19,973		100.0		18,773		100.0

Endesa Chile’s thermal electric generation facilities are either gas-, coal- or oil-fired. In order to satisfy our natural gas and transportation requirements, we enter into long-term gas contracts with suppliers that establish maximum amounts and price of supply and long-term gas transportation agreements with the pipeline companies, currently Gas Andes and Electrogas (an affiliate in which Endesa Chile has a 42.5% interest). We obtain our coal and fuel oil requirements through competitive bidding using major domestic and international suppliers.

The energy crisis in Argentina has affected not only the natural gas supply to Chile but also its domestic market. This situation and the drought conditions evident in Chile during 2007 increased the use of natural gas substitutes including fuel oil and diesel. Endesa Chile increased the use of diesel from 23,000 in 2006 to 591,000 tons in 2007, and coal, from 438,000 to 851,000 tons, respectively. Since 2005, San Isidro has benefited from swaps contracts with Endesa Costanera which has allowed San Isidro to temporarily generate electricity with natural gas, paying Endesa Costanera the additional cost incurred through generation with fuel oil, plus a fee. Fuel oil is subsidized in Argentina.

To reduce the impact of future natural gas restrictions, in May 2007 the Final Investment Decision Agreement for the construction of the LNG regasification facility in Quintero Bay took effect, with GNLQ as the owner, where Endesa Chile has a stake of 20%. The terminal is currently under construction and its partial commercial operation is expected to begin during 2009 while its full commercial operation is foreseen to begin during 2010.

In addition to the LNG project, the works to allow unit 1 of Taltal to operate with diesel were completed in March 2008. With this, all the natural gas units of Endesa Chile are able to operate both with gas and diesel.

In June 2007, the commercial operation of the Electrogas’ Concón-Quillota diesel oil pipeline started, which improved the supply to San Isidro and Nehuenco thermal power plants.

Sales, in GWh in these systems, are shown in the following table:


System	2005		2006		2007		Change %
SIC		35,900		38,259		39,982		4.5	%
SING		11,546		12,027		12,674		5.4	%

Our physical energy sales in Chile reached 20,730 GWh in 2005, 20,923 in 2006 and 19,212 GWh in 2007, which represent a 43.7%, 41.6% and 36.5% market share, respectively. The percentage of energy purchases to satisfy our contractual obligations to third parties has declined from 10.8% in 2005, to 5.3% in 2007 as a result of our commercial strategy of reducing contracted sales. This commercial strategy is strongly driven by our decision to reduce hydrological exposure because of Chilean governmental regulations implemented in 1999. We attempt to minimize the effect of poor hydrological conditions on our operations, in any given year, primarily by limiting contractual commitments to an amount below the estimated production in a dry year. Governmental regulations have had the direct effect of increasing contract failure costs, which is the cost that we have to pay when we are not able to satisfy our contractual commitments. Energy supply has not increased as much as energy demand, increasing the spot price in the electricity pool market and making it a relatively more attractive commercial alternative. See “Item 4.B - Business Overview — Electricity Industry Regulatory Framework.”

The following table sets forth our electricity purchases and production in Chile:

PHYSICAL PRODUCTION AND PURCHASES IN CHILE (GWh)


	Years ended December 31,
	2005				2006				2007
	Sales		%		Sales		%		Sales		%
	(GWh)		of Volume		(GWh)		of Volume		(GWh)		of Volume
Electricity production		18,764		89.2		19,973		93.8		18,773		94.7
Electricity purchases		2,268		10.8		1,317		6.2		1,042		5.3

Total(1)		21,032		100.0		21,290		100.0		19,815		100.0


(1)		Total GWh production plus purchases differs from GWh sales due to transmission losses, as power plant consumption and technical losses have already been deducted.

Endesa Chile supplies electricity to the major regulated electricity distribution companies, large unregulated industrial firms (primarily in the mining, pulp and steel sectors) and the spot market. Commercial relationships with customers are normally governed by contracts. Supply contracts with distribution companies must be auctioned in bidding processes, are generally standardized and have an average term of ten years. Supply contracts with unregulated customers, usually, large industrial customers, are specific to the needs of each client and the conditions reflect competitive market conditions.

In 2005, 2006 and 2007 Endesa Chile had 53, 46 and 35 customers in Chile, respectively, including the main distribution companies of the SIC and the major unregulated industrial customers.

The following table sets forth information regarding our sales of electricity in Chile by type of customer:

ENDESA CHILE PHYSICAL SALES PER CUSTOMER PRICE SEGMENT IN CHILE (GWh)


	Years ended December 31
	2005				2006				2007
	Sales		% of Sales		Sales		% of Sales		Sales		% of Sales
	(GWh)		Volume		(GWh)		Volume		(GWh)		Volume
Regulated customers(1)		10,575		51.0		10,756		51.4		11,502		59.9
Non-Regulated customers		4,797		23.1		5,176		24.7		5,281		27.5
Electricity pool market sales		5,358		25.8		4,991		23.9		2,430		12.6

Total electricity sales		20,731		100.0		20,923		100.0		19,212		100.0


(1)		Includes sales to distribution companies due to Resolution 88.

Endesa Chile’s most significant supply contracts with regulated customers are with Chilectra and Compañía General de Electricidad S.A. or CGE, the two largest distribution companies in Chile in terms of sales. Its contracts with CGE and Chilectra expire in 2009 and 2010, respectively. In November 2007, Chilectra, CGE and Chilquinta placed the second long-term energy requirement bid for 14,732 GWh, divided in three blocks (B1, B2 and B3) to be delivered as of January 2011 for ten, twelve and fourteen years, respectively. Chilectra was the only distributor that awarded energy in this process: 3,200 GWh to Endesa and 2,500 GWh to Colbún. The energy allocated represented 39% of the total requirement of this distribution company.

Chilectra’s energy allocated represented 39% of its total requirement and was awarded as follows:


									% of energy
	Chilectra B1		Chilectra B2		Chilectra B3		Total		allocated
Endesa Chile		1,700		—		1,500		3,200		56.1	%
Colbún		500		1,000		1,000		2,500		43.9	%

Total		2,200		1,000		2,500		5,700		100.0	%

Customarily, contracts with unregulated customers for the sale of electricity in Chile are long-term contracts, generally ranging from five to fifteen years. Such contracts are normally automatically extended at the end of the applicable term unless terminated by either party upon prior notice. The contracts generally provide that the purchase price be reset periodically to the market price. Some of them include a price adjustment mechanism for high marginal costs, which also reduces the hydrological risk. Contracts with unregulated customers may also include specifications for backup power sources and equipment, which may be provided at special rates, as well as the provision of technical assistance to the customer. Endesa Chile has not experienced any supply interruptions under its contracts. In case of a force majeure, as contractually defined with non-regulated customers, Endesa Chile is also allowed to refuse purchases and is not required to supply electricity. Contracts with unregulated customers generally do not impose any limitations on our ability to resell output not purchased under those contracts. Disputes are typically subject to binding arbitration between the parties, subject to limited exceptions.

Operations in Argentina

Endesa Chile participates in electricity generation in Argentina through its subsidiaries Endesa Costanera and El Chocón, with a total of five power plants. El Chocón has two hydroelectric plants, with total installed capacity of 1,320 MW, and Endesa Costanera has three thermal plants, with a total installed capacity of 2,324 MW. In 2007, Endesa Chile’s generation plants in Argentina represented 14.9 % of the generation capacity in the Mercado Eléctrico Mayorista (Wholesale Electricity Market), or MEM.

We also participate in the transmission and trading of electricity in Argentina through our subsidiary, Endesa Brasil, and CEMSA. Endesa Brasil consolidated CTM, which owns the Argentine side of a transmission interconnection line with Brazil. CEMSA is a trading company that has entered into contracts with generators in Argentina to export electricity from Argentina to Brazil and Uruguay. See “ — C. Organizational Structure” for details on associated companies.

Endesa Chile’s Argentine subsidiaries, participate in two new companies, Central Termoeléctrica Manuel Belgrano S.A., or CTMB, and Central Termoeléctrica José de San Martín S.A., or San Martín. These companies were formed to undertake the construction of two new generation facilities under Foninvemem, created through Resolution 712/2004 of the Secretary of Energy to allow the financing and management of all investment aimed at increasing the electric power supply within the MEM. CTMB began operations with a capacity of 275 MW in March 2008, which will increase to 554 MW when the second unit operates in open cycle, in June; a total capacity of 823 MW will be obtained once the combined cycle is completed. The twin company, San Martin, will begin operations in the coming months, and the total capacity of both companies, 1,600 MW, is expected for mid-2009. Since 2002, the government and energy industry authority have intervened in the market which has led to a lack of investment in the electric power sector. An example of authorities’ intervention is the placing of limitations on the maximum spot price, calculating the spot price based on the variable cost of generating electricity with natural gas without taking into account the hydrological conditions of rivers and reservoirs or the use of more expensive liquid fuel.

Endesa Costanera’s installed capacity accounted for 9.5% of the total installed capacity in the Sistema Interconectado Nacional (the Argentine NIS), Argentina’s interconnected grid system, as of December 31, 2007. Endesa Costanera’s combined cycle II 851 MW plant and its 1,138 MW steam turbine power plant can operate with either natural gas or fuel oil.

As of December 31, 2007 El Chocón accounts for 5.4 % of the installed capacity in the Argentine NIS. The larger of the two facilities has 1,200 MW of installed capacity and is the primary flood control installation on the Limay River. The facility’s large reservoir, Ezequiel Ramos Mejía, enables El Chocón to be one of the major peak suppliers. Variations in El Chocón’s water discharge are moderated by El Chocón’s Arroyito facility, a downstream dam with 120 MW of installed capacity.

The following table sets forth the installed capacity of Endesa Chile’s Argentine subsidiaries:

INSTALLED CAPACITY PER SUBSIDIARY IN ARGENTINA (MW)


	As of December 31,
	2005		2006(1)		2007
Endesa Costanera
Costanera (steam turbine)		1,131		1,138		1,138
Costanera (combined cycle II)		851		859		859
Central Termoélectrica Buenos Aires (combined cycle I)		322		322		327
El Chocón
El Chocón (hydroelectric)		1,200		1,200		1,200
Arroyito (hydroelectric)		120		120		120

Total installed capacity		3,624		3,639		3,644


(1)		The installed capacity was certified by Bureau Veritas, according to Norm 038 of Endesa Chile.

Total electricity generation in Argentina reached 12,117 GWh in 2007, 11.9% lower than the 13,750 GWh in 2006. Our generation market share has been 15% of total electricity production in Argentina during 2007.

The following table sets forth the electricity generation of Endesa Chile’s Argentine subsidiaries. Low-cost hydroelectric generation accounted for nearly 30.5 % of total generation in 2007, lower than in 2006 because of a relatively dry year compared to 2006.

ELECTRICITY GENERATION IN ARGENTINA (GWh)


	Year ended December 31,
	2005				2006				2007
	(GWh)		%		(GWh)		%		(GWh)		%
Hydroelectric generation (El Chocón)		3,931		31.9		5,041		36.7		3,696		30.5
Thermal generation (Endesa Costanera)		8,402		68.1		8,709		63.3		8,421		69.5

Total generation		12,333		100.0		13,750		100.0		12,117		100.0

The amount of energy generated and purchased in the last three years is shown in the following table:

PHYSICAL GENERATION AND PURCHASES IN ARGENTINA (GWh)


	2005				2006				2007
	(GWh)		%		(GWh)		%		(GWh)		%
Electricity generation		12,333		97.6		13,750		98.2		12,117		97.1
Electricity purchases		308		2.4		256		1.8		367		2.9

Total(1)		12,640		100.0		14,006		100.0		12,484		100.0


(1)		Energy generation plus energy purchases differ from electricity sales due to power plant consumption.

During 2007, Endesa Costanera served an average of 38 non-regulated customers which had no contracts with distribution companies. Given the regulatory measures adopted in 2003, the current Argentine electricity industry price scenario makes sales to distribution companies less attractive than sales to the wholesale market. Sales to the pool market decreased from 7,978 GWh in 2006 to 7,427 GWh in 2007, which is explained by gas restrictions.

The sales to the pool market decreased from 7,978 GWh in 2006 to 7,427 GWh in 2007. Gas restrictions explain the decrease in 2007 generation.

The energy crisis continued through 2007. Natural gas imports from Bolivia were not enough to supply Argentine requirements. In June 2007 the Energy Secretariat Resolution 599 containing the agreement between the natural gas producers and the Government to satisfy internal consumption for the period 2007-2011 was published. Currently, Endesa Costanera and Docksud (a subsidiary of Endesa Spain) are negotiating terms of gas supply with producers.

In 2005, authorities restricted total access to the electricity spot market and the use of natural gas to export energy to Brazil, resulting in Endesa Costanera’s inability to comply with its export contracts to Brazil. As a consequence, export contracts have remained inoperative during 2007. Endesa Costanera’s 1,000 MW capacity, originally committed to Brazil, has been sold to the MEM since May 2006.

The relative dry condition in 2007 explains the decrease of 23.8 % in physical sales of El Chocón, when compared to 2006. Contracted sales decreased from 1,359 GWh in 2006 to 1,342 GWh in 2007. The remaining 2,615 GWh in sales were delivered to the pool market.

During 2007, El Chocón served an average of 20 non-regulated customers. El Chocón has no contracts with distribution companies because the current Argentine electricity industry price scenario, given regulatory measures adopted since 2003, makes sales to distribution companies less attractive than sales to the wholesale market.

Endesa Chile operates El Chocón for a fee pursuant to an operating agreement with a term equal to its thirty-year concession, which expires in August 2023. El Chocón does not have the right to terminate the operating agreement unless Endesa Chile fails to perform its obligations under the agreement. Such fee is payable monthly in dollars and the amount is based on El Chocón’s annual gross revenues.

The distribution of physical sales in Argentina, in terms of customer segment, is shown in the following table:

PHYSICAL SALES PER CUSTOMER SEGMENT IN ARGENTINA (GWh)


	Years ended December 31,
	2005				2006				2007
			% of Sales				% of Sales				% of Sales
	(GWh)		Volume		(GWh)		Volume		(GWh)		Volume
Contracted sales		2,328		18.5		2,116		15.2		2,364		19.1
Non-contracted		10,251		81.5		11,810		84.8		10,042		80.9

Total electricity sales		12,579		100.0		13,926		100.0		12,406		100.0

Our Argentine power plants compete with all the major power plants connected to the Argentine NIS. Our major competitors in Argentina are AESGroup, Sociedad Argentina de Energía (Sadesa, Bemberg Group), and Petrobrás Energía S.A. The AESGroup has nine power plants connected to the MEM with a total capacity of 2,855 MW and one plant that is not connected to the MEM (Termo Andes), with a total capacity of 600 MW; Sadesa (Grupo Bemberg) owns two plants Piedra del Aguila (hydro 1,400 MW) and Central Puerto (thermal 2,152 MW); and Petrobrás Energía S.A competes with us through two power plants, Genelba (thermal 674 MW) and Pichi Picún Leufú (hydro 285 MW).

Operations in Brazil

Since October 2005, Enersis has consolidated its generation and distribution companies in Brazil through Endesa Brasil.

Endesa Brasil consolidated operations of generation companies Endesa Fortaleza and Cachoeira Dourada; CIEN, which generally trades electricity from two transmission lines between Argentina and Brazil; CTM and TESA, subsidiaries of CIEN, which are owners of the Argentine side of the lines; and two distribution companies, Ampla, which is an electricity distribution company operating in the State of Rio de Janeiro; and Coelce, which is the sole electricity distributor in the State of Ceará.

We have a total generation capacity of 987 MW. Of this amount, 665 MW correspond to Cachoeira Dourada and 322 MW to Endesa Fortaleza. Ampla had various small generation facilities with total maximum installed capacity amounting to 62 MW, but these units were sold in 2006, and we make no reference to their operations in this report.

The following table sets forth information relating to Enersis’ installed capacity in Brazil:

INSTALLED GENERATION CAPACITY IN BRAZIL (MW)


	(MW)
	2005		2006		2007
Cachoeira Dourada		658		658		665
Endesa Fortaleza		319		322		322

Total installed capacity		977		980		987

The following table sets forth the physical energy production of Cachoeira Dourada and Endesa Fortaleza:

PHYSICAL PRODUCTION IN BRAZIL (GWh)


	Years ended December 31,
	2005				2006				2007
	(GWh)		%		(GWh)		%		(GWh)		%
Cachoeira Dourada		3,559		91.1		4,241		94.5		3,888		98.3
Endesa Fortaleza		347		8.9		248		5.5		66		1.7

Total		3,906		100.0		4,489		100.0		3,954		100.0

Cachoeira Dourada has a long-term take-or-pay contract with Companhia Elétrica de Estado de Goiás S.A., or CELG, a regional state-owned distribution company, which was executed in September 1997, when Endesa Chile acquired this company. The contract originally had a term of 15 years. During the first five years, CELG purchased all of the contracted capacity of Cachoeira Dourada (415 MW). This contract was modified in 2006, and the parties agreed to reduce the contracted amount beginning in 2006 and expect the term to expire in 2009. This amendment has allowed Cachoeira Dourada to have greater energy availability for sales to the group and third parties. During 2007, Cachoeira sold 1,222 GWh to CELG; 1,830 GWh to non-regulated clients, and 832 GWh to CIEN.

The following table sets forth certain statistical information regarding Cachoeira Dourada’s electricity sales:


	Years ended December 31,
	2005				2006				2007
			% of Sales				% of Sales				% of Sales
	(GWh)		Volume		(GWh)		Volume		(GWh)		Volume
Contracted sales		3,494.0		90.3		3,284.9		78.6		3,884		83.6
Non-contracted sales		373.0		9.7		892.3		21.4		760		16.4

Total electricity sales		3,867.0		100.0		4,177.2		100.0		4,644		100.0

Endesa Fortaleza is wholly-owned by Endesa Brasil and owns a combined cycle plant which uses natural gas or diesel oil. The plant is located 50 kilometers from the capital of the Brazilian state of Ceará, and began commercial operations in 2003.

The following table sets forth certain statistical information regarding Endesa Fortaleza’s installed capacity and electricity sales:


	Years ended December 31,
	2005		2006		2007
Installed capacity (MW)		319		322		322
Electricity sales (GWh)		2,690		2,690		2,705

Endesa Fortaleza’s market share is 0.3% of the total installed capacity of the Brazilian system and 1.5% of the total installed capacity of thermoelectric generators.

The following table sets forth certain statistical information regarding Endesa Fortaleza’s electricity sales:


	Years ended December 31,
	2005				2006				2007
			% of Sales				% of Sales				% of Sales
	(GWh)		Volume		(GWh)		Volume		(GWh)		Volume
Contracted sales		2,690.0		100.0		2,690.0		100.0		2,690.0		99.4
Non-contracted sales		0.0		0.0		0.0		0.0		15.0		0.6

Total electricity sales		2,690.0		100.0		2,690.0		100.0		2,705.0		100.0

Operations in Colombia

Enersis participates in the generation business in Colombia through Endesa Chile. Until August 2007, we controlled two electricity generation companies in Colombia, Betania and Emgesa. In September 2007, these companies were merged into Betania, which then changed its name to EMGESA S.A. E.S.P. (“Emgesa”). Since then, we have a 16.1% ownership interest in Emgesa.

As of December 31, 2007, our Colombian subsidiary operated a total of eleven generation plants in Colombia, with a total installed capacity of 2,829 MW. Emgesa has 2,451 MW in hydroelectric plants and 378 MW in thermoelectric plants. The Cartagena thermal plant has three units. One of them is being repaired and is expected to be reincorporated into the system during the first half of 2008.

Our generation plants in Colombia represent 21% of the country’s total electricity generation capacity as of December 2007.

The following table sets forth the installed generation capacity of our Colombian subsidiaries for the last three years:

INSTALLED CAPACITY PER SUBSIDIARY IN COLOMBIA (MW)


	Years ended December 31,
	2005		2006		2007
	(MW)
Emgesa
Guavio (hydro)		1,164		1,163		1,213
Cadena Nueva (hydro)		601		601		601
Betania (hydro)		541		541		541

Termozipa (thermal)		236		236		236
Cartagena (thermal)		0		142		142
Minor Plants (hydro)(1)		116		96		96

Total installed capacity		2,657		2,779		2,829


(1)		As of December 31, 2007 Emgesa owned and operated five minor plants: Charquito, El Limonar, La Tinta, Tequendama and La Junca.

Approximately 86.7% of Endesa Chile’s total installed capacity in Colombia is hydroelectric. As a result, our physical generation depends on the reservoir levels and yearly rainfalls. Endesa Chile’s generation market share in Colombia in 2007 was 22%; in 2006 was 24%. In addition to hydrological conditions, the amount of generation depends on our commercial strategy. Colombia’s electricity market is less regulated than the markets of the other countries in which we operate. Companies are free to offer their electricity at prices driven by market conditions, as opposed to being dispatched by a centralized operating entity.

The following table sets forth the energy generation for each of Endesa Chile’s Colombian subsidiaries:

ENERGY GENERATION PER SUBSIDIARY IN COLOMBIA (GWh)


	(GWh)
	2005		2006		2007
Emgesa		9,763		10,360		11,942
Betania(1)		2,101		2,204		0

Total		11,864		12,564		11,942


(1)		Since September 2007, Betania and Emgesa were merged into Betania.

Hydrological conditions in 2007 translated into lower generation for Emgesa when compared to 2006. During 2007, thermal generation represented 4.3% and hydroelectric generation, the remaining 95.7% of our generation in Colombia. Although the two thermal facilities, Termozipa and Cartagena, represent 13.3% of Endesa Chile’s total installed capacity in Colombia, the variable cost of generation of those plants was higher than the average spot market price, given the level of supply and demand of electricity during the year.

The following table sets forth the levels of electricity production and purchases for Endesa Chile’s Colombian subsidiaries for the past three years:

PHYSICAL PRODUCTION AND PURCHASES IN COLOMBIA (GWh)


	Year ended December 31,
	2005				2006				2007
	(GWh)		%		(GWh)		%		(GWh)		%
Electricity production		11,864		78.1		12,564		81.3		11,942		75.8
Electricity purchases		3,321		21.9		2,883		18.7		3,814		24.2

Total(1)		15,185		100.0		15,447		100.0		15,756		100.0


(1)		Energy production plus energy purchases exceed electricity sales due to power plant pump consumption.

Electricity demand in the Colombian NIS increased 4.0% during 2007. The total electricity consumption in the system was 48,829 GWh in 2005, 50,813 GWh in 2006 and 52,851 GWh in 2007.

The demand in Colombia’s electricity market includes the effect of the interconnection with Ecuador. During 2007, physical sales to Ecuador reached 877 GWh, less than 1,608 GWh sold in 2006. A new transmission line between Colombia and Ecuador began operations in 2007, increasing the capacity in 270 MW.

During 2007, Emgesa served an average of 731 contracts with non-regulated customers and 16 distribution and trading companies. Our sales to the related distribution company Codensa accounted for 28.8% of our total contract sales in 2007. Physical sales to the five largest non-regulated customers altogether reached 3.3% of total contracted sales.

Our most important competitors in Colombia include the following state-owned companies: Empresas Públicas de Medellín with 2,597 MW, Isagen with 2,106 MW, and Gecelca with 1,354 MW. We also compete with the following privately owned companies in Colombia: EPSA (Unión Fenosa) with 832 MW and Chivor, which is owned by AESGener, with 1,000 MW. The distribution of our physical sales, in terms of customer segment, is shown in the following table:

PHYSICAL SALES PER CUSTOMER SEGMENT IN COLOMBIA (GWh)


	Years ended December 31,
	2005				2006				2007
	Sales		% of Sales		Sales		% of Sales		Sales		% of Sales
	(GWh)		Volume		(GWh)		Volume		(GWh)		Volume
Contracted sales		9,800		65.0		9,687		63.2		10,539		67.5
Non-contracted sales		5,277		35.0		5,640		36.8		5,074		32.5

Total electricity sales		15,077		100.0		15,327		100.0		15,613		100.0

Operations in Peru

We participate in the generation business in Peru through Endesa Chile’s subsidiary, Edegel. Through Edegel, we operate a total of nine generation plants in Peru, with a total installed capacity of 1,468 MW. Edegel owns seven hydroelectric power plants, with a total installed capacity of 745 MW and two thermal plants which represent the remaining 723 MW. Our generation plants in Peru represent 28.5% of the country’s total electricity generation capacity according to the information reported in December 2007 by Osinergmin.

The following chart sets forth the installed capacity of Edegel:

INSTALLED CAPACITY PER SUBSIDIARY IN PERU (MW)(1)


	Years ended December 31,
	2005		2006		2007
	(MW)
Edegel S.A.
Huinco (hydroelectric)		247		247		247
Matucana (hydroelectric)		129		129		129
Callahuanca (hydroelectric)		75		75		80
Moyopampa (hydroelectric)		65		65		65
Huampani (hydroelectric)		30		30		30
Yanango (hydroelectric)		43		43		43
Chimay (hydroelectric)		151		151		151
Santa Rosa (thermal)		229		229		231
Ventanilla (thermal)(2)		0		457		493

Total installed capacity		969		1,426		1,468


(1)		During 2007 Ventanilla increased in 36 MW its installed capacity due to the control of energy losses.

(2)		Edegel includes Ventanilla’s generation since January 2006.

The increase in thermal electricity generation in 2007, 805 GWh, is due to the increase in the installed capacity in Ventanilla which completed the combined cycle in November 2006. Our generation market share was 28% of total electricity production in Peru in 2007 and 27% in 2006.

HYDRO/THERMAL GENERATION IN PERU (GWh)


	Years ended December 31,
	2005				2006				2007
	(GWh)		%		(GWh)		%		(GWh)		%
Hydroelectric generation		4,095		90.7		4,197		63.0		4,385		57.3
Thermal generation(1)		422		9.3		2,465		37.0		3,270		42.7

Total generation		4,516		100.0		6,662		100.0		7,654		100.0


(1)		Since 2006 includes Ventanilla’s generation.

The portion of electricity supplied by Edegel’s own generation was 93.9% of total physical sales, requiring only a small amount of purchases to satisfy contractual obligations to customers.

Edegel has supply, transportation and distribution contracts for the gas supply for Ventanilla and Santa Rosa. During 2007, the gas pipeline Camisea-Lima, owned by TGP, reached its full capacity. In order to preserve the transportation capacity for its natural gas demand, Edegel modified its agreements, shifting from interruptible to firm modality, with a capacity of 1,5 MMm3/d (from August 2008 to July 2009) and 2,2 MMm3/d (from August 2009 to July 2019), keeping 2 MMm3/d under interruptible modality.

The following table sets forth the electricity generation and purchases for Edegel over the past three years:

PHYSICAL GENERATION AND PURCHASES IN PERU (GWh)


	Years ended December 31,
	2005				2006				2007
	(GWh)		%		(GWh)		%		(GWh)		%
Electricity generation		4,516		94.8		6,662		96.1		7,654		93.9
Electricity purchases		246		5.2		274		3.9		499		6.1

Total(1)		4,762		100.0		6,935		100.0		8,153		100.0


(1)		Since 2006 includes Ventanilla’s generation.

Electricity generation in the Sistema Eléctrico Interconectado Nacional (National Interconnected Electric System), or SEIN, increased 10.1% during 2007 when compared to 2006, reaching a total yearly generation of 27,255 GWh. Increased demand in Peru is partially a result of larger electricity demand by the mining industry whose growth in electricity demand has been driven by increasing copper and gold production, due to their higher international prices.

The distribution of Edegel’s physical sales, in terms of customer segment, is shown in the following table:

PHYSICAL SALES PER CUSTOMER SEGMENT IN PERU (GWh)(1)


	Year ended December 31,
	2005				2006				2007
	Sales		% of Sales		Sales		% of Sales		Sales		% of Sales
	(GWh)		Volume		(GWh)		Volume		(GWh)		Volume
Contracted sales(2)		3,766		81.9		6,145		90.8		7,569		94.7
Non-contracted sales		834		18.1		621		9.2		424		5.3

Total electricity sales		4,600		100.0		6,766		100.0		7,994		100.0


(1)		Since 2006 figures include Ventanilla’s sales.

(2)		Includes the sales to distributors without contract.

Edegel’s physical sales in 2007 increased nearly 18.1% over sales in 2006. Sales in the spot market decreased nearly 31.7%, and contracted sales increased 23.2%. The increase in contracted sales is primarily due to the increase in Ventanilla’s generation which sells the energy to ElectroPerú, the increase in sales to distributors without contracts and the increase in sales to distributors. During 2007, Edegel had six regulated customers, besides Edelnor, with which it has had contracts since 1997, Edegel has contracts with several distributors due to the auctions made during 2006 and 2007 The company has eleven non-regulated customers. Sales to non-regulated customers represented 56.0 % of Edegel’s total contracted sales in 2007, compared to 55.7% in 2006.

Our most important competitors in Peru are ElectroPerú, Enersur and Egenor, whose capacities are 909 MW, 676 MW and 508 MW, respectively.

Electricity Transmission

CIEN

Owing to the reorganization of our Brazilian assets, CIEN is fully owned by Endesa Brasil, in which Enersis holds a 53.7% beneficial interest. CIEN consolidated CTM and TESA, which operate the Argentine side of the interconnection line with Brazil.

CIEN’s electric lines permit the energy integration of Mercosur and the import and export of electricity between Argentina and Brazil in both directions. It has two 500 kV transmission lines covering a distance of about 500 kilometers between Rincón, in Argentina, and the Santa Catarina substation, in Brazil, and has a total capacity of 2,000 MW.

CIEN had contracts to sell energy with Furnas, Tractebel, Ampla and Copelin Brazil based on the energy purchased from Endesa Costanera, our generation subsidiary in Argentina. As of the date of this report CIEN dos not have any commitments with Ampla and Copel, while the contractual relationship with Furnas and Tractebel is frozen. The insufficient electricity supply available in Argentina in 2005 resulted in restrictions on exports from the electricity spot market and the use of natural gas to export energy to Brazil. Since CIEN was unable to import electricity from Argentina to serve its final customers, Brazilian authorities reduced CIEN’s recognized capacity to zero.

To manage this problem, in December 2005, the Argentine and Brazilian governments signed a Memorandum of Understanding (MOU) to avoid the imposition of fines for any non-compliance in export contracts during a transitional period, expected to end by December 31, 2008.

In this respect, the interconnection line between Argentina and Brazil was dispatched in 2006 only under load supply emergencies in Argentina and Uruguay. Similarly, during a four-month period in 2007, Brazilian energy was sold to Cammesa, in Argentina, using CIEN’s lines. Those lines have also been used to transport energy from one country to the other, all of which have allowed CIEN to receive some income.

CIEN continues seeking the Brazilian authorities’ decision on regular compensation for the availability of its lines both to support Brazilian electric system and to allow energy interchanges with Argentina.

Electricity Distribution

Our electricity distribution business has been conducted in Chile through Chilectra, in Argentina through Edesur, in Brazil through Ampla and Coelce, in Colombia through Codensa and in Peru through Edelnor. For the year ended December 31, 2007, our distribution subsidiaries sold 61,610 GWh of electricity. For more information on energy sales by our distribution subsidiaries for the past five fiscal years, see “Item 3. Key Information — A. Selected Financial Data.” Currently, Chilectra is the technical operator of Edesur, Edelnor, Ampla and Coelce.

Chilectra

Chilectra is the largest electricity distribution company in Chile as measured by the number of regulated clients, distribution assets and energy sales. Chilectra had consolidated operating income of Ch$122.1 billion for the year ended as of December 31, 2007. Our economic interest in Chilectra is 99.1%. Chilectra operates in a concession area of 2,118 square kilometers.

Chilectra transmits and distributes electricity in 33 municipalities of the Santiago Metropolitan Region. Chilectra’s service area is defined primarily as a high-density area under the Chilean tariff regulations governing electricity distribution companies, and includes residential, commercial, industrial, government agencies and toll customers. The Santiago Metropolitan Region is Chile’s most densely populated area and has the highest concentration of industries, industrial parks and office facilities in the country. As of December 31, 2007, Chilectra served approximately 1.5 million customers.

As of December 31, 2007, Chilectra owned a 34.0% interest in Edesur and a 10.5% in Endesa Brasil. Chilectra holds a beneficial interest of 35.6% in Ampla and a 10.8% in Coelce through Investluz and Endesa Brasil. Chilectra also owns a 9.9% interest in Codensa in Colombia and a 15.6% interest in Edelnor, in Peru. There are no operator fees associated with Chilectra’s involvement in these companies.

For the fiscal year ended December 31, 2007, residential, commercial, industrial and other customers, who are primarily public and municipal, represented 27.0%, 25.7%, 25.6% and 21.8%, respectively, of Chilectra’s 12,923 GWh energy sales. For the five-year period ended December 31, 2007, physical energy sales increased at a compounded annual rate of 5.3%. For the year ended December 31, 2007, revenues from electricity sales were Ch$734.53 billion.

Edesur

Edesur is the second-largest electricity distribution company in Argentina as measured by energy purchases. Our economic interest in Edesur is 65.4%. Edesur operates in a concession area of 3,309 square kilometers.

Edesur distributes electricity in the south-central part of the greater Buenos Aires metropolitan area. Its service area comprises the major business district of Buenos Aires and several residential areas of the southern part of Buenos Aires. As of December 31, 2007, Edesur distributed electricity to 2.2 million customers. Residential, commercial, industrial and other customers, primarily public and municipal, represented 40.4%, 26.3%, 10.4% and 22.8%, respectively, of Edesur’s total energy sales. It had energy losses of 10.7%. For the year ended December 31, 2007, revenues from electricity sales amounted to Ch$271.69 billion.

In 2007, Edesur’s physical energy sales increased by 6.7%, to 15,833 GWh, compared to 14,837 GWh in 2006 and 14,018 GWh in 2005.

Ampla

Ampla is the second-largest electricity distribution company in the State of Rio de Janeiro, Brazil. As of December 31, 2007, we had a 69.9% economic interest in Ampla. Chilectra is Ampla’s technical operator but does not receive any fees for such role.

Ampla distributes electricity to 66 municipalities of the State of Rio de Janeiro and serves 2.3 million customers in a concession area of 32,054 square kilometers, where an estimated 8.0 million people live. As of December 31, 2007, residential, commercial, industrial and other customers represented 44.7%, 12.1%, 21.7% and 21.5%, respectively, of Ampla’s 8,985 GWh sales. For the year ended December 31, 2007, revenues from electricity sales amounted to Ch$539.09 billion. As of December 31, 2007, Ampla’s energy losses were 21.4% compared to 21.9% in 2006.

Coelce

We hold a 34.9% economic interest in Coelce, the sole electricity distributor in the State of Ceará, in northeastern Brazil, through a 59.5% interest in Investluz, which owns 56.6% of the capital stock of Coelce. Chilectra is Coelce’s technical operator but does not receive fees for such role. As of December 31, 2007, Coelce served over 2.6 million customers within a concession area of 148,825 square kilometers. During 2007, Coelce had annual sales of 7,227 GWh of energy, which represents a 6.8% increase compared to 2006. These sales represented Ch$417.84 billion.

Coelce has a relatively stable client base with residential clients representing 32.1% of energy sold. In 2007, Coelce bought 54% of its energy from Endesa Fortaleza, 36% from energy contracts under regulated environment and 10% from other suppliers.

As of December 31, 2007, residential, commercial, industrial and other customers represented 32.1%, 18.4%, 27% and 22.5%, respectively, of Coelce’s total energy sales. As of December 31, 2007, Coelce’s energy losses were 12.5% compared to 13.0% in 2006.

Codensa

We hold a 21.7% economic interest in Codensa, an electricity distribution company that serves a region of 14,087 square kilometers in Bogotá and 96 other municipalities in the Departments of Cundinamarca, Tolima and Boyacá. More than 9.5 million people, or 23% of the Colombian population, live in Codensa’s service area, where it serves approximately 2.2 million customers. For the year ended December 31, 2007, revenues from electricity sales amounted to Ch$382.4 billion.

During 2007, Codensa’s annual sales reached 11,441 GWh, reflecting a 6.4% increase compared to 2006. Of these sales, residential, commercial, industrial and other customers represented 35.1%, 15.4%, 6.1% and 43.4%, respectively. Codensa purchased 38% of its energy in 2007 from Emgesa, a generating company controlled by Endesa Chile, and the remaining 62% from other suppliers. Since 2001, Codensa only serves regulated clients. The unregulated market is served by our generation company, Emgesa, with the exception of the public lighting in Bogotá.

In 2007, Codensa had energy losses of 8.7% compared to 8.9% in 2006 and 9.4% in 2005. We will continue implementing the energy loss reduction measures that we have been applying in Chile, Argentina and Peru.

Edelnor

Edelnor is a Peruvian electricity distribution company of which 60% is owned by Distrilima. Chilectra is Edelnor’s operator. As of December 31, 2007, we owned an equity interest of 55.9% in Distrilima, which represents a 33.5% interest in Edelnor. Edelnor operates in a concession area of 2,440 square kilometers. For the year ended December 31, 2007, the company had revenues of Ch$199.38 billion from electricity sales.

Edelnor has an exclusive concession to distribute electricity in the northern part of the Lima metropolitan area, some provinces of the Lima department such as Huaral, Huaura, Barranca and Oyón, and in the adjacent province of Callao. As of December 31, 2007, Edelnor distributed electricity to approximately 986.461 customers, a 3.6% increase from December 31, 2006.

For the year ended December 31, 2007, Edelnor had total energy sales of 5,201 GWh. The compounded annual growth rate in energy sales from 2003 to 2007 was 7% per annum.

Edelnor had energy losses of 8.1% in 2007, compared to 8.2% in 2006.

Other Non-Core Businesses

Our non-core businesses represent less than 2% of Enersis’ consolidated Operating Income.

IMV

IMV, our wholly-owned subsidiary, develops real estate projects in Chile. Among these projects, IMV has a 55% interest in ENEA, a long-term project involving 2,594 acres near Santiago’s international airport, which aims to create both industrial and residential lots.

CAM

CAM is engaged in the electrical parts procurement business and is the entity in charge of providing continuity to our engineering and electrical service activities, both in Chile and abroad, and concentrates on managing large-scale services for public utility companies, especially in the electricity, telecommunications, gas and water distribution sectors. The services provided by CAM include maintaining and calibrating electricity meters and other precision equipment, connecting electricity to final users, and constructing electrical facilities and distribution network connections. The company is able to provide improved value in turnkey solutions with reduced transaction costs by integrating the procurement of materials as part of the services.

Synapsis

Synapsis, a wholly-owned subsidiary of Enersis, is engaged in the information system business. Synapsis provides support services to our electric utility businesses, both in Chile and abroad and also operates with unrelated third parties. Synapsis is the main provider of equipment relating to computers and data processing and supplies services to Enersis and its subsidiaries.

Others

Endesa Chile’s non-electricity Chilean businesses consist of a concession for a private tunnel, as well as engineering services.

Competition

In the electricity generation business, companies compete largely on the basis of technical experience and reliability and, in the case of unregulated customers, price.

Our Chilean subsidiary, Endesa Chile, competes in the SIC primarily with two other electricity generation companies, AESGener and Colbún. According to the maximum power considered by CDEC-SIC in the calculation of “firm capacity” in 2007, AESGener and its subsidiaries in the SIC counted on an installed capacity of 1,587 MW, of which 82% was thermal electric, and Colbún on 1,918 MW, of which 57% was thermal electric. In addition, there are a number of smaller entities that generate electricity in the SIC. For further detail on the “firm capacity” concept, please see “ — Electricity Industry Regulatory Framework — Chile — Sales to Other Generation Companies.”

Electricity generation companies compete largely on the basis of technical experience and reliability and, in the case of unregulated customers, on price. In addition, because 72.2% of Endesa Chile’s installed capacity is derived from hydroelectric power plants, it has lower production costs than companies generating electricity in the SIC with thermal plants. During periods of extended droughts, however, Endesa Chile is often forced to buy more expensive electricity from thermoelectric generators at spot prices in order to satisfy its contractual obligations.

Endesa Chile, through its subsidiary Celta, has one 182 MW thermal power plant connected to the SING, which represents 5% of the total capacity of the SING. Including its affiliate company GasAtacama Generación Limitada, whose power plant has 781 MW of installed capacity, Endesa Chile had 21.6% of the SING’s total installed capacity. The main generation companies operating in the SING, Electroandina, Empresa Eléctrica del Norte Grande S.A. (“Edelnor”), AESGener and Norgener S.A., have 992, 719, 643 and 277 MW of installed capacity, respectively.

Our Argentine subsidiaries, Endesa Costanera and El Chocón, compete with other important operators such as AESGener, Pluspetrol, PECOM Energía and Total. Our Peruvian subsidiary, Edegel, competes with Electroperú, Egenor, Enersur and Eepsa. Our Colombian subsidiary Emgesa competes with AESGener and Unión Fenosa. Finally, our Brazilian subsidiaries compete with several important private operators, including Tractebel, AESGener, Duke and the state-owned Electrobrás.

In the electricity distribution business segment, each of our subsidiaries is a natural monopoly in its respective concession area. There are natural, although not legal, barriers to entry, since it is not economically efficient for more than one distribution company to operate in the same concession area. However, the long-term trend in many of our markets is toward increased competition through the incorporation of trading companies that compete with distribution companies for certain customers. In addition, distribution companies are normally allowed to charge trading companies a toll for the use of their lines. At the date of this annual report, Colombia is the only country where there is a trading market. If trading companies are allowed in other countries through future regulatory changes, we expect to compete effectively with them through our own trading companies.

Utility Business

Chile

In accordance with Chile’s regulatory framework for electricity distribution, more than one concession may be granted for the same territory. However, barriers to entry are high because electricity distribution requires an extensive distribution network and significant capital outlays. To date, the Ministry of Economy has not granted any significant overlapping concessions. Nevertheless, the existing tariff system for distribution companies, which sets tariffs by applying efficiency guidelines to a selected actual company of similar size, the model company, has the inherent effect of creating competition between similarly sized electricity distribution companies to improve operating efficiency, reduce distribution energy losses and increase operating margins.

Electricity generation companies compete with each other to obtain long-term contracts with distribution companies and they compete with each other and with distribution companies to provide service to unregulated customers. All sales to regulated customers are subject to tariffs that fix the maximum prices that can be charged.

Distribution and transmission companies are required to allow any interested party to access their lines and ancillary facilities for the transmission of electricity upon payment of a toll. Unregulated customers have several electricity supply alternatives, including:

•

installing their own lines directly from a generation company;

•

arranging a supply contract with a generation company, which pays a toll to a transmission company and a distribution company;

•

negotiating a contract with a distribution company; and

•

generating their own electricity.

We are not aware of any customers in our concession area who have installed their own lines from a generation company as of the date of this annual report. There is currently no significant self-generation or co-generation within Chilectra’s concession area.

Argentina

Our electricity generation operations in Argentina are carried out by El Chocón and Endesa Costanera. Generation companies compete with each other in the wholesale electricity market for sales to distribution companies and large users. The prices received by electricity generation companies in the wholesale market are determined primarily by the marginal cost of supplying additional capacity for the system.

Electricity transmission companies are required by law to provide generators, distributors and large users access to available transmission capacity upon payment of a toll.

Our electricity distribution operations in Argentina are conducted through Edesur, which holds a concession from the Argentine government to transmit and distribute electricity in its territory. The concession agreement precludes third parties from constructing distribution assets within Edesur’s territory.

Brazil

Our electricity generation in Brazil is conducted through Cachoeira Dourada and Endesa Fortaleza. Brazil’s electricity sector is mainly comprised of government-owned generation and transmission companies. Currently, Brazil’s electricity generation needs are supplied primarily by 70 companies. Substantially all of the country’s generating capacity is controlled by either the state or federal government. As a means to promote the integrated development of the electricity sector, Brazil was divided into four regions: the Southeast (including the State of Rio de Janeiro and Ampla’s concession area), the South, the North and the Northeast (including Coelce’s concession area). Each of these regions is supplied primarily by a federally-owned generation company which is responsible for promoting the development of electricity power generation and transmission in its region. The main federal generating company for the Southeast region is Furnas. Centrais Elétricas Brasileiras, or Eletrobrás, a company controlled by the Brazilian federal government, owns three of the four regional generating companies and is generally responsible for implementing policy with respect to the operation of the electricity sector as well as coordinating its planning, financing and operations together with the Operador Nacional do Sistema Elétrico (Electric System National Operator), or ONS.

Our electricity distribution business in Brazil is conducted through Ampla and Coelce. The concession agreements for Ampla and Coelce are non-exclusive in their respective territories.

Colombia

Until August 2007, we controlled two electricity generation companies in Colombia, Betania and Emgesa. In September 2007, these companies were merged into Betania, which then changed its name to Emgesa.

Enersis conducts its Colombian electricity distribution business through Codensa. Most of the other distribution companies are state-owned. On the other hand, the possibility of trading energy in Colombia makes that country’s electricity market quite competitive.

Peru

Our electricity generation business in Peru is conducted through Edegel, the largest privately-owned electricity generation company in the country. Electricity generation companies compete with each other and with distribution companies to provide service to unregulated large users. Edegel is located in the SICN electricity grid system, but competes with the generation companies in both the northern and southern electricity systems. Competition for sales to unregulated customers may affect the tariff for regulated sales. Distribution and transmission companies are required by law to permit the use of their lines and ancillary facilities for the transmission of electricity upon payment of a toll.

Our electricity distribution business in Peru is conducted through Edelnor, which is granted by a concession agreement in its exclusive territory. The Peruvian regulatory authority sets tariffs for distribution companies by using the “model company,” which entails applying efficiency guidelines to a selected actual company of comparable size. This approach to setting tariffs has the inherent effect of encouraging distribution companies to improve operating efficiency, reduce distribution losses and increase operating margins.

Raw Materials

For information regarding Enersis’ raw materials, please see “Item 11. Quantitative and Qualitative Disclosures about Market Risk — Commodity Price Risk.”

ELECTRICITY INDUSTRY REGULATORY FRAMEWORK

Chile

Industry Structure

The electricity sector in Chile is divided into three business segments: generation, transmission and distribution. The generation segment consists of companies that produce electricity; they sell their production to distribution companies, unregulated customers or to other generation companies. The transmission segment consists of companies that transmit at a high voltage the electricity produced by generation companies. Finally, the distribution segment is defined for regulatory purposes to include all electricity supply to end users at a voltage up to and including 23 kV.

The electricity sector in Chile is regulated pursuant to Decree Law 1, as amended, which was first enacted in 1982, and the regulations under Decree 327 of 1998, as amended, collectively known as the Chilean Electricity Law.

In Chile there are four separate interconnected electric systems. The two systems that cover the most populated areas of Chile are the Sistema Interconectado Central, or SIC, that covers the central and south central portion of the territory, where 93% of the Chilean population live, from Paposo, in the Second Region, through Quellón, in the southern extreme of Isla Grande de Chiloé, and the Sistema Interconectado del Norte Grande, or SING, which operates in the northern portion of the country, First and Second Regions, covering 24.5% of the Chilean continental territory. In addition to the SIC and the SING, there are two other isolated systems in southern Chile that provide electricity in remote areas. The operation of electricity generation companies in each of the two major interconnected electricity systems is coordinated by the respective dispatch center, Centro de Despacho Económico de Carga, or CDEC, an autonomous entity that involves generation, distribution, transmission companies and industry groups. CDECs are tasked with coordinating the operation of each system as efficient markets for the sale of electricity in which the lowest marginal cost producer is used to satisfy demand. As a result, at any specific level of demand, the appropriate supply will be provided at the lowest possible cost of production available in the system at any moment. Certain major industrial companies own and operate generation systems to satisfy their own needs.

Chilean Electricity Law

General

The goal of the Chilean Electricity Law is to provide incentives to maximize efficiency and to provide a simplified regulatory scheme and tariff-setting process which limits the discretionary role of the government by determining objective criteria for setting prices. The expected result is an economically efficient allocation of resources. The regulatory system is designed to provide a competitive rate of return on investment to stimulate private investment, while ensuring the availability of electricity service to all who request it.

Three governmental entities have primary responsibility for the implementation and enforcement of the Chilean Electricity Law. The CNE calculates retail tariffs and wholesale, or node prices, which require the final approval of the Ministry of Economy, and prepares the indicative plan, a ten-year guide for the expansion of the system that must be consistent with the calculated node prices. The SEF sets and enforces the technical standards of the system and the correct compliance of the law. In addition, the Ministry of Economy grants final approval of tariffs and node prices set by the CNE and regulates the granting of concessions to electricity generation, transmission and distribution companies.

Companies engaged in generation must coordinate their operations through the CDECs to minimize the operating costs of the electricity system and monitor the quality of service provided by the generation and transmission companies. Generation companies meet their contractual sales requirements with dispatched electricity, whether produced by them or purchased from other generation companies in the spot market. The principal purpose of a CDEC in operating the dispatch system is to ensure that only the most efficiently produced electricity is dispatched to customers. However, the CDEC also seeks to ensure that every generation company has enough installed capacity and can produce enough electricity to meet the demand of its customers. Because Endesa Chile’s production in the SIC is primarily hydroelectric, and therefore its marginal cost of production is generally the lowest in that interconnected system, its electricity capacity in the SIC is generally dispatched under normal or abundant hydrological conditions. Generation companies balance their contractual obligations with their dispatch by buying electricity at the spot market price, which is set hourly by the CDECs, based on the marginal cost of production of the next kWh to be dispatched. This is known as the “marginal cost.”

Sales by Generation Companies

Sales may be made to final customers, pursuant contracts or, to other generation companies, on a spot basis. Generation companies may also be engaged in contracted sales among each other at negotiated prices. Contract terms are freely determined.

Sales to Distribution Companies and Certain Regulated Customers

Historically, sales to distribution companies for resale to regulated customers have been made through contracts at regulated prices (“node prices”) in effect at the relevant locations (“nodes”) on the interconnected system through which such electricity is supplied. Nevertheless, since 2005 all new contracts between generation and distribution companies for the supply to regulated customers must be the result of international auctions which have a maximum regulated offer price equal to 120% of the node price. If a first auction is unsuccessful, authorities may increase this maximum price by an additional 15%. The auctions are awarded on a minimum price basis. The price associated with these auctions will be transferred directly to final users, replacing the current regulated price regime. Beginning in 2010, the distribution companies must contract 100% of their demand.

Regulated customers are those with a maximum consumption capacity not exceeding 0.5 MW. Customers between 0.5 and 2 MW may choose their status as regulated or unregulated. Customers with capacity needs over 2 MW are unregulated. Two node prices are paid by distribution companies: one for capacity and the other for energy consumption. Node prices for capacity are calculated based on the marginal cost of increasing the existing capacity of the electric system with the least expensive generating facility. Node prices for energy consumption are calculated based on the projected marginal cost of satisfying the demand for energy at a given point in the interconnected system, during the next 48 months in the SIC and during the next 24 months in the SING. The determination of such marginal cost takes into account the principal variables in the cost of energy over a ten-year period, including projected growth in demand, reservoir levels, fuel costs for thermal electricity generation facilities, planned maintenance schedules and other factors that would affect the availability of existing generation capacity and scheduled additions to generation capacity during the ten-year indicative electricity development plan. The same general principles are used to determine marginal cost in the SING.

Node prices for capacity and energy consumption are established every six months, in April and October. Although node prices are quoted in pesos, calculations are made in dollars. Node prices may be adjusted during such six-month period according to the fluctuation of average prices on sales by generators to their unregulated clients.

International Auctions for the Supply of Regulated Customers

The first international auction for the supply of the distribution companies’ regulated customers took place in 2006. This auction ended in November 2006, meeting 100% of the energy needs required by participating distribution companies. The second auction took place in November 2007 for energy to be delivered since January 2011. Chilectra was the only distributor that awarded energy in this process with 5,700 GWh: 3,200 GWh to Endesa and 2,500 GWh to Colbún.

Sales to Other Generation Companies

To accomplish its objective of operating the dispatch system to ensure that only the most efficiently produced electricity reaches customers, each CDEC annually determines “Firm Capacity,” which is the total probable capacity of all generating units in an interconnected system at any given time, calculated using historical data, statistical analyses and certain assumptions regarding hydrology. Each CDEC compares Firm Capacity to the maximum anticipated peak demand for capacity at peak hours in the system. The amount by which the system-wide probable capacity exceeds the maximum anticipated demand at peak hours is prorated for each generating unit in the system based on the installed capacity of such unit. Installed capacity of each unit is reduced by such pro rata amount to determine “Allocated Firm Capacity.” If the Allocated Firm Capacity of any generation company exceeds its peak hour contracted commitments to customers, such generation company will be paid for its excess Allocated Firm Capacity by generation companies with peak hour commitments to customers in excess of their Allocated Firm Capacity, based on the prevailing node price for capacity.

A generation company may be required to purchase or sell energy or capacity in the spot market at any time, depending upon its contractual requirements in relation to the amount of electricity to be dispatched from such company.

Transmission

Since transmission assets are built pursuant to concessions granted by the government, the Chilean Electricity Law requires such company to operate on an “open access” basis in which users may obtain access to the system by contributing toward the costs of operating, maintaining and, if necessary, expanding the system. Transmission companies recover their investment in transmission assets through tolls, or “wheeling rates,” which are charged to generation companies and final customers proportionally: 80% to generators and 20% to customers. Transmission companies’ tariffs are determined every four years by a Decree of the Ministry of Economy.

Distribution Tariff to Final Customers

The tariff charged by distribution companies to their final customers is determined by the sum of the cost of electricity purchased by the distribution company, a transmission charge and the value added by the distribution network, or VAD, which allows distribution companies to recover the operating costs. The price for both generation and distribution capacity sold to customers includes a factor which reflects the simultaneous contribution of each customer to peak capacity demand of the system as a whole. The transmission charge reflects the cost paid to transmission companies and the subtransmission cost of transmitting and transforming electricity. The VAD includes an allowed return on investment.

VAD Tariff

VAD is based on a “model company” and includes: selling, general and administrative costs of distribution; maintenance and operating costs of distribution assets; cost of energy and energy losses, and an expected return on investment, before taxes, of 10% per annum in real terms based on the new replacement cost of assets employed in distribution.

To this end the CNE selects an actual company, to which it applies efficiency guidelines, which results in a cost structure for the “model company” for each Typical Distribution Area (see next paragraph). The tariff is not based on actual costs incurred by any given distribution company, but on investment, operating, maintenance and general administrative standards and overall efficiency of operations for the model company, which is used as a benchmark.

Distribution Tariff-Setting Process

VAD is set every four years. The CNE classifies companies into groups, according to Typical Distribution Areas, based on economic factors that group companies with similar distribution costs because of population density which determines equipment density in the network.

A given distribution company’s actual return on investment is dependent on its performance relative to the standards chosen by the CNE for the model company. The tariff system allows for a greater return to distribution companies that are more efficient than the model company. Tariff studies are performed both by the CNE and by the distribution companies. Each party typically retains specialized consultants to perform a parallel tariff study. The tariffs are calculated as a weighted average of the results of the CNE-commissioned study and the companies’ study, with the results of the CNE’s study bearing twice the weight of the companies’ results. Preliminary tariffs are tested to ensure that they provide an average actual annual internal rate of return between 6% and 14% on the replacement cost of electricity-related assets for the entire distribution segment.

Concessions

The Law permits generation activity without a concession. However, companies may apply for a concession to facilitate the access to third-party properties. Third-party property owners are entitled to compensation, which may be agreed to by the parties or, if there is no agreement, may be determined by an administrative proceeding that may be appealed in the Chilean courts.

Concessions for the operation of distribution networks are granted by the Ministry of Economy. Concessions are non-exclusive and of indefinite duration but may be revoked by the President of the Republic if certain quality and safety standards are not met. In such a concession revocation, the distribution company’s assets would be liquidated in a public auction.

Distribution companies are required to provide service within their concession area and may provide service to customers outside the concession area connected to the distribution facilities through their own lines or lines of third parties at applicable tariffs.

Fines and Compensations

If a rationing decree is enacted in response to prolonged periods of electricity shortages, severe penalties may be imposed on deficit generation companies that contravene the decree. Severe drought is not considered a force majeure event.

If generation companies cannot meet their contractual commitments to deliver electricity during periods when a rationing decree is in effect and there is no energy available to purchase in the system, the generation company must pay compensation to the customers at the failure cost determined by the authority in each tariff setting. Failure cost corresponds to the average cost incurred by final users in providing one kWh by their own means.

Distribution companies may be required to compensate final customers if there are shortages of electricity that exceed the authorized standards. These compensatory payments shall be at an amount equal to double the non-supplied energy at failure cost.

Our companies also may be required to pay fines to the regulatory authorities in case of system blackouts owing to operational mistakes, including failures related to the coordination duty of all system agents, and to make compensatory payments to electricity consumers affected by the shortage of electricity.

In 2001, the Chilean Antitrust Commission established a list of 25 services related to the supply of electricity, such as the leasing of meters that should be regulated. In 2005, the CNE issued the Final Technical Report setting tariff reductions for such related services. Chilectra and the main electricity distribution companies appealed this resolution to the Commission of Experts, the judicial authorities and the Contraloría General de la República. The latter declared that the tariff process was illegal and therefore the new tariffs for associated services would be set during the next VAD tariff process in 2008.

The “Short Laws”

Some recent amendments on the Chilean Electricity Law are Short Law I and Short Law II, Law 19,940 and Law 20,018, enacted in 2004 and in 2005, respectively. Their aims were to solve several omissions of the prior law, to resolve some disputes and to improve conditions for long-term investments in the sector. Some changes include a new definition of “unregulated costumer” with a new capacity threshold lowered from 2 MW to 0.5 MW and the obligation for distribution companies to permanently cover future electricity requirements of their regulated clients for the following three years beginning in 2010. According to Short Law II, the generator’s sale prices to distribution companies will be those resulting from auctions bided by distribution companies, supervised by the authority and awarded on a minimum price basis. The auction prices will be transferred to final consumers, replacing the current regulated price regime. During the life of the contract, the energy and capacity prices will be indexed according to formulas set on the auction documentation, associated with fuel, investment and other relevant costs of the energy generation.

Law N° 20,220

On September 14, 2007, Law 20,220 was enacted. It governs cases of bankruptcy in electrical companies in the electricity sector and early termination of contracts between a generating company and a distribution company for the supply of customers subject to regulated prices by a judicial sentence.

Environmental Regulation

The Chilean Constitution grants all citizens the right to live in a pollution-free environment. It further provides that other constitutional rights may be limited in order to protect the environment. Chile has numerous laws, regulations, decrees and municipal ordinances that may raise environmental considerations. Among them are regulations relating to waste disposal (including the discharge of liquid industrial wastes), the establishment of industries in areas in which they may affect public health and the protection of water for human consumption.

Environmental Law 19,300 was enacted in 1994 and implemented through “Reglamento 30,” issued in 1997. This law requires companies to conduct environmental impact studies of any project, including future generation, distribution or transmission projects and to arrange for the review of such studies by the Chilean Environmental Commission, or CONAMA. It also requires an evaluation of environmental impact by the Chilean government or the posting of an environmental insurance policy insuring compliance with standards for emissions, noise, waste and disposal, and authorizes the relevant ministries to establish emission standards. Our companies apply the guidelines set out in Reglamento 30 when analyzing the development of future generation, high-voltage transmission lines and substation projects.

Water rights

Endesa Chile owns unlimited duration, unconditional and absolute property water rights granted by the Chilean Water Authority. Chilean generation companies must pay an annual fee for unused water rights. Endesa Chile continuously analyzes which water rights it will maintain or disregard. We estimate that during 2007 we paid license fees for the previous year in the amount of 70,816 UTM ($4.9 million, using year-end exchange rates). This amount may vary in the future according to the actual water rights we may have in each year. License fee payments carried out during the eight years before the commencement of any project, or the use of such water rights, may be recovered through a tax credit that is applied monthly until the license fee payments are recovered in full. In the case of water rights located in the extreme south of Chile, the Eleventh and Twelfth Regions, outside the area comprised by the SIC, the license fees will be paid starting as of January 1, 2013, using the same tax refund regime mentioned above for the SIC.

Argentina

Ley Nacional 24,065 of 1992 (the “Argentine Electricity Act,” or the “Act”) divides the electricity industry into the same three business segments: generation, transmission, trading and distribution. The objective of this law is to enable the electric market development under conditions of free competition, avoiding the concentration of companies conducting those activities into one unique controlling group.

The Act defines four categories of agents: generators, transmission companies, distribution companies and large users; it also created the Mercado Eléctrico Mayorista (Wholesale Power Market), or MEM, where these actors interact with the Secretariat of Energy; and created the Compañía Administradora del Mercado Eléctrico Mayorista (Administrative Company for the Wholesale Electricity Market), or Cammesa, in which those agents and the Secretariat of Energy have an equal share, and also created the Ente Nacional Regulatorio de la Energía (Electric Power National Regulatory Agency), or ENRE.

Cammesa’s responsibilities are dispatch coordination, setting of wholesale prices and the management of economic transactions in the MEM.

ENRE was created to protect users and to promote electricity production, competition and investments to insure long-term supply.

The generation sector is organized on a competitive basis, with independent generators selling their output on the MEM or through private contracts to distribution companies.

Transmission is a public service that works under conditions of monopoly by private companies to whom the National Government grants concessions to transmit electricity from generation centers to distribution companies and large consumers. Transmission companies are authorized to charge a toll for the transmission services. Transmission companies are prohibited from generating or distributing electricity.

Distribution is also a public service that works under conditions of monopoly, and is provided by companies who have been granted concessions. Distribution companies have the obligation to supply final users within a specific concession area. Accordingly, these companies are regulated with respect to rates and are subject to quality service specifications. Distribution companies may obtain the electricity either in the MEM, at seasonal prices, or through contracts with generation companies. Costs of electricity bought in the MEM can be passed through to end users.

There are three electricity distribution and trading areas subject to national concessions: Edelap, Edesur and Edenor. The local distribution areas are subject to concessions granted exclusively by the regional and/or local authorities. Notwithstanding this division, all distribution facilities operate under the rules of the MEM.

Emergency Measures

Law 25,561 was enacted in 2002 to manage an economic crisis; it authorized the forced renegotiation of public service contracts, imposed the conversion of dollar denominated obligations into Argentine pesos at a rate of Ar$1 per $1 and empowered the Federal Executive Power to implement additional monetary, financial and exchange measures to overcome the crisis in the medium term. In December 2007, the effects of Law 25,561 and the emergency measures were extended until December 31, 2008.

Following such law, the Secretariat of Energy introduced several measures aimed to correct inconsistencies produced by this devaluation and seek normal performance activities.

The mandatory conversion of prices from dollars to local currency, and the regulatory measures issued by the Government, hindered the transfer of variable costs of generation into seasonal prices. This discouraged savings in electricity consumption as well as investments to satisfy the increase in demand, including transmission capacity. In addition, there was a shortage of natural gas supply to power plants. As a result, regulations to set prices pursuant to Law 24,065 have not been set enforced.

Resolution 240, enacted in 2003, changed the way to fix the spot price, in consideration of the fact that the availability of natural gas is the most important factor affecting system operations, with respect to costs and supply risks. The price fixed by the Secretariat of Energy for sales to regulated consumers was different from the marginal cost. Although dispatch is still made based on actually used fuels, the calculation of the spot price is defined as if all dispatched generation units had adequate natural gas supplies, and water value is not considered if its alternative cost is higher than the cost of generating with natural gas.

This situation has generated credits for generators against the MEM, which led authorities to the creation of a fund to invest in new capacity within the MEM, called Foninvemem, managed by Cammesa.

Export and Import of Electricity

In order to give priority to the internal market supply, the Secretariat of Energy adopted additional measures to restrict electricity exports. To that end, Resolution 949/2004 established measures that allowed agents to export and import energy under very restricted measures. These restrictions impeded generators from meeting their export commitments under prior conditions. On December 9, 2005, the Argentine and Brazilian governments signed a memorandum of understanding to facilitate the operation of export contracts without the imposition of fines for any non-compliance through a transitional period ending December 31, 2008 (“MOU”). Under the MOU, both countries agreed to take all possible actions to adapt the regulation of electricity exports from Argentina to Brazil for the transition period. In accordance with this agreement, on February 7, 2006, the Secretariat of Energy issued Resolution 161, which established the Transition Regulation for the amendment of the import and export contracts of electricity entered into between Argentina and Brazil.

Foninvemem

The Secretariat of Energy enacted several resolutions to adjust operation of the MEM to the emergency situation, which, in many cases, modified the criteria and methodology used to determine prices and payment of electricity within the MEM. The Secretariat of Energy Resolution 712/2004 created a fund to generate the necessary investment to increase electricity capacity in generation within the MEM, called Foninvemem. Foninvemem would receive the credits accrued by the private generator from January 1, 2004 to December 31, 2006. Cammesa was appointed to manage the fund.

In October 2005 Resolution 1,193 was issued pursuant to which all private generators of the MEM were called to express their irrevocable commitment to manage the construction, operation and maintenance of the electric energy generation plants to be built with the Foninvemem, consisting of two combined cycle generation plants of 800 MW capacity each. These power plants will be powered by natural gas or alternative fuels.

Because of the insufficient resources to conclude the construction of the plants, in May 2007 Resolution 564 asked private generators to extend the credits accrued during the period up to December 31, 2007.

Energy Plus Service

Resolution 1,281 (2006) established that the electricity traded in the spot market by state-owned generators should be entitled to supply the consumption of distribution company clients. Furthermore, this Resolution created the Energy Plus Service, which is the offer of new electricity capacity to supply the growth of electricity demand. The increase in electricity demand is calculated as the extra demand over the “Base Demand,” which is the demand of electricity in 2005. The Energy Plus Service will be supplied by generators that install new capacity or that offer existing generation capacity not connected to the NIS. All large consumers that, as of November 1, 2006, have a higher demand than their Base Demand, must contract excess demand with the Energy Plus Service. The price of the contracts for Energy Plus Service should be approved by the authorities. The consumptions that cannot secure an Energy Plus Service contract, may request Cammesa to conduct an auction to satisfy such demands.

The Federal Government has adopted several measures to promote new investments and to modernize the electricity sector. These measures include carrying out actions to expand natural gas and electric power transport capacity, the implementation of certain projects to the construction of several power plants, and the creation of fiduciary funds to finance these expansions. Law 26,095 of 2006 created specific charges that must be paid by the final users to finance new electricity and gas infrastructure projects.

Trends

The lack of investments in the energy sector, and mainly in the electricity power generation, the fixing of transportation and distribution tariffs, and the intervention of the Federal Government in fixing the electric energy price by the subsidy thereof, created a market distortion and a lack of electricity offered against the constant increase of the demand. Additionally, the growth of electricity generation will still be restricted in 2008 owing to the delay in the construction of the Foninvemem plants and the execution of the natural gas transportation expansions.

Dispatch and Pricing

Law 24,065 defined the electricity dispatch system, which establishes a “marginal cost principle,” in order to provide electricity supply at the lowest cost. The coordination of dispatch operations, the wholesale price fixation, and the administration of the economic transactions in the MEM are controlled by Cammesa. All generators that are in the pool called Sistema Interconectado de Argentina, Argentine Interconnected System, or SADI, operate in the MEM. Distribution companies, power traders and large users that have entered into private supply contracts with generation companies pay the contractual price. Large users who contract directly with generators must also pay a toll to distribution companies for the use of their networks.

Seasonal price is the price paid by distributors for electricity from the pool market and is a fixed price determined every six months by the Secretariat of Energy upon Cammesa’s recommendation, which is based on an evaluation of the supply, demand and available capacity, among other factors. The seasonal price is maintained for at least 90 days.

The spot price is the price paid to generators, or by power traders marketing generation capacity, for energy dispatched under Cammesa’s direction.

The natural gas shortage and the need to secure the internal supply, combined with the thermal electric generators’ difficulties in obtaining financing for acquiring alternative fuels, forced Argentina to enter into an agreement with the Republic of Venezuela in April 2004, whereby Venezuela agreed to supply fuel to Argentina for a three-year period, extended a new three-year period. Cammesa is in charge of distributing the imported fuel oil among the generators. Although the fuel oil used was a resource of last resort, the national regulatory policy supported the acquisition of liquid fuel by the generators by providing financing from the Stabilization Fund, established by Law 24,064. Notwithstanding the foregoing, the parties also agreed to purchase a fixed volume of fuel oil of instant availability in order to cover any generators’ eventual stock shortages.

Since 2004, the Federal Government has imported natural gas from Bolivia to supply the internal market demand. On June 29, 2006, Argentina and Bolivia executed an agreement for the sale of natural gas and the execution of energy integration projects. The agreement has a 20-year term, and Argentina will receive 28 million cubic meters of natural gas per day. Until December 31, 2006 the price was $5 per million BTU. The parties have not agreed upon a price for 2007.

In February 2004, the Electronic Gas Market, or MEG, was created. Through it the regulatory authorities intend to increase the transparency of physical and commercial operations of the spot market. Supply and demand natural gas agents trade in the MEG under a spot modality.

Environmental Regulation

The operations of electricity facilities are subject to federal and local environmental laws and regulations, including Ley Nacional 24,051, or the Hazardous Waste Law, and its ancillary regulations.

We must comply with certain reporting and monitoring obligations and emission standards. Failure to meet these requirements entitles the government to impose penalties, and, in certain cases, cancel the concession agreement or order the suspension of our operations.

Brazil

Industry Structure

Brazil’s electricity industry is organized into one large interconnected electricity system, which is known as the Sistema Interligado Nacional, or the Brazilian NIS, which comprises most of the regions of Brazil, and several other small, isolated systems.

Generation, transmission and distribution are legally separated activities in Brazil.

The electricity industry in Brazil is comprehensively regulated by the União (Federal Government), acting through the Ministério de Minas e Energia (Ministry of Mines and Energy), or MME, which has exclusive authority over the electricity sector. Regulatory policies are implemented by the Agéncia Nacional de Energia Elétrica (National Agency of Electric Energy, or ANEEL), established pursuant to Law 9,427/96.

ANEEL is responsible, on behalf of the União for, among other things: granting and supervising concessions for electricity generation, transmission, trading and distribution, including approval of applications for the setting of tariff rates; supervising and auditing the concessionaire companies; issuing regulations for the electricity sector; granting decisions in order to resolve differences among concessionaires, independent producers, consumers and other industry participants; determining the criteria to calculate transmission prices; imposing contractual and regulatory penalties; implementing public policies pointed out by the Federal Government; determining the tariff rate for consumers; managing the process of tariff adjustments; managing the bidding process for the wholesale of energy; managing the concession contracts; and terminating a concession. Companies execute concession contracts with ANEEL. ANEEL is also responsible for the approval of each related company contract.

Law 9,648/98 assigned a coordination and supervisory role over generation and transmission in the system to the Operador Nacional do Sistema Elétrico, or the ONS, which is a non-profit private entity in which concession holders, unregulated consumers, the MME and the board of consumers participate. The ONS is responsible for: planning and coordination of the operations and dispatch of electricity in order to optimize electricity production in the interconnected systems; supervision and coordination of the operation centers of the electricity systems; and definition of rules for the transmission in the systems.

Law 8,631 (1993) establishes that electricity tariffs are expected to reflect operating costs of each company plus a certain return on capital determined through a financial/economic equilibrium. Prices are reviewed and corrected on an annual basis.

Deregulation and Privatization

The Concessions Law ( 8,987) and the Power Sector Law ( 9,074), both enacted in 1995, intend to inject competition and attract private capital into the electricity sector. Since then, several assets owned by the Federal Government of Brazil were privatized.

Independent Power Producers and Self-Producers

The Power Sector Law also introduced the concept of independent power producers, or IPP, in order to open the electricity sector to private investment. IPPs contribute or exchange energy with other self-producers within a consortium, sell excess energy to the local distribution concessionaire or exchange energy with the local distribution concessionaire.

As part of the government’s attempt to abolish the monopolies enjoyed by most power companies, the Concessions Law also provides that, upon receiving a concession, IPPs, self-producers, suppliers and consumers will be permitted to have access to the distribution and transmission systems of all concessionaires, provided that the concessionaires are reimbursed for the related costs. The base on which such costs will be reimbursed are determined by ANEEL.

Law 9,648/98 created a Wholesale Energy Market formed by the generation and distribution companies. The price offered at the Wholesale Energy Market for energy contracts is determined according to market conditions, and therefore the spot price derived from the operation of the market system is independent of the contractual relationship of the agents. According to this model, the purchase and sale of electricity was to be negotiated freely. Pursuant to Law 10,433, enacted in 2002, the Wholesale Energy Market structure changed, and started to be closely regulated and monitored by ANEEL. As a result, ANEEL is now responsible for setting Wholesale Energy Market governance rules. This restructuring seeks to reorganize the electricity system model to allow for continued foreign investment.

The main objectives of Law 10,848/04 are to do the following: maintain public service for the production and distribution of electricity to consumers within our concession area; restructure planning systems; provide transparency in the auction and bidding process for public projects; mitigate systemic risks; maintain centralized and coordinated operations of the energy system; grant universal use and access to electricity throughout Brazil, and modify the bidding process of public service concessions.

Distribution companies are required to timely contract all their energy demand.

Structure of the Electricity Sector

The model established pursuant to Laws 10,847 and 10,848 seeks to provide cheaper tariffs for consumers and guarantee the expansion of the system, with the Empresa de Pesquisa Energética (Power Research Company), or EPE, a governmental body, as responsible for the planning of generation and transmission activities. This model has defined a free contracting environment and a regulated environment.

In the free contracting environment the conditions for purchasing energy are negotiable between suppliers and customers. In the regulated environment, where distribution companies operate, the purchase of energy must be executed pursuant to a bidding process coordinated by ANEEL.

Pursuant to the model, 100% of the energy demand from distributors must be satisfied through long-term contracts in advance of the expiration of current contracts.

Another change imposed on the electricity sector is the separation of the bidding process for “existing power” and “new project power.” Power plants that were in existence prior to 2000 are considered “existing power,” and those that were developed after 2000 are considered “new power project.” Cachoeira Dourada and CIEN are considered “existing powers plants.” The government believes that existing power plants are able to provide power at more competitive prices, and therefore it should give priority in the bidding process to power generated by new project power companies. Under the new electricity sector, this priority will be in the form of more favorable contractual terms.

Other agents are the Cámara de Comercialização de Energia Elétrica (Power Marketing Chamber), or CCEE, which will be the Wholesale of Electricity Market’s substitute in contract administration and monitoring contractual warranties; and Comitê de Monitoramento do Setor Elétrico (Monitoring Committee of the Electricity Sector), or CMSE, which will monitor and evaluate the safety and security in the energy supply industry.

Distribution Pricing

The Concessions Law establishes three kinds of price revisions to final consumers which are annual tariff resetting, ordinary tariff revision and extraordinary tariff revisions.

Distribution companies’ pricing aims to maintain a concessionaire’s operating margins constant by allowing for tariff gains due to costs beyond management’s control and permitting the concessionaire to retain any efficiency gains achieved for defined periods of time. Tariffs to end users are also adjusted according to the variation of costs incurred in purchasing electricity.

Ordinary tariff revision takes into account the entire tariff-setting structure of the company, including the costs of providing services, the costs of purchasing energy and the remuneration of the investor. It occurs every four years for Coelce and every five years for Ampla, according to their concession contracts. The asset base consists of the market replacement value depreciated during their useful life from an accounting point of view.

The rate of return for the distribution assets is based on the Weighted Average Cost of Capital, or WACC, of a model company. The operating and maintenance costs reflected in the tariff are calculated based on the model company which considers the singular characteristics of the concession area of distributors.

The Concessions Law guarantees an economic and financial equilibrium for a company in the event that there is a substantial change in its operating cost. In the event that the cost components over which management does not exert influence, such as energy purchases and taxes, increases significantly within the period between two annual tariff adjustments, the concessionaire may make a formal request to ANEEL to permit those costs be charged to final customers.

Concessions

Concessions are exclusive with respect to generation, transmission and distribution assets. Trading is permitted subject to payment of tolls. Such concessions are limited to 35 years in the case of generation and 30 years in the case of transmission or distribution. Concessions may be renewed at the discretion of ANEEL for a period equal to their initial term.

Concessions for distribution in each concession area are granted by the MME through contracts on an exclusive basis, except for large users which are free to negotiate their supply with any generating company. Ampla and Coelce, as concessionaires, are required to supply electricity for public services at the established prices, on a continuous basis, in sufficient quantity and within certain standards of quality. In the case of non-compliance with the terms, concessions may be revoked or concessionaires may be charged with fines and penalties.

Environmental Regulation

The Brazilian Constitution gives both the federal and state governments power to enact laws designed to protect the environment and to issue regulations under those laws. While the federal government has power to promulgate environmental regulations, state governments have the power to enact more stringent environmental regulations. Most of the environmental regulations in Brazil are thus at the state and local level rather than at the level of the federal government.

Hydroelectric facilities are required to obtain concessions for water use and environmental approvals. Thermal electricity generation, transmission and distribution companies are required to obtain environmental approvals from ANEEL and the environmental regulatory authorities.

Colombia

Industry Structure

Two pieces of legislation, both enacted in 1994, regulate the electricity business in Colombia: Law 142 sets the regulatory framework for the supply of public residential services, including electricity, and Law 143 (the “Colombian Electricity Law”) establishes the framework for the generation, commercialization, transmission and distribution of electricity. Law 142 states that the provision of electricity is an essential public service that must be provided by government and private entities.

Utility companies are required to ensure continuous and efficient service, to facilitate the access of low-income users to subsidies granted by the government, to inform users regarding efficient and safe use of the services, to protect the environment, to allow access and interconnection to other public service companies and large users, to cooperate with the authorities in the event of an emergency to prevent damage to users, and to report initiation of activities to the proper regulatory commission and the Superintendence of Public Services.

The Colombian Electricity Act sets out the principles for the electricity industry, which are implemented through the resolutions enacted by the Colombian Comisión para la Regulación de la Energía y del Gas (Commission for the Regulation of Energy and Gas), or “CREG,” among other regulatory bodies governing the electricity sector. Such principles are: efficiency — the correct allocation and use of resources and the supply of electricity at minimum cost; quality — compliance with technical requirements; continuity — continuous electricity supply without unjustified interruptions; adaptability — the incorporation of modern technology and administrative systems to promote quality and efficiency, neutrality — impartial treatment to all electricity consumers, solidarity — the provision of funds by higher-income consumers to subsidize the subsistence consumption of lower income consumers, and, equity — an adequate and non-discriminatory supply of electricity to all the country.

The Colombian Electricity Act regulates the generation, transmission, distribution, and trading (the “Activities”) of electricity. Under the law, any company, domestic or foreign, may undertake any of the Activities. New companies, however, must engage exclusively in one of the Activities. Trading can be combined with either generation or distribution.

The market share for generators and traders is limited. The limit for generators is 25% of its Firm Energy eligible to receive the Reliability Charge. The Reliability Charge pays the ability of a plant to deliver its “Firm Energy”, i.e., the amount of energy in a singular year, as defined by the generator, with 100% certainty. If the plant is actually unable to provide the Firm Energy, the generator is penalized. A generator is allowed to have more than 25% of market share, as long as it grows by ways other than mergers and acquisitions.

Similarly, a trader may not account for more than 25% of the trading activity in the Colombian National Interconnected System (Colombian NIS). Limitations for traders take into account international energy sales.

Such limits are applied to economic groups, including companies that are controlled by, or under common control with, other companies. In addition, generators may not own more than a 25% interest in a distributor, and vice versa. However, this limitation only applies to individual companies and does not preclude cross-ownership by companies of the same corporate group.

A generator, distributor, trader or an integrated company, i.e., a firm combining generation, transmission and distribution activities, cannot have more than 15% of the equity in a transmission company if the latter represents more than 2% of the national transmission business in terms of revenues. A distribution company can have more than 25% of an integrated company’s equity if the market share of the last company is less than 2% of the national generation business. A company created before enactment of Law 143 is banned to merge with another company created after Law 143.

The Ministry of Mines and Energy defines the government’s policy for the energy sector. Other government entities which play an important role in the electricity industry are: Superintendencia de Servicios Públicos Domiciliarios, which is in charge of overseeing and inspecting the utility companies; CREG, which is in charge of regulating the energy and gas sectors; and Unidad de Planeación Minera y Energética, a Mining and Energy Planning Agency, which is in charge of planning the expansion of the generation and transmission network.

CREG is empowered to issue regulations to govern technical and commercial operation and to set charges for regulated activities. CREG’s main functions are to establish conditions for gradual deregulation of the electricity sector toward an open and competitive market; approve charges for transmission and distribution networks and charges for retailing to regulated customers; establish the methodology for calculating and determining maximum tariffs for supplying the regulated market; establish regulations for planning and coordination of operations of the Colombian NIS; and establish technical requirements for quality, reliability and security of supply and protect customers’ rights.

Generation

The generation sector is organized on a competitive basis with companies selling their production on the electricity pool market known as the Bolsa de Energía or Energy Exchange, or the "Bolsa,” at the spot price, or by long-term private contracts with other participants and non-regulated users, at freely negotiated prices. The Colombian NIS is the system formed by the generation plants, the interconnection grid, regional and inter-regional transmission lines, distribution lines and electrical loads of users. The spot price is the price paid by the participants in the wholesale market for energy dispatched under the direction of the Centro Nacional de Despacho (Dispatch National Center), or CND. The hourly spot price paid for energy reflects prices offered by generators in the Bolsa and the respective supply and demand conditions.

Generators connected to the Colombian NIS can also receive “reliability payments” which are a result of the firm energy that they provide to the system. The total firm energy requirement of the system is defined by CREG. To receive reliability payments, generators have to participate in firm energy auctions by declaring and certifying their firm energy. Until November 2012, the transition period, the firm energy supply for reliability purposes will be assigned proportionally to the declared firm energy of each generator. Beyond the transition period the additional firm energy required by the system will be allocated by auctions. The first auction for this period took place in May 6, 2008. In this auction, existing generators participated with new generation projects that meet the established market share limits.

Dispatch and Pricing

The purchase and sale of electricity can take place between generators, distributors acting in their capacity as traders, traders (who do not generate or distribute electricity) and unregulated consumers. There are no restrictions for new entrants into the market as long as the participants comply with the applicable laws and regulations.

The Bolsa facilitates the sale of excess energy that has not been committed under contracts or in spot sales of electricity. In the Bolsa, an hourly spot price for all dispatched units is established based on the offer price of the highest priced generating dispatched unit for that period. The CND receives price bids each day from all the generators participating in the Bolsa. These bids indicate prices and the hourly available capacity for the following day. Based on this information, the CND guided “optimal dispatch” principle (which assumes an infinite transmission capacity through the network), ranks the generators according to their offer price, starting with the lowest bid, and determining the merit order on an hourly basis which generators would be dispatched the following day to meet expected demand. The price for all generators is set by the less expensive generator dispatched in each hour, under the optimal dispatch. This price-ranking system is intended to ensure that national demand, increased by the total amount of energy exported to other countries will be satisfied by the lowest-cost combination of available generating units in the country. Additionally, the CND performs the “planned dispatch,” which takes into account the limitations of the network as well as every other condition necessary to meet the energy demands expected for the following day, in a secure, reliable and cost-efficient manner.

If a generator delivers less energy than that assigned by the optimal dispatch, it is charged with the average of the market price and their offer prices. On the other hand, those generators that deliver energy in excess are credited with the difference. The net value of these restrictions is assigned proportionally to all traders within the Colombian NIS, according to their demands of energy. Some generators have initiated legal proceedings arguing that recognized prices do not cover the costs associated with these restrictions.

Transmission

Transmission companies which operate at least at 220 kV comprise the National Transmission System, or “NTS.” They are required to provide access to third parties on equal conditions and are authorized to collect a tariff for their services. The transmission tariff includes a connection charge that underwrites the cost of operating the facilities, and a usage charge, which applies only to traders.

CREG guarantees an annual fixed income to transmission companies. Income is determined by the new replacement value of the networks and equipment, and by the resulting value of bidding processes awarding new projects for the expansion of the NTS. This value is allocated among the traders of the NTS in proportion to their energy demand.

The expansion of the NTS is conducted according to model expansion plans designed by Unidad de Planeación Minero Energética (Mining and Energy Planning Agency), or UPME, and pursuant to bidding processes opened to existing transmission companies and new companies, which are handled by the Ministry of Mines and Energy in accordance with the guidelines set by CREG. Accordingly, the construction, operation, and maintenance of new projects is awarded to the company that offers the lowest present value of cash flows needed for carrying out the project. Transmission charges are expected to be updated by CREG in 2008.

Distribution

Distribution is defined as the operation of local networks below 220 kV. Every user has access to a distribution network for which it pays a connection charge. CREG regulates distribution prices that should permit distribution companies to recover costs, including operating, maintenance and capital costs, if they are operating efficiently. Distribution charges are set by CREG for each company based on the replacement cost of the existing distribution assets, cost of capital, as well as operational and maintenance costs and vary depending on the voltage level. Distribution charges for the 2008-2012 period are expected to be updated in 2008.

The distribution market is divided into regulated and unregulated customers. Customers in the unregulated market may freely contract for electricity supply directly from a generator or distributor, acting as traders, or from a pure trader. The unregulated customer market consists of customers with a peak demand of more than 0.1 MW or a minimum monthly consumption of 55 MWh, which currently represent about 32% of the market.

Trading

Trading is the resale to end users of electricity purchased in the wholesale market. It may be conducted by generators, distributors or independent agents, that comply with certain requirements. Parties freely agree upon trading prices for unregulated users.

Trading to regulated users is subject to the “regulated freedom regime” under which tariffs are set by each trader using tariff options established by CREG. Tariffs are determined pursuant to a combination of general cost formulas given by CREG and individual trading costs approved by CREG for each trader. Since CREG approves limits on costs, traders in the regulated market may set lower tariffs supported by economic reasons. Tariffs include, among other things, energy procurement costs, transmission charges, distribution charges and a trading margin that covers the risks of the activity and the return on the investment.

A new tariff formula became effective on February 1, 2008. The main changes in the new formula are the establishment of a fixed monthly charge and the introduction of reduced costs of non-technical energy losses in trading charges.

Environmental Regulation

Law 99 of 1993 provides the framework for environmental regulation and established the Ministry of the Environment as the authority for determining environmental policies. The Ministry defines issues and executes policies and regulations that focus on the recuperation, conservation, protection, organization, administration and use of renewable resources. Therefore, the use of natural resources or any impact to them as a result of any activity or project will require the issuance of permits and environmental licenses and the establishment of environmental management plans. The law particularly seeks to prevent environmental damage by entities in the energy sector. Any entity planning to undertake projects or activities relating to generation, interconnection, transmission or distribution of electricity which may result in environmental deterioration, must first obtain an environmental license.

According to this Law 99, generators are required to contribute to the conservation of the environment by means of a payment for their activities. Hydroelectric power plants that have a total installed nominal capacity above 10,000 kilowatts must pay 6% of their energy sales; thermoelectric plants that have a total installed nominal capacity above 10,000 kilowatts must pay 4% of their energy sales. This payment is made to the municipalities and environmental corporations where facilities are located.

Peru

Industry Structure

The main regulations of the Peruvian electricity industry are: Law of Electricity Concessions (Decree Law 25,844) and its ancillary regulations, the Efficient Development Law (Law 28,832), the Technical Regulation on the Quality of the Electricity Supply (Supreme Decree 020-97), Electricity Import and Export Regulation (Supreme Decree 049-2005), the Antitrust Law on the Electricity Sector (Law 26,876), Law 26,734, which regulates the investments in energy, in addition to the supplementary Law 27,699 of Organismo Supervisor de la Inversión en Energía y Minería (Energy and Mining Investment Supervisor Authority), or the Osinergmin, the Peruvian regulatory electricity authority, and the regulation for resolution of controversies that arise within this institution. The changes made to the Law of Electricity Concessions by the Law to Secure the “Efficient Development of Electricity Generation” issued in 2006, hereinafter the “Efficient Development Law,” are mainly related to the implementation of a bid regime for the purchase of energy and capacity by distributors, changes of the transmission legal regime, changes in the structure of the system operator and a change in the regime for access to the spot market.

Some of the characteristics of the regulatory framework are (i) the separation of the three main activities: generation, transmission and distribution; (ii) freedom of prices for the supply of energy in competitive markets; (iii) a system of regulated prices based on the principle of efficiency; and (iv) private operation of the interconnected electricity systems subject to the principles of efficiency and quality service.

In Peru there is one interconnected system, the Sistema Eléctrico Interconectado Nacional, or the SEIN, and several isolated regional and smaller systems that provide electricity to specific areas. The main interconnected system is prepared to supply energy across an interconnection transmission line (TIE) to Ecuador, but the commercial and operative agreements are still under negotiation.

The Ministerio de Energía y Minas (Ministry of Energy and Mining), or the “MINEM,” defines the energy policies, regulates environment matters, and oversees the granting, supervision, maturity and termination of licenses, authorizations and concessions for generation, transmission, and distribution activities. Osinergmin is an autonomous public regulatory entity established in 1996 that controls compliance with legal and technical regulations related to electrical and hydrocarbon activities, compliance of the obligations stated in the concession contracts, as well as the preservation of the environment in connection with the development of these activities. Osinergmin’s Tariff Regulatory Bureau (Gerencia Adjunta de Regulación Tarifaria) has the authority to publish regulated tariffs. The Comité de Operación Económica del Sistema (Committee of the Economic Operation of the System), or the “COES,” coordinates the operation and dispatch of electricity of the SEIN and prepares the technical and financial study that serves as a basis for the annual bus bar tariff calculations. With the enactment of Law 28,832, COES includes as members generation, transmission and distribution companies, as well as users with capacity need higher than 1 MW, the threshold for non-regulated customers. Before this law was enacted, only generation and transmission companies were part of it.

As of October 1997, technical standards were established in order to compare the quality and conditions of the service provided by electricity companies. As of October 1999, companies that do not meet the minimum quality standards are subject to fines and penalties imposed by Osinergmin, as well as to compensate customers who receive deficient service.

To manage the congestion in a certain sector of the SEIN the government has adopted extraordinary measures. Urgency Decree 046 of November 2007, established that until December 31, 2010, if the transmission facilities are saturated, the COES should order the operation of any unit, regardless the principle of efficiency. Operation costs of such units will not be considered to determine the marginal costs.

Dispatch and Pricing

Customers with a capacity demand of less than 1 MW are considered regulated customers, and the supply of their energy is defined as a public service. Nevertheless, according to Law 28,832, regulated customers, which annual demand is within the limits defined by the Complementary Disposition, will be able to choose to be unregulated customers.

Since 1999, capacity payment is determined in relation to a fixed guaranteed component based on the efficiency of each plant and a variable component dependent on the level of dispatch of each plant.

Law 28,832 allowed unregulated users with contracted capacity in excess of 10 MW to have direct access the spot market.

In December 2006, Urgency Decree 035 established specific legal provisions to solve contingencies originated by the lack of electricity supply contracts for some distribution companies. Generators were not billing distributors without supply contracts for their withdrawals because they assumed that the amounts were not being correctly assigned by the COES. This Decree allowed Edegel to collect the debt originated during 2006 for the non-contracted withdrawal of energy.

Transmission

In Peru, transmission lines are divided into principal and secondary systems. The principal system lines are open to all generators and allow electricity to be delivered to all customers. The transmission concessionaire receives an annual fixed income and receives tariff revenues and connection tolls reflecting a charge per kW. The secondary system lines are also open to all generators, but are used to serve only certain customers who are responsible for making payments related to their use of the system.

The Efficient Development Law contains regulations to encourage new investments in transmission to satisfy increase in energy demand.

Distribution Pricing

The Efficient Development Law establishes a bidding regime for the supply of energy and capacity to distributors determining a mechanism to determine prices during the life of a contract.

Sales to distribution companies for resale to regulated customers must be made at bus bar prices set by Osinergmin or at fixed prices determined by the auction. Since 2005, the bus bar prices for capacity and energy have been published annually. Bus bar prices, analogous to node prices in Chile, are the maximum prices for electricity purchased by distribution companies that can be transferred to regulated customers, except in the case of contracts entered into as a result of a public bid, where the prices that will be transferred to regulated customers will be the prices defined by the auction.

Tariffs for regulated clients include bus bar prices for capacity and energy for generation, charges for transmission services) and the VAD (value added by distribution) which considers a regulated return over capital investments, operating and maintenance fixed charges and a standard percentage for energy distribution losses.

The first auctions took place in December 2006. As a result, almost all of the demand for 2007 was successfully covered by supply contracts. The demand for 2008, 2009 and 2010 has been partially covered by such bids. New bids must be carried out by distribution companies in order to cover the balance for such years avoiding penalties stated by regulation.

Concessions

A concession for electricity generation activity is required when a power plant has an installed capacity in excess of 20 MW. An authorization for electricity generation activity is required when either a thermoelectric power plant has an installed capacity of 500 kW; or a hydroelectric or geothermal power plant has an installed capacity between 500 kW and 20 MW. A concession for electricity generation activity is an agreement between the generator and MINEM, while an authorization is merely a unilateral permission granted by the Ministry. Authorizations and concessions are granted for an unlimited period of time although they may be terminated as per the Law of Electrical Concessions.

C. Organizational Structure.

Principal Subsidiaries and Affiliates

The subsidiaries listed in the following table were consolidated by us as of December 31, 2007. Our economic interest is calculated by multiplying our percentage economic interest in a directly held subsidiary by the percentage economic interest of any entity in the chain of ownership of the ultimate subsidiary.


				Consolidated
	% Economic			Assets of Each		Operating Income
	Ownership of			Main Subsidiary		of Each Main
	Main Subsidiaries			on a Stand-alone		Subsidiary on a
Principal Subsidiaries and Country of Operations	by Enersis			Basis		Stand-alone Basis
	(in billions of Ch $ except percentages)
Electricity Generation
Endesa Chile (Chile), on a consolidated basis		60.0	%		5,387.4		570.8
Electricity Distribution
Chilectra (Chile)		99.1	%		1,244.5		122.1
Edesur (Argentina)		65.4	%		630.5		29.2
Edelnor (Peru)		33.5	%		321.7		42.5
Codensa (Colombia)		21.7	%		991.6		155.8
Endesa Brasil, Electricity distribution, generation and transmission
Endesa Brasil Consolidated (Brazil)		53.6	%		3,167.6		326.8
Coelce (Brazil)		34.9	%		827.4		77.7
Ampla (Brazil)		69.9	%		1,321.0		135.5
Cachoeira Dourada (Brazil)		53.4	%		369.7		50.8
Endesa Fortaleza (Brazil)		53.6	%		248.9		44.4
CIEN (Brazil)		53.6	%		407.6		23.2
Other Businesses
IMV (Chile)		100.0	%		83.1		4.5
Synapsis (Chile)		100.0	%		29.3		4.6
CAM (Chile)		100.0	%		102.9		12.1

For further reference regarding voting power versus percentage of economic ownership on the subsidiaries consolidated by Enersis, please see note 2 of our consolidated financial statements contained elsewhere in this annual report.

Business and Subsidiaries Description

Enersis controls subsidiaries engaged in the electricity generation and distribution businesses in South America and has wholly-owned subsidiaries that provide support services to related and unrelated companies. The following chart represents Enersis’ economic ownership participation in its main operating subsidiaries and affiliates as of December 31, 2007.

D. Property, Plant and Equipment.

Description of Property

Enersis’ corporate headquarters are located at Santa Rosa 76, Santiago, Chile, which it shares with Endesa Chile and Chilectra. In addition, we own 58 properties in Santiago with a total of 64,177 square meters. Through IMV, we own 12 office buildings and properties in Santiago, a 8,094 square meter property in Viña del Mar and a 55% interest in a 6.4 million square meter plot of land outside of Santiago.

We also have significant interests or investments in electricity distribution companies in Chile, Argentina, Brazil, Colombia and Peru, where Enersis maintains a total concession area of over 200,000 square kilometers as of December 31, 2007. The description of each distribution company is included in this “Item 4. Information on the Company.” The table set forth hereunder describes Enersis’ main equipment used for its generation and distribution businesses, such as power plants, transmission lines, substations, distribution networks and transformers.

In accordance with international standards, our distribution facilities are insured against damage to substations and administration buildings. Risks covered include losses caused by fires, explosions, earthquakes, floods, lightning, damage to machinery and others. Insurance policies include third-party liability clauses, which protect our companies from complaints made by third parties. Transmission lines and the equipment attached to them do not qualify as insurable assets in the standard market.

Endesa Chile’s main properties in Chile are its 25 electricity generation facilities (detailed in “ — B. Business Overview — Operations in Chile”), and its 27,793 square meter headquarter buildings in Santiago.

A substantial portion of Endesa Chile’s cash flow and net income is derived from the sale of electricity produced by its electricity generation facilities. Significant damage to one or more of Endesa Chile’s main electricity generation facilities or interruption in the production of electricity, would have a material adverse effect on Endesa Chile’s operations. Endesa Chile insures all of its electricity generation facilities against damage from earthquakes, fires, floods and other similar occurrences and third-party actions, based on the appraised value of the facilities as determined from time to time by an independent appraiser. Based on geological, hydrological and engineering studies, however, we believe that the risk of such an event is remote. Claims under Endesa Chile’s insurance policies are subject to customary deductibles and other conditions. Endesa Chile also maintains business interruption insurance which provides up to 18 months’ coverage for failure of any of its facilities, starting after the deductible period.

Insurance coverage abroad is approved by the management of each affiliate which takes into account the quality of the insurance companies and the needs, conditions and risk evaluations of each generating facility, which are based on general corporate guidelines given by Enersis.

All insurance policies are purchased from reputable international insurers. The Company continuously monitors the insurance industry to obtain what we believe to be the most commercially reasonable coverage and premiums available on the market.

The following table identifies our facilities and their basic characteristics:

Table of Generation Facilities

Country/Company

Power Plant Name

Power Plant Type(1)

2006

2007

MW(2)

Argentina

Endesa Costanera

Total

2,319

2,324

Costanera Steam Turbine

Steam Turbine/Natural Gas + Fuel Oil(3)

1,138

Costanera Combined Cycle

Combined Cycle/Natural Gas + Diesel Oil(3)

859

Central Buenos Aires

Combined Cycle/Natural Gas(3)

322

327

El Chocón

Total

1,320

Chocón

Reservoir

1,200

Arroyito

Pass Through

120

Total Capacity in Argentina

3,639

3,644

Brazil

Cachoeira Dourada

Pass Through

658

665

Endesa Fortaleza

CGTF

Combined Cycle/Natural Gas

322

Total Capacity in Brazil

980

987

Chile

Endesa Chile

Total

2,754

3,034

Total Hydroelectric

2,254

2,286

Rapel

Reservoir

377

Cipreses

Reservoir

106

El Toro

Reservoir

450

Los Molles

Pass Through

Sauzal

Pass Through

Sauzalito

Pass Through

Isla

Pass Through

Antuco

Pass Through

320

Abanico

Pass Through

136

Ralco

Reservoir

690

Palmucho

Pass Through(4)

—

Total Thermal

500

748

Huasco

Steam Turbine/Coal

Bocamina

Steam Turbine/Coal

128

Diego de Almagro(5)

Gas Turbine/ Diesel Oil

Huasco

Gas Turbine/IFO 180 Oil

Taltal

Gas Turbine/Natural Gas/Diesel Oil

245

San Isidro II

Gas Turbine/ Diesel Oil(6)

—

248

Pehuenche

Total

695

699

Pehuenche

Reservoir(3)

566

570

Curillinque

Pass Through

Loma Alta

Pass Through

Pangue

Reservoir

467

San Isidro

Combined Cycle /Natural Gas+Diesel Oil

379

Celta

Total

182

Tarapacá

Steam Turbine/Coal

158

Tarapacá

Gas Turbine/Diesel Oil

Endesa Eco

Canela

Wind Farm(7)

—

Total Capacity in Chile

4,477

4,779

Country/Company

Power Plant Name

Power Plant Type(1)

2006

2007

MW(2)

Colombia

Emgesa

Total

2,238

2,829

Guavio(9)

Reservoir

1,163

1,213

Paraíso

Reservoir

276

La Guaca

Pass Through

325

Termozipa

Steam Turbine/Coal

236

Cartagena(14)

Steam Turbine/ Natural Gas + Diesel Oil

142

Minor plants(10)

Pass Through

Betania(8)

Reservoir

541

Betania(8)

Betania

Reservoir

541

Total Capacity in Colombia

2,779

2,829

Peru

Edegel

Total

1,426

1,469

Huinco

Pass Through

247

Matucana

Pass Through

129

Callahuanca (16)

Pass Through

Moyopampa

Pass Through

Huampani

Pass Through

Yanango

Pass Through

Chimay

Pass Through

151

Santa Rosa

Gas Turbine/Diesel Oil(3)

229

231

Ventanilla(11)(12)

Combined Cycle/Natural Gas

457

493

Total Capacity in Peru

1,426

1,469

Total Enersis

13,302

13,708


(1)		“Reservoir” and “pass-through” refer to a hydroelectric plant that uses a dam or a river, respectively, to move the turbines which generate electricity. “Steam” refers to the technology of a thermal power plant that uses natural gas, coal, diesel or fuel oil to produce steam which moves the turbines to generate electricity. “Gas Turbine” (TG) or “Open Cycle” refers to the technology of a thermal power plant that uses either diesel or natural gas to produce gas that moves the turbines to generate electricity. “Combined Cycle” refers to the technology of a thermal power plant that uses natural gas, diesel oil or fuel oil to generate gas that moves the turbines to generate electricity and then recuperates the gas that escapes from that process to generate steam to move another turbine. “Wind Farm” refers to the technology that transforms the kinetic energy of wind into electricity.

(2)		Installed capacity is defined as the maximum MW capacity of generation units, under specific technical conditions and characteristics, in most cases confirmed by satisfaction guarantee tests performed by equipment suppliers certified during 2006 and 2007 by Bureau Veritas according to the Norm 038 of Endesa Chile, “Definition of the maximum power in Hydroelectric and Thermoelectric plants of Endesa Chile.” Figures may differ from installed capacity declared to regulating authorities and customers in each country, according to criteria defined by each authority and corresponding contractual frameworks.

(3)		Certified by Bureau Veritas.

(4)		Palmucho plant began commercial operations on November 28, 2007.

(5)		Includes one additional unit of Diego de Almagro (23 MW), which Endesa Chile rents from Codelco since 2001.

(6)		San Isidro II plant began commercial operations in open cycle on April 23, 2007.

(7)		Canela plant (wind farm) began its commercial operation on December 27, 2007.

(8)		During 2007, Emgesa was merged into Betania, which further changed its name to Emgesa.

(9)		In 2007 the 5 units of the Guavio plant were repowered (240 MW each).

(10)		At December 31, 2007 Emgesa owned and operated five minor plants: Charquito, El Limonar, La Tinta, Tequendama and La Junta.

(11)		During 2006, Edegel and Etevensa merged and Edegel added Ventanilla to its generation assets.

(12)		In 2007, the regulator notified new maximum capacity with additional fire of the Ventanilla plant.

Table of Distribution Facilities

General Characteristics


		Concession Area		Transmission
	Location	(km2)		Lines (km)(1)
				2006		2007
Chilectra	Chile		2,118		355		355
Edesur	Argentina		3,309		1,173		1,185
Edelnor	Peru		2,440		419		419
Ampla	Brazil		32,615		2,303		2,303
Coelce	Brazil		146,817		3,879		3,979
Codensa	Colombia		14,087		1,149		1,262

Total			201,386		9,277		9,503


(1)		The transmission lines consists of circuits, with voltages in the range of 27 kV - 220 kV.

Power and Interconnection Sub-stations and Transformers(2)


	2006						2007
	Number of		Number of		Capacity		Number of		Number of		Capacity
	Sub-stations		Transformers		(MVA)		Sub-stations		Transformers		(MVA)
Chilectra		53		143		6,330		53		143		6,402
Edesur		63		164		10,442		64		170		11,222
Edelnor		28		61		2,127		28		60		2,197
Ampla		115		225		4,199		115		227		4,349
Coelce		93		148		2,065		94		150		2,101
Codensa		60		198		6,534		61		206		7,347

Total		412		939		31,697		415		956		33,618


(2)		Voltage of these transformers is in the range of 500 kV (high voltage) and 7 kV (low voltage).

Distribution Network – Medium and Low Voltage Lines(3)


	2006				2007
	Medium		Low		Medium		Low
	Voltage		Voltage		Voltage		Voltage
	(km)		(km)		(km)		(km)
Chilectra		4,614		9,396		4,681		9,637
Edesur		6,885		15,549		6,841		15,639
Edelnor		3,289		17,116		3,355		17,611
Ampla		28,996		16,142		30,097		16,526
Coelce		57,558		34,587		62,597		39,564
Codensa		17,711		21,912		18,013		21,987

Total		119,053		114,702		125,584		120,964


(3)		Medium voltage lines: 7,000 V – 34,500 V; Low voltage lines: 380V-110 V.

Transformers for Distribution(4)


	2006				2007
	Number of		Capacity		Number of		Capacity
	Transformers		(MVA)		Transformers		(MVA)
Chilectra		26,822		5,260		27,315		5,627
Edesur		23,254		4,801		23,587		4,935
Edelnor		9,216		1,149		9,326		1,226
Ampla		93,293		3,235		98,001		3,390
Coelce		97,529		3,681		105,887		3,736
Codensa		60,168		7,145		61,339		7,323

Total		310,282		25,271		325,455		26,236


(4)		Voltage of these transformers ranges between 34,500 V (high voltage) and 110 V (low voltage).

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

A. Operating Results.

Introduction

We are a holding company that owns and operates electricity generation, transmission and distribution companies in Chile, Argentina, Brazil, Colombia and Peru. Substantially all of our revenues, income and cash flow come from our subsidiaries and equity affiliates’ operations in these five countries.

Factors such as hydrological conditions, extraordinary actions by government authorities, regulatory developments and economic conditions in each country in which we operate are important in determining our financial results. In addition, our reported results from operations and financial condition may be significantly affected by variations in exchange rates between the dollar and the peso and other currencies of the countries in which we operate. Such exchange rate variations may have a significant non-cash effect because of the implementation of Chilean GAAP’s BT 64, “Accounting for Permanent Foreign Investments” as it relates to the consolidation of the results of our companies outside of Chile. Lastly, our other critical accounting policies also have a material effect on our consolidated results from operations.

Hydrological conditions.

A substantial portion of our generation business is dependent upon the hydrological conditions prevailing in the countries where we operate. Our thermal generation plants, which are fueled with natural gas, coal or diesel, are dispatched to cover peaks in energy demand and any shortfalls of our hydroelectric plants. In our generation subsidiaries, we may compensate for the effect on physical and monetary sales of low hydrology (reservoir levels, rainfall, and snow), in the geographical areas where our power plants are located, with thermal generation and electricity purchases. The thermal capacity owned by the Company and the ability to purchase electricity from other generators enables Enersis to increase thermal generation and/or purchase electricity from other industry players in order to satisfy our commitments. Additionally, given the industry structure and the percentage of hydro generation capacity in the countries in which we operate, when hydrology is low the market price of electricity generally increases. Low hydrology may therefore lead to greater revenues.

Operational costs of thermal generation and energy purchases are greater than the Company’s corresponding variable cost of hydroelectric generation. The cost of thermal generation does not directly depend on the level of hydrology; however, the cost of electricity purchases in the spot market does depend on the level of hydrology. (For additional information regarding the effects of hydrological conditions on our results from operations, please see “Item 3. Key Information — D. Risk Factors.”)

Regulatory developments.

The regulatory structure governing our businesses has a material effect on our results from operations. In particular, regulators set (x) distribution tariffs taking into account the costs of energy purchases paid by distribution companies (which distribution companies pass on to their customers) and the “Distribution Added Value,” or VAD, and (y) generation tariffs taking into consideration principally the costs of fuels, level of reservoirs, exchange rate, future investments in installed capacity and growth in demand, all of which are intended to reflect investment and operating costs incurred by the companies and are meant to allow such companies to earn a regulated level of return on their investments. Accordingly, the earnings of our electricity subsidiaries are determined in significant part by the actions of government regulators. For additional information relating to the regulatory framework, please see “Item 4. Information on the Company — B. Business Overview — Electricity Industry Regulatory Framework” included in this report.

Economic Conditions.

Macroeconomic conditions may have a significant effect on our results of operations. For example, when a country experiences sustained economic growth, consumption of electricity by industrial and individual consumers of electricity increases while electricity theft decreases. Other macroeconomic factors such as a devaluation of the local currencies may have a negative impact in our results from operations because while most of our revenues are denominated in such local currencies, our financing and significant other costs such as depreciation are denominated in dollars. As a result, devaluation of local currencies against the dollar shrinks our operating margins and increases the cost of capital expenditure plans. For additional information, see “Item 3. Key Information — D. Risk Factors — Foreign exchange risks may adversely affect our results from operations and financial condition” and “ — South American economic fluctuations are likely to affect our results from operations.”

Technical Bulletin 64 (BT 64)

Our consolidation of the results of our non-Chilean subsidiaries is governed by BT 64. BT 64 establishes a mechanism to consolidate the financial results of a non-Chilean company prepared in local GAAP and denominated in local currency into the financial results of its Chilean parent which are prepared in Chilean GAAP and denominated in pesos. The implementation of BT 64 affects the reporting of our results from operations. In particular, exchange rate variations, if significant, can materially affect the amounts of operating revenues and expenses reported in our consolidated financial statements in Chilean GAAP as well as generate material non-operating gains and losses.

BT 64 — Conversion Effect.

BT 64 requires Enersis to convert the denomination of the financial statements of its non-Chilean subsidiaries from local currency to dollars and to restate such financial statements into Chilean GAAP after such conversion, including by converting such dollar amounts into pesos. We refer to the gain or loss resulting from this balance sheet conversion as the “conversion effect.” In order to convert monetary assets and liabilities of its non-Chilean subsidiaries to dollars, Enersis must use the dollar/local currency exchange rate applicable at period-end. In order to convert Enersis’ equity interests in such subsidiaries as well as such subsidiaries’ non-monetary assets and liabilities to dollars, Enersis must use the dollar/local currency exchange rate applicable at the time when such equity interests or non-monetary assets or liabilities were acquired or incurred.

In addition, BT 64 requires income and expense accounts (except for the expenses incurred in connection with depreciation and amortization) of foreign subsidiaries to be converted into dollars at the average exchange rate of the month during which such results or expenses were recorded. All amounts converted from local currency to dollars are then converted from dollars to pesos at the exchange rate applicable at the end of the reporting period. When both the local currency and the peso depreciate or appreciate against the dollar, the BT 64 conversion effect is inversely related to such respective movements and will have a lesser net effect than together would otherwise result. If the local currency and the peso diverge in their appreciation or depreciation against the dollar, as the case might be, the Chilean GAAP application of BT 64 of each movement is directly related and will have a greater effect than would otherwise result.

BT 64 may have the effect of excluding from our reported financial condition the effect on non-monetary assets of devaluation in the countries in which our subsidiaries and investments are located.

The currency conversion from local currencies to dollars can have different effects depending on a foreign subsidiary’s structure of monetary and non-monetary assets and liabilities. For example, when a foreign subsidiary has more monetary assets than monetary liabilities, a devaluation of the applicable local currency against the dollar may result in a loss due to the effects of the currency conversion. On the other hand, the appreciation of the applicable local currency results in a gain. The opposite is true for foreign subsidiaries with more monetary liabilities than monetary assets, where a devaluation of the applicable local currency against the dollar may result in a gain and an appreciation may result in a loss. The fluctuations of the exchange rates between the currencies of the countries where we operate and the dollar, as well as in the exchange rate between the peso and the dollar, have materially affected the comparability of our results from operations during the periods discussed below because of this conversion effect.

BT 64 — Equity Hedge.

BT 64 permits an investing company to hedge dollar-denominated debt incurred in connection with the acquisition of equity in non-Chilean subsidiaries located in unstable countries, against the book value of such equity investments. For purposes of BT 64 all the countries where we have investments — Argentina, Brazil, Colombia and Peru — are considered unstable countries. This hedge eliminates the effects of exchange rate variations on the debt incurred in connection with such investments. If the book value of an equity investment is lower than the dollar-denominated debt, the results of the exchange rate fluctuations affecting the amount of dollar-denominated debt that is not hedged are included in determining net income. On the other hand, if the book value of an equity investment is higher than the dollar-denominated debt, then the results of the exchange rate fluctuations affecting the book value of the equity that is not hedged are recorded in a cumulative translation adjustment in a reserve account as part of shareholders’ equity.

Critical Accounting Policies

Financial Reporting Release 60 encourages all companies to include a discussion of critical accounting policies or methods used in the preparation of the financial statements. Critical accounting policies are defined as those policies that are reflective of significant judgments and uncertainties, which would potentially result in materially different results under different assumptions and conditions. We believe that our critical accounting policies in the preparation of our Chilean GAAP financial statements are limited to the policies described below. In many cases, Chilean GAAP specifically dictates the accounting treatment of a particular transaction and does not allow for management’s judgment in its application. For a summary of significant accounting policies and methods used in the preparation of the financial statements, see note 2 to our consolidated financial statements.

Impairment of long-lived assets

In accordance with Chilean GAAP, the Company evaluates the recoverability of the carrying amount of property, plant and equipment and other long-lived assets in relation to its recoverable value (calculated based on the operating performance and future undiscounted cash flows of the underlying business), evaluated on an entity by entity basis, in order to determine whether there is an indication of impairment. These standards require that an impairment loss be recognized in the event that facts and circumstances indicate that the carrying amount of an asset may not be fully recoverable. Impairment is recorded based on “useful value” (“useful value” is the present value of estimated future cash flows) compared with current carrying amounts. The factors considered in determining the recoverability of long-lived assets depend on the Company’s business plan expectations, including a macroeconomic framework with considerations regarding GDP growth, inflation, interest and exchange rates, estimations of expected growth for energy demand, forecasted installed capacity, hydrology, regulation and tariff frameworks, and variable and fixed costs, among others, all of which have a significant impact on the calculation.

Impairment of our property, plant and equipment, and other long-lived assets could have a materially adverse impact on our operating income in any given period depending on the results of impairment tests. For the years ending December 31, 2007, 2006 and 2005, management determined that the book value of our assets did not exceed their recoverable value. Given that certain key economic factors, weather conditions, and worldwide prices for the fuels used in the production of energy are subject to fluctuations, it is probable that forecasted operating conditions could change from one period to another.

Impairment of Goodwill

Under Chilean GAAP, accounting for goodwill requires management to estimate the appropriate amortization period and evaluate the recoverability of the carrying value of goodwill in those cases where there may be an indication of a loss. The maximum goodwill amortization period under Chilean GAAP is 20 years. Factors that are considered in estimating the appropriate amortization period of goodwill include:

	•		the foreseeable life of the business and the expectation of future benefits associated with the business or with unidentifiable assets;

	•		expected actions by competitors and potential competitors; and

	•		legal, regulatory, or contractual provisions affecting the useful life.

The recoverability analysis for goodwill is carried out systematically at the end of every year or more frequently if such analysis is deemed necessary.

In the calculation of goodwill recoverability, we have used “useful value.” The preparation of forecasts of future cash flows before taxes is carried out under budgets which are based on a macroeconomic framework with considerations regarding estimations for GDP growth, inflation, interest rates and exchange rates, expected growth for energy demand, forecasted installed capacity, hydrology, regulation and tariff frameworks, variable and fixed costs, among others, all of which have a significant impact on the calculation. Therefore, they include the best available estimations for revenues and costs for the different companies using industry projections, past experience, and future expectations for the next five years, and reasonable growth rates for years thereon.

Based on the results of these estimations for the different cash generating units, management considers that as of December 31, 2007, recorded goodwill will be fully recoverable in the future.

Regulatory Asset and Deferred Costs

According to Brazilian law, Enersis’ distribution subsidiaries in Brazil have recognized for 2001 and 2002 a regulatory asset based on extraordinary tariff increases that was determined based on theoretical energy demand growth over a period between six and nine years beginning in 2002, in order to allow electricity companies to recover certain losses experienced during the period of energy rationing from June 1, 2001 to March 1, 2002.

The regulatory asset recorded by the Company’s Brazilian distribution subsidiaries, Ampla and Coelce, were, as of December 31, 2007, Ch$28.3 billion and Ch$19.0 billion, respectively. In order to record this asset, our subsidiaries and other companies in the energy sector have agreed to forfeit any future claim related to the events and regulations derived from the rationing program and increases through the extraordinary tariff.

Because of the time that has transpired to date and the expected recovery for the regulatory assets which expire in 2008 for Coelce and no later than 2011 for Ampla, the effects of any errors in these Company estimations would probably be minimal.

Additionally, certain costs, including fuel costs, energy transfer costs, and generator transmission costs were recorded as a deferred cost by Ampla and Coelce for the years ending December 31, 2001 and 2002, and amounted to Ch$26.0 billion and Ch$34.6 billion, respectively. These costs will be recovered through future invoices, once the recovery period of the regulatory asset is concluded, without any deadlines.

Estimation of Fair Value of Certain Energy Contracts Under U.S. GAAP

Certain of our generation and distribution commodity contracts are considered derivatives required to be accounted for at fair value under U.S. GAAP. Fair value estimates for these contracts, for which no quoted prices or secondary market exists, are made using valuation techniques such as forward pricing models, present value of estimated future cash flows, and other modeling techniques. These estimates of fair value include assumptions made by the Company about market variables that may change in the future. The internal variables used in the model are historic hydrology, energy demand, fuel and coal prices, and installed capacity, among others. External variables are foreign exchange rate, inflation, and the appropriate interest rate for discounting future cash flows.

Changes in assumptions could have a significant impact on our estimate of fair values disclosed. As a result, such fair value amounts are subject to a significant volatility and are highly dependent on the quality of the assumptions used.

As of December 31, 2006 and 2007, the amounts of energy contracts accounted at fair value are:


	Year ended December 31,
	2006		2007
	(in million of Ch$)
Model using internal data(1)		10,293.7		6,108.4
Model using external data only		0		0


(1)		The model using internal data also relies on external data.

Litigation and Contingencies

The Company is currently involved in certain legal and tax proceedings. As discussed in note 30 of our consolidated financial statements, as of December 31, 2007, we have accrued an estimate of the probable costs for the resolution of these claims. We arrived at this estimate in consultation with legal and tax counsel handling our defense in these matters and an analysis of potential results, assuming a combination of litigation and settlement strategies.

Except for material proceedings described in note 30 of our consolidated financial statements as of December 31, 2007, we are not aware as of the date of this filing of any material legal or tax proceedings.

Pension and Postretirement Benefits Liabilities

We sponsor several defined benefit plans for employees. These plans pay benefits to employees at retirement using formulas based on participants’ years of service and compensation. We provide certain additional benefits for certain retired employees as well.

Recorded pension and other post-retirement benefit liabilities reflect our best estimate of the future cost of honoring our obligations under these benefit plans. In accounting for defined benefit plans, actuarial calculations are made. These calculations contain key assumptions, which include: employee turnover, mortality and retirement ages, discount rates, expected returns on assets, future salary and benefit level, claim rates under medical plans and future medical cost. These assumptions change as market and economic conditions change, and any change in any of these assumptions could have a material effect on our reported results from operations. Once every three years we review the key assumptions used in the determination of the pension obligation plan assets and net periodic pension cost as required by Technical Bulletin 8.

The following table shows the effect of a 1% decrease in the discount rate on our projected benefit obligation for the periods indicated.


	Year ended December 31,
	2006		2007
	(increase in millions of Ch$)
Projected benefit obligation		32,973		36,781

The following table shows the effect of a 1% change in discount rate on our accumulated postretirement benefit obligation for the periods indicated.


	Year ended December 31,
	2006		2007
	(increase in millions of Ch$)
Accumulated postretirement benefit obligation		4,623		5,019

Introduction of International Financial Reporting Standards

On August 28, 2007, the SVS issued an official announcement ruling the adoption of International Financial Reporting Standards (IFRS) in Chile, starting on January 1, 2009. The Company will have to adopt IFRS as of this date. According to the convergence plan defined by the Company, it is currently evaluating the impacts that the application of IFRS will have on the financial statements.

SAB 74 Disclosures

Recent accounting pronouncements

Fair Value Measurement

In September 2006, the FASB issued SFAS 157, “Fair Value Measurement”, which standardizes the measurement of fair value for companies who are required to use a fair value measure for recognition or disclosure purposes. The FASB defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 for financial assets and financial liabilities and November 15, 2008, for non-financial assets and non-financial-liabilities and interim periods within those fiscal years. The Company is currently evaluating the impact, if any, of the adoption of SFAS 157.

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued SFAS 159, “The Fair Value Options for Financial Assets and Financial Liabilities”, which permits an entity, on a contract-by-contract basis, to make an irrevocable election to account for certain types of financial instruments and warranty and insurance contracts at fair value, rather than historical cost, with changes in the fair value, whether realized or unrealized, recognized in earnings. SFAS 159 is effective as of the beginning of the entity’s first fiscal year that begins after November 15, 2007. The Company is evaluating the impact, if any, of the adoption of SFAS 159.

Business Combinations

In December 2007, FASB issued SFAS 141 (revised 2007), “Business Combinations” (“SFAS 141R”). The objective of SFAS 141R is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, this Statement establishes principles and requirements for how the acquirer(1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and(3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is evaluating the impact, if any, of the adoption of SFAS 141R.

Non-controlling Interest in Consolidated Financial Statements

In December 2007, the FASB issued SFAS 160,“Non-controlling Interest in Consolidated Financial Statements.”SFAS 160 amends Accounting Research Bulletin 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. According to SFAS 160, “a non-controlling interest, sometimes called a ‘minority interest’, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent.” The objective of SFAS 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company is evaluating the impact, if any, of the adoption of SFAS 160.

Derivative Instruments and Hedging Activities

In March 2008, the FASB issued FASB Statement 161, “Disclosures about Derivative Instruments and Hedging Activities.” The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosure to better explain their effects on an entity’s financial position, financial performance and cash flows. It is in effect for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is evaluating the impact, if any, of the adoption of SFAS 161.

Enersis’ Results of Operations for the Years Ended
December 31, 2006 and December 31, 2007

Overview

The following are the most important aspects of our results for 2007, as compared to 2006:

	•		Operating income rose by Ch$123.9 billion, or 11.0%, to Ch$1,255.6 billion in 2007.

	•		Energy demand increased in 2007 by the following percentages in the countries where our subsidiaries operate:


Chile	4.0	%
Argentina	5.2	%
Brazil	4.8	%
Colombia	4.0	%
Peru	10.7	%

•

Physical sales and the number of customers continued to increase in the distribution business, by 5.7% and 3.4%, respectively, in 2007. Aggregate energy losses remained at 11.2%.

Operating results


	Years ended December 31,
	2006		2007		Change		% Change
	(in millions of Ch$)
Distribution Business
Chilectra and Subsidiaries (Chile)		125,806		122,105		-3,701		-2.9	%
Edesur (Argentina)		-4,378		29,179		33,557		n.a.
Distrilima/Edelnor (Peru)		41,434		42,482		1,048		2.5	%
Ampla (Brazil)		102,701		135,536		32,835		32.0	%
Investluz/Coelce (Brazil)		92,954		77,673		-15,281		-16.4	%
Codensa (Colombia)		145,368		155,820		10,452		7.2	%

Total operating income from distribution business		503,885		562,795		58,910		11.7	%

Generation Business
Endesa and subsidiaries (Chile)		309,807		333,642		23,835		7.7	%
Endesa Costanera (Argentina)		5,254		387		-4,867		-92.6	%
El Chocón (Argentina)		32,552		25,304		-7,248		-22.3	%
Cachoeira Dourada (Brazil)		31,733		50,815		19,082		60.1	%
Endesa Fortaleza (Brazil)		56,418		44,424		-11,994		-21.3	%
Emgesa (Colombia)		130,309		160,271		29,962		23.0	%
Edegel (Peru)		59,646		46,153		-13,493		-22.6	%

Total operating income from generation business		625,719		660,996		35,277		5.6	%

Transmission Business
CIEN (Brazil)		-814		23,180		23,994		n.a.

Total operating income from transmission business		-814		23,180		23,994		n.a.


	Years ended December 31,
	2006		2007		Change		% Change
	(in millions of Ch$)
Non-electricity subsidiaries(1)		182		3,465		3,283		1,803.8	%

Total operating income from non-electricity subsidiaries in Chile		182		3,465		3,283		1,803.8	%

Less: intercompany transactions		2,659		5,131		2,472		93.0	%


Total operating income		1,131,631		1,255,567		123,936		11.0	%


(1)		Includes Operating Income for CAM, Synapsis, IMV, Túnel El Melón, Ingendesa, Enigesa, Enersis holding and investment vehicles.

The following table shows operating income, by segment, for the years ended December 31, 2006 and 2007.


	Years ended December 31,
	(in millions of Ch$)
	Generation				Transmission				Distribution				Other				Interc. Transactions				Total
	2006		2007		2006		2007		2006		2007		2006		2007		2006		2007		2006		2007

Operating revenues		1,580,736		1,914,801		154,549		261,370		2,717,257		2,822,626		268,300		257,558		-564,997		-569,679		4,155,845		4,686,676

Operating costs		-909,910		-1,213,783		-149,363		-233,816		-2,033,790		-2,051,844		-220,672		-203,883		531,048		539,461		-2,782,687		-3,163,865

Selling and administrative expenses		-45,107		-40,022		-6,000		-4,374		-179,583		-207,987		-47,446		-50,212		36,609		35,351		-241,527		-267,244

Operating income		625,719		660,996		-814		23,180		503,884		562,795		182		3,463		2,660		5,133		1,131,631		1,255,567

Revenues

Generation/transmission business

The following table details the physical sales of the generation business by country, and their changes, for the years ended December 31, 2006 and 2007.


	Physical sales during
	Years ended December 31,
	2006		2007		Change		% Change
	(GWh)
Endesa Chile (Chile)		20,923		19,212		-1,711		-8.2	%
Endesa Costanera (Argentina)		8,736		8,450		-286		-3.3	%
El Chocón (Argentina)		5,191		3,956		-1,235		-23.8	%
Edegel (Peru)		6,766		7,994		1,228		18.1	%
Emgesa (Colombia)		15,327		15,613		286		1.9	%
Cachoeira Dourada (Brazil)		4,177		4,643		466		11.2	%
Endesa Fortaleza (Brazil)		2,690		2,705		15		0.6	%
Cien (Brazil)		6,394		6,232		-162		-2.5	%

Total		70,204		68,805		-1,399		-2.0	%

Distribution business

Our distribution operating revenues mainly arise from the sale of the electricity that we buy from generators. Revenues associated with distribution include the recovery of the cost of electricity bought wholesale from generating companies and revenues generated by the Valor Agregado de Distribución (Added Value from Distribution), or VAD, which corresponds to the recovery of the costs and the return on the investment with respect to the distribution assets, plus the losses allowed under tariff regulations. Other revenues generated by our distribution services consist of charges related to new connections and the maintenance and rental of meters.

The following table details the distribution of physical electricity sales by our subsidiaries, for the years ended December 31, 2006 and 2007.


	Physical sales during
	Years ended December 31,
	2006		2007		Change		% Change
	(GWh)
Chilectra (Chile)		12,377		12,923		546		4.4	%
Edesur (Argentina)(1)		14,837		15,833		996		6.7	%
Edelnor (Peru)		4,874		5,201		327		6.7	%
Ampla (Brazil)		8,668		8,985		317		3.7	%
Coelce (Brazil)		6,769		7,227		458		6.8	%
Codensa (Colombia)(1)		10,755		11,441		686		6.4	%

Total		58,280		61,610		3,330		5.7	%


(1)		Includes toll revenues.

The following table shows our operating revenues for 2006 and 2007:


	Year ended December 31,
	2006		2007		Change		% Change
	(in millions of Ch$)
Distribution Business
Chilectra and Subsidiaries (Chile)		714,164		801,817		87,653		12.3	%
Edesur (Argentina)		266,775		293,374		26,599		10.0	%
Distrilima/Edelnor (Peru)		230,127		214,530		-15,597		-6.8	%
Ampla (Brazil)		573,827		551,394		-22,433		-3.9	%
Investluz/Coelce (Brazil)		449,269		439,785		-9,484		-2.1	%
Codensa (Colombia)		483,097		521,726		38,629		8.0	%

Total operating revenues from distribution business		2,717,259		2,822,626		105,367		3.9	%

Generation Business
Endesa and subsidiaries (Chile)		678,319		945,658		267,339		39.4	%
Endesa Costanera (Argentina)		186,588		209,224		22,636		12.1	%
El Chocón (Argentina)		66,248		55,716		-10,532		-15.9	%
Cachoeira Dourada (Brazil)		67,258		115,325		48,067		71.5	%
Endesa Fortaleza (Brazil)		107,607		103,414		-4,193		-3.9	%
Emgesa (Colombia)		294,088		318,085		23,997		8.2	%
Edegel (Peru)		180,628		167,379		-13,249		-7.3	%

Total operating revenues from generation business		1,580,736		1,914,801		334,065		21.1	%


	Year ended December 31,
	2006		2007		Change		% Change
	(in millions of Ch$)
Transmission Business
CIEN (Brazil)		154,549		261,370		106,821		69.1	%

Total operating revenues from transmission business		154,549		261,370		106,821		69.1	%

Non-electricity subsidiaries(1)		268,298		257,559		-10,739		-4.0	%

Total operating revenues from non-electricity subsidiaries in Chile		268,298		257,559		-10,739		-4.0	%

Less: intercompany transactions		-564,997		-569,680		-4,683		0.8	%


Total operating revenues		4,155,845		4,686,676		530,831		12.8	%


(1)		Includes operating revenues for CAM, Synapsis, IMV, Túnel El Melón, Ingendesa, Enigesa, Enersis holding and investment vehicles.

Operating revenues of the generation business

Total revenues in Chile in 2007 increased by 39.4% from Ch$678.3 billion in 2006 to Ch$945.7 billion in 2007, as a result of higher regulated prices and spot prices, on average. Endesa Chile and its Chilean subsidiaries sold 2,430 GWh on the spot market, where the average energy market price was $172.5 per MWh. The decline in physical sales was 8.2%, mainly resulting from a 51.3% decrease in energy sales to the spot market, partially compensated by a 6.9% increase of energy sales to regulated customers to 11,502 GWh, at a node price which is the result of a price-setting system that reflects the new energy matrix in Chile. The prices for non-regulated customers, during 2007 compared with 2006, showed an increase in value, which positively affected the company’s revenues, reflecting the higher costs of generation of the system. The total average sales price of Endesa Chile’s in Chile increased by 58.3%, from Ch$30.6 per kWh in 2006 to Ch$48.5 per kWh in 2007.

In Argentina, operating revenues for Endesa Costanera rose by 12.1%. This was mainly due to a 35.5% increase in sales prices in local currency terms as a result of the recognition of higher costs related to fuel prices. This was partially offset by a fall in physical energy sales of Endesa Costanera, which declined by 3.3% in 2007. The effect of the BT 64 conversion, as a result of a 1.3% depreciation of the Argentine peso, increased further by the 7.1% appreciation of the peso against the dollar in real terms in 2007, resulted in Ch$27.1 billion of reduced revenues.

The revenues for El Chocón decreased by 15.9%, mainly due to the 23.8% reduction in physical sales because of the dryer hydrology in the Comahue region, partly compensated by a 28.9% increase in the average sales price. The effect of the BT 64 conversion decreased revenues by Ch$9.4 billion.

Total revenues in Colombia (Emgesa) increased by 8.2%, primarily due to the new reliability charge which became effective in 2007 and positively affected revenues by approximately $40 million. The sales mix in 2007 at regulated, non-regulated and spot prices was 51.5%, 16.0% and 32.5%, respectively. Our Colombian subsidiaries average price rose by 6.2%, from Ch$19.1 per kWh in 2006 to Ch$20.3 per kWh in 2007, expressed in pesos, in accordance with BT 64. When expressed in local currency, the nominal average sales price increase was 13.8% in 2007.

In Brazil, the revenues for Cachoeira Dourada increased by 71.5%, mainly due to an increase of 11.2% in physical sales which reached 4,643 GWh, and 15.1% higher sales prices, in local currency terms. The effect of the application of the BT 64 conversion, which used an average exchange rate for the Brazilian real against the dollar, which was then converted into Chilean pesos based on the year-end exchange rate as a result of the 7.1% appreciation of the peso against the dollar in real terms in 2007, compensated partly by the 11.7% appreciation of the real, resulted in Ch$3.3 billion of increased revenue.

Operating revenues of Endesa Fortaleza in 2007 declined by 3.9%, mainly because of a 2.1% fall in the average sales price in local currency, partially offset by the 0.6% increase in physical sales, to 2,705 GWh. The effect of BT 64 was Ch$3.2 billion of reduced revenues.

Revenues of Edegel, our electricity generator in Peru, decreased by 7.3% in 2007, primarily due to a 21.6% lower average sales price, which offset the 18.1% increase of physical energy sales. The drop in average prices was a consequence of the good hydrology and the reduction of the regulated price due to the indexation to the exchange and to the lower price of natural gas. The sales mix at regulated, non-regulated and spot prices was 41.7%, 53% and 5.3%, respectively. The company’s average sales price declined from Ch$26.5 per kWh in 2006 to Ch$20.8 per kWh in 2007, expressed in pesos according to the convention of BT 64. The effect of the BT 64 conversion, using the average exchange rate for the Peruvian sol against the dollar and then converting to pesos at the year-end exchange rate, as a result of the 7.1% appreciation of the Chilean peso against the dollar in real terms, partly compensated by the 4.7% appreciation of the Peruvian sol against the dollar, resulted in Ch$16.2 billion of reduced revenues. When expressed in local currency, the nominal average sales price decreased by 13.1% in 2007.

Operating revenues of the transmission business

The revenues for CIEN in 2007 reached to Ch$261.4 billion, showing a rise of 69.1% compared to 2006. CIEN sold 6,232 GWh, a 2.5% less than in 2006. There were additional energy sales from Brazil to Argentina, and consequently, our new toll fee reached Ch$35.4 billion.

Operating revenues of the distribution business

In Chile, operating revenues of Chilectra in 2007 increased by 12.3% in relation to 2006, mainly because average energy-related prices increased by 24.3% due to successive rises in the node price. There was also a 4.4% rise in physical sales, to 12,923 GWh. Revenues from non-energy sources, related to ancillary services and sales of electrical appliances, increased by Ch$14.6 billion, or 27.7%, to Ch$67.3 billion in 2007, compared to Ch$52.7 billion in 2006, mainly the result of more network transfers and construction of underground junctions. The increase in physical sales is attributed to the 1.2% increase in average per capita consumption in Chilectra’s concession area, and to the increase of 45,859, or 3.2%, in the total number of customers.

In Argentina, operating revenues of Edesur increased in 2007 by 10.0% in relation to 2006, mainly due to the 34.2% increase in the average sales price in local currency, as a result of the increase in the VAD approved in February 2007 and a 6.7% increase in physical sales. Average per capita consumption increased by 5.2% and the total number of customers increased by 31,828, or 1.4%. This is partially compensated for by the effect of the BT 64 conversion in 2007 that represents Ch$38.2 billion of reduced revenues in Chilean pesos.

In Peru, the operating revenues for our subsidiary Distrilima, which is consolidated with Edelnor, declined by 6.8% in 2007 compared to 2006, mainly due to a 2.8% reduction in the average sales price in local currency and the effect of the BT 64 conversion in 2007, leading to Ch$20.6 billion of reduced revenue. This is partially offset by a 6.7% increase in physical sales, which reached 5,201 GWh in 2007 and the 2.9% rise in average per capita consumption. The total number of customers rose by 34,901, or 3.7%.

In Brazil, Ampla’s revenues declined by Ch$22.4 billion (3.9%) in 2007, mainly due to the effect of the BT 64 conversion resulting in Ch$17.3 billion of reduced revenue. On the other hand, physical sales increased by 3.7% to 8,985 GWh in 2007, the number of customers rose by 62,339, or 2.7%, to 2.4 million in 2007 and the average sales price increased by 8.2% in local currency.

The revenues for Coelce declined by 2.1%, principally due to the BT 64 effect of changes in the exchange rates of the Brazilian real and Chilean peso against the dollar in the conversion to Chilean GAAP which meant reduced operating revenues of Ch$12.7 billion. This was offset by a 0.6% rise in the average sales price in local currency and a 6.8% rise in physical sales, plus an increase in other revenues of Ch$10.7 billion derived mainly from selling electric and non-electric appliances (Coelce Plus). Coelce’s customers rose by 5.7%, from 2.5 million in 2006 to 2.7 million in 2007.

In Colombia, the revenues for Codensa in 2007 increased by 8.0%, mainly due to a 6.4% increase in physical sales to 11,441 GWh, and a 0.6% rise in the average sales price in local currency, plus an increase of Ch$16.9 billion mainly from Codensa Hogar. The effect of BT 64 in 2007 with respect to the 13.5% appreciation of the Colombian peso and the 15.1% appreciation of the Chilean peso, in real terms, had a net impact of Ch$1.1 billion of reduced operating revenue. The number of customers of Codensa increased by 3.2% to 2.21 million in 2007, while the average per capita electricity consumption rose by 3.0%, from 5.03 MWh in 2006 to 5.18 MWh.

Revenues of non-electrical subsidiaries

The revenues earned by our non-electrical subsidiaries declined by 4.0% compared to 2006, mainly explained by the Ch$12.9 billion of reduced revenues by CAM due to lower sales of Ch$10.8 billion because of the conclusion of projects with Empresa de los Ferrocarriles del Estado (EFE) (state railway) and Metro (urban subway). This is partially offset by the greater revenues from Synapsis of Ch$1.0 billion and IMV of Ch$0.6 billion, the latter, explained by the increase in sales of real estate of the ENEA project.

Operating costs

Operating costs mainly refer to purchases of electricity from other parties, depreciation and amortization, tolls paid to transmission companies, maintenance costs, wages and fuel purchases.

The following table shows the breakdown of the above costs as a percentage of our total consolidated cost of sales for the years ended on December 31, 2006 and 2007:


	Years ended December 31,
	2006			2007
	(percentage of total costs of
	operations)
Electricity purchases		45.8	%		46.7	%
Depreciation and amortization		15.7	%		13.0	%
Fuel purchases		10.9	%		17.5	%
Operating cost and maintenance		8.7	%		6.0	%
Transmission tolls		5.9	%		5.5	%
Salaries		5.4	%		4.9	%
Other expenses		7.6	%		6.4	%

		100.0	%		100.0	%

The following table shows the breakdown of operating costs for the years ended December 31, 2006 and 2007:


	Years ended December 31,
	2006		2007		Change		% Change
	(in millions of Ch$)
Distribution Business
Chilectra and subsidiaries (Chile)		537,874		630,573		92,699		17.2	%
Edesur (Argentina)		232,947		223,049		-9,898		-4.2	%
Distrilima/Edelnor (Peru)		167,251		152,111		-15,140		-9.1	%
Ampla (Brazil)		452,665		380,606		-72,059		-15.9	%
Investluz/Coelce (Brazil)		319,503		315,228		-4,275		-1.3	%
Codensa (Colombia)		323,551		350,277		26,726		8.3	%

Total operating costs from distribution business		2,033,791		2,051,844		18,053		0.9	%

Generation Business
Endesa and subsidiaries (Chile)		348,492		593,798		245,306		70.4	%
Endesa Costanera (Argentina)		178,946		206,331		27,385		15.3	%
El Chocón (Argentina)		32,568		29,189		-3,379		-10.4	%
Cachoeira Dourada (Brazil)		33,285		61,960		28,675		86.1	%
Endesa Fortaleza (Brazil)		49,502		57,384		7,882		15.9	%
Emgesa (Colombia)		158,854		152,793		-6,061		-3.8	%
Edegel (Peru)		108,263		112,328		4,065		3.8	%

Total operating costs from generation business		909,910		1,213,783		303,873		33.4	%

Transmission Business
CIEN (Brazil)		149,363		233,816		84,453		56.5	%

Total operating costs from transmission business		149,363		233,816		84,453		56.5	%

Non-electricity subsidiaries(1)		220,670		203,882		-16,788		-7.6	%

Total operating costs from non-electricity subsidiaries (Chile)		220,670		203,882		-16,788		-7.6	%

Less: intercompany transactions		-531,047		-539,460		-8,413		1.6	%


Total operating costs		2,782,687		3,163,865		296,725		10.7	%


(1)		Includes the operating costs of CAM, Synapsis, IMV, Túnel El Melón, Ingendesa, Enigesa, Enersis holding and the investment vehicles.

Operating costs of the generation business

Operating costs in Chile increased by 70.4% in 2007 compared to 2006, given lower hydroelectric generation and higher thermal generation using diesel instead of natural gas, as natural gas restrictions from Argentina continued during 2007. Fuel costs increased by Ch$223.3 billion during the year. The average variable cost of generation, excluding the cost of electricity purchases, rose by 139.4%, from Ch$9.4 per kWh in 2006 to Ch$22.5 per kWh in 2007, as a result of the 97.9% increase in thermoelectric generation. The cost of electricity purchases, including energy and capacity, increased from Ch$57.8 billion in 2006 to Ch$59.8 billion in 2007, despite a 20.9% decrease in physical energy purchases. The average price of purchases increased from Ch$43.9 per kWh in 2006 to Ch$57.4 per kWh in 2007.

Operating expenses in Argentina increased by Ch$24.0 billion, from Ch$211.5 billion in 2006 to Ch$235.5 billion in 2007. Hydro and thermoelectric generation decreased by 26.7% and 3.3%, respectively. The cost of fuel increased by Ch$24.0 billion in 2007, due to higher prices of fuel in the generation of electricity when compared to the price of fuels in 2006. The average variable generating cost increased from Ch$11.4 per kWh in 2006 to Ch$14.7 per kWh in 2007. Electricity purchases, including energy and capacity, rose by Ch$708 million in 2007, due to an increase in physical energy purchases in the spot market, while the average purchase price decreased from Ch$23.2 per kWh in 2006 to Ch$18.1 per kWh in 2007. The combination of the appreciation of the peso against the dollar and the depreciation of the Ar$ against the dollar decreased total operating expenses in 2007 when compared to 2006 by Ch$30.3 billion.

Colombia’s operating expenses decreased by 3.8%. The average variable generation cost, excluding the cost of electricity purchases, raised from Ch$4.1 per kWh in 2006 to Ch$9.2 per kWh in 2007. Tolls and energy transportation costs increased by Ch$8.7 billion. The 54.2% increase in thermal generation caused fuel costs to increase by Ch$2.7 billion. Electricity purchases, including energy and capacity, decreased by Ch$13.8 billion in 2007, due to lower energy costs and energy trading operations. Average purchase price dropped from Ch$19.5 per kWh in 2006 to Ch$11.1 per kWh in 2007. The combination of the appreciation of the peso and the appreciation of the Colombian Peso appreciations against the dollar led to a net decrease of Ch$6.4 billion.

The operating costs of Cachoeira Dourada in Brazil increased by 86.1% to Ch$62.0 billion in 2007. This was mainly due to higher energy-purchase costs of Ch$30.2 billion to satisfy demand. Production declined by 8.3% to 3,888 GWh in 2007.

The operating costs of Endesa Fortaleza in Brazil increased by Ch$7.9 billion (15.9%) from Ch$49.5 billion in 2006 to Ch$57.4 billion in 2007, mainly due to higher energy-purchase costs of Ch$12.3 billion, were partially offset by reduced fuel purchases of Ch$2.6 billion. Production fell by 73.4% to 66 GWh in 2007.

Operating expenses in Peru increased by 3.8%. This was primarily due to an increase of Ch$7.5 billion of energy purchases as a consequence of higher physical energy purchases in the spot market due to a capacity constraint in the transmission line in the northern region of the country. This was offset by lower fuel costs of Ch$6.4 billion due to lower cost of natural gas, despite the fact that thermal generation increased by 32.7% in 2007. The average variable generating cost, excluding the cost of electricity purchases, was Ch$8.2 per kWh in 2006 compared to Ch$6.2 per kWh in 2007. The combination of the appreciation of the peso and the appreciation of the Sol against the dollar led to a net decrease in operating expenses of Ch$10.6 billion.

Operating costs of the transmission business

The operating costs for CIEN in 2007 were Ch$233.8 billion, 56.5% more than in 2006. The increase mainly reflects the cost of purchased energy sold to Cammesa for the export of energy from Brazil to Argentina. The BT 64 effect on CIEN of the appreciation of the Brazilian real and the appreciation of the Chilean peso against the dollar resulted in Ch$3.7 billion in higher costs.

Operating costs of the distribution business

Operating costs in Chile increased by 17.2%, mainly due to an increase related to energy purchases that rose by Ch$87.9 billion. The rise in energy-purchase costs is explained by (i) an increase in physical purchases of 641 GWh (4.9%) and (ii) a 31.9% increase in the average price of purchases following the rise in the node price. Physical losses in Chile rose from 5.4% in 2006 to 5.9%, mainly because of the sharp increase in energy prices that led more customers to resort to illicit practices such as theft.

The operating costs for Edesur in Argentina declined by 4.2%. This is mainly explained by the effect of the BT 64 conversion that provided Ch$32.9 billion of lower costs in Chilean pesos. This causes costs to fall despite the 2.7% rise in the average price of purchases in local currency and the 7.0% increase in physical energy purchases, amounting to 17,739 GWh in 2007. Energy losses attributable to theft and vandalism rose slightly from 10.5% in 2006 to 10.7% in 2007.

The operating costs for Edelnor in Peru fell by 9.1%, mainly due to a 7.2% fall in the average price of energy bought, in local currency terms, and the effect of the BT 64 conversion which represents a decrease in operating costs of Ch$15.7 billion in Chilean pesos. This was partially offset by the 6.5% increase in physical energy purchases which amounted to 5,657 GWh in 2007. Physical losses declined from 8.2% in 2006 to 8.1% in 2007.

The operating costs for Ampla in Brazil decreased by Ch$72.1 billion (15.9%). The BT 64 effect produced Ch$23.1 billion of reduced costs. The charge for depreciation of fixed assets declined by Ch$10.8 billion in 2007 and the cost of services provided to third parties decreased by Ch$48.1 billion as, according to a resolution by Aneel, the accounts of CCC, CDE and PROINFA (specific taxes applicable to the electric sector in Brazil), which in 2006 were classified as costs, are deducted from income effective from 2007. This is partially offset by larger physical purchases of 339 GWh and a 1.9% rise in the average purchase price in local currency. Physical energy losses fell from 21.9% in 2006 to 21.4% in 2007 as a result of various projects that the Company is promoting to reduce such losses.

The operating costs for Coelce decreased by 1.3%, in 2007, mainly due to the BT 64 effect which represents a fall of Ch$12.8 billion, partially offset by an increase in energy purchases of Ch$13.7 billion due to a 6.2% rise in physical purchases, amounting to 8,257 GWh, and a 5.2% rise in the average price of bought energy in local currency. Physical energy losses were 12.5% in 2007, down from 13.0% in 2006.

The operating costs of Codensa in Colombia increased by 8.3% in 2007, mainly due to a rise of Ch$23.2 billion in the cost of energy because of the 6.2% increase in purchases of energy and the 7.8% increase in the average purchase price in local currency, and an increase in other operating costs of Ch$7.9 billion. The effect of BT 64 was a net Ch$5.5 billion of lower costs. Physical energy losses were 8.7% in 2007, compared to 8.9% in 2006.

Operating costs of non-electrical subsidiaries

The operating costs of our non-electrical subsidiaries declined by 7.6% in 2007, mainly due to the reduction in costs of Ch$15.7 and Ch$4.1 billion respectively by CAM and Synapsis, following the termination of projects carried out in 2006.

Selling and administrative expenses

Selling and administrative expenses relate to compensation, administrative expenses, depreciation and amortization, bad debts, and office materials and supplies.

The following table details selling and administrative expenses as a percentage of our consolidated selling and administrative expenses:


	Years ended December 31,
	2006			2007
	(percentage of total costs of selling and administrative expenses)
General administrative expenses		43.3	%		38.4	%
Salaries		40.9	%		38.1	%
Uncollectible accounts		7.7	%		17.3	%
Depreciation and amortization		7.5	%		5.6	%
Materials and office supplies		0.6	%		0.5	%

		100.0	%		100.0	%

The following table details selling and administrative expenses for the years 2006 and 2007, and the percentage changes between one year and the other:


	Years ended December 31,
	2006		2007		Change		% Change
	(in millions of Ch$)
Distribution Business
Chilectra and subsidiaries (Chile)		50,484		49,139		-1,345		-2.7	%
Edesur (Argentina)		38,206		41,146		2,940		7.7	%
Distrilima/Edelnor (Peru)		21,442		19,937		-1,505		-7.0	%
Ampla (Brazil)		18,461		35,252		16,791		91.0	%
Investluz/Coelce (Brazil)		36,812		46,884		10,072		27.4	%
Codensa (Colombia)		14,178		15,629		1,451		10.2	%

Total selling and administrative expenses from distribution business		179,583		207,987		28,404		15.8	%

Generation Business
Endesa and subsidiaries (Chile)		20,020		18,218		-1,802		-9.0	%
Endesa Costanera (Argentina)		2,388		2,506		118		4.9	%
El Chocón (Argentina)		1,128		1,223		95		8.4	%
Cachoeira Dourada (Brazil)		2,240		2,550		310		13.8	%
Endesa Fortaleza (Brazil)		1,687		1,606		-81		-4.8	%
Emgesa (Colombia)		4,925		5,021		96		1.9	%
Edegel (Peru)		12,719		8,898		-3,821		-30.0	%

Total selling and administrative expenses from generation business		45,107		40,022		-5,085		-11.3	%

Transmission Business
CIEN (Brazil)		6,000		4,374		-1,626		-27.1	%

Total selling and administrative expenses from transmission business		6,000		4,374		-1,626		-27.1	%

Non-electricity subsidiaries(1)		47,446		50,212		2,766		5.8	%

Total operating costs from non-electricity subsidiaries (Chile)		47,446		50,212		2,766		5.8	%

Less: intercompany transactions		-36,609		-35,351		1,258		-3.4	%


Total selling and administrative expenses		241,527		267,244		25,717		10.6	%


(1)		Includes the selling and administrative expenses of CAM, Synapsis, IMV, Túnel el Melón, Ingendesa, Enigesa, Enersis holding and the investment vehicles.

Selling and administrative expenses increased by 10.6%, mainly due to increases for Coelce and Ampla, as a result of better estimation of the recovery of the ARTE regulatory assets and higher uncollectible debts.

Non-operating results

The following table shows the non-operating results for the years 2006 and 2007 and the percentage change between one year and the other:


	Years ended December 31,
	2006		2007		Change		% Change
	(in millions of Ch$)
Net interest expense		-280,336		-290,878		-10,542		3.8	%
Net income from related companies		5,412		-54,761		-60,173		n.a.
Net other non-operating income (expense)		-111,089		-149,389		-38,300		34.5	%
Net monetary exposure		7,029		-4,017		-11,046		n.a.
Goodwill amortization		-60,045		-59,814		231		-0.4	%

Non-operating expense		-439,029		-558,859		-119,830		-27.3	%

The interest expense, net of interest income, increased by 3.8% as a result of the higher level of debt during the year, principally in our subsidiaries Ampla, Codensa and Edelnor, and lower interest income due to reduced deposits and negative restating due to lower applicable rates in Brazil. There was also an increase of Ch$7.4 billion of interest due to fines for quality service in our subsidiary Edesur, which have been restated for both tariff increases and accrued interests.

The results of our equity investments show a decrease of Ch$60.2 billion, mainly due to the impairment provision of Ch$48.9 billion (Ch$29.3 billion net of minority interest) plus the recognition of the loss in Inversiones Gas Atacama Holding of Ch$10.2 billion, as a result of the non-receipt of gas from Argentina and the high costs of generation that the company has had to withstand.

Other non-operating expenses show an increased loss of Ch$38.3 billion due to:

	•		Net losses of Ch$114.5 billion from the conversion adjustment according to Chilean regulations as contained in BT 64, principally of the subsidiaries in Brazil, Colombia and Peru (Ch$35.8 billion, net of minorities); and

	•		Reduced gain on sales of fixed assets of Ch$21.1 billion, which relates to the sale made in 2006 by Ampla of former generation assets and a higher equity tax charge in Colombia of Ch$18.6 billion.

The above was partly offset by:

	•		Reduced write-off of receivables in CIEN made in 2006 on the renegotiation of the contract with Copel for Ch$32.8 billion;

	•		Income from previous years’ tariff adjustment in Edesur for Ch$27.8 billion;

	•		Reduced provisions for contingencies and litigation of Ch$21.1 billion, principally in Ampla, Coelce and CIEN;

	•		Reduced expenses, related to energy efficiency programs of Brazilian subsidiaries, of Ch$11.9 billion;

	•		Gain in CIEN for settlement of contract with Cemsa for Ch$8.1 billion; and

	•		Reduced allowance for obsolescence and write-offs of fixed assets for Ch$6.5 billion.

Price-level restatements show a negative change of Ch$12,110 million, mainly due to the effect of higher inflation in 2007 of 7.4%, compared to 2.1% the year before. This change has an effect on the non-monetary assets and liabilities and those monetary items, mainly debt, denominated in U.F., plus the restatement of income statement accounts.

Exchange differences as of December 31, 2007 show a positive change of Ch$1,064 million, passing from Ch$5,722 million in 2006 to Ch$6,786 million in 2007. This is the result of the Company’s mismatched position in Chile of dollar-denominated Assets/Liabilities in both years.

Net income

The following table details net income for the periods indicated:


	Years ended December 31,
	2006		2007		Change		% Change
	(in millions of Ch$)
Operating income		1,131,631		1,255,567		123,936		11.0	%
Non-operating income		-439,029		-558,859		-119,830		27.3	%

Net income before taxes, minority interest and negative goodwill amortization		692,602		696,708		4,106		0.6	%
Current tax (expense) benefit		-102,257		-253,148		-150,891		147.6	%
Minority interest		-289,750		-259,606		30,144		-10.4	%
Amortization of negative goodwill		6,527		4,422		-2,105		-32.3	%

Net income		307,122		188,376		-118,746		-38.7	%

Income taxes in 2007 increased by Ch$150.9 billion over 2006, passing from Ch$102.3 billion in 2006 to Ch$253.1 billion in 2007.

The following table shows the detail of income taxes:

Years ended December 31,

2006

2007

Change

% Change

(in million of Ch$)

Current tax (expense) benefit

-254,849

-206,547

48,302

-19.0

Deferred tax (expense) benefit

152,592

-46,601

-199,193

n.a.

Income tax expense

-102,257

-253,148

-150,891

147.6

Income tax expense decreased by Ch$48.3 million, mainly due to reduced provisions for income tax in Enersis on a stand-alone basis (Ch$13.9 billion), and our subsidiaries Emgesa (Ch$19.9 billion), Endesa Chile (Ch$21.6 billion), Codensa (Ch$14.8 billion), Coelce (Ch$7.0 billion) and Ampla (Ch$6.4 billion), partially offset by increases in Edesur (Ch$15.5 billion), Pehuenche (Ch$13.5 billion) and El Chocón (Ch$5.8 billion).

Deferred taxes, which do not represent cash flows, show a negative change mainly derived from the effect recognized in 2006 in Chilectra (formerly Elesur) for Ch$140.8 billion, following the merger between Elesur and Chilectra, and the sale of the offices of Elesur, which led to the reversal of the valuation provision for its tax losses accumulated in previous years. Other important changes were in Ampla (Ch$30.8 billion), CIEN (Ch$21.6 billion), Emgesa (Ch$14.2 billion) and Codensa (Ch$13.0 billion), partially offset by El Chocón (Ch$8.0 billion), Edegel (Ch$7.2 billion), Endesa Chile (Ch$3.3 billion) and Coelce (Ch$2.6 billion).

The gain from the amortization of negative goodwill declined to Ch$4.4 billion as of December 31, 2007. The reduced amortization is mainly due to the end of the negative goodwill generated on the first purchase of shares in Emgesa (Betania), which effect is a reduced amortization of Ch$1.8 billion.

As a result of the above, our consolidated net income declined from Ch$307.1 billion in 2006 to Ch$188.4 billion in 2007, a decrease of Ch$118.7 billion, or 38.7%.

Enersis’ Results of Operations for the Years Ended
December 31, 2005 and December 31, 2006

Overview

Our 2006 results, when compared to those of 2005, were primarily affected by the following factors:

Our operating income increased by Ch$241.7 billion, or 27.2%, to Ch$1,131.6 billion in 2006. As of October 2005, with the creation of the Endesa Brasil holding company, Enersis began consolidating Endesa Fortaleza and CIEN. If we were to give pro forma effect to such consolidation as of January 1, 2005 for comparative purposes, operating income would have increased by 18.7%. See note 2(a)(iii) to our Consolidated Financial Statements. If we were to eliminate the positive impact in pesos of the 3.7% depreciation of the peso against the United States dollar (from Ch$512.50 per dollar as of December 31, 2005 to Ch$532.39 per dollar as of December 31, 2006), operating income would have increased by 16.7%. We believe that it is helpful to eliminate the effects of the appreciation of the peso against the dollar and to give pro forma effect to the formation of Endesa Brasil in order to understand the underlying trends in our operating income. (For a reconciliation of these non-GAAP measures to Chilean GAAP, see “ — B. Liquidity and Capital Resources — Reconciliation of non-GAAP measures to Chilean GAAP 2005-2006” below.)

Physical sales in our distribution companies increased by 5.5% to 58,280 GWh in 2006. Physical sales in generation increased by 19.0% to 70,204 GWh. These increases reflect a continued economic recovery in all the economies of the countries in which we operate. Our number of distribution clients increased by 3.2% to 11.6 million in 2006.

Tax expenses decreased by Ch$88.7 billion, from Ch$191.0 billion in 2005 to Ch$102.3 billion in 2006, partly due to Ch$203.3 billion of non-cash deferred income tax benefit recorded. This deferred income tax benefit is primarily attributable to the merger of Chilectra and Elesur which gave the surviving entity the ability to utilize previously provisioned tax loss carryforwards, which was partially offset by Ch$114.6 billion in tax expenses, as a result of additional taxable income from our foreign subsidiaries.

Operating income


	Years ended December 31,
	2005		2006		Change		% Change
	(in millions of Ch$)
Distribution Business
Chilectra and subsidiaries (Chile)		126,299		125,806		-493		-0.4	%
Edesur (Argentina)		4,015		-4,378		-8,393		n.a.
Distrilima/Edelnor (Peru)		31,931		41,434		9,503		29.8	%
Ampla (Brazil)		87,849		102,701		14,852		16.9	%
Investluz/Coelce (Brazil)		52,828		92,954		40,126		76.0	%
Codensa (Colombia)		118,141		145,368		27,227		23.0	%

Total operating income from distribution business		421,063		503,885		82,822		19.7	%

Generation Business
Endesa and subsidiaries (Chile)		205,902		309,807		103,905		50.5	%
Endesa Costanera (Argentina)		-2,290		5,254		7,544		n.a.
El Chocón (Argentina)		15,537		32,552		17,015		109.5	%
Cachoeira Dourada (Brazil)		25,665		31,733		6,068		23.6	%
Endesa Fortaleza (Brazil)(1)		16,845		56,418		39,573		234.9	%
Emgesa (Colombia)		114,008		117,149		3,141		2.8	%
Betania (Colombia)		18,179		13,160		-5,019		-27.6	%
Edegel (Peru)		59,021		59,646		625		1.1	%

Total operating income from generation business		452,867		625,719		172,852		38.2	%

Transmission Business
CIEN (Brazil)(1)		14,325		-814		-15,139		n.a.

Total operating income from transmission business		14,325		-814		-15,139		n.a.

Non-electricity subsidiaries(2)		3,246		182		-3,064		-94.4	%

Total operating income from non-electricity subsidiaries (Chile)		3,246		182		-3,064		-94.4	%

Less: intercompany transactions		-1,538		2,659		4,197		n.a.


Total operating income		889,963		1,131,631		241,668		27.2	%


(1)		Corresponds to operating income for the last quarter of 2005 in which Enersis consolidated Endesa Brasil.

(2)		Includes operating income for CAM, Synapsis, IMV, Túnel El Melón, Ingendesa, Enigesa, Enersis Holding and investment vehicles.

The table below breaks down operating income by segment for the years ended December 31, 2005 and 2006:


	Years ended December 31,
	(in million of Ch$)
																	Interco.
	Generation				Transmission				Distribution				Other				Transactions				Total
	2005		2006		2005		2006		2005		2006		2005		2006		2005		2006		2005		2006

Operating revenues		1,257,582		1,580,736		30,731		154,549		2,451,089		2,717,257		228,832		268,300		-434,784		-564,997		3,533,450		4,155,845
Operating costs		-760,978		-909,910		-14,990		-149,363		-1,831,412		-2,033,790		-186,458		-220,672		394,322		531,048		-2,399,516		-2,782,687
Selling and administrative expenses		-43,737		-45,107		-1,416		-6,000		-198,613		-179,583		-39,128		-47,446		38,923		36,609		-243,971		-241,527


Operating income		452,867		625,719		14,325		-814		421,064		503,884		3,246		182		-1,539		2,660		889,963		1,131,631

Revenues from operations

Our revenues from operations are derived principally from electricity generation and distribution. Generation revenues are derived primarily from the sale of electricity that we generate. Distribution revenues are derived primarily from the resale of electricity purchased from generators. Resale of electricity revenues consists of revenues related to the recovery of the cost of wholesale electricity purchased from electricity generation companies and Value Added from Distribution, or VAD, revenues, which relate to the recovery of costs and return on investment with respect to distribution assets as well as allowed losses under tariff regulations. Other revenues from our distribution services consist of charges related to new connections and maintenance and leases of meters.

Generation/Transmission business

The table below presents the generation business segment breakdown for physical sales of electricity by our subsidiaries, arranged by country, and their corresponding changes for the twelve-month periods ended December 31, 2005 and 2006:


	Physical sales during
	years ended December 31,
	2005		2006		Change		% Change
	(GWh)
Endesa Chile (Chile)		20,731		20,923		192		0.9	%
Endesa Costanera (Argentina)		8,466		8,736		270		3.2	%
El Chocón (Argentina)		4,113		5,191		1,078		26.2	%
Edegel (Peru)		4,600		6,766		2,166		47.1	%
Emgesa (Colombia)(1)		12,358		12,273		-85		-0.7	%
Betania (Colombia)		2,737		3,054		317		11.6	%
Cachoeira Dourada (Brazil)		3,867		4,177		310		8.0	%
Endesa Fortaleza (Brazil)(2)		678		2,690		2,012		296.8	%
Cien (Brazil)(2)		1,467		6,394		4,927		335.9	%

Total		59,017		70,204		11,187		19.0	%


(1)		In 2005, 18 GWh of inter-company sales are included.

(2)		Corresponds to sales for the last quarter of 2005 in which Enersis consolidated Endesa Brasil.

Distribution business

The table below presents the distribution business segment breakdown for physical sales of electricity by our subsidiaries, arranged by country, and their corresponding changes for the twelve-month periods ended December 31, 2005 and 2006:


	Physical sales during
	years ended December 31,
	2005		2006		Change		% Change
	(GWh)
Chilectra (Chile)		11,851		12,377		526		4.4	%
Edesur (Argentina)(1)		14,018		14,837		819		5.8	%
Edelnor (Peru)		4,530		4,874		344		7.6	%
Ampla (Brazil)		8,175		8,668		493		6.0	%
Coelce (Brazil)		6,580		6,769		189		2.9	%
Codensa (Colombia)(1)		10,094		10,755		661		6.5	%

Total		55,248		58,280		3,032		5.5	%


(1)		Includes toll revenues.

The table below presents, for the periods indicated, the breakdown of our operating revenues and percentage change from period to period.


	Years ended December 31,
	2005		2006		Change		% Change
	(in millions of Ch$)
Distribution Business
Chilectra and subsidiaries (Chile)		650,860		714,164		63,304		9.7	%
Edesur (Argentina)		257,190		266,775		9,585		3.7	%
Distrilima/Edelnor (Peru)		212,102		230,127		18,025		8.5	%
Ampla (Brazil)		521,740		573,827		52,087		10.0	%
Investluz/Coelce (Brazil)		368,909		449,269		80,360		21.8	%
Codensa (Colombia)		440,288		483,097		42,809		9.7	%

Total operating revenues from distribution business		2,451,089		2,717,259		266,170		10.9	%

Generation Business
Endesa and subsidiaries (Chile)		583,467		678,319		94,852		16.3	%
Endesa Costanera (Argentina)		128,592		186,588		57,996		45.1	%
El Chocón (Argentina)		43,342		66,248		22,906		52.8	%
Cachoeira Dourada (Brazil)		55,970		67,258		11,288		20.2	%
Endesa Fortaleza (Brazil)(1)		33,211		107,607		74,396		224.0	%
Emgesa (Colombia)		241,100		254,649		13,549		5.6	%
Betania (Colombia)		42,876		39,439		-3,437		-8.0	%
Edegel (Peru)		129,024		180,628		51,604		40.0	%

Total operating revenues from generation business		1,257,582		1,580,736		323,154		25.7	%

Transmission Business
CIEN (Brazil)(1)		30,731		154,549		123,818		402.9	%

Total operating revenues from transmission business		30,731		154,549		123,818		402.9	%

Non-electricity subsidiaries(2)		228,832		268,298		39,466		17.2	%

Total operating revenues from non-electricity subsidiaries (Chile)		228,832		268,298		39,466		17.2	%

Less: intercompany transactions		-434,784		-564,997		-130,213		29.9	%


Total operating revenues		3,533,450		4,155,845		622,395		17.6	%


(1)		Corresponds to operating revenues for the last quarter of 2005 in which Enersis consolidated Endesa Brasil.

(2)		Includes operating revenues for CAM, Synapsis, IMV, Túnel El Melón, Ingendesa, Enigesa, Enersis Holding and investment vehicles.

Generation business revenues from operations

Revenues from 2006 sales in Chile increased by Ch$94.8 billion, or 16.3%, primarily due to a 0.9% increase in physical sales, reaching 20,923 GWh, as well as to a 0.3% increase in average sales prices. The physical sales increase is attributable primarily to an increase in energy production of 6.4%, reflecting the greater hydroelectric generation. During 2006, Endesa Chile and its Chilean subsidiaries sold 4,991 GWh on the spot market, at an energy price of $48.1 per MWh. Regarding average sales prices, we have to consider both the effect of the physical energy sales to regulated customers, which are subject to a new energy matrix recognized in the tariff-setting process, as well as the regulated customers’ average price increase of 12.7%, from $25.3 per kWh in 2005 to $28.5 per kWh in 2006. Both of these effects, together, led to a 0.3% increase in average sales prices.

In Argentina, Endesa Costanera’s revenues increased by 45.1%, from Ch$128.6 billion in 2005 to Ch$186.6 billion in 2006. The increase is attributable primarily to the volume of physical energy sales for Endesa Costanera, which increased by 3.2% in 2006, reaching 8,736 GWh, compared to 8,466 GWh in 2005, due to higher demand and the supply of fuel oil. In addition, energy prices increased due to the increased cost recognition associated with fuel. In this sense, spot prices increased by 6.7% in local currency. The BT 64 conversion effect, as a consequence of the 5.1% depreciation of the Argentine peso, partially offset by the 3.7% depreciation of the peso, is Ch$7.3 billion in lower revenues.

Argentina’s El Chocón increased revenues by Ch$22.9 billion, or 52.8%, primarily because physical sales increased by 26.2%, reaching 5,191 GWh in 2006, which is explained by the improved hydrological conditions of the Comahue zone, as well as to higher prices in 2006. The net effect of the depreciation of both Argentine currency and pesos against the dollar, led to Ch$2.6 billion in lower revenues.

In Colombia, Emgesa’s revenues increased by 5.6%, from Ch$241.1 billion in 2005 to Ch$254.6 billion in 2006, primarily due to a 7.5% increase in average sales prices in local currency, partially offset by a 0.7% decrease in physical sales. The BT 64 conversion effect led to Ch$0.1 billion of higher operating revenues.

Also in Colombia, Betania’s 2006 revenues decreased by Ch$3.4 billion, or 8.0%, due to a 4.0% decrease in average sales prices in local currency, partially offset by an 11.6% increase in physical sales, reaching 3,054 GWh in 2006. The BT 64 effect on the operating revenues had a net effect of Ch$0.1 billion of higher operating revenues.

In Brazil, Cachoeira Dourada’s revenues increased by 20.2%, from Ch$56.0 billion in 2005 to Ch$67.3 billion in 2006, primarily due to an 8.0% increase in physical sales, reaching 4,177 GWh, partially offset by a 1.8% decrease in sales prices in local currency terms. The BT 64 effect resulted in Ch$8.7 billion of higher revenues.

Commencing October 2005, with the creation of our holding company, Endesa Brasil, Enersis consolidated with Endesa Fortaleza, among others. Endesa Fortaleza’s 2006 operating revenues amounted to Ch$107.6 billion, a decrease of 5.8% over Ch$114.4 billion in 2005, primarily due to a 7.3% decrease in the average sales price in local currency in 2006. The BT 64 effect led to Ch$13.4 billion in higher revenues. Physical sales amounted to 2,690 GWh for all of 2006, unchanged since 2005 because Endesa Fortaleza has only one contract with its single client, Coelce. In 2005, Enersis recognized consolidated operating revenues from Endesa Fortaleza of Ch$33.2 billion only for the last quarter, with 678 GWh in sales.

In Peru, Edegel’s revenues increased by 40.0%, from Ch$129.0 billion in 2005 to Ch$180.6 billion in 2006, primarily due to an increase of 47.1% in higher physical sales, reaching 6,766 GWh in 2006, which was partially offset by a decrease of 4.2% in average prices. The average sales price decreased from Ch$25.8 per kWh in 2005 to Ch$24.7 per kWh in 2006. The BT 64 effect led to Ch$3.9 billion in higher revenues.

Transmission business operating revenues

Enersis began consolidating CIEN through Endesa Brasil in the last quarter of 2005. CIEN’s revenues for 2006 amounted to Ch$154.5 billion, a 7.7% increase in relation to the prior year. CIEN sold 6,394 GWh in 2006, a 2.6% decrease from 2005, at average sales prices 37.6% lower than in the prior year. For the last quarter of 2005, Enersis recognized consolidated operating revenues arising from CIEN in an amount of Ch$30.7 billion, and physical sales of 1,467 GWh. For further detail, please see “Item 4. Information on the Company — B. Business Overview — Business Strategy — Electricity Generation” and “ — Operations in Argentina” and also see “Item 4. Information on the Company — Business Overview — Electricity Transmission — CIEN.”

Distribution business revenues from operations

In Chile, Chilectra’s 2006 operating revenues were Ch$714.2 billion, an increase of Ch$63.3 billion, or 9.7% compared to 2005, primarily because energy-related average prices increased 5.7% due to the increase in the node price. In addition, there was a 4.4% increase in physical sales, which reached 12,377 GWh in 2006. Non-energy revenues associated with ancillary services increased by Ch$3.4 billion, or 6.9%, to Ch$52.7 billion in 2006, compared with Ch$49.3 billion in 2005, primarily as a result of an increase in fees from electric line relocating services. The increase in physical sales is partially attributable to a 2.0% increase in average per capita consumption in Chilectra’s concession area and the total number of customers increased by 33,159 customers, or 2.4%.

In Argentina, Edesur’s 2006 operating revenues were Ch$266.8 billion, an increase of Ch$9.6 billion, or 3.7%, compared to 2005, primarily because of a 5.8% increase in physical sales, which reached 14,837 GWh in 2005. Average per capita consumption increased by 4.4%, and the total number of customers increased by 30,813 customers, or 1.4%, which in turn was partially offset by a 0.7% decrease in the average sales price in local currency. The 2006 BT 64 conversion effect using the average monthly exchange rate of the Argentine peso against the dollar, and subsequently converting to pesos at the year-end exchange rate, as a consequence of the 5.1% depreciation of the Argentine peso, partially offset by the 3.7% depreciation of the peso against the dollar in 2006, amounted to Ch$8.9 billion in lower revenues.

In Peru, operating revenues of our subsidiary Distrilima, which consolidates Edelnor, increased by Ch$18.0 billion, or an 8.5% increase, in 2006 compared to 2005, primarily due to a 7.6% increase in physical sales, which reached 4,874 GWh in 2006. Average per capita consumption increased by 4.6% in 2006, while average sales prices decreased by 3.0% in local currency. The 2006 BT 64 conversion effect, using the average monthly exchange rate of the Peruvian sol against the dollar, and subsequently converting to pesos at the year-end exchange rate, as a consequence of the 0.9% appreciation of the Peruvian sol and the additional 3.7% depreciation effect of the peso against the dollar in 2006, amounted to Ch$5.8 billion in higher revenues.

In Brazil, revenues associated with Ampla increased by Ch$52.1 billion in 2006, or 10.0%, primarily due to a 5.5% increase in the average sales price in local currency, and to an increase of 6.0% in physical sales, reaching 8,668 GWh. The 2006 BT 64 conversion effect using the average exchange rate of the Brazilian real against the dollar, and subsequently converting to pesos at the year-end exchange rate, increased as a consequence of the 10.7% appreciation of the real, and the additional 3.7% depreciation of the peso against the dollar in 2006, amounted to Ch$72.4 billion in higher revenues. Ampla’s customer base increased by 4.5%, from 2.2 million in 2005, to 2.3 million in 2006.

Also in Brazil, Coelce’s 2006 revenues increased by Ch$80.4 billion, or 21.8%, primarily due to a 4.8% increase in the average sales price in local currency as well as a 2.9% increase in physical sales, which reached 6,769 GWh. In Coelce the effect of the variation of the Brazilian real against the peso in the conversion to Chilean GAAP meant higher operating revenues of Ch$54.3 billion. Coelce’s clients increased by 4.3%, from 2.4 million customers in 2005 to 2.5 million in 2006.

In Colombia, Codensa’s 2006 revenues increased by Ch$42.8 billion, or 9.7%, primarily due to a 6.5% increase in physical sales, to 10,755 GWh in 2006, as well as to a 1.2% increase in average sales prices in local currency. The 2006 BT 64 effect of the 1.6% depreciation of the Colombian peso and the 3.7% depreciation of the peso had a net effect of Ch$9.0 billion of higher operating revenues. Codensa’s clients increased by 3.2%, to 2.14 million in 2006, while average per capita electricity consumption increased by 3.3% from 4.87 MWh in 2005 to 5.03 MWh in 2006.

Revenues from non-electricity subsidiaries

Revenues arising from our non-electricity subsidiaries increased by Ch$39.5 billion in 2006, a 17.2% increase compared to 2005, primarily explained by Ch$14.3 billion in higher income from CAM, which was explained by the increase in sales of engineering services and sales of materials for Ch$14.0 billion. Higher operating revenues from IMV amounting to Ch$11.3 billion is explained by the increase in the real estate sales of the ENEA project, the increase in operating revenues of Synapsis for Ch$8.3 billion, and the revenue increase of our subsidiary Ingendesa for Ch$5.3 billion with its engineering services.

Operating costs

Operating costs consist primarily of purchases of electricity from third parties, depreciation and amortization, tolls paid to transmission companies, maintenance expenses, salaries, and fuel purchases.

The table below sets forth the breakdown of the costs described above as a percentage of our total costs of operations for the years ended December 2005 and 2006:


	Years ended December 31,
	2005			2006
	(percentage of total costs of
	operations)
Electricity purchases		47.7	%		45.8	%
Depreciation and amortization		16.3	%		15.7	%
Fuel purchases		9.8	%		10.9	%
Operating cost and maintenance		9.2	%		8.7	%
Transmission tolls		6.0	%		5.9	%
Salaries		5.7	%		5.4	%
Other expenses		5.3	%		7.6	%

		100.0	%		100.0	%

The table below sets forth the breakdown of costs of operations for the years ended December 31, 2005 and 2006.


	Years ended December 31,
	2005		2006		Change		% Change
	(in millions of Ch$)
Distribution Business
Chilectra and subsidiaries (Chile)		477,713		537,874		60,161		12.6	%
Edesur (Argentina)		221,155		232,947		11,792		5.3	%
Distrilima/Edelnor (Peru)		160,669		167,251		6,582		4.1	%
Ampla (Brazil)		409,647		452,665		43,018		10.5	%
Investluz/Coelce (Brazil)		260,236		319,503		59,267		22.8	%
Codensa (Colombia)		301,993		323,551		21,558		7.1	%

Total operating costs from distribution business		1,831,413		2,033,791		202,378		11.1	%

Generation Business
Endesa and subsidiaries (Chile)		354,112		348,492		-5,620		-1.6	%
Endesa Costanera (Argentina)		128,833		178,946		50,113		38.9	%
El Chocón (Argentina)		26,870		32,568		5,698		21.2	%
Cachoeira Dourada (Brazil)		28,451		33,285		4,834		17.0	%
Endesa Fortaleza (Brazil)(1)		15,850		49,502		33,652		212.3	%
Emgesa (Colombia)		121,912		133,337		11,425		9.4	%
Betania (Colombia)		24,195		25,517		1,322		5.5	%
Edegel (Peru)		60,755		108,263		47,508		78.2	%

Total operating costs from generation business		760,978		909,910		148,932		19.6	%

Transmission Business
CIEN (Brazil)(1)		14,990		149,363		134,373		896.4	%

Total operating costs from transmission business		14,990		149,363		134,373		896.4	%

Non-electricity subsidiaries(2)		186,458		220,670		34,212		18.3	%

Total operating costs from non-electricity subsidiaries (Chile)		186,458		220,670		34,212		18.3	%

Less: intercompany transactions		-394,323		-531,047		-136,724		34.7	%


Total operating costs		2,399,516		2,782,687		248,798		10.4	%


(1)		Corresponds to operating costs for the last quarter of 2005 in which Enersis consolidated Endesa Brasil.

(2)		Includes operating costs for CAM, Synapsis, IMV, Túnel el Melón, Ingendesa, Enigesa, Enersis Holding and investment vehicles.

Generation business operating costs

Operating costs in Chile decreased by Ch$5.6 billion, or 1.6%, in 2006. The higher thermal generation during the last quarter of 2006, considering the natural gas supply interruptions from Argentina, led to higher fuel and fixed costs resulting in a Ch$13.4 billion increase for the year, although the good hydrology translated into Ch$14.0 billion in lower costs of purchases of energy and power. The average generation variable cost, except for electricity purchases, decreased by 2.1%, from Ch$9.0 per kWh in 2005 to Ch$8.8 per kWh in 2006, due to the increase of 8.8% in hydroelectric generation in Chile. The cost of electricity purchases decreased from Ch$71.7 billion in 2005 to Ch$57.8 billion in 2006, primarily due to a 42.0% decrease of the physical purchase of energy, while the average purchase price increased from Ch$29.4 per kWh in 2005 to Ch$40.9 per kWh in 2006.

Operating costs for Endesa Costanera, in Argentina, increased by 38.9% in 2006, to Ch$178.9 billion, primarily due to a 3.7% increase in thermal generation, reaching 8,709 GWh in 2006. Fuel costs increased by Ch$48.6 billion, primarily due to fuel oil electric generation. The higher use of fuel oil was a consequence of the decrease in the supply of Argentine natural gas. The generation average variable cost, excluding electricity purchase costs, increased from Ch$7.9 per kWh in 2005 to Ch$10.6 per kWh in 2006, due to higher fuel costs. The purchases of electricity increased by Ch$0.4 billion during 2006 mainly due to the average purchase price increase, from Ch$15.1 per kWh in 2005 to Ch$21.6 per kWh in 2006. The BT 64 effect led to Ch$5.7 billion in lower costs.

Operating costs for El Chocón, in Argentina, increased by 21.2% in 2006, to Ch$32.6 billion, primarily due to a 28.2% increase in generation, reaching 5,041 GWh in 2006. The higher production in 2006 caused an increase in the toll and energy transport costs, as well as a higher operator fee. The BT 64 net effect came to Ch$0.5 billion in lower costs.

Operating costs for Emgesa, in Colombia, increased by 9.4%, to Ch$133.3 billion in 2006 from Ch$121.9 billion in 2005. Total physical generation was 6.1% higher in 2006, or 596 GWh, which was caused by an increase of 491 GWh in hydroelectric energy and a 105 GWh increase in thermoelectric generation. This explains an increase in the fuel cost of Ch$1.6 billion, as well as Ch$7.5 billion in incremental transport and toll expenses. Energy purchase costs decreased by Ch$1.6 billion as a result of 670 GWh in lower purchases, for a total of 2,034 GWh purchased in 2006. The BT 64 net effect resulted in Ch$0.4 billion in higher operating costs.

Operating costs for Betania, also in Colombia, increased by Ch$1.3 billion, or 5.5%, reaching Ch$25.6 billion in 2006. This is primarily due to greater energy purchases of Ch$1.1 billion as a result of higher purchases of 245 GWh, for a total of 850 GWh purchased in 2006. The BT 64 net effect resulted in Ch$0.1 billion in higher operating costs.

Operating costs for Cachoeira Dourada, in Brazil, increased by Ch$4.8 billion, or 17%, reaching Ch$33.3 billion in 2006. This was primarily due to the greater variable costs and transmission toll costs. Production increased by 60.3%, reaching 4,241 GWh in 2006. The BT 64 effect led to Ch$2.4 billion of higher costs.

Operating costs for Endesa Fortaleza, in Brazil, decreased by Ch$5.6 billion, or 10.1%, from Ch$55.1 billion in 2005 to Ch$49.5 billion in 2006, primarily due to lower variable costs, which decreased by Ch$7.1 billion as a result of the lower fuel purchases of Ch$19.2 billion. The decrease in variable costs was partially offset by the higher energy purchase costs given by the increase of 85.2% on the average prices expressed in local currency. Production increased by 4.6%, reaching 248 GWh in 2006. The BT 64 effect amounted to Ch$7.7 billion in higher costs. In 2005, Enersis recognized operating costs of Ch$15.8 billion for Endesa Fortaleza only for the last quarter, while these costs amounted to Ch$49.5 billion for all of 2006.

Operating costs in Edegel, in Peru, increased by 78.2%, or Ch$47.5 billion, reaching Ch$108.3 billion in 2006 compared to Ch$60.8 billion in 2005, primarily due to the increase of Ch$26.8 billion in fuel costs because of a higher thermoelectric generation in a simple cycle for the Ventanilla thermoelectric power plant, as well as an increase of fixed costs of Ch$5.5 billion. Ventanilla was merged into Edegel in 2006. The generation variable average costs, excluding electricity purchases, were Ch$7.7 per kWh in 2006 compared to Ch$5.9 per kWh in 2005. The purchases of electricity, both capacity and energy, increased by Ch$4.9 billion during 2006, primarily due to the average purchase price increase, from Ch$22.7 per kWh in 2005 to Ch$37.3 per kWh in 2006. The BT 64 effect amounted to an increase of Ch$1.7 billion.

Transmission business operating expenses

CIEN’s operating expenses for all of 2006 were Ch$149.4 billion, an 18.8% increase when compared to 2005. The increase is primarily due to an increase in energy purchase costs of Ch$33.8 billion, attributable to an average purchase price increase of 103%, which was partially offset by lower physical purchases of 220 GWh, reaching 6,405 GWh in 2006. The effect in CIEN as a consequence of the appreciation of the Brazilian real and the depreciation of the peso against the dollar was Ch$16.5 billion in higher costs. Enersis recognized Ch$15.0 billion in operating costs for CIEN during the last quarter of 2005 and Ch$149.4 billion in 2006.

Distribution business operating costs

Operating costs in Chile increased by Ch$60.2 billion, or 12.6%, during 2006, primarily due to an increase in costs associated with energy purchases which rose by Ch$53.7 billion. The rise in energy purchase costs can be explained by (i) an increase in physical purchases of 13,088 GWh, or 4.3%, and (ii) an increase in the average price of purchases of 8.8% due to the node price increase. Physical losses in Chile decreased marginally, from 5.5% in 2005 to 5.4% in 2006, because significant reductions can no longer be efficiently made. Chilectra’s physical loss levels cannot be reduced as readily as those of our non-Chilean subsidiaries.

Operating costs for Edesur, in Argentina, increased by Ch$11.8 billion, or 5.3%. This result is primarily explained by an increase in energy purchase cost, which rose by Ch$12.9 billion, due to an increase in the average price of purchases of 7.3%, measured in local currency, which in turn was driven by a 4.9% increase in physical energy purchases, amounting to 16,585 GWh in 2006. Energy losses arising from theft and vandalism decreased from 11.4% in 2005 to 10.5% in 2006. The BT 64 effect led to Ch$5.9 billion in lower costs.

Operating costs for Distrilima, in Peru, increased by Ch$6.6 billion, or 4.1%, primarily due to the higher costs of energy purchased, which rose by Ch$2.3 billion as a result of a 7.1% increase in physical energy purchases, reaching 5,310 GWh in 2006, and a 7.5% decrease in the average price of energy purchased in terms of local currency. The BT 64 effect led to Ch$4.2 billion in higher costs. Physical losses decreased from 8.6% in 2005 to 8.2% in 2006.

Operating costs for Ampla, in Brazil, increased by Ch$43.0 billion, or 10.5%, primarily due to an increase in the cost of energy purchased of Ch$19.9 billion, which is attributable to a 5.3% increase in physical purchases, and a 13.9% decrease in average purchase prices in local currency. On the other hand, the BT 64 effect led to Ch$50.9 billion in higher costs. Physical energy losses fell from 22.4% in 2005 to 21.9% in 2006 as a result of management’s efforts to reduce such losses.

Operating costs in Coelce, also in Brazil, increased by Ch$59.3 billion, or 22.8%, in 2006, due to a Ch$27.5 billion increase in the costs of energy purchased, which was driven by a 3.4% increase in the average price of energy purchased, in local currency, and a 1.6% increase in physical energy purchases. The BT 64 effect led to higher operating costs of Ch$34.5 billion. Physical energy losses were 13.0% in 2006 compared to 14.0% in 2005.

100

Operating costs in Codensa, in Colombia, increased by Ch$21.6 billion, or 7.1%, in 2006, primarily due to the Ch$11.9 billion increase in the cost of energy purchased due to a 5.9% increase in physical energy purchases. Depreciation expenses increased by Ch$2.0 billion. The BT 64 effect led to a net effect of Ch$7.1 billion in higher costs.

Operating costs for non-electricity subsidiaries

Operating costs for our non-electricity subsidiaries increased Ch$34.2 billion, or 18.3%, in 2006, primarily due to a Ch$14.0 billion and Ch$10.3 billion increase for CAM and Synapsis, respectively, due to their increases in projects and engineering services.

Selling and administrative expenses

Selling and administrative expenses consist principally of salaries, general administrative expenses, depreciation and amortization, uncollectible accounts and materials and office supplies.

The table below sets forth the breakdown of selling and administrative expenses as a percentage of our total selling and administrative expenses:


	Years ended December 31,
	2005			2006
	(percentage of total costs of
	operations)
General administrative expenses		35.3	%		43.3	%
Salaries		35.1	%		40.9	%
Uncollectible accounts		20.7	%		7.7	%
Depreciation and amortization		8.3	%		7.5	%
Materials and office supplies		0.6	%		0.6	%

		100.0	%		100.0	%

101

The table below sets forth the breakdown of selling and administrative expenses for the years ended on December 31, 2006 and 2005, as well as percentage changes from period to period:


	Years ended December 31,
	2005		2006		Change		% Change
	(in millions of Ch$)
Distribution Business
Chilectra and subsidiaries (Chile)		46,848		50,484		3,636		7.8	%
Edesur (Argentina)		32,020		38,206		6,186		19.3	%
Distrilima/Edelnor (Peru)		19,502		21,442		1,940		9.9	%
Ampla (Brazil)		24,244		18,461		-5,783		-23.9	%
Investluz/Coelce (Brazil)		55,845		36,812		-19,033		-34.1	%
Codensa (Colombia)		20,154		14,178		-5,976		-29.7	%

Total selling and administrative expenses from distribution business		198,613		179,583		-19,030		-9.6	%

Generation Business
Endesa and subsidiaries (Chile)		23,453		20,020		-3,433		-14.6	%
Endesa Costanera (Argentina)		2,049		2,388		339		16.5	%
El Chocón (Argentina)		935		1,128		193		20.6	%
Cachoeira Dourada (Brazil)		1,854		2,240		386		20.8	%
Endesa Fortaleza (Brazil)(1)		516		1,687		1,171		226.9	%
Emgesa (Colombia)		5,180		4,163		-1,017		-19.6	%
Betania (Colombia)		502		762		260		51.8	%
Edegel (Peru)		9,248		12,719		3,471		37.5	%

Total selling and administrative expenses from generation business		43,737		45,107		1,370		3.1	%

Transmission Business
CIEN (Brazil)(1)		1,416		6,000		4,584		323.7	%

Total selling and administrative expenses from transmission business		1,416		6,000		4,584		323.7	%

Non-electricity subsidiaries(2)		39,128		47,446		8,318		21.3	%

Total operating costs from non-electricity subsidiaries (Chile)		39,128		47,446		8,318		21.3	%

Less: intercompany transactions		-38,923		-36,609		2,314		-5.9	%


Total selling and administrative expenses		243,971		241,527		-2,444		-1.0	%


(1)		Corresponds to selling and administrative expenses for the last quarter of 2005 in which Enersis consolidated Endesa Brasil.

(2)		Includes selling and administrative expenses for CAM, Synapsis, IMV, Túnel el Melón, Ingendesa, Enigesa, Enersis Holding and investment vehicles.

Consolidated selling and administrative expenses decreased 1.0%, or Ch$2.5 billion, from Ch$244.0 billion in 2005, to Ch$241.5 billion in 2006. This is primarily due to decreases in Coelce of Ch$19.0 billion, in Codensa of Ch$6.0 billion, and of Ch$5.8 billion in Ampla. The decreases are primarily due to lower provisions for uncollectible amounts, which, in the case of Coelce, represented a decrease of Ch$20.6 billion, which affected management’s annual assessment as to the recoverability of regulatory assets recorded in 2001, as provisions in uncollectible debt in 2005. The decrease in uncollectible debt is the result of a write-off for Ch$8.9 billion, which was transferred into a loss during 2006.

102

Non-operating income (expense)

The table below sets forth non-operating income (expense) for the years ended December 31, 2006 and 2005, and the percentage change from period to period.


	Year ended December 31,
	2005		2006		Change		% Change
	(in millions of Ch$)
Net interest expense		-290,075		-280,336		9,739		-3.4	%
Net income from related companies		7,397		5,412		-1,985		-26.8	%
Net other non-operating income (expense)		-100,050		-111,089		-11,039		11.0	%
Net monetary exposure		-12,267		7,029		19,296		n.a.
Goodwill amortization		-60,515		-60,045		470		-0.8	%

Non-operating expense		-455,510		-439,029		16,481		-3.6	%

Non-operating expenses decreased by Ch$16.5 billion, or 3.6%, from Ch$455.5 billion in 2005, to Ch$439.0 billion in 2006.

Interest expense, net of interest income, decreased from Ch$290.1 billion in 2005 to Ch$280.3 billion in 2006, a reduction of Ch$9.7 billion, or 3.4%. The reduction is a consequence of higher interest income, primarily because of the use of cash surpluses, and a decrease in the average balance of debt during the periods under comparison. This is despite the consolidation of two new entities with their material indebtedness during all of 2006 (CIEN and Endesa Fortaleza) and only three months in 2005.

Income from our unconsolidated affiliates decreased by Ch$2.0 billion, from net income of Ch$7.4 billion in 2005 to Ch$5.4 billion in 2006. This lower gain is primarily attributable to Gas Atacama, with Ch$3.8 billion, partially compensated by the lower loss recognized by CIEN, amounting to Ch$8.5 billion, and the gain in Endesa Fortaleza of Ch$6.4 billion. We started consolidating CIEN and Endesa Fortaleza in October 2005.

	•		Other non-operating expenses presents a reduction of Ch$11.0 billion, which contributed to a change in net loss from Ch$100.1 billion in 2005 to a net loss of Ch$111.1 billion in 2006. The primary reasons for this change are detailed below:

	•		Write-off in accounts receivable from CIEN due to contract a renegotiation of Ch$32.8 billion with Copel in 2006.

	•		Higher expenses due of Ch$13.1 billion to an energy efficiency program promoted by the authorities that affect all the distribution companies in Brazil.

	•		Net loss of Ch$10.8 billion due to an accounting adjustment under Chilean GAAP, with the application of the BT 64, mainly from our subsidiaries from Colombia, Brazil and Peru.

	•		The aforementioned points were partially compensated by:

	•		Higher gains arising from the sales of fixed assets for Ch$20.6 billion, mainly because of the generation asset sales of Ampla.

	•		Lower expenses for provisions and contingencies of Ch$17.9 billion.

103

Net monetary exposure consists of the effects of foreign exchange movements and price level restatement on the balance sheet of Enersis and its consolidated subsidiaries. Net monetary exposure led to losses of Ch$12.2 billion in 2005 compared to a gain of Ch$7.0 billion in 2006. This is primarily explained by the price level restatement effect of Ch$6.8 billion, mainly due to the effect of inflation of 3.6% during 2005 and 2.1% in 2006 over the non-monetary assets and liabilities and the monetary accounts (mainly debt) expressed in UF, and also due to the update of income statement’s accounts. The other positive effect is the exchange difference with a net positive increase of Ch$12.6 billion in 2006, from a loss of Ch$6.9 billion in 2005 where the peso appreciated by 8.1% against the dollar, to a gain of Ch$5.7 billion in 2006, with a 3.7% devaluation of the peso. This reflects a mismatch in the dollar position that the company has kept for both periods.

Net income

The following table sets forth our net income for the periods indicated:


	Years ended December 31,
	2005		2006		Change		% Change
	(in millions of Ch$)
Operating income		889,963		1,131,631		241,668		27.2	%
Non-operating income		-455,510		-439,029		16,481		-3.6	%

Net income before taxes, minority interest and negative goodwill amortization		434,453		692,602		258,149		59.4	%
Current tax (expense) benefit		-190,984		-102,257		88,727		-46.5	%
Minority interest		-185,879		-289,750		-103,871		55.9	%
Amortization of negative goodwill		16,993		6,527		-10,466		-61.6	%

Net income		74,583		307,122		232,539		311.8	%

The sum of operating and non-operating income increased by Ch$258.1 billion, from Ch$434.4 billion in 2005 to Ch$692.6 billion in 2006, representing a 59.4% increase, as explained above.

Income taxes for 2006 decreased by Ch$88.7 billion in relation to 2005, going from Ch$191.0 billion in 2005 to Ch$102.3 billion in 2006.

The table below presents a breakdown of income taxes:

Years ended December 31,

2005

2006

Change

% Change

(in millions of Ch$)

Current tax (expense) benefit

-140,222

-254,849

-114,627

81.7

Deferred tax (expense) benefit

-50,762

152,592

203,354

n.a.

Income tax expense

-190,984

-102,257

88,727

-46.5

Current income tax expense increased by Ch$114.6 billion, and is primarily explained by the higher provision for income tax arising from our subsidiaries Coelce (Ch$27.6 billion), Endesa Chile (Ch$18.5 billion), Endesa Fortaleza (Ch$2.6 billion), Pehuenche (Ch$16.2 billion), Codensa (Ch$11.8 billion) and Edelnor (Ch$10.5 billion). This was partially compensated by lower expense in Edesur (Ch$6.1 billion) and Chilectra for (Ch$4.3 billion).

Non-cash deferred tax expense increased by Ch$203.3 billion, primarily attributable to Chilectra (Ch$139.6 billion), which is primarily due to the important recognized effect of Ch$115.1 billion resulting from the merger between Elesur and Chilectra, which caused a reversal in the valuation provision that Elesur had over its accumulated tax losses from prior years. In addition, there are the effects in CIEN (Ch$30.9 billion), Ampla (Ch$18.6 billion), Coelce (Ch$15.1 billion), Emgesa (Ch$13.5 billion), Pehuenche (Ch$11.8 billion) and Codensa (Ch$11.1 billion). This was partially compensated by the negative variation in Edegel (Ch$13.9 billion), Enersis (Ch$10.1 billion) and Endesa Chile (Ch$5.7 billion).

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The gain due to the amortization of negative goodwill decreased by Ch$10.5 billion in 2006, going from Ch$17.0 billion in 2005 to Ch$6.5 billion in 2006. The lower amortization is primarily due to the end of the amount outstanding for Edegel amortizations and for the first purchase of Betania’s shares, whose effect is a lower amortization of Ch$4.0 million and Ch$6.2 million, respectively.

As a result of all the foregoing, our consolidated net income increased from Ch$74.6 billion in 2005 to Ch$307.1 billion in 2006, an increase of Ch$232.5 billion, or 311.8%.

B. Liquidity and Capital Resources

We are a holding company with no significant assets other than the stock of our subsidiaries. The following discussion of our cash sources and uses reflects the key drivers of cash flow for Enersis, as they are regularly reported to the holders of our debt and included in financial covenant ratios. (For more information on cash flows from an accounting rather than a financial perspective, please see “Item 18. Financial Statements — Consolidated Financial Statements — Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007.”)

We believe that cash flow generated from operations, cash balances, assets sales, borrowings from commercial banks and access to both domestic and foreign capital markets will be sufficient to meet our needs for working capital, debt service, dividends and routine capital expenditures.

We consider cash flows generated by our wholly-owned subsidiaries (Cam, Synapsis, IMV and investment vehicles) as our own operational inflows and outflows, given that we have always had access to these wholly-owned Chilean subsidiaries’ cash flows.

Cash flows received from non-wholly-owned subsidiaries and affiliates are considered financial investments, and are included as dividends, capital reductions, interest income and intercompany debt amortization.


	2006		2007
	(figures in $ millions)
INITIAL CASH (A)		0.7		25.3

SOURCES (B) + (C)		684.3		876.9

Cash Inflows from Chile (B)		580.3		744.3
Cash Inflows from Operations		348.2		325.1
Interest Income from Chilean Subsidiaries		43.4		43.7
Dividends from Chilean Subs		141.3		266.1
Amortization of Intercompany Loans from Chilean Subsidiaries		47.4		109.4
Other Income from non-operating activities		—		—

Cash Inflows from foreign subsidiaries (C)		104.0		132.6
Interest Income from Foreign Subs		3.1
Dividends from Foreign Subs		17.4		80.2
Capital Reductions		21.3		5.8
Management Fee and Others		0.1		0.2
Intercompany debt amortizations		62.2		46.4

105


	2006		2007
	(figures in $ millions)
USES (D) + (E)		659.7		833.1

Cash Outflows from Operations (D)		329.3		281.2
Cash Outflows from Operations		297.1		253.5
Taxes		32.2		27.7

Cash Outflows from non-Operating Activities (E)		330.4		551.9
Interest Expenses and Derivative Contracts		84.6		123.5
Dividend Payment		133.4		352.9
Debt Amortization		85.2		75.5
Others		27.2

FINAL CASH (A)+(B)+(C)-(D)-(E)		25.3		69.1

For the twelve-month period ended December 31, 2007, our principal sources of funds, expressed in dollars at the year-end exchange rate, were:

	•		$325.1 million of cash inflows from operating revenues of our wholly-owned subsidiaries;

	•		$43.7 million of interest payments from non-wholly-owned Chilean subsidiaries;

	•		$266.1 million of dividends from Chilean subsidiaries, which includes $56.0 million from Chilectra;

	•		$109.4 million of intercompany loan payment from Chilean subsidiaries, which includes $90.1 million from Chilectra;

	•		$80.2 million from dividends, which includes $47.4 million from our Brazilian subsidiaries and $32.8 million from our Colombian subsidiaries;

	•		$5.8 million from capital reductions from our Colombian subsidiaries; and

	•		$46.4 million from amortization of intercompany loans from our Brazilian subsidiary Coelce.

The aggregate inflows of cash from these sources amounted to $876.9 million.

For the same twelve-month period ended December 31, 2007, Enersis principal cash outflows totaled $833.1 million, including:

	•		$253.5 million from operating expenses of our wholly-owned subsidiaries, including investments and capital expenditures;

	•		$27.7 million in taxes paid by Enersis and its wholly-owned subsidiaries;

	•		$123.5 million in net interest expense (net of derivatives contracts);

	•		$352.9 million dividend payments by Enersis; and

	•		$75.5 million of net financial debt amortization (discounting new debt used for refinancing purposes).

As of December 31, 2007, Enersis had $69.1 million in final cash.

For the twelve-month period ended December 31, 2006, our principal sources of funds, expressed in dollars at the year-end exchange rate, were:

	•		$348.2 million of cash inflows from operating revenues of our wholly-owned subsidiaries;

	•		$43.4 million of interest payments from non-wholly-owned Chilean subsidiaries;

	•		$141.3 million of dividends from Chilean subsidiaries, which includes $62.2 million from Chilectra;

	•		$47.4 million of intercompany loan payment from Chilean subsidiaries, which includes $41.1 million from Chilectra;

106

	•		$3.1 million on interest income from intercompany debt with our Brazilian subsidiaries;

	•		$17.4 million from dividends, which includes $13.9 million from our Brazilian subsidiaries and $3.5 million from our Colombian subsidiaries;

	•		$21.3 million from capital reductions, which includes $20.8 million from our Colombian subsidiaries; and

	•		$62.2 from amortization of intercompany loans from our Brazilian subsidiary Coelce;

The aggregate inflows of cash from these sources amounted to $684.3 million.

For the same twelve-month period ended December 31, 2006, Enersis’ principal cash outflows totaled $659.7 million, including:

	•		$297.1 million from operating expenses of our wholly-owned subsidiaries, including investments and capital expenditures;

	•		$32.2 million in taxes paid by Enersis and its wholly-owned subsidiaries;

	•		$84.6 million in net interest expenses (net of derivative contracts);

	•		$133.4 million dividend payments by Enersis;

	•		$85.2 million of net financial debt amortization (discounting new debt used for refinancing purposes); and

	•		$27.2 million of payment to Endesa Internacional related to the purchase of Elesur.

As of December 31, 2006, Enersis had $25.3 million in final cash.

For a description of liquidity risks related to our holding company status, please see “Item 3. Key Information — D. Risk Factors — We are a holding company and depend on payments from our subsidiaries and affiliates to meet our payment obligations” in this annual report.

We coordinate the overall financing strategy of our majority-owned subsidiaries. Our operating subsidiaries independently develop capital expenditure plans and generally our strategy is to have the operating subsidiaries independently financing capital expansion programs through internally generated funds or direct financings. We also coordinate acquisition financing with respect to distribution operation of Chilectra. We coordinate all generation and transmission acquisition financing with Endesa Chile. For information regarding our commitments for capital expenditures, see “Item 4. Information on the Company — A. History and Development of the Company — Capital Investment Program” and our contractual obligations table set forth below.

On July 3, 2007, Standard & Poor’s upgraded our rating and also the rating for Endesa Chile, to BBB from BBB-, both with “Stable Outlook.” With this rating action, both companies raised their rating risk category based upon their improved financial profile. The upgrade by Standard & Poor’s was mainly attributable to the positive performance of Enersis’ Chilean operations, as well as the adequate debt service coverage. On the other hand, the Stable Outlook was placed due to the stable scenario in the region, with growing electricity tariffs, better economic conditions, a strongly increasing electricity demand and a lower degree of regulatory uncertainty.

We have accessed the international equity capital markets, with three SEC-registered ADS issuances in October 1993, February 1996 and September 2000, for Enersis, and once in 1994 for Endesa Chile. We have also frequently issued bonds in the international capital markets, mainly for both Enersis and Endesa Chile. Enersis issued $800 million in Yankee Bonds in November 1996, and $350 million in November 2003. Endesa Chile and its consolidated subsidiaries have also issued Yankee Bonds between 1996 and 2003, of which $2.1 billion are currently outstanding.

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The following table lists the Yankee Bonds of Enersis and its consolidated subsidiaries outstanding as of December 31, 2007. The weighted average annual interest rate for Yankee Bonds issued by Enersis and its consolidated subsidiaries, of which an aggregate principal amount of $2.9 billion is outstanding as of the date of this report, is 7.9%.


				Aggregate
				Principal
Issuer	Maturity	Coupon		Amount Issued
		(as a percentage)		(in millions)
Endesa Chile through its Cayman Islands Branch	July 15, 2008		7.750		400
Endesa Chile	April 1, 2009		8.500		400
Endesa Chile through its Cayman Islands Branch	August 1, 2013		8.350		400
Endesa Chile through its Cayman Islands Branch	August 1, 2015		8.625		200
Endesa Chile(3) through its Cayman Islands Branch	February 1, 2027		7.875		230
Endesa Chile(1) through its Cayman Islands Branch	February 1, 2037		7.325		220
Endesa Chile(3)	February 1, 2097		8.125		200
Enersis through its Cayman Islands Branch	January 15, 2014		7.375		350
Enersis(3) through its Cayman Islands Branch	December 1, 2016		7.400		350
Enersis(2) through its Cayman Islands Branch	December 1, 2026		6.600		150


(1)		Holders of these Yankee Bonds can exercise a put option against Endesa Chile on February 1, 2009.

(2)		Holders of these Yankee Bonds exercised a put option against Enersis on December 1, 2003 for an aggregate principal amount of $149.1 million, leaving only $0.9 million outstanding.

(3)		In 2001, Enersis and Endesa Chile repurchased an aggregate of $284 million of these Yankee Bonds.

Enersis and Endesa Chile, as well as our subsidiaries in the five countries in which we operate, have access to domestic capital markets, where we have issued debt instruments including commercial paper and medium- and long-term bonds that are primarily sold to pension funds, life insurance companies and other institutional investors. As of the date of this report, we are in compliance with our material covenants contained in our debt instruments. In 2001, Endesa Chile issued UF 7.5 million (approximately $180 million at the time of issuance) in 5-year and 21-year local bonds, in each case with an interest rate of 6.2% per annum. In 2001, Enersis also issued UF 6.5 million (approximately $169 million at the time of issuance) in 8-year and 21-year local bonds, each with interest rates of 5.5% and 5.75% per annum, respectively. On October 24, 2003, Endesa Chile issued UF 4 million in 7-year UF denominated bonds with an interest rate of 5.65% per annum, and another UF 4 million in 25-year UF denominated bonds with an interest rate of 6.20% per annum, for an aggregate principal amount of UF 8 million ($214 million at the time of issuance). In 2007, Endesa Chile made an anticipated redemption of its 7-year UF 4 million issuance with interest rate of 5.65% per annum, which was financed through the issuance of a new UF 4 million 20-year bond with an interest rate of 3.8% per annum. For a full description of the local bonds issued by Enersis and Endesa Chile, see “ — Bonds Payable” in note 18 to our consolidated financial statements.

Our companies frequently participate in the commercial bank markets through both bilateral loans and syndicated loans.

Between November 2004 and December 2006, Enersis entered into two senior unsecured syndicated revolving credit facilities through its Cayman Island’s Branch. In the same period, Endesa Chile, acting through its Cayman Island’s Branch, entered into three senior unsecured syndicated revolving credit facilities. These facilities were structured with various banks, for an aggregate amount of $550 million for Enersis and $650 million for Endesa Chile, with maturity dates between 2009 and 2010. The lenders under these facilities may have recourse to a Mandatory Prepayment in the event there is a “Change of Control,” as defined in the agreements. A Change of Control will not be triggered if Endesa Spain remains in the chain of control over Enersis or Endesa Chile. If Endesa Spain is no longer in the chain of control, each lender may demand prepayment subject to certain conditions: under the 2004 facilities, the new controlling entity must have a lower credit rating than Endesa Spain subsequent to the launching of a transaction that would end in an effective Change of Control. In that facility, either the S&P or Moody’s rating for the new controlling entity would have to be worse than that of Endesa Spain. In the 2006 facilities, however, the new controlling entity could have a rating lower than that of Endesa Spain before the initial announcement of the transaction, and no Change of Control Mandatory Prepayment could be triggered unless all of S&P, Moody’s and Fitch rated the new controlling company by more than one notch, including with respect to outlook, below Endesa Spain’s ratings at such time. In all cases described in this paragraph, a Mandatory Prepayment for Change of Control could only be triggered if lenders representing more than 50% of the corresponding facility so request.

108

The December 2006 credit facilities do not contain a condition precedent requirement that there should not have occurred any “material adverse effect” (as defined contractually) prior to a disbursement, allowing the companies the flexibility to draw on such revolving facilities under any circumstances.

The undrawn amount of Enersis’ two revolving credit facilities is $200 million as of December 31, 2007. At the same time, the undrawn amount of Endesa Chile’s three revolving credit facilities is $434 million.

All of Enersis and Endesa Chile’s credit facilities include various financial covenants. Enersis and Endesa Chile were in compliance with such financial covenants at the time of this report. Enersis and Endesa Chile’s Yankee Bonds, on the other hand, are not subject to financial covenants.

As is customary for certain credit and capital market debt facilities, a significant portion of Enersis and Endesa Chile’s financial indebtedness is subject to cross default provisions. Each of the revolving credit facilities described above, as well as all of Enersis and Endesa Chile’s Yankee Bonds, have cross default provisions with different definitions, criteria, materiality thresholds, and applicability as to the subsidiaries that could give rise to a cross default.

The cross default provision of the revolving credit facilities for Enersis and Endesa Chile refer only to so-called “Relevant Subsidiaries,” a contractually defined term that refers to our most important subsidiaries. There is a complex mathematical determination to determine the list of Relevant Subsidiaries, which vary somewhat from year to year. As of the filing of this annual report, the Enersis Relevant Subsidiaries are Chilectra, Endesa Chile, Endesa Brasil and Ampla, and the Endesa Chile Relevant Subsidiaries are Pehuenche, Cono Sur, Celta and Pangue (Celta and Pangue only apply as Relevant Subsidiaries in the 2004’s Revolving Facility of Endesa Chile). In the case of a matured default above the materiality threshold, revolving credit facility’s lenders would have the option to accelerate if the lenders representing more than 50% of the aggregate debt of a particular facility then outstanding choose to do so.

Yankee Bonds are the most restrictive in terms of cross default provisions, as any matured default of either Enersis, Endesa Chile or any subsidiary could result in a cross default to Enersis and Endesa Chile’s Yankee Bonds if the matured default, on an individual basis, has a principal exceeding $30 million, or its equivalent in other currencies. In the case of a matured default above the materiality threshold, Yankee bondholders would have the option to accelerate if either the Trustee or bondholders representing no less than 25% of the aggregate debt of a particular series then outstanding choose to do so. In the most benign case for Enersis under the 2006 credit facilities only matured defaults exceeding $50 million qualify for a potential cross default.

Certain other customary events of default include bankruptcy and insolvency proceedings, material adverse judgments, and certain governmental actions such as nationalization, seizure, or expropriation of assets. The general cross acceleration provisions give rise to an event of default only when other material indebtedness has been accelerated by the required lenders thereunder or otherwise pursuant to its terms, after expiration of grace periods if applicable, and after formal notices have been granted.

109

At the time of this report, our Argentine subsidiary, Endesa Costanera, had not paid the installments due in December 2007 and March 2008 for its supplier credit with Mitsubishi Corporation (“MC”) dating back to 1996. However, in the second quarter of 2008, Endesa Costanera and MC signed agreements for both the December 2007 and March 2008 installments, with payments now rescheduled between 2012 and 2013.

Most of our companies have access to existing credit lines sufficient to meet all of our present working capital needs.

Payment of dividends and distributions by our subsidiaries and affiliates represent an important source of funds for us. The payment of dividends and distributions by certain subsidiaries and affiliates are subject to legal and contractual restrictions, such as legal reserve requirements, capital and retained earnings criteria and other restrictions. We have been advised by legal counsel in the various geographical locations where our subsidiaries and affiliates operate that there currently are no other legal restrictions on the payment to Enersis of dividends or distributions to us in the jurisdictions where such subsidiaries or affiliates are incorporated. Certain credit facilities and investment agreements of our subsidiaries restrict the payment of dividends or distributions in certain circumstances. There can be no assurance that legal restrictions will not be imposed or that additional contractual restrictions will not arise in the future. For a description of liquidity risks resulting from our holding company status, please see “Item 3. Key Information — D. Risk factors — We are a holding company and depend on payments from our subsidiaries and affiliates to meet our payment obligations” in this annual report.

In addition to available cash and the undrawn amount of revolving credit facilities mentioned above, as of this report, currently we can draw up to $270 million from unused lines of credit granted by Chilean banks, and Endesa Chile can draw up to another $255 million from similar sources. Our level of consolidated indebtedness increased by 20%, from $7.0 billion as of December 31, 2006, to $8.4 billion as of December 31, 2007. This increase is primarily due to the appreciation during the year of most of the South American exchange rates against the dollar. We do not currently anticipate liquidity shortfalls affecting our ability to satisfy the obligations described in this report. We expect to refinance our indebtedness as it becomes due, fund our purchase obligations outlined previously with internally generated cash, and fund capital expenditures with a mixture of internally generated cash and borrowings.

Transactions that most significantly affected Enersis foreign subsidiaries’ liquidity in 2007 included:

	•		Edegel: loan agreements for $50 million for the short and the long term. Edegel also made bond issuances in the Peruvian market for approximately $71 million, with maturities ranging from 4 to 15 years, which were used to refinance and prepay debt, improving contractual conditions and debt maturity.

	•		Edelnor: local bonds for approximately $53 million equivalent in local currency with maturities between 5 years and 8 years, which were used to refinance debt. Also, Edelnor signed short-term loans for $195 million, including renovations and new debt, taking advantage of low interest rates.

	•		Endesa Costanera: debt refinancing for $70 million with bank loans with medium-term maturity and supplier financing with maturity of 5 years.

	•		Edesur: debt prepayment for $65 million with a local bond issuance for approximately $50 million with maturity of 5 years and a medium-term bilateral loan for $15 million. Edesur extended its debt duration and improved interest rate terms. Likewise, in November the company signed an interest rate swap for $15 million to fix the rate of the medium-term bilateral loan.

	•		Ampla: 3-year bank loans for $135 million and debt refinancing for $40 million, extending debt maturity from 2 to 5 years and lowering interest rate by 15 basis points. In December, Ampla signed bank loans to refinance bonds due in March 2008, for $163 million with maturities of 5 and 6 years.

110

	•		Endesa Fortaleza: cross currency swap for $25 million, redenominating part of its debt from dollars to reais, reducing currency mismatch between debt and revenues generation.

	•		Coelce: bank loans for a total of approximately $71 million and swaps to hedge the interest and exchange rate risks of these debts for approximately $60 million.

	•		Emgesa: bank loans for $57 million with short-term maturity and debt refinancings in February 2007 with local bond issuances for $77 million with a maturity of 10 years.

	•		Codensa: bank loans for $511 million with short-term maturity and short term debt refinancings with local bond issuances for approximately $323 million with maturities of 3 and 10 years.

Transactions that most significantly affected Enersis’ foreign subsidiaries’ liquidity during 2006 included:

	•		Edegel: loan agreement for $20 million for a 3-year term entered into in July. Two bond issuances on the Peruvian market in October 2006 for $25 million soles each ($16 million) for 7 years. Bank note refinancing for $50 million soles for a 2-year term. Finally, new loan with a foreign bank for $24 million for 3 years to refinance short-term loans.

	•		Edelnor: local bonds for approximately $53 million equivalent in local currency with maturities between 3 years and 10 years.

	•		Edesur: bank loan refinancings for Ar$150 million with a 3-year syndicated loan.

	•		CIEN: $280 million debt refinancing with a syndicated loan of R$600 million on a 6-year term (with a grace period of three years).

	•		Ampla: local debentures in Brazil for R$370 million (approximately $173 million) on a 6-year term loan to prepay bank loans. Also, a 5-year loan with BNDES for R$300 million ($140 million) to finance Ampla’s investment plan.

	•		Endesa Fortaleza: syndicated loan led by IFC for $130 million with an average maturity of approximately 7 years to refinance short-term debt.

	•		Coelce: two loans for a total of approximately $90 million equivalent in local currency to finance investments.

	•		El Chocón: bank loan for $100 million for a 5-year term and its proceeds were used to prepay commercial papers maturing in 2007.

	•		Betania: bond in the Colombian market for $100 billion CPs ($44 million), 7-year maturity. Also, a structured loan for $305 billion CPs ($123 million), maturing in April 2012.

	•		Emgesa: local bond for CPs 40,000 million ($17.5 million), 10-year maturity. Also, three 180-day facilities with local banks in the equivalent of $62 million, refinanced during February 2007 (see above).

111

Reconciliation of non-GAAP measures to Chilean GAAP 2005 – 2006


	2005		2006
	(in millions of Ch$)
Operating Income		889,963		1,131,631
Consolidation CIEN and Endesa Fortaleza year 2005		63,209		—

Operating income included above		953,172		1,131,631

C. Research and development, patents and licenses, etc.

None

D. Trend Information.

There is a tendency toward greater competition in some countries in the Region where we operate, combined with a liberalization of regulated markets, and the introduction of trading companies that will market energy to final clients. This would give us access to a broader customer base, allowing us to compete for higher margin clients. The tendency toward the interconnection of electricity systems, including cross-border systems, is changing due to difficulties in the electricity supply from Argentina to Brazil, and the gas supply from Argentina to Chile, for instance. This has led to the use of local sources of energy, or internationally traded fuels that eliminate the dependency on a single supplier.

There is a sustained growth in demand, combined with delays in the start-up of new capacity, to which is added the important increase in the cost of fossil fuels. This results in a generalized increase in production costs and marginal costs in almost all the countries. This situation is most serious in Chile, Argentina and Brazil, but attenuated in Peru and Colombia.

This sustained increase in the value of electricity generation represents an opportunity for predominantly hydroelectric generators due to the revaluation of this type of energy. This trend also offers important opportunities for growth and expansion in generating capacity.

Regarding supplies of energy to the term market, an upward trend is also noted in prices, as well as the need to design contractual tariffs and schemes with customers having the necessary flexibility for handling price volatility.

The gap between supply and demand for gas is widening due to the stagnation in gas production in Argentina and the lack of gas extraction infrastructure in Bolivia, for export to Brazil and Argentina, which has led Chile, Argentina and Brazil to look at the possibility of LNG projects for meeting their needs. Chile and Brazil have ongoing LNG projects.

Altogether, the situation offers important opportunities for improving generating margins and the challenge of relationships with customers subject to higher prices and regulators whose essential concern is the safety and adequacy of supplies.

E. Off-balance Sheet Arrangements.

Enersis is not a party to any off-balance sheet arrangements.

112

F. Tabular Disclosure of Contractual Obligations.

The table below sets forth the Company’s cash payment obligations as of December 31, 2007:

ENERSIS on a Consolidated Basis


			Jan 2008		Jan 2009		Jan 2010		Jan 2011
As of December 31, 2007			to		to		to		to		After
Ch$ billion	Total		Dec 2008		Dec 2009		Dec 2010		Dec 2011		2011
Bank Debt		1.139		233		321		162		186		237
Local Bonds(1)		1.224		105		127		122		237		633
Yankee Bonds(2)		1.367		203		308		—		—		856
Other Debt(3)		421		85		72		74		67		123
Interest Expenses		1.884		297		267		212		188		920
Pension and post-retirement obligations(4)		300		36		36		37		38		152
Purchase Obligations(5)		31.621		2.529		2.484		2.290		1.856		22.462
Financial Leases		86		11		9		11		9		45

Total Contractual Obligations		37.956		3.488		3.616		2.897		2.572		25.383


(1)		Includes net payment from Endesa Chile’s Currency Swap of Ch$4,101.3 million.

(2)		Includes net payment of Enersis’ Currency Swaps for a total of Ch$137,296.3 million.

(3)		Includes Endesa Chile’s capital lease obligations for a total of Ch$22,265.9 million.

(4)		We have funded and unfunded pension and post-retirement benefit plans. Our funded plans have contractual annual commitments for contributions which do not change based on funding status. Cash flow estimates in the table are based on such annual contractual commitments including certain estimable variable factors such as interest. Cash flow estimates in the table relating to our unfunded plans are based on future undiscounted payments necessary to meet all of our pension and post-retirement obligations.

(5)		Includes generation and distribution business purchase obligations comprised mainly of energy purchases, operating and maintenance contracts and other services.

G. Safe Harbor.

This “Item 5. Operating and Financial Review and Prospects”, contains information that may constitute forward-looking statements. See “Forward-Looking Statements” in the Introduction of this report, for safe harbor provisions.

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Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management.

We are managed by our Board of Directors, which consists of seven members who are elected for a three-year term at a General Stockholders’ Meeting. If a vacancy occurs in the interim, the Board of Directors elects a temporary director to fill the vacancy until the next regularly scheduled stockholders’ meeting where the entire Board of Directors will be elected. Our Executive Officers are appointed by the Board of Directors and hold office at the discretion of the Board. Set forth below are the members of our Board of Directors as of December 31, 2007.


Directors	Position	Held Since

Pablo Yrarrázaval V.(1)	Chairman	2002

Rafael Miranda R.	Vice Chairman	1999

Pedro Larrea P.	Director	2007

Patricio Claro G.(1)(2)	Director	2006

Juan Ignacio de la Mata G.(2)	Director	2005

Eugenio Tironi B.	Director	2000

Hernán Somerville S.(1)(2)	Director	1999


(1)		Member of the Directors’ Committee.

(2)		Member of the Audit Committee.

On April 1, 2008, Mr. Juan Eduardo Errázuriz replaced Mr. Juan Ignacio de la Mata as Director of Enersis and member of the Audit Committee.

Set forth below are brief biographical descriptions of our directors, four of whom reside in Chile and three of whom reside in Spain, as of December 31, 2007.

Pablo Yrarrázaval V. became Chairman of the Board of Directors in July 2002 and has been Chairman of the Directors’ Committee since April 2003. He has been a member of the Endesa Internacional’s Board since October 2006. Mr. Yrarrázaval is a partner in the brokerage firm Corredora de Bolsa Yrarrázaval y Compañía Limitada, Vice Chairman of Depósito Central de Valores S.A., DCV, and is also Chairman of the Santiago Stock Exchange, a position he has occupied since 1989. Before Mr. Yrarrázaval became Chairman of Enersis, he was Chairman of Endesa Chile.

Rafael Miranda R. holds a BSc in Industrial Engineering from Comillas University (ICAI) and a Master’s Degree in Management Science from the School of Industrial Organization. Between 1987 and 1997, Mr. Miranda was the Managing Director of Endesa Spain. In 1997, he was appointed as Endesa Spain’s CEO, and has held this position to date. Mr. Miranda is the Chairman of Endesa Europe and Endesa Internacional, as well as Vice Chairman of Enersis, Chairman of Club Español de la Energía. Since June 2005, he has held the position of Chairman of the Union of the Electricity Industry, Eurelectric, a professional association which represents the common interests of the electricity industry at a pan-European level.

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Pedro Larrea P. began his career in Endesa Spain in 1996 in the Regulatory Affairs Department. A year later, he became Manager of Strategy and Regulatory Affairs, including the company’s energy planning activities and country-wide industrial strategic activities. In 1999, he became Deputy Managing Director of Energy Management, and in 2001, Managing Director of Energy Management for Spain and Portugal. In October 2006, he was appointed Managing Director of Endesa Spain for Latin America, Managing Director and Board Member of Endesa Internacional, and Vice Chairman of Endesa Chile. During his eleven years in Endesa Spain, Mr. Larrea has been member of the board of Nuclenor, Apx, and Endesa Trading. He is a member of the Directors Committee of UNESA. Before joining Endesa Spain, he worked as a consultant at McKinsey for electricity companies, both in Spain and the United States of America. Mr. Larrea holds a degree in Mining Engineering (MSc Equivalent) from the Universidad Politécnica de Madrid and an M.B.A. from INSEAD (Fontainebleau, France). Mr. Larrea has been an Enersis board member since August 2007.

Patricio Claro G. is a Civil Industrial Engineer from Universidad de Chile. Mr. Claro is a board member of Industrias Forestales S.A., Cía. de Seguros BiceVida S.A., Parque Arauco S.A. and Banco Bice. Additionally, he serves as a board member of Cámara de Compensación Interbancaria de Pagos de Alto Valor, Combanc S.A., and has been a board member of Cristalerías de Chile, Cía. Sudamericana de Vapores, Gener, Pilmaiquén, CTC, Cía. Chilena de Fósforos and Banco de Santiago. Mr. Claro has been an Enersis board member since April 2006 and recently has become a member of Enersis’ Audit Committee and Board Members’ Committee.

Juan Ignacio de la Mata G. holds a degree in Law from Universidad de Madrid. He became a member of the Spanish Cuerpo de Abogados del Estado, and served at the Abogacía del Estado de la Audiencia Nacional and later at the Tribunal Supremo. Among other positions, Mr. de la Mata was Secretary of Endesa Spain’s Board of Directors for 14 years, until 1999. Also, he has been Chairman of Empresa Nacional de Córdoba, Director of Compañía Sevillana de Electricidad and of Retevisión (currently “Orange”), and a member of various non-profit organizations such as Vice-president of UNICEF (Spanish Committee) and Chairman of NGO “Pueblos en Desarrollo-Puedes.” At Enersis, Mr. de la Mata has been a Director since June 2005.

Hernán Somerville S., has a law degree from Universidad de Chile and an M.C.J. degree from New York University Law School. Since 1989, Mr. Somerville has been the Managing Director and Partner of FINTEC, an investment, advisory and management company which led the bank debt-to-equity conversion program sponsored by the Chilean Central Bank in the 1980’s. Prior to his involvement with FINTEC, and from 1983 to 1988, Mr. Somerville was Director of the Chilean Central Bank, serving as Chief Debt Negotiator for Chilean public debt and private commercial bank debt. Mr. Somerville was the former Chairman of CPC, the Confederation of Production & Commerce in Chile. He is also the non-executive Chairman of ABIF, the Chilean Association of Banks and Financial Institutions A.G., former Chairman of FELABAN (Latin American Federation of Banks) and Chairman of TRANSBANK S.A., which manages credit and debit cards in Chile. He is also a Board Member of Corp Banca, Viña Santa Rita, INACAP, and has been a Director of Enersis since 1999. Mr. Somerville is one of the three Chilean representatives at the Asia Pacific Economic Council’s Business Advisory Committee, and is Chairman of the Chilean Pacific Foundation.

Eugenio Tironi B., received a Ph.D. in sociology from L’Ecole des Hautes Etudes en Sciences Sociales (Paris, France). He is currently a Professor of the Sociology Department of Pontificia Universidad Católica de Chile, and a member of the High Counsel of Universidad Alberto Hurtado. Mr. Tironi has published seventeen books in Chile and abroad. Mr. Tironi has been a consultant to international organizations and, between 1990 and 1994, was a Director of the Secretary for Communication and Culture of the Chilean Government. Mr. Tironi was also a visiting professor at Notre Dame University (USA), in 2002, and Sorbonne-Nouvelle (France) in 2006. In addition, since 1994, Mr. Tironi has been the Chairman of Tironi Asociados, a strategic communications firm, which has advised many Chilean and international firms in a number of Latin American countries. Mr. Tironi has been a Director of Enersis since July 2000.

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Executive Officers (as of December 31, 2007)


	Position	Current Position Held Since
Ignacio Antoñanzas A.	Chief Executive Officer	2006

José Luis Domínguez C.	Communications Officer	2003

Alfredo Ergas S.	Chief Financial Officer	2003

Antonio Zorrilla O.	Auditing Officer	2007

Fernando Isac C.	Accounting Officer	2003

Ramiro Alfonsín B.	Planning and Control Officer	2007

Francisco Silva B.	Human Resources Officer	2003

Domingo Valdés P.	General Counsel	1999

Set forth below are brief biographical descriptions of our Executive Officers, all of whom reside in Chile:

Ignacio Antoñanzas A. was appointed CEO of Enersis in October 2006. Mr. Antoñanzas holds a degree in Mining Engineering with a major in energy and fuels from the Universidad Politécnica de Madrid. He started his career as a trader of raw materials. He joined Endesa Spain in 1994, having worked mainly during his professional career in generation and corporate strategy areas. He has been the CEO of Endesa Net Factory and Director of Endesa Italia. Until assuming his current position, he served as Deputy General Manager of Strategy for Endesa Spain.

José Luis Domínguez C. Communications Officer since July 2003, is a civil engineer from Pontificia Universidad Católica de Chile. Mr. Domínguez joined the Enersis Group in May 1987 and has held many positions in Endesa Chile and its Chilean subsidiaries until 2000, when he assumed the position of Public Affairs Director of Enersis.

Alfredo Ergas S. is a commercial engineer from Universidad de Chile, and has an MBA degree from Trium Global Executive MBA alliance between NYU, HEC and LSE. Mr. Ergas has been the CFO of Enersis since July 2003, after having held a similar position at Endesa Chile. Before that, Mr. Ergas served as CFO and Chief Controlling Officer of the Chilean telecommunications company, Smartcom, from 2000 to 2002. Prior to that, Mr. Ergas served as Deputy Chief Financial Officer of Endesa Chile and later in Enersis as Planning and Control Director. Currently, Mr. Ergas serves as Director of Codensa, Compañía Eléctrica Cono Sur S.A. and Inversiones GasAtacama Holding Ltda., all subsidiaries or affiliates of Enersis. Mr. Ergas joined the Enersis Group in April 1993.

Antonio Zorrilla O. was appointed as Auditing Officer in August 2007. Mr. Zorrilla holds a degree in Mining Engineering from the Universidad Politécnica de Madrid and the Rheinisch-Westfälische Technische Hochschule Aachen (RWTH) and holds a joint MSc. in Natural Resources Management from the Helsinki University of Technology (HUT), the Royal School of Mines, the Technische Universiteit Delft and the RWTH. Prior to joining the Enersis Group, Mr. Zorrilla served as Auditing Team Chief at the Auditing Corporate Direction at Endesa Spain. Prior to that, Mr. Zorrilla served as Consultant at PriceWaterhouseCoopers and IBM Spain.

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Fernando Isac C., an economist, is a graduate of Universidad de Zaragoza. Mr. Isac worked in several accounting and finance positions in Eléctricas Reunidas de Zaragoza (“ERZ”), a subsidiary of Endesa Spain, between 1977 and 1996. Subsequently, he was a Director of Electricidad de Caracas (Venezuela) until 1998. Between 1998 and September 2000, he was Deputy CFO of ERZ, a subsidiary of Endesa Spain. In September 2000, Mr. Isac joined Enersis as Accounting Director.

Ramiro Alfonsín B. holds a degree in Business Administration from the Pontificia Universidad Católica de Argentina. He joined the Endesa group in June 2000, having worked in Endesa Net Factory: as Investment and Risk Capital Manager and later as Forecasting and Control Manager. Subsequently, he worked in Endesa Italia as Planning and Investment Deputy Director and in Endesa Europa as Investment and Corporate Relations Deputy Director. In March 2007, he joined the Enersis Group as Regional Forecasting and Control Officer. Before joining the Endesa Group, Mr. Alfonsín worked as Senior Financial Advisor at the Banco Urquijo KBL Group, as Management Advisor of the Corporate Development and Institutional Relations Department at Alcatel, and also as Corporate Banking Associate at ABN Amro Bank N.V.

Francisco Silva B. holds a degree in public administration from Universidad de Chile, and received a D.P.A. from Universidad Adolfo Ibáñez in 1986. Mr. Silva joined Chilectra in 1987 and has worked primarily in human resources and general management positions in several subsidiaries and affiliates of Enersis. Between 1998 and 2000, and since July 2003, he has been the Enersis Human Resources Officer. From January 2001 to June 2003, he worked as Adjunct Director of an Endesa Spain subsidiary in Spain.

Domingo Valdés P. has been General Counsel since May 1999. Mr. Valdés is a lawyer from Universidad de Chile with a Master of Laws Degree from the University of Chicago. He joined the Enersis Group as a corporate attorney at law for Chilectra in 1993 and became Legal Counselor at Enersis in December 1997. Mr. Valdés worked as an intern at the New York City law firms of Milbank, Tweed, Hadley & McCloy and Chadbourne & Parke LLP. Before joining Chilectra, Mr. Valdés was a lawyer at Chase Manhattan Bank, N.A., Corporate Department (Chile) and an associate at Carey & Cía., a Santiago-based law firm. Mr. Valdés is also Secretary of the Enersis Board of Directors and a Professor of Economic and Antitrust Law at Universidad de Chile Law School.

B. Compensation.

Directors are paid a variable annual fee, depending on net earnings of the Company and a monthly fee paid in advance, depending on their attendance to the board meetings and their participation as Director of any of our subsidiaries. In 2007, the total compensation paid to each of our directors, including fees for attendance at meetings of the Directors Committee and of the Audit Committee, was as follows:


	Year Ended December 31, 2007
	(in thousands of Ch$)
Pablo Yrarrázaval V.		75,591
Rafael Miranda R.		49,530
Pedro Larrea P.		10,484
Hernán Somerville S.		44,627
Patricio Claro G.		40,781
Juan Ignacio de la Mata G.		36,411
Rafael Español N.(1)		25,221
Eugenio Tironi B.		33,688

Total		316,333


(1)		Mr. Español ceased to be a Director of Enersis in July 2007.

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We do not disclose, to our shareholders or otherwise, information on individual executive officers’ compensation. For the year ended December 31, 2007, the aggregate gross compensation paid or accrued (including performance-based bonuses) of the Executive Officers of Enersis, was Ch$1,873 million. Enersis’ Executive Officers are eligible for variable compensation under a bonus plan for meeting company-wide objectives and for their individual contribution to the Company’s results. The annual bonus plan provides for a range of bonus amounts according to seniority level. The bonuses eventually paid to executives consist of a certain number of gross monthly salaries. The total variable compensation paid in March 2007 was Ch$456 million, and is included in the aggregate compensation figure. Of this variable compensation, Ch$215 million were deposited in pension funds, and Ch$241 million were paid to the Executive Officers.

The amount set aside or accrued by the Company to provide severance indemnities to its executive officers amounts Ch$292 million, of which Ch$6 million were accrued during 2007.

All of our executive officers have severance indemnity agreements with the Company in the event of voluntary resignation, mutual agreement among the parties, or death. They do not have a right to severance indemnity if the relationship with the Company is terminated due to willful misconduct, prohibited negotiations, unjustified absences, abandonment of duties, among other causes, as defined in article 160 of the Chilean Code of Labor (“Código del Trabajo”). All of the Company’s employees are entitled to legal severance pay if dismissed due to needs of the Company, as defined in article 161 of the Chilean Code of Labor.

C. Board Practices.

The current Board of Directors was elected at the Ordinary Shareholders’ meeting dated April 1, 2008, for a period of three years. For the period during which each director has served, please see “ — A. Directors and Senior Management” above.

Corporate Governance

Enersis is managed by its Executive Officers under the direction of its Board of Directors which, in accordance with the estatutos, or articles of incorporation, or bylaws, consists of seven directors who are elected at an annual regular shareholders’ meeting. Each director serves for a three-year term and the term of each of the seven directors expires on the same day. Staggered terms are not permitted under Chilean law. If a vacancy occurs on the board during the three-year term, the Board of Directors may appoint a temporary director to fill the vacancy. In addition, the vacancy will trigger an election for every seat on the Board of Directors at the next Ordinary Shareholders’ Meeting. The current Board of Directors was elected in April 2008 and their terms expire in April 2011.

Chilean corporate law provides that a company’s Board of Directors is responsible for the management, administration and representation of a company in all matters concerning its corporate purpose, subject to the provisions of the company’s estatutos and the stockholders’ resolutions. In addition to the estatutos, the Board of Directors of Enersis has adopted regulations and policies that guide our corporate governance principles. The most important of these regulations and policies are the following:

The Internal Regulations on Conduct in Securities Markets, approved by the Board on January 31, 2002, defines the rules of conduct that must be followed by members of the Board of Directors, senior management and other executives and employees who, due to the nature of their job responsibilities, may have access to sensitive or confidential information, with a view to contributing to transparency and to the protection of investors. These regulations are based on the principles of impartiality and good faith, placing the company’s interests before one’s own, and care and diligence in using information when acting in the securities markets.

The Charter Governing Executives (“Estatuto del Directivo”), approved by the Board on May 28, 2003, and the Employees Code of Conduct, provide the rules governing dealings with customers and suppliers, and establish the principles that should be followed by employees, including ethical conduct, professionalism and confidentiality. They also impose limitations on the activities that our senior executives and other employees may undertake outside the scope of their employment with us.

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The regulations and rules mentioned above reflect our core principles of transparency, respect for stockholders’ rights, and the duty of care and loyalty of the directors imposed by Chilean law.

On January 15, 2008, the SVS enacted its Norma de Carácter General N° 211, which instructed Chilean issuers to adopt internal policies and regulations related to the information they have to provide to the market and to the systems implemented in order to guarantee a timely communication of such information. To such effect, each Chilean issuer shall dispose to the market a document denominated “Manual de Manejo de Información de Interés para el Mercado,” which among others, must address the following issues: applicable standards to the information of transactions of the Company’s securities or those of its affiliates by directors, principal executives and other related parties; existence of blackout periods for such transactions by directors, principal executives and other related parties; existence of mechanisms for the continuous revelation of information that is of interest to the market; mechanisms that provide protection for confidential information, etc. Such Manual must be enacted and informed to the market by June 1, 2008.

Compliance with NYSE Listing Standards on Corporate Governance

The following is a summary of the significant differences between our corporate governance practices and those applicable to domestic issuers under the corporate governance rules of the New York Stock Exchange. Because we are a “controlled company” under NYSE rules (a company of which more than 50% of the voting power is held by an individual, a group or another company), we would not, were we to be a U.S. company, be subject to the requirement that we have a majority of independent directors, or nomination and compensation committees.

Independence and Functions of the Audit Committee

Under the NYSE corporate governance rules, all members of the Audit Committee must be independent. We are subject to this requirement as of July 31, 2005.

Under the NYSE corporate governance rules, the audit committee of a U.S. company must perform the functions detailed in, and otherwise comply with the requirements of NYSE Listed Company Manual Rules 303A.06 and 303A.07. Non-U.S. companies have been required to comply with Rule 303A.06 beginning July 31, 2005, but are not required to comply with Rule 303A.07. We do not currently comply with Rule 303A.07, but as of July 31, 2005, we did comply with the independence and the functional requirements of Rule 303A.06. As required by the Sarbanes-Oxley Act and the NYSE corporate governance rules, on June 29, 2005, the Board of Directors of Enersis created an Audit Committee. The Audit Committee is currently composed of three directors meeting the applicable independence requirements of the NYSE: Messrs. Juan Eduardo Errázuriz, Patricio Claro and Hernán Somerville.

As required by Chilean Law, Enersis also has a Directors’ Committee composed of three directors. Although Chilean Law requires that the majority of the Directors’ Committee (two out of three members) be composed of directors who were not nominated by the votes of the controlling shareholder or, if excluding the votes from the controlling shareholders would have been elected nevertheless (a “non-control director”), it permits the Directors’ Committee to be composed of a majority or even a unanimity of control directors, if there are not sufficient non-control directors on the Board to serve on the committee. Currently, our Directors’ Committee is composed of one non-control director and two directors appointed by the controlling shareholder.

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Corporate Governance Guidelines

The NYSE’s corporate governance rules require U.S.-listed companies to adopt and disclose corporate governance guidelines. Although Chilean law does not contemplate this practice (except for the “Manual de Manejo de Información de Interés para el Mercado,” which must be adopted by June 1, 2008), the Company has adopted the codes of conduct described above, and its Special Shareholders’ Meeting held on March 2006, approved the inclusion of articles in its bylaws that govern the creation, composition, attributions, functions and retribution of the Directors’ Committee and the Audit Committee.

Committees and Other Advisory Bodies

Directors’ Committee (Comité de Directores)

The Directors’ Committee is composed of three members who are simultaneously directors of the Company. It performs the following functions:

	•		examination of Annual Report, Financial Statements and the Reports of the External Auditors and Inspectors of the Accounts;

	•		formulation of the proposal to the Board of Directors for the selection of external auditors and private rating agencies;

	•		examination of information related to operations by the Company with related parties and/or related to operations in which the Company board members or relevant executive officers may have personal interest;

	•		examination of the compensation framework and plans for managers and executive officers; and

	•		any other function mandated to the committee by the estatutos, the Board of Directors or the shareholders of the Company.

Pablo Yrarrázaval, Chairman of the Board, has also served as chairman of this committee since
July 31, 2002. The other members are Hernán Somerville and Patricio Claro.

The Audit Committee (Comité de Auditoría)

The Audit Committee is composed of three independent members who also serve as directors of the Company. It performs the following functions:

	•		submits a proposal for the appointment and compensation of independent auditors at the Shareholders’ Meeting;

	•		oversees the work of independent auditors;

	•		pre-approves audit and non-audit services provided by the independent auditors; and

	•		establishes procedures for receiving and dealing with complaints regarding accounting, internal control and auditing matters.

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D. Employees.

The following table provides the total number of employees of the Company and its subsidiaries for the past three fiscal years:


	Years ended December 31,
	2005		2006		2007
Enersis (Chile)		215		220		222
Endesa Chile(1)		1,560		2,028		2,230
Endesa Brasil(2)		2,842		2,938		2,905
Chilectra (Chile)		712		708		728
Edesur (Argentina)		2,338		2,407		2,534
Edelnor (Peru)		536		548		544
Codensa (Colombia)		926		934		931
Other Businesses(3)		2,524		2,001		2,035

Total		11,653		11,784		12,129


(1)		Includes Chilean operations and subsidiaries in Argentina, Colombia and Peru.

(2)		Endesa Brasil includes Ampla, Coelce, Cachoeira Dourada, Endesa Fortaleza, CIEN, CTM and TESA.

(3)		Includes CAM, Synapsis and IMV.

As of December 31, 2007, Enersis, on a consolidated basis, had 300 temporary employees of which 269 are from Ingendesa, Endesa Chile’s subsidiary, and the rest are distributed among other companies. For the past two years, the total number of temporary employees has not changed materially.

Chile

As of December 31, 2007, we and our principal subsidiaries and affiliates in Chile had 2,865 employees of Enersis and of all Chilean majority-owned subsidiaries, which includes 534 employees of Endesa Chile employed in Chile. In July and December 2007, we entered into two collective bargaining agreements with our employees. The agreements expire in July and in December 2011, respectively. Collective bargaining agreements with employees of Chilectra took effect in December 2004 and expire in December 2008. Endesa Chile signed an agreement with the Engineers Union in December 2006. This agreement will expire in December 2009. Endesa’s collective bargaining agreements with electro-mechanical, technical and administrative personnel expire in June and December 2008. CAM has two collective bargaining agreements with its employees, one of them expires in December of 2008 and the other, signed this year, expires in December of 2010.

Argentina

As of December 31, 2007, Edesur had 2,534 employees, Endesa Costanera had 273 employees and El Chocón had 50 employees. In October 2004, two collective bargaining agreements were signed with the employees of Edesur. However, the agreements have not yet been registered with government authorities and are not yet effective. We anticipate that the agreements will be registered and take effect in 2008. In December 2006, two collective bargaining agreements with the employees of Endesa Costanera were signed and expire in December 2008 and December 2009, respectively.

Brazil

As of December 31, 2007, Ampla had 1,385 employees, Cachoeira Dourada employed 65 persons and Coelce had 1,297 employees. CIEN and Endesa Fortaleza had 60 employees each one as of the same date, while 6 employees are distributed within CTM and TESA. Coelce is a party to a collective bargaining agreement that will expire in October 2008. Cachoeira Dourada is a party to two collective bargaining agreements which expire in April 2008 and 2009, respectively. Ampla is a party to collective bargaining agreements which expire in September 2009. Such agreements establish salaries, productivity bonuses, individual performance evaluations and general working conditions. Brazilian law stipulates that collective bargaining agreements cannot be for more than two years.

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Colombia

As of December 31, 2007, Codensa had 931 employees. Emgesa had 399 employees as of December 31, 2007. Codensa had two collective bargaining agreements that expire in June 2008. Typically, collective bargaining agreements have two-year terms. However, there are no legal restrictions on the maximum duration of such agreements. Emgesa was a party to a collective bargaining agreement that is scheduled to expire in June 2008.

Peru

As of December 31, 2007, Edelnor had 544 employees and Endesa Chile’s affiliate Edegel had 226 employees. Edelnor is a party to three collective bargaining agreements which expire in December 2008. Edegel is a party to a collective bargaining agreement which expires in December 2008.

The employees indicated by country correspond to the number of workers with temporary or indefinite contracts.

E. Share Ownership.

To the best of the Company’s knowledge, none of Enersis’ directors or officers owns more than 0.1% of the shares of the Company. None of Enersis’ directors and officers has any stock options.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders.

As of March 31, 2008, Endesa Spain beneficially owned 60.6% of the shares of Enersis. Chilean private pension funds, Administradora de Fondos de Pensiones, or AFPs, owned 17.3% in the aggregate, with AFP Provida having the largest ownership interest of 5.3%. Chilean stockbrokers, mutual funds, insurance companies, foreign equity funds, and other Chilean institutional investors collectively owned 10.1% of our equity. ADR holders own 8.8% of the equity. The remaining 3.2% is held by 8,244 minority shareholders.

Principal Shareholders

Enersis’ only outstanding voting securities are shares of common stock. As of March 31, 2008, our 32,651,166,465 shares of common stock outstanding were held by 8,417 stockholders of record.

As of March 31, 2008, six out of seven members of our Board of Directors were designees of Endesa Spain. As a result of the foregoing, Endesa Spain has exerted majority control over Enersis since April 1999. However, Endesa Spain does not have different voting rights than the other shareholders of Enersis. The following table sets forth certain information concerning ownership of the common stock as of March 31, 2008, with respect to each stockholder known to us to own more than 5% of the outstanding shares of common stock:


			Percentage of
	Number of		Shares
	Shares Owned		Outstanding
Endesa Spain(1)		19,794,583,473		60.6	%
AFP Provida(2)		1,741,527,434		5.3	%


(1)		Endesa Spain’s 60.6% beneficial interest is held through Endesa Internacional.

(2)		The beneficial interest of AFP Provida is held through four different investment funds.

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B. Related Party Transactions.

Article 89 of the Chilean Companies Act requires that our transactions with our parent company, subsidiaries and/or their related parties be on equitable conditions, similar to those customarily prevailing in the market.

Directors and executive officers of companies who violate Article 89 are liable for losses resulting from such violation. In addition, Article 44 of the Chilean Companies Act, as amended, provides that a corporation may only execute transactions in which one or more directors have a personal interest or an interest as a representative of another person, when such transactions are previously examined and reported to the Board of Directors by the Directors’ Committee and then approved by the Board of Directors prior to execution by the Company, and the terms of such transactions are adjusted to equitable conditions similar to those customarily prevailing in the market. Resolutions approving transactions under Article 44 must be reported to our stockholders in the next stockholders’ meeting. If the transactions involve a material amount, the Board of Directors must determine in advance if the transactions are adjusted to equitable conditions similar to those customarily prevailing in the market or not. If the board decides that it is not possible to ascertain such conditions, the Board of Directors, with the exclusion of interested directors, may approve or reject the transaction, or appoint two independent appraisers. The appraisers’ report will be available to the shareholders and the Board of Directors for a period of 20 business days. Once such term has expired, the Board of Directors with the abstention of interested directors may approve or reject the transaction. If shareholders representing 5% or more of the voting shares consider that the terms and conditions of the transactions are not favorable to the interests of the Company, or that the appraisers’ reports are substantially different, they may request that the board convene a Special Shareholders’ meeting to approve or reject the transaction with a majority of two-thirds of the voting shares. Violation of Article 44 may result in administrative and criminal sanctions and civil liability to us, our shareholders or interested third parties who suffer losses as a result of such violation. We, our shareholders and interested third parties, however, may ask the interested director to reimburse the Company in an amount equivalent to the benefits that the transaction in violation of Article 44 represented to the interested director, relatives and/or representatives.

It is a common practice in Chile to transfer surplus funds from one company to another affiliate that has a cash deficit. These transactions are carried out through either short-term inter-company loans or through structured inter-company loans. Under Chilean law and regulation, such transactions must be carried out on an arm’s-length basis. It is our policy to manage all cash inflows and outflows of our wholly-owned Chilean subsidiaries, Endesa Chile and Endesa Chile’s Chilean subsidiaries by way of a centralized cash management policy. Such centralized cash management is more efficient for both financial and tax reasons. All of these operations are subject to the supervision of our Directors’ Committee.

In other countries in which we do business, these inter-company transactions are permitted but they have adverse tax consequences. Accordingly, we do not similarly manage the cash flows of our non-Chilean subsidiaries.

Enersis has made structured loans to Chilean subsidiaries, at the same cost of funds for Enersis, primarily to finance foreign investments. As of December 31, 2007, the outstanding net balance for such loans was $659 million, and the largest amount outstanding during 2007 and 2006 was $723 million and $778 million respectively. Additionally, the outstanding net balance of the loans granted by Enersis to its foreign subsidiaries was of $27 million as of December 31, 2007. The largest net amount outstanding during 2007and 2006 for such loans was $27, and $89 million, respectively.

The currency denomination of the structured loans granted by Enersis to it’s Chilean subsidiaries is the dollar and the UF. The interest rate on these intercompany loans to Enersis’ Chilean subsidiaries ranges from Libor plus 0.5% to Libor plus 2.7%, with a nominal weighted average interest rate of Libor plus 2.1%. The interest rate on the intercompany loans to Enersis’ foreign subsidiaries ranges from Libor plus 5% to Libor plus 6%, with a nominal weighted average interest rate of Libor plus 5.9%.

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Endesa Chile has also made structured loans to its subsidiaries in Chile, primarily to finance projects and refinance existing indebtedness. As of December 31, 2007, the outstanding net balance for such loans was $499 million. The largest amounts outstanding during 2007 and 2006 were $519 million and $547 million, respectively. Additionally, the outstanding net balance of the loans granted by Endesa Chile to its foreign subsidiaries was $7 million as of December 31, 2007. The largest net amounts outstanding during 2007 and 2006 for such loans were $165 million, and $458 million, respectively.

The interest rates on these intercompany loans to Endesa-Chile’s Chilean subsidiaries range from Libor plus 0.75 % to Libor plus 3.6%, with a weighted average interest rate of approximately Libor plus 2.33%. The interest rates on these intercompany loans to Endesa-Chile’s foreign subsidiaries range from Libor plus 2.85% to Libor plus 4.9%, with a weighted average interest rate of approximately Libor plus 2.9%.

As of the date of this report, the above-mentioned transactions have not suffered material changes. For more information regarding transactions with affiliates, refer to note 6 of our consolidated financial statements.

C. Interests of Experts and Counsel.

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information.

See “Item 18. Financial Statements” for our consolidated financial statements.

Legal Proceedings

We and our principal subsidiaries and affiliates routinely are parties to legal proceedings arising in the normal course of business that are not material to our consolidated results of operations. For more information on all of our legal proceedings please refer to note 30 of our consolidated financial statements.

Dividends

As determined by Enersis’ Board of Directors, the dividend policy for fiscal year 2007 was to pay a provisional dividend to stockholders equivalent to 15% of net income accumulated up to September 30, 2007 before negative goodwill amortization, which would be paid on December 2007, and a definitive dividend payment equal to 70% of the annual net income of fiscal year 2007 before negative goodwill amortization.

The Board generally proposes a definitive dividend payable each year, and attributable to the prior year, which cannot be less than the legal minimum of 30% of annual net income before negative goodwill amortization. At a meeting held on March 28, 2008, the Board of Directors agreed to propose at the general shareholders’ meeting held on April 1, 2008, the payment of a definitive dividend of Ch$3.94375 per share for fiscal year 2007, which is equal to 70% of the annual net income before negative goodwill amortization. The provisional dividend of Ch $0.53119 per share paid on December 2007 was deducted from the definitive dividend to be paid on April 30, 2008, as agreed by the general shareholders meeting.

The Board of Directors also approved a dividend policy for fiscal year 2008 according to which a provisional dividend would be paid to stockholders equal to 15% of the net income accumulated up to September 30, 2008, before negative goodwill amortization, and to propose to the general shareholders’ meeting to be held during the first four months of 2009, a definitive dividend payment equal to 70% of the annual net income of fiscal year 2008, before negative goodwill amortization. Actual dividend payments will be subject to net profits obtained in each period, as well as to expectations of future profit levels and other conditions that may exist at the time of such dividend declaration.

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Enersis, as a holding company, is primarily dependent upon cash inflows from its operating subsidiaries in the form of dividend payments, interest payments, management fees and capital reductions to service its debt obligations. The principal operating subsidiaries and affiliates of Enersis are Endesa Chile and Chilectra in Chile, Edesur in Argentina, Edelnor in Peru, Ampla and Coelce in Brazil (through Endesa Brasil) and Codensa in Colombia. See “Item 4. Information on the Company — C. Organizational Structure — Principal Subsidiaries and Affiliates.”

Stockholders set dividend policies at each subsidiary and affiliate. There are currently no material currency controls which prohibit Enersis from repatriating the dividend payments from its non-Chilean principal subsidiaries and affiliates.

Dividends Paid


	Nominal		$ per
Year	Ch$(1)		ADS(2)
	(Ch$ per share)
2002		—		—
2003		—		—
2004		—		—
2005		0.42		0.04
2006		2.11		0.21
2007		5.42		0.55


(1)		Amounts shown are in historical pesos and reflect all the dividends paid in a given year. These dividends may have been accrued the prior year, or the same year in which they were paid.

(2)		The dollar per ADS amount has been calculated by applying the exchange rate of Ch$496.89 = $1.00, the Observed Exchange Rate prevailing on December 31, 2007, to the constant peso amount.

For a discussion of Chilean Withholding Taxes and access to the formal currency market in Chile in connection with the payment of dividends and sales of ADSs and the underlying Common Stock, see “Item 10. Additional Information — E. Taxation,” and “Item 10. Additional Information — D. Exchange Controls.”

B. Significant Changes.

None.

Item 9. The Offer and Listing

A. Offer and Listing Details.

Market Price and Volume Information

The shares of our Common Stock currently trade on the Chilean Exchanges. Shares of our Common Stock have traded in the United States on the NYSE since October 19, 1993 in the form of ADSs under the ticker symbol “ENI.” Each ADS represents 50 shares of Common Stock, with the ADSs in turn evidenced by American Depositary Receipts (“ADRs”). The ADRs are outstanding under a Deposit Agreement dated as of October 18, 1993, as amended, among us, Citibank, N.A., as Depositary, and the holders from time to time of ADRs issued thereunder. Only persons in whose names ADRs are registered on the books of the Depositary are treated by the Depositary as owners of ADRs.

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The table below shows, for the periods indicated, the share volume, quarterly high and low closing prices in pesos of the Shares on the Santiago Stock Exchange and the quarterly high and low closing prices of the ADSs in dollars as reported by the NYSE.


	Chilean Pesos Per Share(1)						U.S.$ per ADS(2)
	Share Volume		High		Low		High			Low
2008
May		610,304,619		189.00		163.99		19	5/6		17	4/7
April		1,282,543,671		184.00		156.50		20	1/4		17	3/4
March		756,857,502		155.70		136.00		17	7/8		15
February		546,881,794		151.00		130.00		16	1/2		13	1/3
January		1,326,228,078		161.89		110.00		16			11	5/6

2007
December		1,318,759,385		182.50		157.00		18	5/8		15	5/6
November		954,272,189		195.00		167.40		19	3/4		16
4^th quarter		3,104,262,960		199.00		157.00		20	1/5		15	5/6
3^rd quarter		2,623,759,573		213.80		159.00		20	1/2		15
2^nd quarter		2,281,519,210		215.00		175.50		20	2/5		16	1/5
1^st quarter		2,326,545,937		185.50		163.00		17	2/7		14	1/3

2006
December		1,473,086,846		173.00		158.16		16	2/5		15
November		983,312,375		164.00		143.00		15	4/9		13	1/2
4^th quarter		2,935,194,633		173.00		140.00		16	2/5		13
3^rd quarter		1,424,604,249		147.99		117.99		13	6/7		10	3/4
2^nd quarter		1,391,561,107		129.90		112.40		12	2/3		10	1/7
1^st quarter		1,963,504,194		129.49		108.50		12	2/3		10	3/5

2005
December		618,835,548		122.00		109.00		8	2/3		7	1/3
4^th quarter		2,212,992,708		130.00		109.00		12	1/3		10	1/2
3^rd quarter		1,840,936,792		123.00		111.00		11	1/2		9	7/8
2^nd quarter		2,112,530,098		126.00		97.00		10	6/7		8	1/4
1^st quarter		1,348,339,507		103.50		87.00		9			7	1/3

2004
December		568,896,414		97.00		87.00		8	5/8		7	2/5
4^th quarter		2,248,285,905		97.00		84.00		8	5/8		6	4/5
3^rd quarter		2,236,312,231		89.51		73.00		7	1/2		5	2/3
2^nd quarter		1,032,271,059		82.01		70.00		6	5/6		5	1/2
1^st quarter		1,413,791,567		87.50		73.00		7	3/4		5	7/8

2003
4^th quarter		2,949,415,326		88.00		72.01		7	2/5		5	7/9
3^rd quarter		2,615,141,119		76.50		60.80		6			4	1/2
2^nd quarter		2,037,701,115		73.00		56.00		5	1/4		3	6/7
1^st quarter		435,639,838		67.00		55.00		4	5/7		3	5/8


(1)		As reported by the Santiago Stock Exchange. Pesos per share reflect the nominal price as of the trade date. The price has not been restated in constant pesos.

(2)		As reported by the NYSE. One ADS = 50 Shares

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As of December 31, 2007, there were 57,802,786 ADSs (equivalent to 2,890,139,300 common shares) outstanding. Such ADSs represented at such date 8.9% of the total number of outstanding shares. It is not practicable for us to determine the proportion of ADRs beneficially owned by U.S. persons.

Trading

The Santiago Stock Exchange was established in 1893 and is a private company whose equity consists of 48 shares held by 45 stockholders as of the date of this report. As of December 31, 2007, 238 companies had shares listed on the Santiago Stock Exchange.

Equities, closed-end funds, fixed-income securities, short-term and money market securities, gold and dollars are traded on the Santiago Stock Exchange. In 1990, the Santiago Stock Exchange initiated a futures market with two instruments, dollar futures and Selective Shares Price Index, or IPSA, futures. Securities are traded primarily through an open-voice auction system, a firm offers system or the daily auction. Trading through the open-voice system occurs on each business day from 9:30 a.m., to 4:30 p.m., Santiago time, which varies from New York City time depending on the season. The Santiago Stock Exchange has an electronic trading system called Telepregón, which operates continuously from 9:30 a.m. to 4:30 p.m. on each business day. For days on which auctions are scheduled, there are three times available for such auctions: 9:15 a.m., 12:30 p.m. and 4:30 p.m.

There are two share price indices on the Santiago Stock Exchange: the General Share Price Index, or IGPA, and the IPSA. The IGPA is calculated using the prices of over 156 issues and is divided into five main sectors: banks and finance; farming and forest products; mining; industry; and miscellaneous. The IPSA is calculated using the prices of the 40 most actively traded shares. The shares included in the IPSA are weighted according to the value of the shares traded. As of December 31, 2007, Enersis and Endesa Chile shares were included in the IPSA.

Shares of Enersis were first listed and began trading on the Bolsa de Valores Latinoamericanos de la Bolsa de Madrid, or Latibex, as of December 17, 2001. One trading unit is the equivalent of 50 common shares (the same unit conversion of 50:1 as an ADS) and the trading ticker symbol is “XENI.” Banco Santander Central Hispano Bolsa S.A. S.V.B. acts as the liaison entity, and the Banco Santander as the depositary in Chile. Trading of our shares in the Latibex amounted to approximately 1.3 million units in 2007, which in turn was equivalent to €17 million. The stock closed at €11.01 on the last day of trading in Latibex in 2007.

B. Plan of Distribution.

Not applicable.

C. Markets.

See “ — A. Offer and Listing Details — Market Price and Volume Information” above.

D. Selling Shareholders.

Not applicable.

E. Dilution.

Not applicable.

F. Expense of the Issue.

Not applicable.

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Item 10. Additional Information

A. Share Capital.

Not applicable.

B. Memorandum and Articles of Association.

Description of Share Capital

Set forth below is certain information concerning our share capital and a brief summary of certain significant provisions of our by-laws and Chilean law.

General

Shareholders’ rights in Chilean companies are governed by company’s by-laws, which effectively serve the purpose of both the articles or certificate of incorporation and the by-laws of a company incorporated in the United States, and by the Chilean Companies Act (Ley de Sociedades Anónimas 18,046). In accordance with the Chilean Companies Act, legal actions by shareholders against us to enforce their rights as shareholders must be brought in Chile in arbitration proceedings or at the option of the plaintiff before the ordinary courts of Chile.

The Chilean securities markets are principally regulated by the Superintendencia de Valores y Seguros, Superintendence of Securities and Insurance, or SVS, under the Ley de Mercado de Valores 18,045, or the Securities Market Law, and the Chilean Companies Act. These two laws provide for disclosure requirements, restrictions on insider trading and price manipulation, and protection of minority investors. The Securities Market Law sets forth requirements for public offerings, stock exchanges and brokers, and outlines disclosure requirements for companies that issue publicly offered securities. Law 19,705 introduced important amendments to the Chilean Companies Act and the Securities Market Law. Among other things, it provides a new definition for publicly held limited liability stock companies and new rules regarding takeovers, tender offers, transactions with directors, qualified majorities, share repurchase, directors committee, stock options and derivative actions. Publicly held limited liability stock companies are those with 500 or more shareholders, or companies in which 100 or more shareholders own at least 10% of the subscribed capital, excluding those whose individual holdings directly or indirectly exceed such percentage, and all other companies whose shares are registered voluntarily with the SVS, regardless of the number of their shareholders. Enersis is a publicly held limited liability stock company (sociedad anónima abierta).

Reporting Requirements Regarding Acquisition or Sale of Shares

Under Article 12 of the Securities Market Law and Section II of Circular 585 of the SVS, certain information regarding transactions in shares of publicly held limited liability stock companies must be reported to the SVS and the Chilean stock exchanges. Since ADSs are deemed to represent the shares of common stock underlying the ADRs, transactions in ADRs will be subject to these reporting requirements and those established in Circular 1,375 of the SVS. Shareholders of publicly held limited liability stock companies are required to report to the SVS and the Chilean stock exchanges:

	•		any direct or indirect acquisition or sale of shares or options to buy or sell shares that results in the holder’s acquiring or disposing, directly or indirectly, of 10% or more of a publicly held limited liability stock company’s subscribed capital; and

	•		any direct or indirect acquisition or sale of shares or options to buy or sell shares, in any amount, if made by a holder of 10% or more of a publicly held limited liability stock company’s subscribed capital.

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Any direct or indirect acquisition or sale of shares or options to buy or sell shares, in any amount, made by a director, liquidator, principal executive, chief executive officer or officer of a company whose shares are registered with the SVS must be reported to the SVS and the Chilean stock exchanges.

In addition, the majority shareholders must inform the SVS and the Chilean stock exchanges if the above-mentioned acquisitions are done with the intention to obtain control of the Company or only as passive investment.

Under Article 54 of the Securities Market Law and Norma de Carácter General 104 enacted by the SVS in 2001, any person who directly or indirectly intends to take control of a publicly held limited liability stock company must disclose his intent to the market at least 10 business days in advance of the change of control and, in any event, as soon as the negotiations for the change of control have started. If the change of control shall occur by means of a tender offer, the new provisions on tender offers will apply.

Law 19,705 introduced a chapter to the Securities Market Law, establishing a comprehensive regulation on tender offers. The law defines a tender offer as an offer to purchase shares of corporations which publicly offer their shares or securities convertible into shares and which offer is made to shareholders to purchase their shares on conditions which allow the bidder to reach a certain percentage of ownership of the corporation within a fixed period of time. These provisions apply to both voluntary and mandatory tender offers.

Register

Enersis is registered with the SVS and its entry number is 0175.

Corporate Objective and Purpose

Article 4 of our by-laws states that our corporate objective and purpose are, among other things, to conduct the exploration, development, operation, generation, distribution, transmission, transformation, or sale of energy in any form, directly or through other companies, as well as to provide engineering-consultancy services related to these objectives, in Chile and abroad and to participate in the telecommunications business.

Board of Directors

Our Board of Directors is made up of seven members who may or may not be shareholders of Enersis. Members of the Board are elected at the general meeting of shareholders for a period of three years at the end of which they will be re-elected or replaced.

The seven directors elected at the shareholders’ meeting are those seven individual nominees who receive the most votes. Each shareholder may vote all of his shares in favor of one nominee or may apportion his shares among any number of nominees. These voting provisions ensure that a shareholder owning more than 12.5% of our shares outstanding is able to elect a member of the Board of Directors.

The compensation of the directors is set annually at the general meeting of shareholders. The Chairman is entitled to receive twice the compensation paid to each director, and the Vice Chairman 50% more than that paid, to each director. Thus, the Board of Directors does not have power to vote compensation for themselves or any members of their body.

Our by-laws do not contain provisions relating to borrowing powers exercisable by the directors and how such borrowing powers can be varied; or retirement or non-retirement of directors under an age limit requirement.

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Certain Provisions Regarding Shareholder Rights

As of the date of the filing of this annual report, Enersis’ capital is comprised of only one class of shares, all of which are ordinary shares and have the same rights.

Our by-laws do not contain any provisions relating to redemption provisions, sinking funds or liability to further capital calls by the Company.

Under Chilean law, the rights of holders of stock may only be changed by an amendment to the by-laws of the company that complies with the requirements explained below under “ — Shareholders’ Meetings and Voting Rights.”

Capitalization

Under Chilean law, the shareholders of a company, acting at special shareholders’ meeting, have the power to authorize an increase in its capital. When an investor subscribes for shares, the shares are officially issued and registered in his name, and the subscriber is treated as a shareholder for all purposes except receipt of dividends and for return of capital in the event that the subscribed shares have not been paid for. The subscriber becomes eligible to receive dividends once he has paid for the shares, or, if he has paid for only a portion of such shares, the pro rata portion of the dividends declared with respect to such shares unless the company’s by-laws provide otherwise. If a subscriber does not fully pay for shares for which he has subscribed on or prior to the date agreed, the company is entitled to auction the shares on the stock exchange where such shares are traded and has a cause of action against the subscriber for the difference, if any, between the subscription price and the price received at auction. However, until such shares are sold at the auction, the subscriber continues to have all the rights of a shareholder, except the right to receive dividends and return of capital. Authorized and issued shares, for which full payment has not been made within the period fixed by the special shareholders’ meeting at which their subscription was authorized, which may not exceed three years from the date of such meeting, are canceled and are no longer available for issuance.

In 1999, our shareholders approved a capital increase of 2.58 billion shares. In 2000, the Company issued a Pre-Emptive Rights’ Offering, including an ADS Offering, in which approximately 1.49 billion common shares were fully subscribed and paid for under this capital increase. In 2002, the three-year period granted by the Company’s shareholders in order to carry out the remainder of the authorized capital increase, expired. Therefore, the shares of the Company were reduced to the number which until now have been fully subscribed and paid.

In 2003, at a Special Shareholders’ Meeting, Enersis’ shareholders approved the issuance of 24,382,994,488 shares, at a market value of approximately $2 billion. The capital increase allowed Endesa Spain, acting through a subsidiary, to exercise a portion of its pre-emptive options corresponding to 14,406,840,511 new shares, which were paid by the cancellation of a Ch$1.0 trillion (approximately $1.4 billion at the exchange rate applicable at that time) inter-company loan that had previously been granted to Enersis. As required by Chilean law, an independent appraiser valued the loan exclusively for purposes of the capital increase at 86.8% of its par value. Endesa Spain, acting through a subsidiary, subscribed for 59.1% of the new shares at a value of Ch$870.5 billion, the appraised value of the loan. Additionally, the capital increase allowed the subscription for 3.7% of the new shares as part of the local bond exchange offer, which took place between the first and the second pre-emptive rights periods of the capital increase. The total amount of local bonds exchanged was equivalent to approximately Ch$54 billion.

The shareholders also approved in that meeting, the elimination of the 65% by-laws’ restriction on the maximum shareholding by any party. In 2004, our shareholders approved a new amendment to our by-laws to reinstate, among other things, the 65% maximum shareholding restriction set forth above.

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Preemptive Rights and Increases of Share Capital

The Chilean Companies Act requires Chilean companies to grant shareholders preemptive rights to purchase a number of shares sufficient to maintain their existing ownership percentage of such company whenever such company issues new shares.

Under Chilean law, preemptive rights are exercisable or freely transferable by shareholders during the 30-day period following the granting of such rights. During such 30-day period, and for an additional 30-day period, Chilean publicly held limited liability stock companies are not permitted to offer any unsubscribed shares to third parties on terms which are more favorable than those offered to their shareholders, but they may be freely sold after the 30-day period following the granting of such rights to third parties on terms less favorable for the purchaser than those offered to shareholders. At the end of such additional 30-day period, a Chilean publicly held limited liability stock company is authorized to sell non-subscribed shares to third parties on any terms, provided they are sold on one of the Chilean stock exchanges.

Under the last capital increase, the first preemptive rights period ended on June 30, 2003 and the second period was from November 20 to December 20, 2003. Between the two preemptive rights periods, there was also a preferred opportunity for Enersis’ local bondholders to tender their bonds in exchange for shares of common stock.

Shareholders’ Meetings and Voting Rights

An amendment to our by-laws requires the affirmative vote of shareholders holding not less than two-thirds of the shares eligible to vote.

An ordinary annual meeting of our shareholders is held within the first four months following the end of our fiscal year, generally in March or April. The last ordinary annual meeting was held on April 1, 2008. Special meetings may be called by the Board of Directors when deemed appropriate or when requested by shareholders representing at least 10% of the issued voting shares or by the SVS. To convene a Special meeting, or an ordinary annual meeting, notice must be given by three publications in a prescribed manner in a newspaper of our corporate domicile. The newspaper designated by our shareholders is the Santiago edition of El Mercurio. The first notice must be published not less than 15 days nor more than 20 days in advance of the scheduled meeting. Notice must also be mailed to each shareholder and given to the SVS and the Chilean stock exchanges. The last special meeting of Enersis’ shareholders was held on March 21, 2006.

Under Chilean law, a quorum for a shareholders’ meeting is established by the presence, in person or by proxy, of shareholders representing at least a majority of the issued voting shares of a company. If a quorum is not present at the first meeting, a reconvened meeting can take place at which the shareholders present are deemed to constitute a quorum regardless of the percentage of the shares represented. The second meeting must take place within 45 days following the scheduled date of the first meeting. Shareholders’ meetings adopt resolutions by the affirmative vote of an absolute majority of those shares present, or represented, at the meeting. Additionally, if a shareholders’ meeting is called for the purpose of considering a transformation of the company into a different form of entity, a merger or division of the company; an amendment to the term of duration or early dissolution; a change in the corporation’s domicile; a decrease of corporate capital; approval of capital contributions in kind and assessment of such assets; modification of the authority reserved to shareholders or limitations on the Board of Directors’ powers; reduction in the number of members of the Board of Directors; disposition of 50% or more of the assets of the corporation, whether it includes disposition of liabilities or not, as well as the approval or the amendment of the business plan which contemplates the disposition of assets for such amount; the form of distributing corporate benefits; issue of guarantees for third parties’ liabilities which exceed 50% of the assets, but if the third party is a subsidiary of the company, the approval of the Board of Directors is sufficient; the purchase of the corporation’s own shares; or certain remedies for the nullification of the corporate by-laws, regardless of the quorum present, then the vote required for the action is a two-thirds majority of the issued voting shares.

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By-law amendments for the creation of a new class of shares, or an amendment to or an elimination of those classes of shares that already exist, must be approved by two-thirds majority of the outstanding shares of the affected series.

Shareholders are entitled to examine the books of the Company within the 15-day period before the scheduled shareholders’ meeting. Under Chilean law, a notice of a shareholders’ meeting listing matters to be addressed at the meeting must be mailed at least 15 days prior to the date of such meeting, and, in cases of an ordinary annual meeting, the annual report of the Company’s activities which includes audited financial statements, must be made available to shareholders and published on the Company’s website: www.enersis.cl. In addition to these requirements, we regularly provide, and management currently intends to continue to provide, together with the notice of the ordinary shareholders’ meetings, a proposal for the final dividend and an explanation of the dividend policy for interim dividends for that current year, previously approved by the Board of Directors, as well as a proposal of the Investment and Financing Policy to be approved by the shareholders for the current year.

The Chilean Companies Act provides that, upon the request by shareholders representing 10% or more of the issued voting shares, a Chilean company’s annual report must include, in addition to the materials provided by the Board of Directors to shareholders, such shareholders’ comments and proposals in relation to the company’s affairs. Similarly, the Chilean Companies Act provides that whenever the Board of Directors of a publicly held limited liability stock company convenes an ordinary meeting of shareholders and solicits proxies for the meeting, or circulates information supporting its decisions or other similar material, it is obligated to include the pertinent comments and proposals that may have been made by shareholders owning 10% or more of the company’s voting shares who request that such comments and proposals be so included.

Only shareholders registered as such with Enersis five business days prior to the date of a meeting are entitled to attend and vote their shares. A shareholder may appoint another individual, who need not be a shareholder, as his proxy to attend and vote on his behalf. Proxies for such representation shall be given in writing for all the shares held by the owner. Every shareholder entitled to attend and vote at a shareholders’ meeting shall have one vote for every share subscribed.

Dividends and Liquidation Rights

In accordance with Chilean law, we are required to pay cash dividends equal to at least 30% of annual audited net income, calculated in accordance with Chilean GAAP (before negative goodwill amortization). If there is no net income in a given year, we may, but are not legally obligated to, distribute dividends out of retained earnings.

Any dividend in excess of 30% of such net income may be paid, at the election of the shareholder, in cash, in Enersis’ shares or in shares of publicly held limited liability stock corporations held by Enersis. Shareholders who do not expressly elect to receive a dividend other than in cash are legally presumed to have decided to receive the dividend in cash.

Dividends which are declared but not paid or made available to shareholders within the appropriate time period set forth in the Chilean Companies Act — as to minimum dividends, 30 days after declaration; as to additional dividends, the date set for payment at the time of declaration — are adjusted to reflect the change in the value of UF, a Chilean inflation adjusted currency, from the date set for payment to the date such dividends are actually paid. Such dividends also accrue interest at the then prevailing rate for UF-denominated deposits during such period. The right to receive a dividend lapses if it is not claimed within five years from the date such dividend is payable.

In the event of a liquidation of Enersis, the holders of shares would participate in the assets available in proportion to the number of paid-in shares held by them, after payment of all creditors.

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Approval of Financial Statements

The Board of Directors is required to submit Enersis’ financial statements to the shareholders annually for their approval. If the shareholders by a vote of a majority of shares present (in person or by proxy) at the shareholders’ meeting reject the financial statements, the Board of Directors must submit new financial statements no later than 60 days from the date of such meeting. If the shareholders reject the new financial statements, the entire Board of Directors is deemed removed from office and a new board is elected at the same meeting. Directors who individually approved such financial statements are disqualified for re-election for the following period. Our shareholders have never rejected the financial statements presented by the Board of Directors.

Change of Control

Our by-laws do not contain any provisions that would delay, defer or prevent a change in control of Enersis. Under Article 54 of the Securities Market Law and Norma de Carácter General 104 enacted by the SVS in 2001, any person who directly or indirectly intends to acquire control of a publicly held limited liability stock company must disclose their intent do so at least 10 business days in advance of the change of control and, in any event, as soon as the negotiations for the change of control have started. If the change of control shall occur by means of a tender offer, the provisions on tender offers will apply.

Acquisition of Shares

There are no provisions in our by-laws that discriminate against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares, except for the maximum concentration limit of shares to be held or voted, which currently is set at 65%, and provided for in our by-laws.

Right of Dissenting Shareholders to Tender Their Shares

The Chilean Companies Act provides that upon the adoption of any of the resolutions enumerated below at a special meeting of shareholders, dissenting shareholders acquire the right to withdraw from the company and to compel the company to repurchase their shares, subject to the fulfillment of certain terms and conditions. In order to exercise such rights, holders of ADRs must first withdraw the shares represented by their ADRs pursuant to the terms of the deposit agreement.

“Dissenting” shareholders are defined as those who vote against a resolution that results in the withdrawal right, or who, if absent from such meeting, state in writing their opposition to the respective resolution, within 30 days following the shareholders’ meeting, where the resolution giving rise to the withdrawal right was approved. The price paid to a dissenting shareholder of a publicly held limited liability stock company, the shares of which are quoted and actively traded on one of the Chilean stock exchanges, is the greatest among (i) the weighted average of the sales prices for the shares as reported on the Chilean stock exchanges on which the shares are quoted for the two-month period preceding the shareholders’ meeting giving rise to the withdrawal right, and (ii) the market price resulting from the average price of transactions on such day. If, because of the volume, frequency, number and diversity of the buyers and sellers, the SVS determined that the shares are not actively traded on a stock exchange, the price paid to the dissenting shareholder shall be the book value. Book value for this purpose shall equal paid capital plus reserves and profits, less losses, divided by the total number of subscribed shares, whether entirely or partially paid. For the purpose of making this calculation, the last annual balance sheet is used, as adjusted to reflect inflation up to date of the shareholders’ meeting which gave rise to the withdrawal right.

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The resolutions that result in a shareholder’s right to withdraw include, among others, the following: the transformation of the company into another type of entity; the merger of the company with another company; disposition of 50% or more of the assets of the corporation, whether it includes disposition of liabilities or not, as well as the approval or the amendment of the business plan which contemplates the disposition of assets for such amount; issue of guarantees for third parties’ liabilities which exceed 50% of the assets, but if the third party is a subsidiary of the company, the approval of the Board of Directors is sufficient; and the creation of preferential rights for a class of shares or an amendment to the existing ones. The right to withdraw only accrues to the dissenting shareholders of the class or classes of shares adversely affected; certain remedies for the nullification of the corporate by-laws; and such other causes as may be established by a company’s by-laws.

Investments by AFPs

Title XII of DL-3500 permits AFPs to invest their fund assets in companies that are subject to Title XII and, subject to greater restrictions, in other companies. The determination of which stocks may be purchased by AFPs is made by the Comisión Clasificadora de Riesgo, or the CCR. The CCR establishes investment guidelines and is empowered to approve or disapprove those companies that are eligible for AFP investments. Except for the period from March 2003 to March 2004, Enersis has been a Title XII Company since 1985 and is approved by the CCR.

Registrations and Transfers

Enersis’ shares are currently registered through an Administrative Agent named DCV Registros S.A. This entity is responsible for Enersis’ shareholders registry as well.

C. Material contracts.

None.

D. Exchange controls.

The Central Bank is responsible for, among other operating functions, the regulation of the amount of money in circulation and credit, the regulation of the financial system and the capital market. It has faculties to preserve financial system stability, to issue monetary policies and to control foreign currency operations.

On January 23, 2002, the Chilean Central Bank approved a new Compendium of Foreign Exchange Regulations that replaced the existing one. The new Compendium has been in effect since March 1, 2002.

With these new rules, the Central Bank effectively concluded a process of gradual deregulation of the foreign exchange market.

This new Compendium enhances the information gathered by the Central Bank and the quality of such information. In addition, this new Compendium includes the main rules that modified the Compendium of Foreign Exchange Regulations in April 1991. In other words, new cross-border investing and financing decisions will no longer be subject to any restrictions set forth in both Articles 42 and 49 of the Central Bank Law such as:

	•		the prior Central Bank authorization requirement for the entry of capital associated with foreign loans, investments, capital contributions, bonds and ADRs;

	•		the prior Central Bank authorization for capital remittances associated with returns of capital, dividends, and other benefits related to capital contributions, investments and prepayment of foreign loans;

	•		the prior Central Bank authorization for the return of capital, profits and other benefits associated with investments made by Chilean residents abroad;

	•		the limitations to the special prepayment and acceleration clauses contained in foreign loans;

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	•		the restrictions of minimum risk classification and the weighted duration for the issuance of bonds;

	•		the limitations with respect to the currencies in which external debt can be issued or contracted;

	•		the restrictions to the issue of ADRs; and

	•		the reserve requirement on funds coming from abroad (which was already 0%).

The Compendium and International Bond Issuances

Chilean issuers may offer bonds internationally under Chapter XIV, as amended, of the Compendium of Foreign Exchange Regulations (the “Compendium”), issued by the Central Bank.

Prior to September 17, 1998, foreign loans (including international bond offerings) granted to individuals or companies in Chile were subject to a mandatory deposit (“encaje”) of an amount equal to 10% (reduced from a prior level of 30%) of the proceeds of the loan (or bond offering) in a one-year, non-interest-bearing dollar account with the Central Bank (or to payment of a charge to the Central Bank on the next working day after the date of conversion of foreign currency into pesos in an amount equal to interest on such deposit at the rate of the twelve-month LIBOR for dollar deposits plus a market spread). On September 17, 1998, the encaje deposit requirement was reduced to 0%, and on April 19, 2001, the encaje was eliminated. Despite this elimination, the Central Bank may at any time reinstate the encaje.

Foreign Investment Contracts and Chapter XXVI

In connection with our initial offering of ADSs in 1993, on October 15, 1993, we entered into a foreign investment contract (the “Foreign Investment Contract”) with the Central Bank and Citibank N.A., New York, the Depositary, pursuant to Article 47 of the Central Bank Act and Chapter XXVI of the Compendium of Foreign Exchange Regulations of the Central Bank (“Chapter XXVI”), which governed the issuance of ADSs by a Chilean company. Pursuant to the Foreign Investment Contract, and those agreed on October 15th, 1993, September 7th, 2000 and October 12, 2000 (the “Foreign Investment Contracts”), the foreign exchange for payments and distributions with respect to the ADSs may be purchased in either the Formal Exchange Market or the Informal Exchange Market, but such payments must be necessarily remitted through the Formal Exchange Market. A new Compendium of Foreign Exchange Regulations in force since April 19, 2001, abrogated Chapter XXVI. This Compendium was restated and has been in force since March 1, 2002. Despite the fact of the abrogation of Chapter XXVI, the ADSs issued under the terms of the Foreign Investment Contracts currently in effect have a guaranteed access to the Formal Exchange Market. Foreign investors who have purchased their shares under a Foreign Investment Contract pursuant to the former Chapter XXVI continue to have access to the Formal Exchange Market for the purpose of converting pesos to dollars and repatriating from Chile amounts received with respect to the deposited shares of common stock or shares of common stock withdrawn from deposit on surrender of ADRs (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying shares of common stock and any rights with respect thereto).

The Foreign Investment Contracts cannot be modified or terminated without the consent of all parties, and therefore foreign investors who have purchased their shares under a Foreign Investment Contract will continue to have access to the Formal Exchange Market. However, foreign investors who did not deposit their shares of common stock into our ADS facility will not have the benefits of our Foreign Investment Contracts with the Central Bank but instead will be subject to the normal foreign investment rules.

The following is a summary of certain provisions of the former Chapter XXVI and the Foreign Investment Contract, and which therefore remain relevant. This summary does not purport to be complete and is qualified in its entirety by reference to the former Chapter XXVI, the Foreign Investment Contracts, the Central Bank decision dated May 10th, 2007 and Rule 1228 issued by the Central Bank on May 23, 2007.

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Under the former Chapter XXVI and the Foreign Investment Contracts, the Central Bank agreed to grant to the Depositary, on behalf of ADR holders, and to any investor not residing or domiciled in Chile who withdraws common stock under Foreign Investment Contracts pursuant to the former Chapter XXVI, upon delivery of ADRs (such shares of common stock being referred to herein as “Withdrawn Shares”), access to the Formal Exchange Market to convert pesos into dollars (and to remit such dollars outside of Chile), including amounts received as:

	•		cash dividends;

	•		proceeds from the sale in Chile of Withdrawn Shares subject to receipt by the Central Bank of a certificate from the holder of the Withdrawn Shares (or from an institution authorized by the Central Bank) that such holder’s residence and domicile are outside Chile and a certificate from a Chilean stock exchange (or from a brokerage or securities firm established in Chile) that such Withdrawn Shares were sold on a Chilean stock exchange;

	•		proceeds from the sale in Chile of rights to subscribe for additional shares of Common Stock;

	•		proceeds from the liquidation, merger or consolidation of our Company; and

	•		other distributions, including, without limitation, those resulting from any recapitalization, as a result of holding shares of Common Stock represented by ADSs or Withdrawn Shares.

Transferees of Withdrawn Shares were not entitled to any of the foregoing rights under the former Chapter XXVI. Investors receiving Withdrawn Shares in exchange for ADRs had the right to redeposit such shares in exchange for ADRs, provided that certain conditions relating to redeposit were satisfied.

The former Chapter XXVI provided that access to the Formal Exchange Market in connection with dividend payments was conditioned upon certification by Enersis to the Central Bank that a dividend payment has been made and any applicable tax has been withheld. Chapter XXVI also provided that the access to the Formal Exchange Market in connection with the sale of Withdrawn Shares or distributions thereon was conditioned upon receipt by the Central Bank of certification by the Depositary (or the Custodian on its behalf) that such Shares have been withdrawn in exchange for ADRs and receipt of a waiver of the benefit of the Foreign Investment Contract with respect thereto until such Withdrawn Shares were redeposited.

The Foreign Investment Contracts provide that a person who brings foreign currency into Chile to purchase shares of common stock with the benefit of the Foreign Investment Contract must convert it into pesos on the same date and has five banking business days within which to invest in shares of common stock in order to receive the benefits of the Foreign Investment Contracts. If such person decides within such period not to acquire shares of common stock, such person can access the Formal Exchange Market to reacquire dollars, provided that the applicable request is presented to the Central Bank within seven banking business days of the initial conversion into pesos. Shares acquired (as described above) may be deposited for ADRs and receive the benefits of the Foreign Investment Contracts, subject to receipt by the Central Bank of a certificate from the Depositary (or the Custodian on its behalf) that such deposit has been effected and that the related ADRs have been issued and receipt of a declaration from the person making such deposit waiving the benefits of the Foreign Investment Contract with respect to the deposited shares of common stock.

Access to the Formal Exchange Market under any of the circumstances described above is not automatic. Pursuant to the former Chapter XXVI, such access required approval of the Central Bank based on a request therefor presented through a banking institution established in Chile. The Foreign Investment Contracts provides that if the Central Bank has not acted on such request within seven banking days, the request will be deemed approved.

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In November 1995, the Central Bank amended the former Chapter XXVI to regulate secondary offerings of ADSs by companies that have previously entered into a Foreign Investment Contract. In accordance with the new regulations, we entered into an amended Foreign Investment Contract in connection with its offering of ADSs completed in February 1996 to comply with the rules in effect on the date of Central Bank approval of the new issuance of ADSs.

On November 16, 1999, the Central Bank issued new regulations which amended Chapter XXVI. Among the amendments, the former Chapter XXVI required that foreign currency that entered Chile pursuant to the former Chapter XXVI be converted into pesos in the Formal Exchange Market, and the shares evidencing ADRs only be paid in pesos. In addition, foreign currency required to remit the proceeds of the sale of the underlying shares be acquired alternatively in the Formal or in the Informal Exchange Market, although remittance of such amounts necessarily was to be made through the Formal Exchange Market (i.e., through a bank). On May 12, 2000, the rule that required that the invested capital remain in the country for at least one year before being repatriated was eliminated.

In connection with our capital increase approved in our shareholders’ meeting of April 30, 1999, we first amended our Foreign Investment Contract on September 7, 2000, and subsequently entered into a new Foreign Investment Contract on October 12, 2000.

On May 10th, 2007, the Central Bank agreed to extend the effects of the former Chapter XXVI to capital increases approved after April 18, 2001. As a consequence of such Central Bank’s decision, Enersis formally requested to the Central Bank to be allowed to enter into a new Foreign Investment Contract regarding a capital increase approved in our shareholders’ meeting of March 31, 2003, which was granted by the Central Bank, subject to signing of a new Foreign Investment Contract which new terms have to be defined by the Central Bank and agreed to by Enersis.

Under current Chilean law, the Foreign Investment Contract cannot be changed unilaterally by the Central Bank. However, the Central Bank’s approval to extend the effects of the former Chapter XXVI to the last capital increase, is subject to the condition that shares of any future capital increase would have to be sufficiently differentiated from shares under the effects of the former Chapter XXVI, otherwise the Central Bank could revoke its last approval. Furthermore, it is not certain, however, that additional Chilean restrictions applicable to the holders of ADRs, the disposition of underlying shares of Common Stock or the repatriation of the proceeds from such disposition could not be imposed in the future, nor can there be any assessment of the duration or impact of such restrictions if imposed.

E. Taxation.

Chilean Tax Considerations

The following discussion summarizes material Chilean income and withholding tax consequences to beneficial owners arising from the receipt, the exercise and/or the sale of ADS rights as well as from the purchase, ownership and disposition of the shares and ADSs. The summary which follows does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, own or dispose of shares or ADSs and does not purport to deal with the tax consequences applicable to all categories of investors, some of which may be subject to special rules. Holders of shares and ADSs are advised to consult their own tax advisors concerning the Chilean and other tax consequences of the ownership of shares or ADSs.

The summary which follows is based on Chilean law, as in effect on the date hereof, and is subject to any changes in these or other laws occurring after this date, possibly with retroactive effect.

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Under Chilean law, provisions contained in statutes such as tax rates applicable to foreign investors, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may be amended only by another law. In addition, the Chilean tax authorities enact rulings and regulations of either general or specific application and interpret the provisions of Chilean tax law. Chilean tax may not be assessed retroactively against taxpayers who act in good faith relying on such rulings, regulations and interpretations, but Chilean tax authorities may change their rulings, regulations and interpretations prospectively. The discussion which follows is also based, in part, on representations of the depositary, and assumes that each obligation in the deposit agreement and any related agreements will be performed in accordance with its terms. There is no income tax treaty in force between Chile and the United States.

As used in this annual report, the term “foreign holder” means either:

	•		in the case of an individual, a person who is not a resident in Chile; for purposes of Chilean taxation, an individual holder is resident in Chile if he or she has resided in Chile for more than six months in one calendar year, or a total of more than six months in two consecutive fiscal years; or

	•		in the case of a legal entity, an entity that is not organized under the laws of Chile, unless the shares or ADSs are assigned to a branch, agent, representative or permanent establishment of such entity in Chile.

Taxation of Shares and ADSs

Taxation of Cash Dividends and Property Distributions

Cash dividends paid with respect to the shares or ADSs held by a foreign holder will be subject to a 35% Chilean withholding tax, which is withheld and paid by the Company. A credit against the Chilean withholding tax is available based on the level of corporate income tax actually paid by the Company on the income to be distributed; however, this credit does not reduce the Chilean withholding tax on a one-for-one basis because it also increases the base on which the Chilean withholding tax is imposed. In addition, if the Company distributes less than all of its distributable income, the credit for the Chilean corporate income tax paid by the Company is proportionately reduced. On September 28, 2001, the Chilean corporate tax rate was amended. Since 2004 the corporate tax rate has been 17%. The example below illustrates the effective Chilean withholding tax burden on a cash dividend received by a foreign holder, assuming a Chilean withholding tax rate of 35%, an effective Chilean corporate income tax rate of 17% and a distribution of 50% of the net income of the Company distributable after payment of the Chilean corporate income tax:


Company taxable income	100.00
Chilean corporate income tax (17% of Ch$100)	(17	)
Net distributable income	83
Dividend distributed (50% of net distributable income)	41.5
Withholding tax (35% of the sum of Ch$41.50 dividend plus Ch$8.50 credit)	(17.5	)
Credit for 50% of Chilean corporate income tax	8.5
Net withholding tax	(9	)
Net dividend received	32.5
Effective dividend withholding rate	21.69	%

In general, the effective dividend Chilean withholding tax rate, after giving effect to the credit for the Chilean corporate income tax paid by the company, can be computed using the following formula:


Effective Dividend	=	(Withholding tax rate) – (Chilean corporate income tax rate)
Withholding Tax Rate		1 – (Chilean corporate income tax rate)

Dividends generally are assumed to have been paid out of the Company’s oldest retained profits for purposes of determining the level of Chilean corporate income tax that was paid by the Company. For information as to the retained earnings of the Company for tax purposes and the tax credit available on the distribution of such retained earnings, see note 8 to our consolidated financial statements.

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Stock dividends are not subject to Chilean taxation.

Taxation on Sale or Exchange of Shares or ADSs

Gains obtained by a foreign holder from the sale or exchange of ADSs outside Chile will not be subject to Chilean taxation.

Taxation on Shares Acquired on or before April 19, 2001

Gain recognized on a sale or exchange of shares (as distinguished from sales or exchanges of ADSs representing such shares) will be subject to both a 17% Chilean income tax and the 35% Chilean withholding tax (the former being creditable against the latter) if either the foreign holder:

	•		has held the shares for less than one year since exchanging ADSs for the shares; or

	•		acquired and disposed of the shares in the ordinary course of its business or as a habitual trader of shares.

In all other cases, gain on the disposition of shares will be subject to a 17% Chilean income tax, but will not be subject to the 35% Chilean withholding tax.

Taxation on Shares Acquired after April 19, 2001

On November 7, 2001, the income tax law was amended in order to create a tax exemption on capital gains arising from the sale of shares of listed companies traded in the stock markets. Although there are certain restrictions established in the amended income tax law, in general terms, the amendment provides that in order to have access to the capital gain exemption: (i) the shares must be of a public stock corporation with a certain minimum level of trading in a stock exchange; (ii) the sale must be carried out in a Chilean stock exchange, or in another stock exchange authorized by the SVS, or in a tender offer subject to Chapter XXV of the Chilean Securities Market Law; (iii) the shares which are being sold must have been acquired on a stock exchange, or in a tender offer subject to Chapter XXV of the Chilean Securities Market Law, or in an initial public offering (due to the creation of a company or to a capital increase), or due to the exchange of convertible bonds; and (iv) the shares must have been acquired after April 19, 2001.

The tax basis of shares received in exchange for ADSs will be the value of the shares on the date of the exchange. The valuation procedure set forth in the deposit agreement, which values shares at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, will determine the acquisition value for this purpose. Consequently, the conversion of ADSs into shares and the immediate sale of the shares for the value established under the deposit agreement will not generate a capital gain subject to taxation in Chile.

Taxation of Rights and ADS Rights

For Chilean tax purposes, the receipt of rights or ADS rights by a foreign holder of shares or ADSs pursuant to a rights offering is a non-taxable event. In addition, there are no Chilean income tax consequences to foreign holders upon the exercise or the lapse of the rights or the ADS rights. Any gain on the sale, exchange or transfer of the rights by a foreign holder is subject to a 35% Chilean withholding tax.

Other Chilean Taxes

There are no gifts, inheritance or succession taxes applicable to the ownership, transfer or disposition of ADSs by a foreign holder, but such taxes will generally apply to the transfer at death or by gift of the shares by a foreign holder. There are no Chilean stamps, issue, registration or similar taxes or duties payable by holders of shares or ADSs.

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Material U.S. Federal Income Tax Considerations

The following are the material U.S. federal income tax consequences to the U.S. Holders described herein of owning and disposing of shares or ADSs, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to hold such securities. The discussion applies only if you hold shares or ADSs as capital assets for U.S. federal income tax purposes and it does not describe all of the tax consequences that may be relevant to holders subject to special rules, such as:

	•		certain financial institutions;

	•		insurance companies;

	•		dealers and traders in securities;

	•		persons holding shares or ADSs as part of a hedge, “straddle,” integrated transaction or similar transaction;

	•		persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

	•		partnerships or other entities classified as partnerships for U.S. federal income tax purposes;

	•		persons liable for the alternative minimum tax;

	•		tax-exempt organizations;

	•		persons holding shares or ADSs that own or are deemed to own ten percent or more of our voting stock; or

	•		persons who acquired our shares or ADSs pursuant to the exercise of any employee stock option or otherwise as compensation.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds shares or ADSs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Partnerships holding shares or ADSs and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of holding and disposing of the shares or ADSs.

This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof. These authorities are subject to change, possibly with retroactive effect. This discussion is also based in part on representations by the Depositary and assumes that each obligation under the Deposit Agreement and any related agreement will be performed in accordance with its terms.

You are a “U.S. Holder” if you are a beneficial owner of our shares or ADSs and if you are, for U.S. federal tax purposes:

	•		a citizen or individual resident of the United States;

	•		a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or

	•		an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

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In general, if you own ADSs, you will be treated as the owner of the shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be recognized if you exchange ADSs for the underlying shares represented by those ADSs.

The U.S. Treasury has expressed concerns that parties to whom depositary shares such as the ADSs are pre-released or intermediaries in the chain of ownership between holders and the issuer of the security underlying the depositary shares may be taking actions that are inconsistent with the claiming of foreign tax credits for holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate holders. Accordingly, the analysis of the creditability of Chilean taxes, and the availability of the reduced tax rate for dividends received by certain non-corporate holders, each described below, could be affected by actions taken by such parties or intermediaries.

The summary of U.S. federal income tax consequences set out below is intended for general informational purposes only. You should consult your tax advisors with respect to the particular tax consequences to you of owning or disposing of shares or ADSs, including the applicability and effect of state, local, non-U.S. and other tax laws and the possibility of changes in tax laws.

This discussion assumes that the Company is not, and will not become, a passive foreign investment company, as described below.

Taxation of Distributions

Distributions paid on shares or ADSs other than certain pro rata distributions of ordinary shares will be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because the Company does not maintain calculations of its earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. holders as dividends.

Subject to applicable limitations and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid by qualified foreign corporations to certain non-corporate U.S. Holders in taxable years beginning before January 1, 2011, are taxable at a maximum rate of 15%. A foreign corporation is treated as a qualified foreign corporation with respect to dividends paid on stock that is readily tradable on a securities market in the United States, such as the New York Stock Exchange where our ADSs are traded. You should consult your tax advisors to determine whether the favorable rate will apply to dividends you receive and whether you are subject to any special rules that limit your ability to be taxed at this favorable rate.

The amount of a dividend will include any amounts withheld by us in respect of Chilean taxes on the distribution. The amount of the dividend will be treated as foreign-source dividend income to you and will not be eligible for the dividends-received deduction generally allowed to U.S. corporations under the Code. Dividends will be included in your income on the date of your, or in the case of ADSs, the Depositary’s, receipt of the dividend. The amount of any dividend paid in Chilean pesos will be a U.S. dollar amount calculated by reference to the exchange rate for converting Chilean pesos into U.S. dollars in effect on the date of such receipt regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. You may have foreign currency gain or loss if the dividend is not converted into U.S. dollars on the date of receipt.

Subject to applicable limitations that may vary depending upon your circumstances and subject to the discussion above regarding concerns expressed by the U.S. Treasury, the net amount of Chilean withholding tax (after reduction for the credit for Chilean corporate income tax, as discussed above under “ — Chilean Tax Considerations — Taxation of Shares and ADSs — Taxation of Cash Dividends and Property Distributions”) withheld from dividends on shares or ADSs will be creditable against your U.S. federal income tax liability. The rules governing foreign tax credits are complex and, therefore, you should consult your tax advisor regarding the availability of foreign tax credits in your particular circumstances. Instead of claiming a credit, you may, at your election, deduct such Chilean taxes in computing your taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits must apply to all taxes paid or accrued in the taxable year to foreign countries and possessions of the United States.

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Sale or Other Disposition of Shares or ADSs

For U.S. federal income tax purposes, gain or loss you realize on the sale or other disposition of shares or ADSs will be capital gain or loss, and will be long-term capital gain or loss if you have held the shares or ADSs for more than one year. The amount of your gain or loss will equal the difference between your tax basis in the shares or ADSs disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. Such gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes.

In certain circumstances, Chilean taxes may be imposed upon the sale of shares. See “ — Chilean Tax Considerations — Taxation of Shares and ADSs.” If a Chilean tax is imposed on the sale or disposition of shares or ADSs, and a U.S. Holder does not receive significant foreign source income from other sources, such U.S. Holder may not be able to credit such Chilean tax against U.S. federal income tax liability.

Passive Foreign Investment Company Rules

The Company believes that it was not a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes for its 2007 taxable year. However, because PFIC status depends upon the composition of a company’s income and assets and the market value of its assets (including, among others, less than 25 percent owned equity investments) from time to time, and because it is unclear whether certain types of our income constitute passive income for PFIC purposes, there can be no assurance that the Company will not be considered a PFIC for any taxable year. If the Company were a PFIC for any taxable year during which a U.S. Holder held shares or ADSs, certain adverse consequences could apply to such holder, including the imposition of higher amounts of tax than would otherwise apply and additional filing requirements. U.S. Holders should consult their tax advisors regarding the consequences to them if the Company were a PFIC, as well as the availability and advisability of making any election, which may mitigate the adverse consequences of PFIC status.

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting and to backup withholding unless (i) you are a corporation (or other exempt recipient) or (ii) in the case of backup withholding, you provide a correct taxpayer identification number and certify that you are not subject to backup withholding.

The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

F. Dividends and Paying Agents.

Not applicable.

G. Statement by Experts.

Not applicable.

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H. Documents on Display.

We are subject to the information requirements of the Exchange Act, except that as a foreign issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file or furnish reports and other information with the SEC. Reports and other information filed or furnished by us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 100 F Street, N.E., Washington, D.C. 20549, and at the SEC’s regional offices at 233 Broadway, New York, New York 10279 and 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604. Copies of such material may also be inspected at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, on which our ADSs are listed. In addition, the SEC maintains a Website that contains information filed electronically with the SEC, which can be accessed over the Internet at http://www.sec.gov.

I. Subsidiary Information.

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to risks from changes in interest rates and foreign exchange rates. These risks are monitored and managed by the Company. The Company’s Board of Directors approves risk management policies at all levels.

The Company does not enter into financial instruments for non-trading or speculative purposes. As a result, the Company’s market risk is limited to trading risks.

Commodity Price Risk

In our electricity generation business, we are exposed to market risks arising from the volatility of electricity, natural gas, diesel oil and coal prices. In order to manage these exposures, we enter into long-term contracts with suppliers and customers.

We are exposed to the volatility of natural gas prices in the Chilean and Argentine markets. We seek to ensure our supply of this commodity by securing long-term contracts with our suppliers for terms that are expected to match the lifetime of our generation assets. These contracts generally provide for us to purchase gas at market prices prevailing at the time the purchase occurs. As of December 31, 2007 and 2006, we did not hold any contracts classified as either derivative financial instruments, financial instruments or derivative commodity instruments related to natural gas.

We are partially exposed to the volatility of coal and diesel oil prices. In the countries where we operate, the dispatch mechanism allows the thermal power plant to cover its variable cost. On the other hand, under certain circumstances fuel price fluctuations might affect marginal costs. Additionally, the Company, through adequate commercial risk mitigation policies, and its hydro-thermal mix, seeks to naturally protect the commodity price volatility over its operating margin. As of December 31, 2007 and 2006, we did not hold any contracts classified as either derivative financial instruments, financial instruments or derivative commodity instruments related either to coal or to diesel oil.

As of December 31, 2007, the Company did not hold electricity price-sensitive instruments.

Interest Rate Risk

Of our total outstanding debt obligations as of December 31, 2007, 32% of such debt bore interest at floating rates compared to 29% in 2006.

143

We manage interest rate risk by maintaining a mixture of both variable and fixed rate debt. Additionally, we manage interest rate risk through the use of interest rate derivatives. The above percentages include the effect of interest rate derivatives (swaps or collars) that hedge part of our debt.

The recorded values for accounting purposes of our financial debt as of December 31, 2007, and the corresponding fair values of the significant financial instruments exposing us to interest rate risk are detailed below, according to the date of maturity. Total values do not include interest rate derivatives.


	Contract Terms
As of December 31,	2008			2009			2010			2011			2012			Thereafter			Total			Fair Value(1)
	(in millions of constant Ch$)
Long-term Debt
Fixed rate:
Ch$- and UF-denominated		2,422			2,425			6,506			6,612			6,723			197,692			222,380			237,354
Weighted average interest rate		5.3	%		5.3	%		5.3	%		5.2	%		5.2	%		5.2	%		5.3	%		—
$-denominated		246,633			337,500			22,028			29,505			28,741			758,026			1,422,434			1,819,835
Weighted average interest rate		7.7	%		7.8	%		7.8	%		7.8	%		7.8	%		7.9	%		7.7	%
Other currencies(2)		73,716			107,077			100,653			192,754			44,828			360,760			879,789			963,421
Weighted average interest rate		6.0	%		6.0	%		6.3	%		6.4	%		6.2	%		6.0	%		6.0	%		—

Variable rate:
Ch$- and UF-denominated		—			—			—			—			—			—			—			—
Weighted average interest rate		—			—			—			—			—			—			—			—
$-denominated		48,573			238,861			77,209			105,876			31,298			18,946			520,763			418,817
Weighted average interest rate		6.9	%		6.9	%		7.3	%		7.4	%		8.0	%		7.5	%		6.9	%		—
Other currencies(2)		245,455			141,799			150,504			153,594			228,120			35,865			955,338			848,848
Weighted average interest rate		13.1	%		12.9	%		12.3	%		11.5	%		11.1	%		11.7	%		13.1	%		—

Total		616,799			827,662			356,901			488,341			339,711			1,371,289			4,000,703			4,288,275


(1)		As of December 31, 2007, fair values were calculated based on the discounted value of future cash flows expected to be paid (or received), considering current discount rates that reflect the different risks involved.

(2)		“Other currencies” includes the Euro, the Brazilian real, the Colombian peso and the Peruvian sol, among others.

144

By comparison, as of December 31, 2006, the recorded values for financial accounting purposes and the corresponding fair values of the significant financial instruments which expose the Company to interest rate risk were as follows:


	Contract Terms
As of December 31,	2007			2008			2009			2010			2011			Thereafter			Total			Fair Value(1)
	(in millions of constant Ch$)
Long-term Debt
Fixed rate:
Ch$- and UF-denominated		2,461			2,271			2,254			79,425			6,178			117,670			210,259			241,226
Weighted average interest rate		5.6	%		5.6	%		5.6	%		5.6	%		6.1	%		6.1	%		5.6	%		—
$-denominated		91,029			268,215			392,065			44,331			18,160			857,785			1,671,585			1,849,024
Weighted average interest rate		7.7	%		7.7	%		7.7	%		7.7	%		7.8	%		7.8	%		7.7	%		—
Other currencies(2)		73,451			66,669			82,811			67,510			129,931			174,061			594,433			584,264
Weighted average interest rate		5.9	%		5.6	%		5.4	%		5.6	%		5.2	%		5.8	%		5.9	%		—

Variable rate:
Ch$- and UF-denominated		—			—			—			—			—			—			—			—
Weighted average interest rate		—			—			—			—			—			—			—			—
$-denominated		28,229			216,059			29,777			54,729			44,537			29,891			403,222			432,646
Weighted average interest rate		5.9	%		5.9	%		7.2	%		6.4	%		6.8	%		7.3	%		5.9	%		—
Other currencies(2)		128,596			102,425			145,355			112,979			100,955			168,383			758,693			833,624
Weighted average interest rate		13.3	%		13.2	%		12.4	%		12.2	%		11.9	%		11.5	%		13.3	%		—

Total		323,765			655,638			652,263			358,974			299,762			1,347,790			3,638,192			3,940,785


(1)		As of December 31, 2006, fair values were calculated based on the discounted value of future cash flows expected to be paid (or received), considering current discount rates that reflect the different risks involved.

(2)		“Other currencies” includes the Euro, the Brazilian real, the Colombian peso and the Peruvian sol, among others.

Foreign Currency Risk

We are exposed to foreign currency risk arising from long-term debt denominated in foreign currencies, the majority of which is in dollar. This risk is mitigated, as a substantial portion of our revenues is linked to the dollar either directly or indirectly. Additionally, we manage this risk through the use of dollar/UF exchange currency swaps and dollar/peso forward foreign exchange contracts. As of December 31, 2007, Enersis’ total consolidated indebtedness reached $8.3 billion, which includes the effect of currency hedging instruments. From this amount, $3,081 million, or 37%, was denominated in dollars. For the twelve-month period ended December 31, 2007, our revenues amounted to $10,579 million of which $661 million, or 6%, were denominated in dollars, and $1,874 million, or 18%, were linked in some way to the dollar. In the aggregate, 24% of our revenues were either in dollars or correlated to such currency through some form of indexation. On the other hand, the equivalent of $2,097 million was revenues in pesos, which represents 20% of our 2007 revenues. The revenue figures discussed in this context are all prior to consolidation adjustments.

Prior to our acquisition of a controlling interest in Endesa Chile, we did not manage foreign exchange rate risk. This risk management became active in 1999 due to the instability of the peso and the change in the trend in which the UF began to devaluate against the dollar. Moreover, during 2004, we changed our corporate currency risk policy from a pure accounting hedge to a cash flow hedge. This policy takes the level of operating income of each country that is indexed to the United States dollar and seeks to hedge them with liabilities in the same currency.

In addition, our currency risk policy determines a maximum level of consolidated accounting mismatch. We manage that accounting risk through short-term hedging instruments until the difference between assets and liabilities in dollars returns to levels below the maximum permitted.

145

Although the actual foreign currency exchange risk to which we are exposed depends upon the fluctuation of foreign exchange rates in which monetary assets and liabilities are maintained as compared to the peso, for accounting purposes our results from operations are affected by variations in the exchange rate between the dollar and the peso, due to the application of BT 64. For further detail, please see “Item 5. Operating and Financial Review and Prospects — A. Operating results — Introduction — Technical Bulletin 64 (BT 64).

Foreign currency gains and losses are included in the results from operations for the period together with price-level restatement.

As of December 31, 2007, the recorded values of our financial debt for accounting purposes and the corresponding fair values of the significant financial instruments exposing us to foreign currency risk are as follows, according to the date of maturity:


	Contract Terms
As of December 31,	2008		2009		2010		2011		2012		Thereafter		Total		Fair Value(1)
	(in millions of constant Ch$)
Long-term Debt
Fixed rate:
$-denominated		246,633		337,500		22,028		29,505		28,741		758,026		1,422,434		1,819,835
Other currencies(2)		73,716		107,077		100,653		192,754		44,828		360,760		879,789		963,421

Variable rate:
$-denominated		48,573		238,861		77,209		105,876		31,298		18,946		520,763		418,817
Other currencies(2)		245,455		141,799		150,504		153,594		228,120		35,865		955,338		848,848
Other instruments(3)
$-denominated assets		229,891		—		—		—		—		—		229,891		229,891
Assets in other currencies(2)		1,594,747		58,847		31,175		16,668		12,812		76,662		1,790,911		1,790,911
Forward contracts (receive U.S.$/Pay Ch$)(1)		—		—		—		—		—		—		—		—
Swap contracts (receive U.S.$/Pay Ch$)		62,111										298,134		360,245		-196,730
Other foreign currency derivatives(2)		79,442		54,658		19,876		7,453		62,492		34,695		258,616		-18,989


(1)		Calculated based on the Observed Exchange Rate as of December 31, 2007, which was Ch$496.89 = $1.00. Fair values were calculated based on the discounted value of future cash flows expected to paid (or received), considering current discount rates that reflect the different risks involved.

(2)		“Other currencies” includes the Euro, Brazilian real, the Colombian pesos, Peruvian soles, Argentine and Chilean pesos.

(3)		“Other instruments” include cash, time deposits and short-term accounts receivables. See note 29 to financial statements.

146

As of December 31, 2006, the recorded values of our financial debt for accounting purposes and the corresponding fair values of the significant financial instruments exposing us to foreign currency risk are as follows, according to the date of maturity:


	Contract Terms
As of December 31,	2007		2008		2009		2010		2011		Thereafter		Total		Fair Value(1)
	(in millions of constant Ch$)
Long-term Debt
Fixed rate:
$-denominated		91,029		268,215		392,065		44,331		18,160		857,785		1,671,585		1,849,024
Other currencies(2)		73,451		66,669		82,811		67,510		129,931		174,061		594,433		584,264

Variable rate:
$-denominated		28,229		216,059		29,777		54,729		44,537		29,891		403,222		432,646
Other currencies(2)		128,596		102,425		145,355		112,979		100,955		168,383		758,693		833,624
Other instruments(3)
$-denominated assets		81,683		90,524		2,049		—		—		—		174,256		174,256
Assets in other currencies(2)		1,320,719		55,508		19,110		8,464		9,535		42,813		1,456,149		1,456,149
Forward contracts (receive $/Pay Ch$)(1)		—		—		—		—		—		—		—		—
Swap contracts (receive $/Pay Ch$)		—		66,549		—		—		—		319,434		385,983		-142,193
Other foreign currency derivatives(2)		—		1,314		—		—		—		26,620		27,934		-4,219


(1)		Calculated based on the Observed Exchange Rate as of December 31, 2006, which was Ch$532.39 = $1.00. Fair values were calculated based on the discounted value of future cash flows expected to paid (or received), considering current discount rates that reflect the different risks involved.

(2)		“Other currencies” includes the Euro, Brazilian real, the Colombian pesos and Peruvian soles among others.

(3)		“Other instruments” include cash, time deposits and short-term accounts receivables. See note 29 to financial statements.

D. Safe Harbor

The information in this “Item 11. Quantitative and Qualitative Disclosures About Market Risk,” contains information that may constitute forward-looking statements. See “Forward-Looking Statements” in the Introduction of this report, for safe harbor provisions.

Item 12. Description of Securities Other Than Equity Securities

A. Debt Securities.

Not applicable.

B. Warrants and Rights.

Not applicable.

C. Other Securities.

Not applicable.

D. American Depositary Shares.

Not applicable.

147

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

A. Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of the Company’s Management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rules 13 (a)-15 (e) and 15 (d)-15 (e) under the Exchange Act) for the year ended December 31, 2007. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error, and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon the Company’s evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is gathered and communicated to the Company’s Management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

B. Management’s Annual Report on Internal Control Over Financial Reporting

As required by Section 404 of the Sarbanes-Oxley Act of 2002, Enersis’ Management is responsible for establishing and maintaining “adequate internal control over financial reporting” (as defined in Rule 13 (a)-15 (f) under the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted.

Because of its inherent limitations, internal control over financial reporting may not necessarily prevent or detect some misstatements. It can only provide reasonable assurance regarding financial statement preparation and presentation. Also, projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with the polices or procedures may deteriorate over time.

Management assessed the effectiveness of its internal control over financial reporting as of December 31, 2007. The assessment was based on criteria established in the framework “Internal Controls — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, Enersis’ Management has concluded that as of December 31, 2007, the Company’s internal control over financial reporting was effective.

Deloitte Auditores y Consultores Ltda., the independent registered accounting firm that has audited our Consolidated Financial Statements, has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2007. This attestation report appears on page F-4.

148

C. Changes in internal control

There were no changes in the Company’s internal control over financial reporting that occurred during 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

On April 12, 2008, the Board of Directors determined that Patricio Claro is an audit committee financial expert as defined under Item 16A of Form 20-F, is serving on the audit committee and is an independent member of the Audit Committee.

Item 16B. Code of Ethics

The standards of ethical conduct at Enersis are currently governed by means of two corporate rulings or policies: the Charter Governing Executives (Estatuto del Directivo) and the Internal Regulations on Conduct in Securities Markets.

The Charter Governing Executives, approved as a corporate statute, was adopted by the Board of Directors in May 2003 and is applicable to all managers contractually related to Enersis, including the Chief Executive Officer, the Chief Financial Officer and other senior officers of the Company, and to all senior management controlled subsidiaries in which Enersis is the majority shareholder, both in Chile and internationally. The objective of this statute is to establish standards for the governance of our management’s actions.

The Internal Regulations on Conduct in Securities Markets, adopted by Enersis’ Board of Directors in January 2002, sets the criteria to be followed in market operations in order to make our behavior in the market more transparent and to protect market investors. It is applicable to members of the Board of Directors, the senior executives and the executives and employees of Enersis determined by the Chief Executive Officer, and known to the Chairman, who work in areas related to the securities market or have access to privileged information.

A copy of these documents is also available upon request, free of charge, by writing or telephoning us at:

ENERSIS S.A.
Attention: Investor Relations Department
Santa Rosa 76
Santiago, Chile
(56-2) 353-4682

During fiscal year 2007, there have been no amendments to any provisions of the Charter Governing Executives or the Internal Regulations on Conduct in Securities Markets.

No waivers from any provisions of the Charter Governing Executives or the Internal Regulations on Conduct in Securities Markets were expressly or implicitly granted to the Chief Executive Officer, the Chief Financial Officer or any other senior financial officer of the Company in fiscal year 2007.

Item 16C. Principal Accountant Fees and Services

The following table provides information on the aggregate fees billed by our principal accountants, Deloitte Auditores y Consultores Ltda., as well as the other member firms of Deloitte Touche Tohmatsu and their respective affiliates (including Deloitte Consulting) by type of service rendered for periods indicated.

149


Services Rendered	2006		2007
	(millions of $)
Audit Fees		3.7		3.3
Audit-Related Fees(1)		0.2		—
Tax Fees(2)		0.1		0.3
All Other Fees(3)		0.1		—

Total		4.1		3.6


(1)		In 2006, includes fees paid for assistance services rendered in relation with Enersis’ readiness plan to comply with Sarbanes-Oxley’s section 404 requirements ($122,200) and other audit-related services ($47,380).

(2)		Figure for 2007 includes mainly fees paid for tax advisory work in Colombia and Chile ($177,939;and $43,600 respectively). In 2006, includes fees paid for tax advisory work in Argentina, Colombia and Chile ($56,250, $50,288, and $10,158 respectively).

(3)		In 2006, includes fees for collaboration in a rules and procedures program project ($80,000) and other minor services in Peru and Chile ($31,062).

The amounts included in the table above and the related footnotes have been classified in accordance with Public Company Accounting Oversight Board (PCAOB) guidance, which are different in certain respects from the classifications made under our consolidated financial statements prepared for our parent company, Endesa Spain, in accordance with IFRS.

Audit committee Pre-Approval Policies and Procedures

Enersis’ external auditors are appointed by its shareholders at the annual shareholders’ meeting. Similarly, the shareholders of our subsidiaries located in countries where applicable law and regulation so establishes, appoint their own external auditors. Enersis’ Audit Committee submits a proposal to the Board of Directors and to the Shareholder Meeting for the appointment of its external auditors.

The Audit Committee manages appointment proposals, review of engagement letters, fee negotiations, quality control in respect of the services provided, review and control of independence issues and other related matters.

The Audit Committee has a pre-approval policy regarding the contracting of Enersis’ external auditor, or any affiliate of the external auditor, for professional services. Since July 2005, all professional services including audit and non-audit services provided to Enersis or any of our subsidiaries are subject to such policy.

Fees payable in connection with recurring audit services are pre-approved by the Audit Committee and then approved as part of our annual budget. Fees payable in connection with non-recurring audit services, once they have been analyzed by the corporative audit department, are submitted to the Audit Committee for its pre-approval or denial.

150

The pre-approval policy established by the Audit Committee for non-audit services is as follows:

	•		The business unit that has requested the service and the audit firm requested to perform the service must request that the corporate audit manager review the nature of the service to be provided.

	•		At that point, the corporate audit department analyzes the request and requires the audit firm that has been requested to provide the service to issue a certificate signed by the partner responsible for the audit of our consolidated financial statements confirming such audit firm’s independence.

	•		Finally, the proposal is submitted to the Audit Committee for approval or denial.

All services described in footnote (1) to the table above were approved in line with the procedure described immediately above.

In addition, due to the SEC-PCAOB release number 34-53677 (Audit Committee Pre-Approval of Certain Tax Services), the Audit Committee has designed, approved and implemented the necessary procedures to fulfill the new requirements described by this rule.

Item 16D. Exemptions from Listing Requirements for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Persons

Neither Enersis nor any affiliated purchaser acquired any shares of Enersis during 2007.

151

Item 19. Exhibits


Exhibit		Description
1.1		By-laws (Estatutos) of Enersis, as amended.*
1.2		By-laws (Estatutos) of ENERSIS S.A., as amended (English translation).*
4.1		Assignment of Rights Contract, dated January 27, 2004, between Endesa Internacional S.A. and Enersis (Spanish version).**
4.2		Assignment of Rights Contract, dated January 27, 2004, between Endesa Internacional S.A. and Enersis (English version).**
8.1		List of Subsidiaries as of December 31, 2006.
12.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
12.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
13.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.


*		Incorporated by reference to Enersis annual report on Form 20-F for the year ended December 31, 2006 filed with the Securities and Exchange Commission on May 14, 2007.

**		Incorporated by reference to Enersis annual report on Form 20-F for the year ended December 31, 2004 filed with the Securities and Exchange Commission on June 10, 2005.

We will furnish to the Securities and Exchange Commission, upon request, copies of any unfiled instruments that define the rights of holders of long-term debt of Enersis.

153


		Deloitte Auditores y Consultores Ltda. RUT: 80.276.200-3 Av. Providencia 1760 Pisos 6, 7, 8, 9 y 13 Providencia, Santiago Chile Fono: (56-2) 729 7000 Fax: (56-2) 374 9177 e-mail: deloittechile@deloitte.com www.deloitte.cl

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Enersis S.A.:

We have audited the accompanying consolidated balance sheets of Enersis S.A. and subsidiaries (the “Company”) as of December 31, 2006 and 2007, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2007 (expressed in constant Chilean pesos). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Empresa Nacional de Electricidad S.A. (a subsidiary) and certain of its consolidated subsidiaries and certain of its equity method investees (hereinafter collectively referred to as the “Companies”), which statements reflect total assets constituting 35.90% and 36.78% of consolidated total assets at December 31, 2006 and 2007, respectively, and total revenues constituting 22.00%, 23.04% and 33.50% of consolidated total revenues for the years ended December 31, 2005, 2006 and 2007, respectively. With respect to the consolidated shareholders’ equity and net income information stated on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”) in Note 36, these financial statements reflect total shareholders’ equity constituting 58.00% and 16.88% of consolidated U.S. GAAP basis shareholders’ equity at December 31, 2006 and 2007, respectively, and total net income constituting 44.98%, 7.00% and 6.88% of consolidated U.S. GAAP basis net income for the years ended December 31, 2005, 2006 and 2007, respectively. Those statements were audited by other auditors whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included for the Companies, is based solely on the reports of the other auditors.

In our opinion, based on our audits and the reports of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Enersis S.A. and subsidiaries as of December 31, 2006 and 2007, and the results of their operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in Chile.


		Una firma miembro de Deloitte Touche Tohmatsu

F - 2

Accounting principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the three years in the period ended December 31, 2007, and the determination of shareholders’ equity as of December 31, 2006 and 2007, to the extent summarized in Note 36 to the consolidated financial statements.

Our audits also comprehended the translation of constant Chilean Peso amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2 (c). Such U.S. dollar amounts are presented solely for the convenience of readers in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 30, 2008, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit and the report of the other auditors.

/s/ Deloitte

Santiago, Chile
April 30, 2008


		Una firma miembro de Deloitte Touche Tohmatsu

F - 3


		Deloitte Auditores y Consultores Ltda. RUT: 80.276.200-3 Av. Providencia 1760 Pisos 6, 7, 8, 9 y 13 Providencia, Santiago Chile Fono: (56-2) 729 7000 Fax: (56-2) 374 9177 e-mail: deloittechile@deloitte.com www.deloitte.cl

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Enersis S.A.:

We have audited the internal control over financial reporting of Enersis S.A. and subsidiaries (the “Company”) as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ( the COSO criteria ). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We did not examine the effectiveness of internal control over financial reporting of Empresa Nacional de Electricidad S.A. and certain subsidiaries (collectively hereinafter referred to as “Empresa Nacional de Electricidad, S.A.”), whose financial statements reflect total assets and revenues constituting 36.78% and 33.50% percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2007. The effectiveness of Empresa Nacional de Electricidad, S.A.’s internal control over financial reporting was audited by other auditors whose report has been furnished to us, and our opinions, insofar as it relates to the effectiveness of Empresa Nacional de Electricidad, S.A.’s internal control over financial reporting, are based solely on the report of the other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


		Una firma miembro de Deloitte Touche Tohmatsu

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Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our audit and the report of the other auditors, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the consolidated financial statements as of and for the year ended December 31, 2007 of the Company and our report dated April 30, 2008 expressed an unqualified opinion on those financial statements based on our audit and the report of the other auditors.

/s/ Deloitte

Santiago, Chile
April 30, 2008


		Una firma miembro de Deloitte Touche Tohmatsu

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•

Huérfanos 770, 5° Piso

•

Teléfono

(56-2) 676 1000

Santiago, Chile

Fax

(56-2) 676 1010

Casilla

2823

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Empresa Nacional de Electricidad S.A. (Endesa-Chile):

We have audited the accompanying consolidated balance sheets of Endesa-Chile and its subsidiaries (the “Company”) as of December 31, 2006 and 2007, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the consolidated financial statements of certain subsidiaries, which statements reflect total assets representing 36.91 percent and 31.39 percent as of December 31, 2006 and 2007, respectively, and total revenues representing of 37.39 percent, 38.08 percent and 33.76 percent for each of the three years in the period ended December 31, 2007, respectively. We also did not audit the financial statements of certain investments accounted for under the equity method, which represented 8.04 percent and 6.84 percent of total consolidated assets as of December 31, 2006 and 2007, respectively, and the equity in their net results represented 11.7 percent, 19.6 percent and 9.5 percent of the consolidated net income for each of the three years in the period ended December 31, 2007, respectively. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for those entities, is based solely on the reports of the other auditors.

In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Endesa-Chile and subsidiaries at December 31, 2006 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 32 to the consolidated financial statements).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 3!, 2007, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2008, except for internal control over financial reporting related to Notes 30 and 32 of the 2007 consolidated financial statements for which the date is April 30, 2008, expressed an unqualified opinion thereon.


ERNST & YOUNG LTDA.		/s/ Ernst & Young

Santiago, Chile
February 19, 2008
(except for Notes 30 and 32 for which the date is April 30, 2008)

Firma miembro de Ernst & Young Global

F - 6

•

Huérfanos 770, 5° Piso

•

Teléfono

(56-2) 676 1000

Santiago, Chile

Fax

(56-2) 676 1010

Casilla

2823

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Empresa Nacional de Electricidad S.A. (Endesa-Chile):

We have audited internal control of Endesa-Chile (“the Company”) over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying annual report on form 20-F. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances, We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Endesa-Chile S.A. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007 based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Endesa-Chile S.A. as of December 31, 2006 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007 and our report dated February 19, 2008, except for Notes 30 and 32 for which the date is April 30, 2008, expressed an unqualified opinion thereon.


ERNST & YOUNG LTDA.		/s/ Ernst & Young

Santiago, Chile
February 19, 2008
(except for Notes 30 and 32 for which the date is April 30, 2008)

Firma miembro de Ernst & Young Global

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		Deloitte & Touche Ltda. Cra. 7 N° 74 - 09 AA 075874 Nit. 860.005.813-4 Bogotá D.C. Colombia Tel: +57(1) 5461810 - 5461815 Fax: +57(1) 2178088 www.deloitte.com/co

Report of Independent Registered Public Accounting Firm

To the Board of Director and Shareholders of
Emgesa S.A. E.S.P. (before Central Hidroelectrica de Betania S.A. E.S.P. and its subsidiary)

We have audited the balance sheets of Emgesa S.A. E.S.P. (before Central Hidroelectrica de Betania S.A. E.S.P. and its subsidiary) (the “company”) as of December 31,2007 and 2006 and the related statements of income and cash flows for the three years in the period ended December 31, 2007, all expressed in thousands of constant Chilean pesos (not separately presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included considerations of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis evidence supporting the amounts an disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements referred to above present fairly, in all material respects, the financial position of Emgesa S.A. E.S.P. (before Central Hidroelectrica de Betania S.A. E.S.P. and its subsidiary) as of December 31, 2007 and 2006, and the results of their operations and their cash flows for the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in Chile.

As described in greater detail in Note 1 to the financial statements, dated August 17, 2007, the Office of the Superintendent of Corporations in Colombian authorized the merger through absorption between Central Hidroeléctrica de Betania S.A. E.S.P. and Emgesa S.A. E.S.P., being the first, i.e., Central Hidroeléctrica de Betania S.A. E.S.P. the absorbing company and Emgesa S.A. E.S.P. the company absorbed.”

Accounting principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the three years ended December 31, 2007 and the determination of shareholders’ equity at December 31,2007 and 2006 to the extent summarized in Note 30.

/s/ Carlos Eduardo Tovar R.

Carlos Eduardo Tovar R.
Bogotá, Colombia, March 7, 2008
DELOITTE & TOUCHE LTDA.


Auditoría.lmpuestos.Consultoría.Finanzas Corporativas.		Una firma miembro de
		Deloitte Touche Tohmatsu

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		Deloitte & Touche S.R.L Florida 234, Piso 5° C1005AAF Ciudad Autónoma de Buenos Aires Argentina Tel: (54-11) 4320-2700 Fax: (54-11) 4325-8081/4326-7340 www.deloitte.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the President and Board of Directors of
Endesa Argentina S.A.:

We have audited the consolidated balance sheets of Endesa Argentina S.A. and subsidiaries (the “Company”) as of December 31, 2007 and 2006 and the consolidated statements of operations and cash flows for each of the three years in the period ended December 31, 2007 (none of which are presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Endesa Argentina S.A. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in Chile.

Accounting principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the three years in the period ended December 31, 2007 and the determination of shareholders’ equity at December 31, 2007 and 2006, to the extent summarized in Note 36.

DELOITTE & Co. S.R.L.

/s/ Carlos A. Lloveras

Carlos A. Lloveras
Buenos Aires, Argentina
March 27, 2008

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its Member Firms.

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		Deloitte Auditores y Consultores Ltda. RUT: 80.276.200-3 Av. Providencia 1760 Pisos 6, 7, 8, 9 y 13 Providencia, Santiago Chile Fono: (56-2) 729 7000 Fax: (56-2) 374 9177 e-mail: deloittechile@deloitte.com www.deloitte.cl

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Director and Stockholders of
Endesa Brasil S.A.

We have audited the accompanying consolidated balance sheets of Endesa Brasil S.A. and subsidiaries (the “Company”) as of December 31, 2006 and 2007, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the three month period ended December 31, 2005 and for each of the two years in the period ended December 31, 2007, expressed in constant Chilean pesos (none of which are presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements as of and for the years ended December 31, 2006 and 2007, of certain of the Company’s consolidated subsidiaries (hereinafter referred to as the “Companies”), which statements reflect total assets constituting 34.46% and 30.63% of consolidated total assets at December 31, 2006 and 2007, respectively and total revenues constituting 9.92% , 27.21% and 36.32% of consolidated total revenues for the three month period ended December 31, 2005 and the years ended December 31, 2006 and 2007, respectively. With respect to the consolidated shareholders’ equity and net income information stated on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”) in Note 24, these financial statements reflect total shareholders’ equity constituting 50.87% and 54.43% of consolidated U.S. GAAP basis shareholders’ equity at December 31, 2006, and 2007 and total net income constituting 60.52%, 56.77% and 55.31%, of consolidated U.S. GAAP basis net income for the three month period ended December 31, 2005 and the years ended December 31, 2006 and 2007, respectively. Such statements were audited by other auditors whose reports have been provided to us and our opinion, insofar as it relates to the amounts included for these companies, is based solely on the reports of such other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Endesa Brasil S.A. and subsidiaries as of December 31, 2006 and 2007, and the results of their operations, changes in their shareholders’ equity and their cash flows for the three month period ended December 31, 2005 and for each of the two years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in Chile.


		Una firma miembro de
		Deloitte Touche Tohmatsu

F - 10




• Praia de Botafogo, 300 - 13° andar	•	Fone:	(55) (21) 2109-1400
22250-040 – Rio de Janeiro, RJ Brasil		Fax:	(55) (21) 2109-1400
		www.ey.com.br

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Centrais Elétricas Cachoeira Dourada S.A. — CDSA

We have audited the accompanying balance sheet of Centrais Elétricas Cachoeira Dourada S.A. — CDSA (the “Company”) as of December 31, 2005, and the related statements of income, changes in shareholders’ equity and cash flows for the three-month period ended December 31, 2005 (not presented separately herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain-reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Centrais Elétricas Cachoeira Dourada S.A. — CDSA as of December 31, 2005, and the results of its operations and its cash flows for the three-month period ended December 31, 2005 in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 21 to the financial statements).

Rio de Janeiro, Brazil, January 13, 2006

ERNST & YOUNG
Auditores Independentes S.S.

/s/ Claudio Camargo

Claudio Camargo
Partner

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• Praia de Botafogo, 300 - 13° andar	•	Fone:	(55) (21) 2109-1400
22250-040 – Rio de Janeiro, RJ Brasil		Fax:	(55) (21) 2109-1400
		www.ey.com.br

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Central Geradora Termelétrica Fortaleza — CGTF

We have audited the accompanying balance sheet of Central Geradora Termelétrica Fortaleza — CGTF (the “Company”) as of December 31, 2005, and the related statements of income, changes in shareholders’ equity and cash flows for the three-month period ended December 31, 2005 (not presented separately herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Central Geradora Termelétrica Fortaleza — CGTF as of December 31, 2005, and the results of its operations and its cash flows for the three-month period ended December 31, 2005 in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 22 to the financial statements).

Rio de Janeiro, Brazil, January 13, 2006

ERNST & YOUNG
Auditores Independentes S.S.

/s/ Claudio Camargo

Claudio Camargo
Partner

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• Praia de Botafogo, 300 - 13° andar	•	Fone:	(55) (21) 2109-1400
22250-040 – Rio de Janeiro, RJ Brasil		Fax:	(55) (21) 2109-1400
		www.ey.com.br

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
CIEN—Companhia de Interconexão Energética

We have audited the accompanying balance sheet of CIEN—Companhia de Interconexão Energetica (the “Company”) as of December 31, 2005, and the related statements of income, changes in shareholders’ equity and cash flows for the three-month period ended December 31, 2005 (not presented separately herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
CIEN—Companhia de Interconexão Energética at December 31, 2005, and the results of its operations and its cash flows for the three-month period ended December 31, 2005 in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 24 to the financial statements).

Rio de Janeiro, Brazil, January 13, 2006

ERNST & YOUNG
Auditores Independentes S.S.

/s/ Claudio Camargo

Claudio Camargo
Partner

F - 14




• Praia de Botafogo, 300 - 13° andar	•	Fone:	(55) (21) 2109-1400
22250-040 – Rio de Janeiro, RJ Brasil		Fax:	(55) (21) 2109-1400
		www.ey.com.br

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Centrais Elétricas Cachoeira Dourada — CDSA

We have audited the accompanying balance sheets of Centrais Elétricas Cachoeira Dourada — CDSA (the “Company”) as of December 31, 2006 and 2007, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended (not presented separately herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the financial position of Centrais Elétricas Cachoeira Dourada — CDSA as of December 31, 2006 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 21 to the financial statements).

Rio de Janeiro, Brazil, March 27, 2008

ERNST & YOUNG
Auditores Independentes S.S.

/s/ Claudio Camargo

Claudio Camargo
Partner

F - 15




• Praia de Botafogo, 300 - 13° andar	•	Fone:	(55) (21) 2109-1400
22250-040 – Rio de Janeiro, RJ Brasil		Fax:	(55) (21) 2109-1400
		www.ey.com.br

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Central Geradora Termelétrica Fortaleza — CGTF

We have audited the accompanying balance sheets of Central Geradora Termelétrica Fortaleza — CGTF (the “Company”) as of December 31, 2006 and 2007, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended (not presented separately herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the financial position of Central Geradora Termelétrica Fortaleza — CGTF as of December 31, 2006 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 21 to the financial statements).

Rio de Janeiro, Brazil, March 27, 2008

ERNST & YOUNG
Auditores Independentes S.S.

/s/ Claudio Camargo

Claudio Camargo
Partner

F - 16




• Praia de Botafogo, 300 - 13° andar	•	Fone:	(55) (21) 2109-1400
22250-040 – Rio de Janeiro, RJ Brasil		Fax:	(55) (21) 2109-1400
		www.ey.com.br

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
CIEN — Companhia de Interconexão Energética

We have audited the accompanying consolidated balance sheets of CIEN — Companhia de Interconexão Energética and its subsidiaries (the “Company”) as of December 31, 2006 and 2007, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for years then ended (not presented separately herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Transportadora de Energía S.A. — TESA and Compañía de Transmisión del MERCOSUR S.A. — CTM, wholly-owned subsidiaries of the Company, which statements reflect total assets of 13 percent and 11 percent as of December 31, 2006 and 2007, respectively, and total revenues representing and 6 percent and 2 percent for each of the two years in the period ended December 31, 2007, respectively. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Transportadora de Energía S.A. — TESA and Compañía de Transmisión del MERCOSUR S.A. — CTM, is based solely on the reports of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

F - 17


		Deloitte & Touche S.R.L Florida 234, Piso 5° C1005AAF Ciudad Autónoma de Buenos Aires Argentina Tel: (54-11) 4320-2700 Fax: (54-11) 4325-8081/4326-7340 www.deloitte.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the President and Board of Directors of
Transportadora de Energía S.A.:

We have audited the balance sheets of Transportadora de Energía S.A. (the “Company”) as of December 31, 2007 and 2006 and the statements of operations and cash flows for each of the two years in the period ended December 31, 2007 (none of which are presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Transportadora de Energía S.A. as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in Chile.

Accounting principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the two years in the period ended December 31, 2007 and the determination of shareholders’ equity at December 31, 2007 and 2006, to the extent summarized in Note 20.

DELOITTE & Co. S.R.L.

/s/ Carlos A. Lloveras

Carlos A. Lloveras
Buenos Aires, Argentina
March 27, 2008

F - 19


		Deloitte & Touche S.R.L Florida 234, Piso 5° C1005AAF Ciudad Autónoma de Buenos Aires Argentina Tel: (54-11) 4320-2700 Fax: (54-11) 4325-8081/4326-7340 www.deloitte.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the President and Board of Directors of
Compañía de Transmisión del Mercosur S.A.:

We have audited the balance sheets of Compañía de Transmisión del Mercosur S.A. (the “Company”) as of December 31, 2007 and 2006 and the statements of operations and cash flows for each of the two years in the period ended December 31, 2007 (none of which are presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Compañía de Transmisión del Mercosur S.A. as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in Chile.

Accounting principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the two years in the period ended December 31, 2007 and the determination of shareholders’ equity at December 31, 2007 and 2006, to the extent summarized in Note 19.

DELOITTE & Co. S.R.L.

/s/ Carlos A. Lloveras

Carlos A. Lloveras
Buenos Aires, Argentina
March 27, 2008

F - 20

ENERSIS S.A. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos of December 31, 2007, and thousands of US dollars)


	As of December 31,
	2006			2007			2007
	ThCh$			ThCh$			ThUS$

ASSETS
CURRENT ASSETS
Cash		107,178,991			81,979,611			164,985
Time deposits		303,002,428			404,583,941			814,232
Marketable securities		9,788,358			11,797,463			23,743
Accounts receivable, net		901,208,837			987,383,472			1,987,127
Notes receivable, net		8,020,849			11,839,116			23,826
Other accounts receivable, net		108,526,853			99,770,021			200,789
Amounts due from related companies		14,568,778			152,384,020			306,676
Inventories		71,789,477			105,439,534			212,199
Taxes recoverable		76,630,339			144,712,085			291,235
Prepaid expenses		55,250,232			50,356,678			101,344
Deferred taxes		66,111,520			68,409,142			137,675
Other current assets		71,588,880			142,032,393			285,843


Total current assets		1,793,665,542			2,260,687,476			4,549,674


PROPERTY, PLANT AND EQUIPMENT
Land		142,417,227			138,136,415			278,002
Buildings and infrastructure and works in progress		11,772,969,596			11,269,879,056			22,680,833
Machinery and equipment		2,134,240,240			1,984,794,585			3,994,435
Other plant and equipment		674,281,014			533,413,209			1,073,504
Technical appraisal		141,422,764			126,858,094			255,304
Accumulated depreciation		(6,179,423,073	)		(6,045,735,243	)		(12,167,150	)


Total property, plant and equipment, net		8,685,907,768			8,007,346,116			16,114,928


OTHER ASSETS
Investments in related companies		123,445,231			59,195,644			119,132
Investments in other companies		25,874,450			22,976,929			46,242
Goodwill, net		703,536,585			641,178,413			1,290,383
Negative goodwill, net		(39,755,524	)		(37,394,320	)		(75,257	)
Long-term receivables		147,653,188			195,537,843			393,524
Amounts due from related companies		97,222,765			626,547			1,261
Deferred taxes		13,155,686			—			—
Intangibles		97,475,614			95,326,429			191,846
Accumulated amortization		(58,856,697	)		(59,911,980	)		(120,574	)
Other assets		294,779,113			252,197,547			507,552


Total other assets		1,404,530,411			1,169,733,052			2,354,109


TOTAL ASSETS		11,884,103,721			11,437,766,644			23,018,711

The accompanying notes are an integral part of these consolidated financial statements.

F - 21

ENERSIS S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos of December 31, 2007, and thousands of US dollars)


	As of December 31,
	2006			2007			2007
	ThCh$			ThCh$			ThUS$

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term debt due to banks and financial institutions		144,194,111			169,694,879			341,514
Current portion of long-term debt due to banks and financial Institutions		105,769,447			129,310,857			260,241
Current portion of bonds payable		121,584,960			366,034,697			736,652
Current portion of long-term notes payable		36,540,686			24,183,692			48,670
Dividends payable		80,213,385			32,885,815			66,183
Accounts payable		397,090,406			514,755,846			1,035,955
Short-term notes payable		16,890,479			15,961,727			32,123
Miscellaneous payables		119,630,007			106,100,650			213,530
Amounts payable to related companies		32,072,346			31,851,119			64,101
Accrued expenses		85,222,581			85,055,952			171,177
Withholdings		107,385,626			106,033,166			213,394
Income taxes payable		156,915,030			18,343,075			36,916
Deferred income		5,391,968			7,829,528			15,757
Other current liabilities		97,574,529			132,218,175			266,091


Total current liabilities		1,506,475,561			1,740,259,178			3,502,304


LONG-TERM LIABILITIES:
Due to banks and financial institutions		972,982,285			1,024,723,413			2,062,274
Bonds payable		2,357,989,334			2,146,924,098			4,320,723
Long-term notes payable		120,705,276			122,967,653			247,475
Miscellaneous payables		165,166,253			143,948,640			289,699
Amounts payable to related companies		12,082,887			8,161,792			16,426
Accrued expenses		348,993,080			328,299,704			660,709
Deferred income taxes		—			22,440,908			45,163
Other long-term liabilities		235,115,670			255,064,580			513,322


Total long-term liabilities		4,213,034,785			4,052,530,788			8,155,791


MINORITY INTEREST		3,082,340,206			2,741,767,047			5,517,855


SHAREHOLDERS’ EQUITY:
Paid-in capital, no par value		2,594,015,458			2,594,015,458			5,220,502
Additional paid-in capital		184,861,405			184,861,405			372,037
Other reserves		(255,979,636	)		(435,491,419	)		(876,434	)
Retained earnings		291,354,472			388,982,534			782,834
Net income for the year		307,121,433			188,376,410			379,111
Interim dividends		(38,924,762	)		(17,534,757	)		(35,289	)
Deficit of subsidiaries in development stage		(195,201	)		—			—


Total shareholders’ equity		3,082,253,169			2,903,209,631			5,842,761


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		11,884,103,721			11,437,766,644			23,018,711

F - 22

ENERSIS S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos of December 31, 2007, and thousands of US dollars)


	For the years ended December 31,
	2005			2006			2007			2007
	ThCh$			ThCh$			ThCh$			ThUS$
OPERATING INCOME:
SALES		3,533,450,059			4,155,844,703			4,686,675,559			9,432,018
COST OF SALES		(2,399,515,599	)		(2,782,687,091	)		(3,163,865,117	)		(6,367,335	)


GROSS PROFIT		1,133,934,460			1,373,157,612			1,522,810,442			3,064,683

ADMINISTRATIVE AND SELLING EXPENSES		(243,970,734	)		(241,526,970	)		(267,243,749	)		(537,833	)


OPERATING INCOME		889,963,726			1,131,630,642			1,255,566,693			2,526,850


NON-OPERATING INCOME AND EXPENSE:
Interest income		94,452,404			139,286,384			116,407,766			234,273
Equity in income of related companies		15,860,236			5,546,450			2,732,317			5,499
Other non-operating income		73,286,949			113,673,478			199,327,497			401,150
Equity in loss of related companies		(8,463,062	)		(134,628	)		(57,493,370	)		(115,707	)
Amortization of goodwill		(60,514,060	)		(60,045,277	)		(59,814,172	)		(120,377	)
Interest expense		(384,527,149	)		(419,622,162	)		(407,285,992	)		(819,670	)
Other non-operating expenses		(173,337,268	)		(224,762,650	)		(348,716,130	)		(701,798	)
Price-level restatement, net		(5,422,442	)		1,306,844			(10,803,572	)		(21,742	)
Exchange difference, net		(6,844,633	)		5,721,747			6,786,479			13,658


NON-OPERATING EXPENSE, NET		(455,509,025	)		(439,029,814	)		(558,859,177	)		(1,124,714	)


INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND AMORTIZATION OF NEGATIVE GOODWILL		434,454,701			692,600,828			696,707,516			1,402,136

INCOME TAXES		(190,983,412	)		(102,256,730	)		(253,147,436	)		(509,463	)


INCOME (LOSS) BEFORE MINORITY INTEREST AND AMORTIZATION OF NEGATIVE GOODWILL		243,471,289			590,344,098			443,560,080			892,673

MINORITY INTEREST		(185,879,944	)		(289,749,961	)		(259,605,529	)		(522,461	)


INCOME (LOSS) BEFORE AMORTIZATION OF NEGATIVE GOODWILL		57,591,345			300,594,137			183,954,551			370,212

AMORTIZATION OF NEGATIVE GOODWILL		16,992,820			6,527,296			4,421,859			8,899


NET INCOME FOR THE YEAR		74,584,165			307,121,433			188,376,410			379,111

The accompanying notes are an integral part of these consolidated financial statements.

F - 23

ENERSIS S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos of December 31, 2007, and thousands of US dollars)


	For the years ended December 31,
	2005			2006			2007			2007
	ThCh$			ThCh$			ThCh$			ThUS$

Net income for the year		74,584,165			307,121,433			188,376,410			379,111

GAIN (LOSSES) FROM SALES OF ASSETS:
Losses (gain) on sale of property, plant and equipment		1,192,666			(19,947,183	)		(562,731	)		(1,133	)
Gain on sale of investments		—			—			(3,077,984	)		(6,194	)
Gain on sale of other assets		(289,801	)		(290,967	)		(568,995	)		(1,145	)

Charges (credits) to income which do not represent cash flows:
Depreciation		403,119,542			445,298,395			416,692,881			838,602
Amortization of intangibles		9,114,585			8,440,982			8,733,850			17,577
Write-offs and accrued expenses		61,153,232			27,992,780			52,431,844			105,520
Equity in income of related companies		(15,860,236	)		(5,546,450	)		(2,732,317	)		(5,499	)
Equity in loss of related companies		8,463,062			134,628			57,493,370			115,707
Amortization of goodwill		60,514,060			60,045,277			59,814,172			120,377
Amortization of negative goodwill		(16,992,819	)		(6,527,296	)		(4,421,859	)		(8,899	)
Price-level restatement, net		5,422,442			(1,306,844	)		10,803,572			21,742
Exchange difference, net		6,844,633			(5,721,747	)		(6,786,479	)		(13,658	)
Other credits to income which do not represent cash flows		(29,098,526	)		(16,315,444	)		(53,730,500	)		(108,133	)
Other charges to income which do not represent cash flows		94,015,314			73,902,631			204,009,880			410,572

Changes in assets which affect operating cash flows:
Decrease (increase) in trade receivables		(85,128,384	)		(193,956,180	)		(216,050,555	)		(434,806	)
Decrease (increase) in inventory		(21,797,219	)		5,011,884			(30,585,338	)		(61,554	)
Decrease (increase) in other assets		29,691,002			(104,362,820	)		(66,934,474	)		(134,707	)

Changes in liabilities which affect operating cash flows:
Increase (decrease) in accounts payable associated with operating results		19,477,150			156,946,384			233,699,604			470,325
Increase (decrease) in interest payable		39,649,652			29,991,724			30,089,971			60,557
Increase (decrease) in income tax payable		49,099,925			(32,879,227	)		(96,770,840	)		(194,753	)
Increase (decrease) in other accounts payable associated with operating results		45,612,435			(39,663,944	)		(15,723,876	)		(31,645	)
Net (increase) in value added tax and other similar taxes payable		(25,569,761	)		(51,891,419	)		(69,370,824	)		(139,610	)
Income attributable to minority interest		185,879,944			289,749,961			259,605,529			522,461


Net cash flows provided by operating activities		899,097,063			926,226,558			954,434,311			1,920,815


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt		439,489,161			—			2,820,189			5,676
Proceeds from bond issuances		183,206,329			1,368,499,397			869,561,904			1,750,009
Other sources of financing		742,515			178,976,706			363,114,713			730,775
Distribution of capital in subsidiary		(133,133,252	)		(91,851,542	)		(14,339,987	)		(28,859	)
Dividends paid		(302,553,363	)		(191,825,479	)		(553,116,614	)		(1,113,157	)
Payment of debt		(864,519,052	)		(1,062,289,729	)		(713,170,383	)		(1,435,269	)
Payment of bonds		(121,226,128	)		(503,548,490	)		(129,596,682	)		(260,816	)
Payment of loans obtained from related companies		(2,828,287	)		(8,675,671	)		(2,374,719	)		(4,779	)
Payment of bond issuance costs		(984,335	)		(537,063	)		—			—
Other disbursements for financing		(19,010,186	)		(7,822,642	)		(1,380,797	)		(2,779	)


Net cash used in financing activities		(820,816,598	)		(319,074,513	)		(178,482,376	)		(359,199	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment		6,682,050			47,847,295			3,755,584			7,558
Sales of investment in related companies		1,829,591			53,049			8,373,539			16,852
Payments received from notes receivable from related companies		8,633,163			2,997,252			—			—
Other receipts from investments		7,778,683			2,053,906			44,102,997			88,758
Liquidation of subsidiary (see note 11 h) iv))		—			(4,425,890	)		—			—
Additions to property, plant and equipment		(348,100,160	)		(556,083,204	)		(594,055,321	)		(1,195,547	)
Long-term investments in related companies		(36,341,503	)		(24,219,165	)		(38,182,150	)		(76,842	)
Documented loans to related companies		—			—			(4,441,474	)		(8,939	)
Other loans to related companies		—			—			(38,730,510	)		(77,946	)
Other investment disbursements		(3,136,265	)		(13,472,337	)		(72,360,024	)		(145,626	)


Net cash used in investing activities		(362,654,441	)		(545,249,094	)		(691,537,359	)		(1,391,732	)


POSITIVE (NEGATIVE) NET CASH FLOW FOR THE PERIOD		(284,373,976	)		61,902,951			84,414,576			169,886

EFFECT OF PRICE-LEVEL RESTATEMENT ON CASH AND CASH EQUIVALENTS		(22,990,227	)		15,657,549			19,449,757			39,143


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(307,364,203	)		77,560,500			103,864,333			209,029

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR		621,678,000			395,096,571			472,657,071			951,231


Additional cash resulting from creation of Endesa Brasil (see note 11 (f) i)		80,782,774			—			—			—

CASH AND CASH EQUIVALENTS AT END OF THE YEAR		395,096,571			472,657,071			576,521,404			1,160,260

The accompanying notes are an integral part of these consolidated financial statements.

F - 24

ENERSIS S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Expressed in thousands of historical Chilean pesos, except as stated)


			Additional								Deficit of
	Paid-in		paid-in		Other			Retained			subsidiaries in			Interim			Net income
	capital		capital		reserves			earnings			development stage			dividends			for the year			Total
	ThCh$		ThCh$		ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

As of January 1, 2005		2,283,404,124		162,725,820		(122,588,994	)		194,378,259			(2,673,664	)		—			44,307,596			2,559,553,142
Transfer of prior year income to retained earnings		—		—		—			41,633,932			2,673,664			—			(44,307,596	)		—
Investment equity variations		—		—		(5,851,418	)		—			—			—			—			(5,851,418	)
Dividend paid		—		—		—			(13,600,517	)		—			—			—			(13,600,517	)
Cumulative translation adjustment		—		—		(97,676,664	)		—			—			—			—			(97,676,664	)
Reserve Technical Bulletin No. 72		—		—		(6,197,072	)		—			—			—			—			(6,197,072	)
Price-level restatement		82,202,548		5,858,130		(4,413,203	)		7,979,618			—			—			—			91,627,092
Net income for the year		—		—		—			—			—			—			68,016,865			68,016,865


As of December 31, 2005		2,365,606,672		168,583,950		(236,727,351	)		230,391,292			—			—			68,016,865			2,595,871,428


As of December 31, 2005(1)		2,594,015,458		184,861,406		(259,584,324	)		252,636,493			—			—			74,584,165			2,846,513,198


As of January 1, 2006		2,365,606,672		168,583,950		(236,727,351	)		230,391,292			—			—			68,016,865			2,595,871,428
Transfer of prior year income to retained earnings		—		—		—			68,016,865			—			—			(68,016,865	)		—
Investment equity variations		—		—		(10,585,093	)		—			—			—			—			(10,585,093	)
Accumulated deficit of subsidiaries in development stage		—		—		—			—			(181,751	)		—			—			(181,751	)
Final dividend 2005		—		—		—			(32,651,166	)		—			—			—			(32,651,166	)
Cumulative translation adjustment		—		—		14,766,794			—			—			—			—			14,766,794
Reserve Technical Bulletin No. 72		—		—		(825,381	)		—			—			—			—			(825,381	)
Price-level restatement		49,677,740		3,540,263		(4,971,274	)		5,522,778			—			—			—			53,769,507
Interim dividend		—		—		—			—			—			(36,242,795	)		—			(36,242,795	)
Net income for the year		—		—		—			—			—			—			285,960,366			285,960,366


As of December 31, 2006		2,415,284,412		172,124,213		(238,342,305	)		271,279,769			(181,751	)		(36,242,795	)		285,960,366			2,869,881,909


As of December 31, 2006 (1)		2,594,015,458		184,861,405		(255,979,636	)		291,354,472			(195,201	)		(38,924,762	)		307,121,433			3,082,253,169


As of January 1, 2007		2,415,284,412		172,124,213		(238,342,305	)		271,279,769			(181,751	)		(36,242,795	)		285,960,366			2,869,881,909
Transfer of prior year income to retained earnings		—		—		—			249,535,820			181,751			36,242,795			(285,960,366	)		—
Investment equity variations		—		—		(7,702,898	)		—			—			—			—			(7,702,898	)
Final dividend 2006		—		—		—			(159,675,172	)		—			—			—			(159,675,172	)
Reserve Technical Bulletin No. 72		—		—		(56,695,443	)		—			—			—			—			(56,695,443	)
Cumulative translation adjustment		—		—		(115,113,442	)		—			—			—			—			(115,113,442	)
Price-level restatement		178,731,046		12,737,192		(17,637,331	)		27,842,117			—			(190,784	)		—			201,482,240
Interim dividend		—		—		—			—			—			(17,343,973	)		—			(17,343,973	)
Net income for the year		—		—		—			—			—			—			188,376,410			188,376,410


As of December 31, 2007		2,594,015,458		184,861,405		(435,491,419	)		388,982,534			—			(17,534,757	)		188,376,410			2,903,209,631

As of December 31, 2007 (2)		5,220,502		372,037		(876,434	)		782,834			—			(35,289	)		379,111			5,842,761


(1)		Restated in thousands of constant Chilean pesos as of December 31, 2007.

(2)		Expressed in thousands of US$ as of December 31, 2007

The accompanying notes are an integral part of these consolidated financial statements.

F - 25

ENERSIS S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos of December 31, 2007, except as stated)
As of and for the years ended December 31, 2005, 2006 and 2007

Note 1. Description of Business

Enersis S.A. (the “Company”) is registered in the Securities Register under No.0175 and is regulated by the Chilean Superintendence of Securities and Insurance (the “SVS”). The Company issued publicly registered American Depositary Receipts in 1993 and 1996. Enersis S.A. is a reporting company under the United States Securities and Exchange Act of 1934.

The Company’s subsidiaries, Chilectra S.A. (formerly Elesur S.A.), Empresa Nacional de Electricidad S.A. (“Endesa Chile”), Pehuenche S.A. and Aguas Santiago Poniente S.A., are registered in the Securities Register under No. 0931, 0114, 0293 and 0972, respectively.

Note 2. Summary of Significant Accounting Policies

a)		General

(i)		The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in Chile and the regulations established by the SVS (collectively “Chilean GAAP”), and the specific corporate regulations of Law No.18,046, related to the formation, registration and liquidation of Chilean corporations, among others. Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation.

		The preparation of financial statements in conformity with Chilean GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates.

		In certain cases generally accepted accounting principles in Chile require that assets or liabilities be recorded or disclosed at their fair values. The fair value is the amount at which an asset could be bought or sold or the amount at which a liability could be incurred or settled in a current transaction between willing parties, other than in a forced or liquidation sale. Where available, quoted market prices in active markets have been used as the basis for the measurement; however, where quoted market prices in active markets are not available, the Company has estimated such values based on the best information available, including using modeling and other valuation techniques.

F - 26

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

(iii)

The accompanying financial statements reflect the consolidated results of operations of Enersis S.A. and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Investments in companies in the development stage are accounted for using the equity method, except that income or losses are included directly in equity instead of being reflected in the Company’s consolidated statement of operations. The Company consolidates the financial statements of companies in which it controls over 50% of the voting shares, provided there are no substantive minority participating rights that prevent control, as detailed as follows:


	Percentage participation in voting rights as of December 31,
	2005				2006				2007
Company	Economic		Voting		Economic		Voting		Economic		Voting

Chilectra S.A. (1)		98.24		98.24		—		—		—		—
Synapsis Soluciones y Servicios IT Ltda.		100.00		100.00		100.00		100.00		100.00		100.00
Inmobiliaria Manso de Velasco Ltda.		100.00		100.00		100.00		100.00		100.00		100.00
Cía. Americana de Multiservicios Ltda.		100.00		100.00		100.00		100.00		100.00		100.00
Endesa Chile		59.98		59.98		59.98		59.98		59.98		59.98
Chilectra S.A. (former Elesur) (1)		100.00		100.00		99.09		99.09		99.09		99.09
Enersis Internacional Ltda. (5)		100.00		100.00		—		—		—		—
Inversiones Distrilima S.A.		55.68		68.39		55.91		68.39		55.90		68.39
Empresa Distribuidora Sur S.A. (Edesur)		65.09		65.88		65.39		65.88		65.39		65.88
Codensa S.A. (2)		21.66		25.71		21.73		25.71		21.73		25.71
Investluz (3)		59.45		100.00		59.51		100.00		59.51		100.00
Ampla Energía e Serviços S.A.		69.64		91.93		69.88		91.93		69.88		91.93
Ampla Investimentos e Serviços S.A.		69.64		91.93		69.88		91.93		69.88		91.93
Compañía de Interconexión Energética S.A. (Cien) (4)		53.61		100.00		53.57		100.00		53.57		100.00
Central Geradora Termeléctrica Fortaleza S.A. (4)		53.61		100.00		53.57		100.00		53.57		100.00
Endesa Brasil S.A. (4)		53.61		71.52		53.57		71.52		53.57		71.52
Cachoeira Dourada S.A.		53.61		99.61		53.36		99.61		53.36		99.61



(1)		In the extraordinary meeting of Elesur S.A., held on March 31, 2006, shareholders approved the name change. The merger of Chilectra (formerly Elesur) and Chilectra S.A., approved in general meetings of their shareholders held on March 31, 2006, became effective on April 1, 2006.

		On May 27, 2004, 99.9989% of Elesur S.A. was purchased, therefore, as from that date it is consolidated into Enersis S.A. financial statements.

(2)		Codensa S.A. is consolidated because of the majority presence on the board of directors, obtained through the shareholders’ agreement of January 27, 2004, between Endesa Internacional and Enersis S.A.

(3)		Investluz is Parent Company of Companhia Energética do Céará S.A. Coelce.

(4)		As a result of the creation of the Brazilian holding company, Endesa Brasil S.A. (“Endesa Brasil”) (see Note 11.(f) i, this company and its subsidiaries were included in the consolidated financial statements of Enersis S.A.

		The following pro forma income statement information for the year ended December 31, 2005 gives effect to the acquisition of additional shareholding in these subsidiaries as if it took place on January 1, 2005. The pro forma information is not necessarily indicative of what would have occurred if the acquisitions had been in effect for the periods presented, nor is it intended to be a projection of future results.

(5)		On September 21, 2006, Enersis Internacional ceased to exist. Its assets and liabilities were awarded to Agencia Enersis. Due to the above, the following investments in related companies were awarded to Agencia Enersis: 33,336,890 shares of Distrilec Inversora S.A., equivalent to 6.76%; 56,008,787 shares of Inversiones Distrilima S.A., equivalent to 12.21%; 98,539 shares of Compañía Peruana de Electricidad S.A., equivalent to 0.1%; 536,591,907,867 shares of Ampla Energia e Serviços S.A., equivalent to 13.68%; 1,641,574,700 shares of Ampla Investimentos e Serviços S.A., equivalent to 13.68%, and 450 rights of Synapsis Argentina S.R.L, equivalent to 0.12%.

F - 28

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

(iv)

Consolidated subsidiaries of Endesa Chile. are detailed as follows:


		Percentage participation in voting
		rights as of December 31,
Company name	Country	2005		2006		2007
		Total		Total		Direct		Indirect		Total
		%		%		%		%		%

Enigesa S.A.	Chile		100.00		100.00		99.51		0.49		100.00
Ingendesa S.A. (1)	Chile		100.00		100.00		98.75		1.25		100.00
Pehuenche S.A.	Chile		92.65		92.65		92.65		—		92.65
Endesa Argentina S.A.	Argentina		99.99		99.99		99.66		0.33		99.99
Endesa Chile Internacional (2)	Chile		100.00		100.00		—		—		—
Pangue S.A.(3)	Chile		94.99		94.99		94.98		0.01		94.99
Hidroinvest S.A. (11)	Argentina		69.93		69.93		41.94		54.15		96.09
Hidroeléctrica El Chocón S.A. (12)	Argentina		65.19		65.19		2.48		65.19		67.67
Endesa Costanera S.A. (13)	Argentina		64.26		64.26		12.33		57.44		69.77
Endesa Brasil Participacoes Ltda.	Brazil		100.00		100.00		5.00		95.00		100.00
Túnel El Melón S.A. (16)	Chile		99.96		99.99		99.99		0.01		100.00
Compañía Eléctrica Cono Sur S.A.	Panama		100.00		100.00		100.00		—		100.00
Central Hidroeléctrica Betania S.A. (4)	Colombia		85.62		99.99		—		—		—
Capital de Energía S.A. (5)	Colombia		51.00		—		—		—		—
Emgesa S.A. (6), (8)	Colombia		51.32		23.45		1.44		25.43		26.87
Edegel S.A. (9)	Peru		63.56		55.44		—		55.44		55.44
Generandes Perú S.A.	Peru		59.63		59.63		—		59.63		59.63
Compañía Eléctrica San Isidro S.A. (7)	Chile		100.00		100.00		100.00		—		100.00
Compañía Eléctrica Tarapacá S.A.	Chile		100.00		100.00		99.94		0.06		100.00
Inversiones Endesa Norte S.A.	Chile		100.00		100.00		99.99		0.01		100.00
Ingendesa Do Brasil Limitada	Brazil		100.00		100.00		—		100.00		100.00
Endesa Eco S.A. (10)	Chile		100.00		100.00		99.99		0.01		100.00
Southern Cone Power Argentina S.A.(14)	Argentina		—		—		98.00		2.00		100.00
Central Eólica Canela S.A.(15)	Chile		—		—		—		75.00		75.00


(1)		See Note 11 (f) ii

(2)		See Note 11 (f) v

(3)		See Note 11 (g) ii

(4)		See Note 11 (f) vi, Note 11 (g) iv

(5)		See Note 11 (h) iv

(6)		Endesa Chile exercises control over this company pursuant to a shareholders’ agreement.

(7)		See Note 11(f) iii, Note 11 (g) i, Note 11 (h) ii

(8)		See Note 11 (f) vi, Note 11 (g) iv, Note 11 (h) iv

(9)		See Note 11 (g) iii

(10)		See Note 11 (e) i

(11)		See Note 11 (g) vi

(12)		See Note 11 (g) vi

(13)		See Note 11 (g) v

(14)		See Note 11 (g) v

(15)		See Note 11 (e) iv

(16)		See Note 11 (g) vii

F - 30

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

The participation in voting rights is equal to economic participation in all subsidiaries except for those presented as follows:


	Percentage of economic
	participation as of December 31,
	2005		2006		2007
	%		%		%

Emgesa S.A. (1)		22.36		23.45		26.87
Edegel S.A. (2)		37.90		33.06		33.06
Capital de Energía S.A. (3)		43.59		—		—
Hidroeléctrica El Chocón S.A. (4)		47.45		47.45		65.37


(1)		See Note 11 (f) vi, Note 11 (g) iv, Note 11 (h) iv, subsequent to the mergers in 2007, voting rights are equal to economic interest.

(2)		See Note 11 (g) iii.

(3)		See Note 11 (h) iv.

(4)		See Note 11 (g) vi

Economic participation is calculated taking into account Enersis participation in share capital of its subsidiaries and equity method investees.

Years covered

These financial statements reflect the Company’s financial position as of December 31, 2006 and 2007, and the results of its operations, the changes in its shareholders’ equity and its cash flows for the years ended December 31, 2005, 2006 and 2007.

Constant currency restatement

The cumulative inflation rate in Chile as measured by the Chilean Consumer Price Index (“CPI”) for the three-year period ended December 31, 2007 was approximately 13.1%.

Chilean GAAP requires that the financial statements be restated to reflect the full effects of gain or loss in the purchasing power of the Chilean peso on the financial position and results of operations of reporting entities. The method described below is based on a model that enables calculation of net inflation gains or losses caused by monetary assets and liabilities exposed to changes in the purchasing power of local currency. The model prescribes that the historical cost of all non-monetary accounts be restated for general price-level changes between the date of origin of each item and the year-end.

The financial statements of the Company have been price-level restated in order to reflect the effects of the changes in the purchasing power of the Chilean currency during each year. All non-monetary assets and liabilities, all equity accounts and income statement accounts have been restated to reflect the changes in the CPI from the date they were acquired or incurred to year-end (see also Note 24).

The purchasing power gain or loss included in net income reflects the effects of Chilean inflation on the assets and liabilities held by the Company.

The restatements were calculated using the official consumer price index of the National Institute of Statistics and based on the “prior month rule,” in which the inflation adjustments are based on the CPI at the close of the month preceding the close of the respective year or transaction. This index is considered by the business community, the accounting profession and the Chilean government to be the index that most closely complies with the technical requirement to reflect the variation in the general level of prices in Chile, and consequently it is widely used for financial reporting purposes.

F - 31

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

The values of the Chilean consumer price indices used to reflect the effects of the changes in the purchasing power of the Chilean peso (“price-level restatement”) are as follows:


			Change over
			Previous
	Index		November 30,

November 30, 2005		100.00		3.6	%
November 30, 2006		102.10		2.1	%
November 30, 2007		109.67		7.4	%

By way of comparison, the actual values of the Chilean consumer price indices as of the balance sheet dates are as follows:


			Change over
			Previous
	Index		December 31,

December 31, 2005		100.00		3.7	%
December 31, 2006		103.67		2.6	%
December 31, 2007		111.76		7.8	%

The above-mentioned price-level restatements do not purport to represent appraisal or replacement values and are only intended to restate all non-monetary financial statement components in terms of local currency of a single purchasing power and to include in net income or loss for each year the gain or loss in purchasing power arising from the holding of monetary assets and liabilities exposed to the effects of inflation.

Index-linked assets and liabilities

Assets and liabilities that are denominated in index-linked units of account are stated at the year-end values of the respective units of account. The principal index-linked unit used in Chile is the Unidad de Fomento (“UF”), which is adjusted daily to reflect the changes in Chile’s CPI. Certain of the Company’s investments are linked to the UF. As the Company’s indexed liabilities exceed its indexed assets, the increase in the index results in a net loss on indexation. Values for the UF are as follows (historical Chilean pesos per UF):


	Ch$

December 31, 2005		17,974.81
December 31, 2006		18,336.38
December 31, 2007		19.622,66

Comparative financial statements

For comparative purposes, the 2005 and 2006 consolidated financial statements and the amounts disclosed in the related Notes have been restated in terms of the purchasing power of Chilean pesos as of December 31, 2007.

This updating does not change the prior years’ statements or information in any way except to update the amounts to constant Chilean pesos of similar purchasing power.

F - 32

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Convenience translation to U.S. dollars

The financial statements are stated in Chilean pesos. The translations of Chilean pesos into US dollars are included solely for the convenience of the reader, using the observed exchange rate reported by the Chilean Central Bank as of December 31, 2007 of Ch$ 496.89 to US$ 1.00. The convenience translations should not be construed as representations that the Chilean peso amounts have been, could have been, or could in the future be, converted into US dollars at this or any other rate of exchange.

Assets and liabilities in foreign currencies

Assets and liabilities denominated in foreign currencies are detailed in Note 32. These amounts have been stated at the observed exchange rates reported by the Central Bank of Chile as of each December 31, as follows:


	Symbol	As of December 31,
Currency	Used	2005		2006		2007
		Ch$		Ch$		Ch$

United States dollar	US$		512.50		532.39		496.89
British pound sterling	£		880.43		1,041.86		989.43
Colombian peso	$Col		0.22		0.24		0.25
New Peruvian sol	Soles		149.42		166.58		165.96
Brazilian real	Rs		219.02		249.01		280.32
Japanese yen	¥		4.34		4.47		4.41
Euro	€		606.08		702.08		730.94
Unidad de Fomento (UF)	UF		17,974.81		18,336.38		19,622.66
Argentine peso	$Arg		181.92		173.87		157.79

Time deposits and marketable securities

Time deposits are presented at original placement plus accrued interest and UF indexation adjustments, as applicable. Marketable securities include investments in quoted shares that are valued at the lower of cost or market value. The investments are in both short-term highly liquid fixed rate investment shares and mutual fund units valued at cost plus interest and indexation or redemption value as appropriate (Note 4).

Allowance for doubtful accounts

The estimates for the allowance for doubtful accounts have been made considering the aging and nature of the accounts receivables. Accounts receivable are classified as current or long-term, depending on their collection terms. Current and long-term trade accounts receivable, notes receivable and other receivables are presented net of allowances for doubtful accounts (see Note 5). The allowance for doubtful accounts amounted to ThCh$ 143,297,058, ThCh$ 144,839,220 and ThCh$ 187,039,400 as of December 31, 2005, 2006 and 2007, respectively. In addition, the total sum owed by companies that have gone into bankruptcy amounting to ThCh$ 1,713,147 in 2005, ThCh$ 1,351,220 in 2006 and ThCh$ 1,388,725 in 2007 is included in the bad debt allowance estimation.

F - 33

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Inventories

Inventory of materials in transit, and operation and maintenance materials on hand, are valued at the lower of price-level restated cost or net realizable value.

In the case of real estate projects’ under development inventory includes the cost of land, demolition, urbanize, payments to contractors and other direct costs.

The costs and revenues of construction in progress are accounted for under the completed contract method in accordance with Technical Bulletin No. 39 of the Chilean Institute of Accountants and are included in current assets as their realization is expected in the short-term.

Property, plant and equipment

Property, plant and equipment are valued at net replacement cost as determined by the former Superintendence of Electric and Gas Services (SEG) adjusted for price-level restatement in accordance with D.F.L. No.4 of 1959. The latest valuation under the D.F.L. 4 was in 1980.

Property, plant and equipment acquired after the latest valuation of net replacement cost are shown at cost, plus price-level restatement. Interest on debt directly obtained to finance construction of power generation projects is capitalized during the term of construction.

In 1986, an increase based upon a technical appraisal of property, plant and equipment was recorded in the manner authorized by the SVS in Circulars No.’s 550 and 566 dated October 15 and December 16, 1985, respectively, and Communication No.4790, dated December 11, 1985.

Under Technical Bulletin Bulletin No. 33, the Company is required to evaluate the recoverability of its property, plant and equipment when certain indicators of impairment exist. The Company has not identified any impairment to property, plant and equipment as a result of applying Technical Bulletin No. 33.

Depreciation

Depreciation expense is calculated on the revalued balances using the straight-line method over the estimated useful lives of the assets.

The table below provides the useful life range for our most significant fixed assets classes.


	Useful life
Table	in years

Distribution and transmission lines network		20 - 50
Substations		20 - 40
Public lighting		20 - 50
Generator and turbines		20 - 40
Combined cycle		20 - 40

Leased assets

The leased assets, whose contracts have financial lease characteristics, are accounted for as an acquisition of property, plant and equipment, recognizing the total obligation and the unaccrued interest. Said assets do not legally belong to the Company, for this reason, as long as the purchase option is not exercised, it will not be able to freely dispose of them.

F - 34

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Power installations financed by third parties

As established by D.F.L. 1 of the Ministry of Mines dated September 13, 1982, power facilities subsidized by third parties are treated as reimbursable contributions as such facilities form part of the Company’s plant and equipment.

Contributions completed prior to D.F.L. 1 are deducted from Plant and equipment and their depreciation is charged to Power facilities financed by third parties.

Investments in related companies

The Company classifies an investment as investment in related companies, when it has the ability to exercise significant influence over the operations. Investments in related companies are included in “Other assets” using the equity method. This accounting method recognizes in income the Company’s proportionate share in the net income or loss of each investee on an accrual basis (Note 11).

Investments in foreign affiliates are recorded in accordance with Technical Bulletin No.64 of the Chilean Association of Accountants. Under Technical Bulletin No.64 of the Chilean Association of Accountants, investments in foreign subsidiaries are price-level restated, the effects of which are reflected in income, while the effects of the foreign exchange gains or losses between the Chilean peso and the US dollar on the foreign investment measured in US dollars, are reflected in equity in the account “Cumulative Translation Adjustment”.

The Company assesses its ability to recover the carrying amounts of its investments in related companies accounted for under the equity method, whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. This assessment requires determining the fair values of the equity method investments. Fair value is determined using valuation methodologies, including discounted cash flows and the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. A write down is recorded in case the fair value is less than the carrying value and the decline in value is considered to be other than temporary. As indicated in Note 11 (j), the Company during the year ended December 31, 2007 recorded an impairment of its investment in Inversiones Gas Atacama Holding Limitada amounting to ThCh$ 48,890,387 as a result of an other-than-temporary impairment of the investment. The impairment charge includes a write down of the investment to its recoverable amount and impairment of goodwill which was recorded over the investment. (see Note 13a).

Intangibles, other than goodwill

Intangible assets are recorded at acquisition cost, and restated price level adjustment. Such assets are amortized over their estimated useful lives, not to exceed twenty years. Intangibles other than goodwill correspond mainly to easements, rights of way and water rights.

Severance indemnities

The severance indemnity that the Company is obliged to pay to its employees under collective bargaining agreements is stated at the present value of the benefit under the vested cost method, discounted at 6.5% in Chile, 12.1% in Brazil and 9.8% in Colombia in 2005, 2006 and 2007 and assuming an average employment span which varies based upon years of service with the Company.

Revenue recognition

The Company’s revenues are primarily derived from electric power generation and distribution services, and include energy supplied and unbilled at each year-end. Revenues are valued using rates in effect when services are provided to customers. Accrued unbilled revenues are presented in current assets as trade receivable and the corresponding cost is included in cost of sales.

The Company also recognizes revenues for amounts received from highway tolls for motorized vehicles, income related to computer advisory services, engineering services, sale of materials and sale of real estate.

F - 35

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Cost of sales and Administrative and selling expenses

The cost of sales line item includes: purchased energy and power, materials, fuel, tolls and energy transportation cost, direct production salaries, productive assets’ depreciation, amortization, and maintenance and operation cost. The purchase of power amounted to ThCh$ 1,143,893,936, ThCh$ 1,274,309,997 and ThCh$ 1,478,544,716 for the years ended December 31, 2005, 2006 and 2007. The administrative and selling expense line item includes: general and administrative, materials and office supplies, overhead salaries, bad debt expense, non-productive assets’ amortization and depreciation.

Income tax and deferred income taxes

For the years ended December 31, 2005, 2006 and 2007, the Company recorded current tax expense (net) determined in accordance with the laws and regulations in each country in which it operates of ThCh$ 159,775,788, ThCh$ 256,547,287 and ThCh$ 216,776,295, respectively and, additionally, it recorded a deferred tax expense of ThCh$ 35,746,636 in 2005, deferred tax expense of ThCh$ (154,290,557) in 2006 and deferred tax expense ThCh$ 36,371,141 in 2007. The Company records deferred income taxes in accordance with Technical Bulletin No.60 of the Chilean Association of Accountants, and with Circular No.1466 issued on January 27, 2000 by the SVS, recognizing, using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities using the tax rates estimated to be in effect at the time of reversal of the temporary differences that gave rise to them.

Accrued vacation expense

In accordance with Technical Bulletin No.47 issued by the Chilean Association of Accountants, employee vacation expense is recorded on an accrual basis.

Purchase with resale agreements

Purchase with resale agreements are included in “Other current assets” and are stated at cost plus interest and indexation accrued at year-end, in conformity with the related contracts.

Statements of cash flows

The Consolidated Statements of Cash Flows have been prepared in accordance with the indirect method.

Investments considered as cash equivalents, as indicated in point 6.2 of Technical Bulletin No.50 issued by the Chilean Association of Accountants, include time deposits, investments in fixed income securities classified as marketable securities, repurchase agreements classified as other current assets, and other cash balances classified as other accounts receivable with maturities less than 90 days.

For classification purposes, cash flows from operations include collections from clients and payments to suppliers, payroll and taxes.

Financial derivative contracts

As of December 31, 2005, 2006 and 2007 the Company and its subsidiaries have forward contracts, currency swaps, and interest rate swaps and collars with several financial institutions, to hedge against mainly foreign currency and interest risk exposures, which are recorded according to Technical Bulletin No.57 of the Chilean Association of Accountants. If the derivative foreign exchange contract qualifies for hedge accounting, it is recorded at estimated fair value, and the corresponding gain or loss is deferred and recorded as an offsetting asset or liability until settlement, at which time it is recognized in earnings as “Other non-operating income and expense”.

F - 36

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Goodwill and negative goodwill

Prior to January 1, 2004, goodwill arose from the excess of the purchase price of companies acquired over their net book value; negative goodwill arose when net book value exceeded the purchase price of companies acquired.

Goodwill and negative goodwill are also accounted for in the purchase of investments accounted for by the equity method. Chilean GAAP also provides that goodwill and negative goodwill amortization may be accelerated if the proportional net income or net loss of the investee exceeds the respective straight-line amortization amount.

Beginning January 1, 2004, the Company adopted Technical Bulletin No.72 of the Chilean Association of Accountants, which changes the basis for determining accounting for goodwill and negative goodwill generated in transactions after January 1, 2004, based on an allocation of the purchase price based on the fair value of the identifiable assets acquired and identifiable liabilities assumed. Both goodwill and negative goodwill are normally amortized over the maximum period of twenty years considering the expected period of return of the investments.

Whenever events or changes in circumstances indicate that goodwill recorded might be impaired, the Company performs a goodwill impairment test. Goodwill is tested for impairment on the level of cash generating units (CGU).

The testing of goodwill for impairment involves two steps:

	1.		The first step is to compare each CGU’s fair value with its carrying amount, including goodwill. The CGU’s fair value is determined using market prices, or, if not available, valuation techniques including discounted cash flow approaches. If a CGU’s carrying amount exceeds its fair value, an indicator for goodwill impairment exists and step two is performed.

	2.		The second step is to compare the implied fair value of goodwill with its carrying amount. The implied fair value represents the excess of the CGU’s net identifiable assets over the CGU’s net assets at fair value. Any excess of the carrying amount of goodwill over its implied fair value is recorded as impairment loss, writing down the carrying amount of goodwill to its implied fair value.

During the year ended December 31, 2007, the Company recorded an impairment of goodwill recorded over its equity method investment in Inversiones Gas Atacama Limitada amounting to ThCh$ 62,675. (See Note 11 j) and 13 a).

Goodwill related to investments accounted for under the equity method is tested for impairment together with the related investment, as if goodwill formed part of the carrying amount of the investment. See Note 2 l).

Pension and post-retirement benefits

Pension and post-retirement benefits are recorded in accordance with the respective collective bargaining contracts of the employees based on the actuarially determined projected benefit obligation, and using an annual discount rate of 6.5%.

Bonds

Bonds payable are recorded at the face value of the bonds. The difference between the face value and the placement value, equal to the premium or discount, is deferred and amortized over the term of the bonds.

Investments in other companies

Investments in other companies are presented at acquisition cost adjusted for price-level restatement, as they do not trade in an organized market and because the Company does not exercise significant influence.

F - 37

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Research and development costs

Costs incurred by the Company in research and development relate mainly to water-level studies, hydroelectric research, and seismic-activity surveys which are expensed as incurred. Costs incurred in performing studies related to specific construction projects are capitalized.

aa)

Cost of share issue

Costs incurred to date associated with issuing and placing shares are recorded according to the provisions of Circular No.1370 of 1998 of the Superintendence of Securities and Insurance. The amounts are deducted from the share premium account. A breakdown of the costs is shown in Note 27.

ab)

Litigation and other legal action

The Company has not recognized any assets for expected recoveries, through insurance or from others, related to litigation and other legal actions, in the periods presented. The Company records such recoveries only in the case that it is virtually certain such recoveries will be realized. In the case that the Company does record expected recoveries, the Company’s policy is to record such amounts as an asset in our consolidated balance sheet, unless a right of offset clearly exists.

As of December 31, 2007, the Company has established accruals for probable losses in the aggregate amount of ThCh$ 171,647,300 (ThUS$ 345,443), including accruals Endesa Chile has established in the amount of ThCh$ 6,862,026 (ThUS$ 13,810). See Note 30 for detail of claims to which such accruals relate to.

F - 38

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 4. Time Deposits

Time deposits as of each year end are as follows:


		2006							2007
		Annual			Scheduled				Annual			Scheduled
Tax Payer Number	Financial Institution	Rate %			Maturity		ThCh$		Rate %			Maturity		ThCh$

Foreign	Alfa mix		1.11	%		02.01.07		2,692,712		—			—		—
Foreign	Alianza Valores		8.10	%		02.01.07		1,396,215		—			—		—
Foreign	AFIN S.A.		—			—		—		9.67	%		03.01.08		4.047,845
Foreign	Banco Bilbao Vizcaya		7.45	%		02.01.07		112,931		7.50	%		02.01.08		1,982
Foreign	Banco Colpatria		1.24	%		02.01.07		3,858		1.26	%		02.01.08		9,086
Foreign	Banco Continental		4.97	%		02.01.07		9,031,979		—			—		—
Foreign	Banco Crédito		4.43	%		02.01.07		1,262,835		4.83	%		02.01.08		1,832,612
Foreign	Banco Davivienda		1.00	%		02.01.07		146		9.71	%		14.01.08		20,128,614
Foreign	Banco de Galicia		6.34	%		02.01.07		2,040,457		1.54	%		02.01.08		1,809,212
Foreign	Banco Frances		4.08	%		02.01.07		4,226,924		1.13	%		02.01.08		969,407
Foreign	Banco Hipotecario		—			—		—		0.00	%		02.01.08		1,719,812
Foreign	Banco Itau		4.09	%		02.01.07		14,133,250		0.96	%		02.01.08		60,873,430
Foreign	Banco Lloyds		5.65	%		02.01.07		242		—			—		—
Foreign	Banco Mellon Brascan		1.60	%		02.01.07		4,424,863		—			—		—
Foreign	Banco Merrill Linch		3.34	%		02.01.07		63,491		4.83	%		14.01.08		3,693,436
Foreign	Banco Nordeste		1.17	%		02.01.07		156,426		1.06	%		02.01.08		144,981
Foreign	Banco Pactual		1.10	%		31.01.07		67,469		0.93	%		31.01.08		1,511,540
Foreign	Banco Paribas Luxembourg		6.67	%		02.01.07		4,652,499		4.09	%		02.01.08		3,775,051
Foreign	Banco Real		0.10	%		02.01.07		1,893,835		—			—		—
Foreign	Banco Rio de la Plata		8.74	%		02.01.07		12,446,715		1.81	%		02.01.08		3,820,049
Foreign	Banco Santander Central Hispano		2.76	%		02.01.07		15,619,248		2.69	%		02.01.08		18,169,448
Foreign	Banco Sudameris		7.80	%		02.01.07		6,729,078		9.65	%		02.01.08		18,515,423
Foreign	Banco Votorantim		1.17	%		02.01.07		17,900,189		0.87	%		02.01.08		24,919,321
Foreign	Bancolombia		6.58	%		02.01.07		77		8.46	%		02.01.08		80
Foreign	Banistmo Colombia S.A.		7.00	%		02.01.07		752,811		—			—		—
Foreign	Bank Boston		5.14	%		02.01.07		2,331,870		0.93	%		02.01.08		109,321
Foreign	Bank of America		4.76	%		02.01.07		10,813,619		2.85	%		02.01.08		3,269,537
Foreign	BNY		1.18	%		02.01.07		6,414,232		—			—		—
Foreign	Bradesco		7.06	%		02.01.07		71,079,327		0.86	%		02.01.08		73,267,958
Foreign	Caixa Economica		—			—		—		0.93	%		31.01.08		1,471,426
Foreign	Certifacates of post to terms		8.68	%		02.01.07		259,389		—			—		—
Foreign	Citibank N.Y.		4.19	%		02.01.07		45,376,154		3.59	%		02.01.08		56,615,174
Foreign	Colmena		—			—		—		9.80	%		02.01.08		17,904,026
Foreign	Comafi		9.97	%		02.01.07		1,071,346		1.19	%		02.01.08		1,689,769
Foreign	Corficolombiana		6.39	%		02.01.07		12,313,019		7.45	%		02.01.08		773,371
Foreign	Correval		7.99	%		02.01.07		925,081		—			—		—
Foreign	Corredores Asociados		7.85	%		02.01.07		783,065		—			—		—
Foreign	Encargo Fiduciario Banco Santander		7.00	%		02.01.07		279,889		6.19	%		02.01.08		1,595,808
Foreign	FAM Fondo Ganadero		6.72	%		02.01.07		851		7.66	%		02.01.08		87
Foreign	Fiduciaria Helm Trust		6.01	%		02.01.07		85		7.85	%		02.01.08		87
Foreign	Fiducolombia		6.80	%		02.01.07		7,120,679		8.44	%		02.01.08		6,102
Foreign	Fiducomercio		5.46	%		02.01.07		55		—			—		—
Foreign	Fiduoccidente		5.93	%		02.01.07		251,322		8.07	%		02.01.08		205
Foreign	Fiduvalle		5.99	%		02.01.07		1,583,470		—			—		—
Foreign	Fiduciaria Banco de Bogotá		—			—		—		6.98	%		02.01.08		21,595
Foreign	Fondeos		7.32	%		02.01.07		3,155,144		—			—		—
Foreign	Fondo Sumar		6.48	%		02.01.07		239,732		6.98	%		02.01.08		61
Foreign	Fondo Surgir		5.09	%		02.01.07		2,356,562		7.53	%		02.01.08		118
Foreign	Fondo Surenta		6.90	%		02.01.07		2,816,788		—			—		—
Foreign	HSBC - Bamerindus		1.27	%		02.01.07		5,352,652		0.95	%		02.01.08		45,414,832
Foreign	Panamericano		1.10	%		02.01.07		182,264		—			—		—
Foreign	SAFRA		—			—		—		0.85	%		02.01.08		1,406,202
Foreign	Serfinco		7.89	%		02.01.07		689,082		—			—		—
Foreign	Standard Bank London		5.29	%		17.01.07		3,566,339		1.16	%		02.01.08		1,035,120
Foreign	Suvalor		7.32	%		02.01.07		14,317,239		—			—		—
Foreign	Unibanco		8.83	%		02.01.07		10,114,923		0.88	%		02.01.08		34,061,813


	Total							303,002,428							404,583,941

F - 40

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 5. Accounts, Notes and Other Receivables

(a)

Current accounts, notes and other receivables and their related allowances for doubtful accounts as of each December 31, are as follows:


	As of December 31,
	Under 90 days						91 days to 1 year						Sub total			Current					Long term
Account	2006			2007			2006			2007			2007			2006			2007		2006			2007
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$		ThCh$			ThCh$

Accounts receivable		933,806,606			1,031,985,273			97,238,464			130,242,547			1,162,227,820			1,031,045,070			987,383,472		—			—
Allowance for doubtful accounts		(54,153,397	)		(93,762,655	)		(75,682,836	)		(81,081,693	)		(174,844,348	)		(129,836,233	)		—		—			—


Notes receivable		7,719,233			11,443,638			844,524			920,801			12,364,439			8,563,757			11,839,116		—			—
Allowance for doubtful accounts		(380,491	)		(153,787	)		(162,417	)		(371,536	)		(525,323	)		(542,908	)		—		—			—


Other receivable (1) (2)		102,950,685			97,600,900			12,830,082			12,253,895			109,854,795			115,780,767			99,770,021		154,859,353			197,122,798
Allowance for doubtful accounts		(4,306,732	)		(1,446,819	)		(2,947,182	)		(8,637,955	)		(10,084,774	)		(7,253,914	)		—		(7,206,165	)		(1,584,955	)


Total																	1,017,756,539			1,098,992,609		147,653,188			195,537,843


(1)		Includes ThCh$ 29,980,100, which is the balance due from the rate increase pursuant to the Agreement signed in February, 2007 by the Argentine government and the subsidiary Edesur S.A. in Argentina. This agreement generated income of ThCh$ 37,513,207 ($Arg 237,000,000 approximately) which will be collected in equal installments over 55 months starting from February, 2007.

(2)		This includes ThCh$ 31,241,992, ThCh$ 29,343,531 in 2006 and 2007 relating to other generating companies debt payable to Endesa Chile. and generating subsidiaries, as a result of the collection of tolls due to the application, since March 13, 2004, of Law No.19,940.

(b)

Current and long-term accounts receivable per country as of each December 31, are as follows:


	As of December 31,
Country	2006					2007
	ThCh$		%			ThCh$		%

Chile		256,797,683		22.03	%		280,723,013		21.69	%
Peru		67,159,968		5.76	%		57,048,906		4.41	%
Argentina		145,084,968		12.45	%		195,460,802		15.10	%
Colombia		247,006,296		21.19	%		284,714,598		21.99	%
Brazil		449,360,812		38.56	%		466,045,865		36.00	%
Panama		—		—			10,537,268		0.81	%


Total		1,165,409,727		100.00	%		1,294,530,452		100.00	%

(c)

Changes in provision for accounts receivables are as follows:


	Year ended December 31,
	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Balance at beginning of period		118,539,819			143,297,058			144,839,220
Additions charged to costs and expenses		36,757,988			33,201,444			81,443,200
Deductions		(15,173,012	)		(33,872,053	)		(27,752,712	)
Price-level restatement and conversion adjustment		3,172,263			2,212,771			(11,490,308	)


Balance at end of period		143,297,058			144,839,220			187,039,400

F - 41

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

(d)

Amounts of unbilled energy sold are as follows:

As of December 31,

2005

2006

2007

ThCh$

Unbilled energy sold

206,942,348

253,547,417

304,226,945

Note 6. Balances and Transactions with Related Companies

The balances of accounts receivable and payable with related companies are as follows at December 31, 2006 and 2007:

(a)

Notes and accounts receivable due from related companies:


	As of December 31,
	Short-term				Long-term
Company	2006		2007		2006		2007
	ThCh$		ThCh$		ThCh$		ThCh$

Atacama Finance Co. (1)		66,117		89,682,080		97,222,765		—
Com. de Energía del Mercosur S.A.		6,651,990		9,061,690		—		—
Empresa Eléctrica Piura S.A.		141,986		147,889		—		—
Endesa, S.A.		295,375		272,825		—		—
Endesa Europa		943		—		—		—
Endesa Servicios		—		699,239		—		—
Endesa Internacional S.A.		368,445		225,192		—		—
Gas Atacama Generación S.A.		65,906		18,421		—		—
Gasoducto Atacama Chile S.A.		304,823		13,096		—		—
Gasoducto Tal Tal Ltda.		2,119		180		—		—
Sociedad Consorcio Ara Ltda.		8,515		723		—		—
Consorcio Ara-Ingendesa Ltda.		158,496		50,423		—		—
Sacme		1,661		772		—		—
Sistemas Sec S.A.		6,499,305		7,451,623		—		121,521
Centrales Hidroeléctricas de Aysén S.A.		—		777,623		—		—
GNL Quinteros S.A. (2)		—		40,175,603		—		—
GNL Chile S.A.		—		1,873,672		—		—
Konecta Chile S.A.		—		77,445		—		505,026
Transmisora Eléctrica de Quillota Ltda.		3,097		1,855,524		—		—


Total		14,568,778		152,384,020		97,222,765		626,547


(1)		The balance receivable from Atacama Finance Co. relates to the loans granted by Compañía Eléctrica Cono Sur S.A. to finance the work in construction of Gasoducto Atacama Argentina S.A., Gasoducto Atacama Chile S.A. and Gas Atacama Generación S.A. The loans are expressed in US dollars, accrue interest at a rate of 7.5% per annum and are due in September 2008.

(2)		The balance receivable from GNL Quintero S.A. relates to financing operations. It is US dollars, accrues interest at rate of 5.56% per annum and is due in 2008.

F - 42

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

(c)

The most significant transactions and their effects in income (expense) for each year ended December 31 are as follows:


			2005			2006			2007
			Income			Income			Income
Company	Relationship	Nature of transaction	(Expense)			(Expense)			(Expense)
			ThCh$			ThCh$			ThCh$

Atacama Finance Co.	Affiliate	Interest		5,288,647			6,976,594			7,103,591
		Monetary correction		4,149,796			2,025,889			6,772,234
		Exchange difference		(13,542,589	)		1,764,710			12,992,064
Consorcio ARA-Ingendesa	Affiliate	Services		2,068,892			859,252			30,155
Consorcio Ingendesa Minmetal Ltda.	Affiliate	Services		114,316			67,725			—
Com. de Energía del Mercosur S.A.	Affiliate	Sale of energy		12,093,332			6,275,933			9,317,681
		Purchase of energy		(7,632,768	)		(5,391,304	)		(4,478,394	)
		Purchase of gas		—			—			(15,725,078	)
		Services		1,296,308			6,348,132			(13,360,951	)
Empresa Eléctrica Piura S.A.	Member of Controlling Group	Sale of energy		776,121			728,503			261,641
		Purchase of energy		(5,646,346	)		(12,668,622	)		(5,210,267	)
		Services		142,539			220,679			197,043
Electrogas S.A.	Affiliate	Purchase of gas		(1,702,881	)		(2,112,880	)		(2,740,516	)
Endesa, S.A.	Parent company	Interest		—			(3,435,483	)		(29,485	)
		Exchange difference		—			49,933			1,087
Endesa Servicios	Member of Controlling Group	Exchange difference		—			157			(9,720	)
		Monetary correction		—			(156	)		—
		Services		—			—			812,886
Endesa Internacional S.A.	Parent company	Interest		(660,217	)		(2,290,623	)		(983,934	)
		Services		—			(4,427,229	)		490
		Exchange difference		—			(13,632	)		(122,566	)
		Monetary correction		—			(64,736	)		(3,119,538	)
Etevensa	Member of Controlling Group	Sale of energy		1,101,957			—			—
		Purchase of energy		(184,606	)		—			—
		Services		1,026,182			—			—
Fundación Endesa	Member of Controlling Group	Services		109,020			101,721			46,328
Gas Atacama Generación S.A.	Affiliate	Services		158,166			1,042,030			353,218
Sacme	Affiliate	Services		(391,166	)		(428,536	)		(530,956	)
Sistema SEC S.A	Affiliate	Services		(8,133	)		504,166			4,479,552
		Interest		—			—			59,251
Soc. Consorcio Ingendesa ARA Ltda.	Affiliate	Services		235,305			176,960			620,673
Konecta Chile S.A.	Affiliate	Exchange difference		—			—			23,873
		Services		—			—			136,530
Transmisora Eléctrica de Quillota Ltda.	Affiliate	Interest		66,506			28,879			—
		Monetary correction		—			—			—
		Services		5,264			5,497			—
Centrales Hidroeléctricas de Aysén S.A.	Affiliate	Services		—			—			3,145,649
		Monetary correction		—			—			23,844
		Interest		—			—			5,675
GNL Quinteros S.A.	Affiliate	Interest		—			—			802,022
		Monetary correction		—			—			1,310,042
		Exchange difference		—			—			(3,114,788	)

The transfer of short-term funds between related companies is on the basis of a current cash account, at a variable interest rate based on market conditions. The resulting accounts receivable and accounts payable are essentially on 30 day terms, with automatic rollover for the same year and settlement in line with cash flows.

F - 44

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

In accordance with BT No.60 and 69 of the Chilean Association of Accountants, and Circular No.1,466 of the SVS, the Company and its subsidiaries have recorded consolidated deferred income taxes as of December 31, 2006 and 2007 as follows:


	As of December 31, 2006											As of December 31, 2007
	Asset						Liability					Asset					Liability
Description	Short-term			Long-term			Short-term		Long-term			Short-term		Long-term			Short-term		Long-term
	ThCh$			ThCh$			ThCh$		ThCh$			ThCh$		ThCh$			ThCh$		ThCh$

Allowance for doubtful accounts		17,862,101			54,683,790			—		—			30,361,777		48,273,005			—		—
Deferred income		745,055			1,656,641			—		1,156,534			1,265,004		1,108,332			2,637,219		6,925,008
Vacation accrual		1,232,038			—			—		—			1,247,119		17,155			—		—
Leased assets		—			—			—		498,992			—		—			—		1,058,920
Fixed assets depreciation		—			2,941,948			847,577		441,198,613			—		2,579,361			683,056		424,955,762
Severance indemnities		—			686			—		1,801,981			—		7,548			—		1,701,576
Other		6,187,147			5,738,352			2,466,375		3,304,601			5,882,834		3,557,093			1,561,515		4,430,015
Contingencies		9,269,507			82,318,172			—		—			16,042,437		63,062,629			—		—
Bond discount		—			—			151,909		1,436,000			—		—			149,319		1,162,405
Cost of studies		—			—			—		9,043,752			—		—			—		8,960,610
Finance cost		—			—			—		16,490,104			—		893,075			—		19,427,055
Imputed interest on construction		—			—			—		4,034,502			1,772		—			—		3,959,224
Deferred charges		754,583			—			603,823		3,623,416			638,534		—			1,646,651		2,313,433
Actuarial deficit (Brazil)		—			11,277,352			—		—			—		12,297,971			—		—
Obsolescence		377,614			2,353,317			—		—			587,954		1,472,713			—		—
Materials used		—			—			—		871,574			—		—			—		806,387
Imputed salaries on construction		—			4,310,885			—		—			—		4,291,425			—		—
Tax losses		57,625,464			202,087,224			—		—			24,832,066		170,877,538			—		—
Provision real state project		—			2,543,050			—		—			295,526		2,134,677			—		—
Sie 2000A project		—			—			—		509,235			—		—			—		487,855
Provision for employee benefits		2,666,877			3,291,938			—		—			2,599,987		1,556,802			—		—
Energy in measurers		—			—			2,489,140		—			—		—			—		—
Deferred assets		—			—			11,333,148		19,784,907			—		—			16,581,950		9,108,453
Capitalized expenses		—			—			—		2,288,007			—		—			—		2,352,113
Allowance for tariff decree (Chilectra)		—			—			—		—			6,897,750		—			—		—
Exchange difference		—			—			—		20,060,608			—		—			—		6,798,246
Intangible		—			—			—		—			1,016,092		—			—		—
Complementary account-net		—			(11,599,970	)		—		(207,896,363	)		—		(10,877,871	)		—		(186,864,460	)
Valuation allowance		(12,716,894	)		(30,241,236	)		—		—			—		(16,109,759	)		—		—


Total		84,003,492			331,362,149			17,891,972		318,206,463			91,668,852		285,141,694			23,259,710		307,582,602

Income tax benefit (expense) for the year ended December 31, 2005, 2006 and 2007 is as follows:


	As of December 31,
Item	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Current income tax (expense) benefit:
Income tax provision		(160,613,952	)		(263,056,470	)		(218,772,960	)
Adjustment for tax expense – prior year		838,164			6,509,183			1,996,665

Deferred tax (expense) benefit:
Deferred taxes		(24,049,714	)		24,630,271			(58,881,158	)
Benefits for tax losses		15,014,329			1,698,147			10,179,231
Amortization of complementary accounts		(6,385,846	)		(12,756,498	)		(12,460,703	)
Valuation allowance (*)		(19,036,965	)		140,718,637			24,791,489
Other charges or credits		(1,288,440	)		—			—


Total		(195,522,424	)		(102,256,730	)		(253,147,436	)


(*)		During 2006, the valuation provision has been reversed as a consequence of the merger approved in Extraordinary Shareholders’ Meetings of Chilectra S.A. (formerly Elesur S.A.) and Chilectra S.A. and the sale of the offices of the former Elesur S.A., whose proceeds, ThCh$140,835,232 were credited to net income as a reduction in the allowance for valuation.

		In 2007, the valuation provision has been reversed as a consequence of the merger of Emgesa S.A. and Betania S.A. The amount credited to income in income tax expense was ThCh$ 25,352,804.

F - 46

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


As of December 31, 2006
	Date					Interest		Current
Code	Start	End	Financial institution	Currency	Document		rate	amount		Nominal		Fair value
							%	ThCh$		ThCh$		ThCh$

VRC	12-26-2006	01-02-2007	CorpBanca	$	D.P.F.		0.50%		2,370,614		2,368,641		2,370,614
VRC	12-26-2006	01-02-2007	Banco Central de Chile	$	CERO		0.50%		3,047		3,045		3,047
VRC	12-26-2006	01-02-2007	Banco Estado	$	D.P.F.		0.50%		4,817,834		4,813,822		4,817,834
VRC	12-26-2006	01-02-2007	Citibank	$	D.P.F.		0.50%		2,768,427		2,766,122		2,768,427
VRC	12-26-2006	01-02-2007	Banco Crédito e Inversiones	$	D.P.F.		0.50%		3,654,675		3,651,632		3,654,675
VRC	12-26-2006	01-02-2007	Banco Santander Santiago	$	D.P.F.		0.50%		1,485,456		1,484,219		1,485,456
VRC	12-26-2006	01-02-2007	Banco Chile	$	D.P.F.		0.50%		2,244,764		2,242,895		2,244,764
VRC	12-29-2006	01-02-2007	BBVA Banco BHIF	$	D.P.R.		0.51%		3,114		3,112		3,114
VRC	12-29-2006	01-02-2007	Banco Central de Chile	$	CERO		0.51%		174		173		174
VRC	12-29-2006	01-02-2007	Banco Santander Santiago	$	D.P.F.		0.51%		2,090,097		2,089,387		2,090,097
VRC	12-29-2006	01-02-2007	Banco Crédito e Inversiones	$	D.P.F.		0.51%		70,602		70,578		70,602
VRC	12-27-2006	01-03-2007	Banco Central de Chile	$	CERO		0.53%		3,048		3,046		3,048
VRC	12-27-2006	01-03-2007	BBVA Banco BHIF	$	D.P.F.		0.53%		7,987,044		7,981,404		7,987,044
VRC	12-27-2006	01-03-2007	BBVA Banco BHIF	$	D.P.R.		0.53%		119,298		119,213		119,298
VRC	12-28-2006	01-04-2007	Banco Chile	$	L.H.		0.52%		4,190,322		4,188,144		4,190,322
VRC	12-28-2006	01-04-2007	Banco Santander Santiago	$	L.H.		0.52%		3,143		3,141		3,143
VRC	12-28-2006	01-04-2007	Banco Central de Chile	$	CERO		0.54%		11,993		11,987		11,993
VRC	12-28-2006	01-04-2007	Banco Boston	$	D.P.F.		0.54%		75,041		75,001		75,041
VRC	12-28-2006	01-04-2007	Banco Santander Santiago	$	D.P.F.		0.54%		5,811,794		5,808,657		5,811,794
VRC	12-28-2006	01-04-2007	Banco Crédito e Inversiones	$	D.P.F.		0.54%		1,623,231		1,622,355		1,623,231
VRC	12-28-2006	01-02-2007	Banchile C. de B.	$	L.H.		0.52%		114,372		114,313		114,372
VRC	12-28-2006	01-02-2007	Banchile C. de B.	$	L.H.		0.52%		1,094,493		1,093,924		1,094,493
VRC	12-28-2006	01-02-2007	Banchile C. de B.	$	L.H.		0.52%		430,223		430,000		430,223
VRC	12-28-2006	01-02-2007	Banchile C. de B.	$	L.H.		0.52%		206,402		206,295		206,402
VRC	12-29-2006	01-02-2007	Banchile C. de B.	$	BOND		0.35%		123,939		123,910		123,939
VRC	12-29-2006	01-02-2007	Banchile C. de B.	$	L.H.		0.35%		273,696		273,632		273,696
VRC	12-29-2006	01-02-2007	Banchile C. de B.	$	L.H.		0.35%		218,142		218,092		218,142
VRC	12-29-2006	01-02-2007	Inv. Boston C. de B.	$	D.P.F.		0.48%		161,429		161,377		161,429
VRC	12-29-2006	01-02-2007	Inv. Boston C. de B.	$	CERO		0.48%		41,469		41,456		41,469
VRC	12-29-2006	01-02-2007	Inv. Boston C. de B.	$	D.P.F.		0.48%		300,150		300,054		300,150
VRC	12-29-2006	01-02-2007	Inv. Boston C. de B.	$	D.P.F.		0.48%		541,213		541,040		541,213
VRC	12-29-2006	01-02-2007	BBVA BHIF C. de B.	$	CERO		0.51%		946		946		946
VRC	12-29-2006	01-02-2007	BBVA BHIF C. de B.	$	D.P.F.		0.51%		2,015,903		2,015,218		2,015,903
VRC	12-29-2006	01-02-2007	BBVA BHIF C. de B.	$	D.P.F.		0.51%		215,969		215,894		215,969
VRC	12-29-2006	01-02-2007	BBVA BHIF C. de B.	$	D.P.F.		0.51%		157,819		157,765		157,819
VRC	12-29-2006	01-02-2007	BBVA BHIF C. de B.	$	D.P.F.		0.51%		320,230		320,122		320,230
VRC	12-29-2006	01-02-2007	BBVA BHIF C. de B.	$	D.P.F.		0.51%		27,375		27,366		27,375
VRC	12-29-2006	01-02-2007	BBVA BHIF C. de B.	$	D.P.R.		0.51%		170,165		170,107		170,165
VRC	12-29-2006	01-02-2007	BBVA BHIF C. de B.	$	D.P.R.		0.51%		221,735		221,660		221,735
VRC	12-29-2006	01-02-2007	BBVA Banco BHIF	UF	D.P.R.		0.51%		6,795		6,793		6,795
VRC	12-29-2006	01-02-2007	Banco Santander Santiago	UF	D.P.F.		0.51%		2,241,409		2,240,648		2,241,409
VRC	12-29-2006	01-02-2007	Banco Chile	UF	D.P.F.		0.51%		550,204		550,017		550,204
VRC	12-29-2006	01-02-2007	Banco Estado	UF	D.P.F.		0.51%		542,837		542,652		542,837
VRC	12-29-2006	01-02-2007	Banco Crédito e Inversiones	UF	D.P.F.		0.51%		1,168,059		1,167,661		1,168,059
VRC	12-29-2006	01-02-2007	BBVA Banco BHIF	UF	D.P.R.		0.51%		783,823		783,557		783,823
VRC	12-29-2006	01-02-2007	Security	UF	D.P.R.		0.51%		675,547		675,317		675,547
VRC	12-29-2006	01-02-2007	Scotiabank	UF	D.P.R.		0.51%		550,573		550,386		550,573


				Total					52,488,635		52,456,776		52,488,635

F - 48

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


As of December 31, 2007
	Date					Interest		Current
Code	Start	End	Financial institution	Currency	Document		rate	amount		Nominal		Fair value
							%	ThCh$		ThCh$		ThCh$

VRC	12-27-2007	01-02-2008	Banco Central de Chile	$	CERO		0.58%		228		228		228
VRC	12-27-2007	01-03-2008	Banco Central de Chile	$	CERO		0.59%		495		495		495
VRC	12-28-2007	01-02-2008	Banco Central de Chile	UF	CERO		0.46%		1,724		1,724		1,724
VRC	12-27-2007	01-03-2008	Banco Central de Chile	UF	CERO		0.46%		2,441		2,442		2,441
VRC	12-28-2007	01-07-2008	Banco Estado	UF	L.H.		0.46%		2,898		2,901		2,898
VRC	12-27-2007	01-02-2008	CorpBanca	$	D.P.F.		0.58%		5,806		5,802		5,806
VRC	12-28-2007	01-07-2008	Banco Estado	$	L.H.		0.58%		7,867		7,877		7,867
VRC	12-28-2007	01-07-2008	Banco Chile	$	L.H.		0.58%		11,053		11,046		11,053
VRC	12-27-2007	01-03-2008	CorpBanca	$	L.H.		0.59%		16,028		16,015		16,028
VRC	12-27-2007	01-03-2008	CorpBanca	UF	L.H.		0.46%		17,419		17,429		17,419
VRC	12-27-2007	01-03-2008	Banco Central de Chile	UF	CERO		0.46%		31,472		31,490		31,472
VRC	12-27-2007	01-03-2008	Banco Santander Santiago	UF	L.H.		0.46%		38,823		38,845		38,823
VRC	12-28-2007	01-07-2008	Banco Central de Chile	$	CERO		0.59%		39,750		39,727		39,750
VRC	12-28-2007	01-07-2008	BBVA Banco BHIF	$	L.H.		0.58%		102,623		102,564		102,623
VRC	12-28-2007	01-07-2008	Banco Crédito e Inversiones	$	L.H.		0.58%		103,061		103,001		103,061
VRC	12-28-2007	01-07-2008	Banco Santander Santiago	UF	L.H.		0.46%		181,172		181,415		181,172
VRC	12-28-2007	01-07-2008	Banco Chile	$	L.H.		0.58%		304,554		304,378		304,554
VRC	12-27-2007	01-02-2008	BBVA Banco BHIF	$	D.P.R.		0.58%		338,170		337,908		338,170
VRC	12-28-2007	01-07-2008	Banco Crédito e Inversiones	$	L.H.		0.58%		402,103		402,647		402,103
VRC	12-28-2007	01-07-2008	Banco Itaú Chile	$	L.H.		0.59%		432,524		432,269		432,524
VRC	12-28-2007	01-07-2008	Banco Crédito e Inversiones	UF	L.H.		0.46%		812,733		813,831		812,733
VRC	12-27-2007	01-03-2008	CorpBanca	UF	D.P.F.		0.46%		880,200		880,710		880,200
VRC	12-27-2007	01-03-2008	Banco Chile	UF	D.P.F.		0.46%		1,014,792		1,015,380		1,014,792
VRC	12-27-2007	01-03-2008	Banco Chile	UF	D.P.R.		0.46%		1,076,820		1,077,443		1,076,820
VRC	12-28-2007	01-07-2008	BBVA Banco BHIF	$	L.H.		0.58%		1,076,715		1,078,171		1,076,715
VRC	12-28-2007	01-07-2008	Banco Estado	$	L.H.		0.59%		1,222,809		1,222,088		1,222,809
VRC	12-27-2007	01-03-2008	Banco Santander Santiago	UF	D.P.F.		0.46%		1,979,624		1,980,771		1,979,624
VRC	12-27-2007	01-03-2008	Banco Crédito e Inversiones	UF	D.P.F.		0.46%		2,022,504		2,023,676		2,022,504
VRC	12-28-2007	01-07-2008	BBVA Banco BHIF	$	L.H.		0.59%		2,032,233		2,031,035		2,032,233
VRC	12-28-2007	01-07-2008	Banco Santander Santiago	$	L.H.		0.58%		2,208,292		2,207,010		2,208,292
VRC	12-27-2007	01-03-2008	Banco Estado	UF	L.H.		0.46%		2,647,879		2,649,414		2,647,879
VRC	12-28-2007	01-07-2008	Banco Chile	$	L.H.		0.58%		2,680,621		2,684,247		2,680,621
VRC	12-28-2007	01-07-2008	Banco Chile	$	L.H.		0.59%		2,776,518		2,774,881		2,776,518
VRC	12-28-2007	01-07-2008	Banco Chile	UF	L.H.		0.46%		3,502,917		3,507,655		3,502,917
VRC	12-27-2007	01-02-2008	BBVA Banco BHIF	$	D.P.F.		0.58%		4,659,663		4,656,062		4,659,663
VRC	12-28-2007	01-02-2008	Banco Central de Chile	UF	BOND		0.46%		5,001,226		5,003,191		5,001,226
VRC	12-27-2007	01-03-2008	Banco Crédito e Inversiones	UF	L.H.		0.46%		7,622,401		7,626,819		7,622,401
VRC	12-27-2007	01-03-2008	Banco Chile	UF	L.H.		0.46%		9,706,363		9,711,988		9,706,363
VRC	12-27-2007	01-03-2008	BBVA Banco BHIF	UF	D.P.F.		0.46%		10,188,164		10,194,170		10,188,164
VRC	12-27-2007	01-03-2008	BBVA Banco BHIF	$	D.P.F.		0.59%		12,762,122		12,752,090		12,762,122


				Total					77,914,807		77,930,835		77,914,807

F - 49

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 10. Property, Plant and Equipment

The composition of property, plant and equipment is as follows:


	As of December 31,						Useful life
	2006			2007			range
	ThCh$			ThCh$			Years

Land		142,417,227			138,136,415


Buildings and infrastructure		7,088,886,496			6,803,456,467			20-40
Distribution and transmission lines and public lighting		4,797,370,988			4,604,970,885			20-50
Less: third party contributions		(113,287,888	)		(138,548,296	)		20-50


Sub-total		11,772,969,596			11,269,879,056


Machinery and equipment		2,134,240,240			1,984,794,585			4-20


Work in progress		325,780,367			247,008,085			—
Construction materials		54,720,857			34,775,543			4-10
Leased assets (1)		106,463,451			80,139,028			4-10
Furniture and fixtures, tools, and computing equipment		86,347,144			77,716,227			4-10
Vehicles		7,816,606			6,744,819			4-10
Equipment in transit		14,205,374			7,158,458			4-10
Other assets		78,947,215			79,871,049			4-10


Sub-total		674,281,014			533,413,209


Technical appraisal		141,101,386			—
Buildings and infrastructure		321,378			126,536,716			20-50
Machinery and equipment		—			321,378			4-20


Total technical appraisal		141,422,764			126,858,094


Total property plant and equipment		14,865,330,841			14,053,081,359


Accumulated depreciation at beginning of year
Buildings and infrastructure		(4,754,590,323	)		(4,678,944,782	)
Machinery and equipment		(842,536,014	)		(820,941,974	)
Other assets		(86,563,740	)		(80,987,171	)


Accumulated depreciation at beginning of year		(5,683,690,077	)		(5,580,873,927	)


Accumulated depreciation at beginning of year technical appraisal
Buildings and infrastructure		(49,995,470	)		(47,556,001	)
Machinery and equipment		(313,602	)		(315,682	)
Other assets		(125,529	)		(296,752	)


Total accumulated depreciation at beginning of year technical appraisal		(50,434,601	)		(48,168,435	)


Depreciation of the year		(445,298,395	)		(416,692,881	)


Total accumulated depreciation at end of year		(6,179,423,073	)		(6,045,735,243	)


Total property, plant and equipment, net		8,685,907,768			8,007,346,116

F - 50

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Depreciation expense of the three years ended December 31, 2007, has been allocated as follows:


	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Cost of sales		(388,883,649	)		(432,664,256	)		(407.388.420	)
Administrative and selling expenses		(14,235,893	)		(12,634,139	)		(9.304.461	)


Total		(403,119,542	)		(445,298,395	)		(416.692.881	)

(1) Leased assets:

a.		In Endesa Chile the amount of ThCh$ 31,536,927 corresponds to a contract for power transmission lines and installations (Ralco-Charrúa 2X220KV) between Empresa Nacional de Electricidad S.A. and Huepil S.A. This contract has a 20-year maturity and earns interest at a 6.5% annual rate.

b.		In the Peruvian subsidiary Edegel S.A. the amount of ThCh$ 46,660,579 relates to contracts to finance the project of converting the thermo-electric plant to combination cycle (former Etevensa), being carried out by the Company and the financial institutions Banco de Crédito del Perú BBVA — Banco Continental and Citibank. These contracts have a life of eight years and accrue interest at an annual rate of Libor +2.5%.

The Company and its foreign subsidiaries have all risk insurance contracts that include blanket, earthquake, and machinery failure policies up to a US$ 200,000,000 limit. This coverage includes losses due to business interruption. Premiums prepaid associated with these policies are recorded in prepaid expenses and charged to income over the life of the policy.

Note 11. Investment in Related Companies

Investments in related companies of December 31, 2006 and 2007 are as follows:


			Percentage						Shareholders’ equity						Net income
	Number		owned						of investee						of investees						Equity in income									Investment book value
Related Companies	of shares		2006			2007			2006			2007			2006			2007			2005			2006			2007			2006			2007
			%			%			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Cía. de Interconexión Energética S.A. (5)		—		—			—			—			—			—			—			(8,456,356	)		—			—			—			—
Gas Atacama Generación S.A.		—		0.050	%		0.050	%		27,916,295			(5,006,882	)		(16,557,908	)		(29,266,495	)		(5,524	)		(8,279	)		(14,633	)		13,958			(2,504	)
Gasoducto Atacama Argentina S.A.		—		0.050	%		0.050	%		78,726,403			117,961,103			11,325,225			(1,456,134	)		4,643			5,663			(437	)		39,363			35,388
Gasoducto Atacama Chile S.A.		—		0.050	%		0.050	%		86,919,214			93,723,709			12,141,320			18,867,054			6,552			6,071			9,434			43,459			46,862
Inversiones Electrogas S.A.		425		42.500	%		42.500	%		18,429,720			17,260,328			4,718,427			5,286,673			1,918,728			2,005,331			2,246,836			7,832,630			7,335,639
Cía. de Energía del Mercosur S.A. (2)		6,305,400		45.000	%		45.000	%		8,868,705			7,588,668			1,878			(118,348	)		54,631			845			(53,257	)		3,990,917			3,414,901
Transmisora Eléctrica de Quillota Ltda.		—		50.000	%		50.000	%		7,411,771			8,075,084			459,913			663,312			188,156			229,956			331,656			3,705,885			4,037,542
Sacme		12,000		50.000	%		50.000	%		82,316			73,170			3,811			3,986			(1,182	)		1,906			1,993			41,159			36,585
Electrogas S.A.		85		0.021	%		0.021	%		17,026,601			16,028,805			4,866,893			5,461,865			985			1,034			1,161			3,618			3,406
Consorcio ARA- Ingendesa		—		50.000	%		50.000	%		347,488			212,273			199,917			280,982			160,729			99,958			140,491			173,744			106,137
Sociedad Consorcio Ingendesa Ara Ltda (1)		—		50.000	%		50.000	%		166,062			23,820			126,045			(27,931	)		67,401			63,022			(13,966	)		83,031			11,910
Consorcio Ingendesa - Minmetal Limited (1)		—		50.000	%		50.000	%		31,311			32,800			157,880			1,492			117,903			78,940			746			15,656			16,400
Gas Atacama S.A.		1,147		0.00115	%		0.00115	%		192,636,990			157,594,012			6,845,363			(9,809,964	)		153			78			(113	)		2,209			1,808
Inversiones Gas Atacama Holding Ltda. (7)		—		50.000	%		50.000	%		191,715,200			152,292,311			6,107,289			(14,310,417	)		6,818,420			3,053,646			(56,045,596	)		95,857,601			27,255,769
Central Geradora Termelectrica Fortaleza S.A. (5)		20,246,908		0.000	%		0.000	%		—			—			—			—			6,475,405			—			—			—			—
Konecta Chile S.A. (6)		262					26.200	%		—			1,056			—			—			—			—			—			—			277
Sistemas SEC S.A. (3)		56,350		49.000	%		49.000	%		2,072,767			1,882,101			(257,855	)		190,667			46,530			(126,349	)		(93,427	)		1,015,656			922,229
Termoeléctrica José de San Martín S.A. (4)		500,006		23.100	%		23.100	%		84,163			70,987			—			—			—			—			—			19,442			16,398
Termoeléctrica Manuel Belgrano S.A. (4)		500,006		23.100	%		23.100	%		84,158			70,983			—			—			—			—			—			19,440			16,397
GNL Chile S.A. (5)		3,023,642		23.57	%		33.330	%		(1,493,484	)		(1,708,857	)		—			(412,488	)		—			—			(137,496	)		(352.011	)		(569,619	)
Centrales Hidroeléctricas de Aysén S.A. (5)		1,702,124		51.000	%		51.000	%		21,449,949			29,258,515			—			(1,931,804	)		—			—			(985,219	)		10,939,474			14,921,838
GNL Quintero S.A. (5)		200		—			20.00	%		—			7,950,210			—			(735,660	)		—			—			(147,132	)		—			1,590,042
Consorcio Ara- Ingendesa Sener (1)		—		—			33..33	%		—			(5,283	)		—			(6,282	)		—			—			(2,094	)		—			(1,761	)


Total																						7,397,174			5,411,822			(54,761,053	)		123,445,231			59,195,644

F - 51

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Equity method investee:

	(1)		Related companies of subsidiary Ingendesa Ltda. that cannot be consolidated.

	(2)		Related company of subsidiary Endesa Argentina S.A. that cannot be consolidated.

	(3)		Related company of subsidiary of CAM Chile Ltda. that cannot be consolidated.

	(4)		Related companies of subsidiaries Endesa Costanera S.A. and Hidroeléctrica El Chocón S.A. that cannot be consolidated.

	(5)		Companies of Endesa Chile that cannot be consolidated (in organization of start-up in 2006).

	(6)		Related company of subsidiary Synapsis Ltda. that cannot be consolidated

	(7)		Included an allowance for impairment ascending ThCh$ 48,890,387 (see Note 2 l).

Income and (losses) recognized by Enersis S.A. based on the participation in the related companies as of December 31, 2005, amounted to ThCh$ 15,860,236 (ThCh$ 8,463,062); ThCh$ 5,546,450 (ThCh$ (134,628)) in 2006 and ThCh$ 2,732,317 (ThCh$ (57,493,370)) in 2007.

In accordance with Technical Bulletin No.64 of the Chilean Association of Accountants for the years ended December 31, 2005, 2006 and 2007, the Company has recorded foreign exchange gains and losses on liabilities related to net investments in foreign countries that are denominated in the same currency as the functional currency of those foreign investments. Such gains and losses are included in the cumulative translation adjustment account in shareholders’ equity, and in this way, act as a hedge of the exchange risk affecting the investments. As of December 31, 2007 the corresponding amounts are as follows:

2007:

Country

Reporting

Company

of origin

Investment

currency

Liability

ThCh$

Edesur S.A.

Argentina

154,877,795

US$

53,275,201

Ampla Energía e Servicos S.A.

Brazil

139,554,346

US$

130,222,037

Emgesa S.A.

Colombia

178,159,768

US$

227,962,660

Edegel S.A.

Peru

123,522,245

US$

105,048,701

Hidroeléctrica El Chocón S.A.

Argentina

209,430,225

US$

70,068,527

Comercializadora de Energía del Mercosur S.A.

Argentina

3,414,901

US$

2,328,177

Endesa Brasil S.A.

Brazil

447,199,840

US$

378,631,505

Endesa Costanera S.A.

Argentina

76,640,125

US$

42,241,091

Total

1,332,799,245

1,009,777,899

2006:

Country

Reporting

Company

of origin

Investment

currency

Liability

ThCh$

Edesur S.A.

Argentina

170,072,007

US$

61,305,441

Ampla Energía e Servicos S.A.

Brazil

162,345,326

US$

149,850,571

Emgesa S.A.

Colombia

355,604,911

US$

262,323,761

Edegel S.A.

Peru

150,895,239

US$

120,882,825

Hidroeléctrica El Chocón S.A.

Argentina

189,228,513

US$

84,283,253

Comercializadora de Energía del Mercosur S.A.

Argentina

3,990,917

US$

2,674,710

Endesa Brasil S.A.

Brazil

505,152,941

US$

433,600,545

Endesa Costanera S.A.

Argentina

88,845,906

US$

52,242,841

Total

1,626,135,760

1,167,163,947

F - 52

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

The investments in related companies made by Enersis S.A. and its affiliates for the years ended December 31, 2006 and 2007, amounted to ThCh$ 24,219,165 and ThCh$ 38,182,150, respectively, which are detailed as follows:


	As of December 31,
Company	2006		2007
	ThCh$		ThCh$

Centrales Hidroeléctricas de Aysén S.A. (Endesa Chile) (2)		10,910,981		3,848,089
Pangue (Endesa Chile)		9,829		—
Sistemas Sec S.A. (Cam)		277,492		—
Chilectra S.A. (formerly Elesur S.A.) (1)		13,020,863		—
Endesa Costanera S.A.		—		5,505,301
Central Hidroeléctrica El Chocón S.A.		—		28,828,760


Total		24,219,165		38,182,150


	As of December 31,
Company	2006		2007
	ThCh$		ThCh$

Centrales Hidroeléctricas de Aysén S.A. (Endesa Chile)		10,910,981		3,848,089
Pangue (Endesa Chile)		9,829		—
Sistemas Sec S.A. (Cam)		277,492		—
Chilectra S.A. (formerly Elesur S.A.) (1)		13,020,863		—
Endesa Costanera S.A.		—		5,505,301
Central Hidroeléctrica El Chocón S.A.		—		28,828,760


Total		24,219,165		38,182,150


(1)		These are partial disbursements made by Endesa Internacional for the purchase of Chilectra S.A. (Ex-Elesur).

(2)		The total investment was ThCh$ 4,967,589 , of wich ThCh$ 1,119,500 correspond a capitalization of an intercompany receible between Endesa Chile and Aysén.

Constitution of companies

	i.		On April 18, 2005, Endesa Chile and its subsidiary Enigesa executed the incorporation deed of a new subsidiary, bearing the corporate name of Endesa Eco S.A. and whose purpose will be to promote and develop projects associated with renewable energies. Endesa Eco S.A.’s capital amounts to ThCh$ 636,001, and is divided into 5,800,000 nominal, no par value shares. Endesa Chile subscribed to 5,799,420 shares, representing 99.99% of the corporate capital and paid in ThCh$ 197,360, representing 1,799,820 shares while Enigesa subscribed to 580 shares, representing 0.01% of the corporate capital and paid in ThCh$ 20, representing 180 shares. Each shareholder will pay in its part of the balance of the capital over three years as from the date of incorporation.

	ii.		On September 4, 2006, Endesa Chile and its subsidiary Endesa Inversiones Generales S.A. executed the incorporation deed that gave birth to a new subsidiary, whose name is Centrales Hidroeléctricas de Aysén S.A. and whose objective is the development, financing, ownership and operation of a hydroelectric project in the 11th Region (Aysén). The capital of the company is one million Chilean pesos divided into 100 ordinary, single-series, nominal, equivalent, no par-value shares. Endesa Chile subscribed 99 shares, representing 99% of the capital, and paid the total amount, a sum of ThCh$ 1.059, while Endesa Inversiones Generales S.A. subscribed one share, representing 1% of the capital, and paid in ThCh$ 11 for it.

F - 53

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

			On September 21, 2006 the First General Extraordinary Shareholders’ Meeting of Centrales Hidroeléctricas de Aysén S.A. was held and in it the increase in the paid-in capital of the Company to the new sum of ThCh20,000,000 divided into 2 million nominal, single-series, no par value shares, was approved. This will be subscribed to and paid in within three years of the date of the above mentioned First Extraordinary General Shareholders’ Meeting. In this way, of the 1,999,900 shares corresponding to the increase in paid-in capital, Endesa Chile would subscribe to 1,019,900 shares, representing 51% of the increase in capital and 50.99995% of the new capital of the Company, while the new shareholder Colbún S.A. would subscribe to 980,000 shares, representing 49% of the increase in paid-in capital and 49% of the new paid-in capital. Endesa Inversiones Generales S.A. will not exercise its preferential subscription right, and therefore its interest in the paid-in capital of the Company will be 0.00005%.

			On October 10, 2006, Endesa Chile subscribed to 1,019,899 shares, paying in a total of ThCh$ 10,909,900 for them, or $ 10,000 per share, a sum equivalent to the placement value agreed to in the First General Shareholders’ Meeting of Centrales Hidroeléctricas de Aysén S.A.. At the same time, it subscribed to an additional 1 share, paying in a total of $ 10,000 for it, equivalent to the placement value agreed to in the First General Extraordinary Shareholders’ Meeting of Centrales Hidroeléctricas de Aysén S.A. However, the payment for this share was made in accordance with the terms set out in the public deed of “Payment of Shares Subscribed to for Transfer of Title and the Constitution of Usufruct on the Rights to Use the Water”, which was executed by the parties as of the same date, and according to which Ch$ 11 were paid in cash, plus a contribution for the ownership of the title to the rights to use the water that are identified in the above deed.

			On October 16, 2007, the Extraordinary Shareholders’ Meeting of Centrales Hidroeléctricas de Aysén S.A. was held. The shareholders increased its capital by ThCh$ 13,375,000 representing 1,337,500 single series, no par value shares, which shall be subscribed and paid in within 3 years after the date of the Shareholders’ Meeting. At the same time, Empresa Nacional de Electricidad S.A. subscribed 682,125 shares for a total of ThCh$ 6,821,250, of which it paid ThCh$ 1,119,500 by capitalizing credits and ThCh$ 1,934,569 in cash. On December 17, 2007, Empresa Nacional de Electricidad S.A. paid in ThCh$ 1,913,520 by means of a cash payment to the account of this capital increase.

	iii.		On March 9, 2007, Empresa Nacional de Electricidad S.A. subscribed 200 of the 1,000 registered shares issued by public deed of the Company GNL Quintero S.A.. It paid for them by assigning, transferring and capitalizing in the Company accounts receivable of ThCh$ 2,011,863 from its investee GNL Chile S.A.. The ownership interest of Endesa Chile in GNL Quintero S.A. is 20%. On May 31, 2007 the pending contribution of ThCh$ 708 in GNL Chile S.A. was paid by capitalizing the account receivable.

	iv.		On October 29, 2007, the company Central Eólica Canela S.A. was incorporated. Its shareholders are the subsidiary Endesa Eco S.A., which owns 75%, and Centinela S.A., which owns 25%. As of this date, this subsidiary forms part of the consolidated financial statements of the company.

			By means of a shareholders’ agreement of November 23, 2007, Endesa Eco S.A. and Centinela S.A. stipulated the terms and conditions for the latter’s withdrawal 5 years after signing such agreement. The above agreement stipulates that Centinela S.A. will have the option of withdrawing from the company by selling its ownership interest to Endesa Eco S.A.. As a result of the above, minority interest has been recorded in sundry long-term creditors.

Reorganization of entities under common control

	i.		On June 10, 2005, Endesa Brasil S.A. was incorporated; its purpose is to acquire paid-in capital in other companies operating, or that may be incorporated to operate, directly or indirectly, in any segment of the electrical sector, transmission, distribution, generation and marketing of electrical energy, in Brazil and other countries. Endesa Brasil S.A. was created as an energy holding concentrating all the electrical assets of Endesa, S.A. Group’s in Brazil.

			Endesa Brasil S.A. holds ownership percentages in the following companies: Compañía de Interconexión Energética S.A. (CIEN), Central Generadora Termeléctrica Fortaleza S.A. (CGTF), Companhia Energetica Do Ceara (COELCE), Ampla Energia e Servicos S.A. (formerly, Cerj), Ampla Investimentos e Servicos S.A., Ampla Generación S.A., Investluz and Cetrais Eléctricas Cachoeira Dourada S.A. (CDSA).

			Endesa Brasil’s interest in these investees were contributed on October 25, 26 and 27, 2005 by Enersis S.A., Endesa Chile., Chilectra S.A. and Endesa Internacional.

F - 54

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Contributions made by Enersis S.A. and its subsidiaries are detailed as follows:

	•		Endesa Chile, through its subsidiaries Edegel S.A. and Compañía Eléctrica Cono Sur S.A., contributed its investment in Centrais Eléctricas Cachoeira Dourada S.A. (99.61%) and Compañía de Interconexión Energética S.A. (Cien) (45.00%), receiving in exchange an interest in Endesa Brasil S.A.: 4.18% for Edegel S.A. and 36.27% for Compañia Eléctrica Cono Sur S.A.

	•		Chilectra S.A., through its subsidiaries Chilectra Inversud S.A. and Luz de Río S.A., contributed its investments as follows:

	•		Chilectra S.A. contributed 10.33% of its investment in Ampla Energia e Servicos S.A., receiving in exchange a 4.65% interest in Endesa Brasil S.A.

	•		Chilectra Inversud S.A. contributed 10.42% of its investment in Investluz S.A., receiving in exchange a 2.37% interest in Endesa Brasil S.A.

	•		Luz de Río S.A. contributed 7.76% of its investment in Ampla Energia e Servicos S.A., receiving in exchange a 3.49% interest in Endesa Brasil S.A.

	•		Enersis S.A., contributed to Endesa Brasil S.A. the following investments:

	•		Its 48.82% interest in Central Generadora Termeléctrica Fortaleza S.A., receiving in exchange an 8.84% interest in Endesa Brasil S.A.

	•		Its 15.61% interest in Investluz S.A., receiving in exchange a 3.55% interest in Endesa Brasil S.A.

	•		Its 18.10% interest in Ampla Energia e Servicos S.A., receiving in exchange an 8.15% interest in Endesa Brasil S.A.

To summarize the above, Enersis S.A. has a direct and indirect interest in Endesa Brasil S.A. amounting to 53.61%.

The transaction described above resulted in ThCh$ 6,795,534 equity decrease as a result of the application of Technical Bulletin No. 72 of the Chilean Association of Accountants, for a business combination under the pooling of interest method (see note 22 e).

ii.

On September 6, 2005, the Company acquired 189,000 shares of Ingendesa S.A. for ThCh$ 66,458, increasing its direct participation in that company to 98.75%.

iii.

On November 22, 2005, the Company sold 1 share of Compañía Eléctrica San Isidro S.A. to Endesa Inversiones Generales S.A., for the amount of ThCh$ 15

iv.

On April 1, 2006, the subsidiaries Chilectra S.A. (formerly Elesur S.A.) and Chilectra S.A. merged, as was approved in a Meeting of Shareholders held on March 31, 2006. As a result of the merger and according to Technical Bulletin N°72 of the Chilean Institute of Accountants, this business combination subject to common control was recorded under the pooling of interests methodology, causing an increase of ThCh$ 3,242,987 in shareholders’ equity (see note 22e).

On August 3, 2007, Endesa Chile Internacional S.A. was subject to a takeover merger by Sociedad Compañía Eléctrica Cono Sur S.A., with the latter subsisting as the company making the takeover. This merger was approved and ratified in the Extraordinary Shareholders’ Meetings of both companies on August 7, 2007.

F - 55

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

This merger had no effect, since Endesa Chile was the main 100% shareholder of both companies

	vi.		On September 1, 2007, the merger of the Colombian companies Emgesa S.A. and Central Hidroeléctrica Betania S.A., approved by the Shareholders’ Meetings of both companies of February 21, 2007, took place by Betania taking over Emgesa, with the former subsisting as the company making the take over and changing its name Emgesa S.A.

			The above transaction has been recorded as stipulated in Technical Bulleting 72 of the Chilean Institute of Accountants as a combination of companies under common control based on the methodology of the unification of interests.

			As a result of this merger Endesa Chile and its subsidiary Compañía Eléctrica Cono Sur S.A. hold a direct 26.87% (1.45% and 25.43%, respectively) share of this new company. This ownership interest eliminates the 99.99% previously held in Betania S.A.. Before the merger, Betania S.A. held a 23.45% ownership interest in Emgesa S.A.

			As a result of the above, an equity reduction of reserves of ThCh$ 56,695,443 has been recognized (See note 22e).

Acquisitions

	i.		On August 11, 2005, the Company and its subsidiary Endesa Inversiones Generales S.A. acquired 99.999% and 0.001% of Inversiones Lo Venecia Ltda., for amounts of ThCh$ 9,167,709 and ThCh$ 90, respectively. Lo Venecia Ltda was the owner of 25.001% of the paid-in capital of Compañía Eléctrica San Isidro S.A. As a result, Endesa Chile now directly and indirectly owns 100% of the shares of Compañía Eléctrica San Isidro S.A.

			In accordance with Technical Bulletin No.72 of Chilean Association of Accountants and the standards established in the Circular No.1697 of the Chilean Superintendence of Securities and Insurance, the Company recorded the acquisition under the purchase method, valuing the proportion of all assets and liabilities acquired of Compañía Eléctrica San Isidro S.A. from third parties as of July 31, 2005 at their respective fair values.

			The difference determined by the Company between the fair value and the carrying value of Compañía Eléctrica San Isidro S.A. shareholders’ equity as of the acquisition date amounted to ThCh$ 7,287,452, and it is due to the higher economic value of property, plant and equipment compared to their carrying value. This amount assigned to the property, plant and equipment will be depreciated over 18 years, which was the estimated remaining useful life of these assets at the time of acquisition.

	ii.		On January 13, 2006, the Company purchased 5,500 shares in Empresa Eléctrica Pangue S.A. for ThCh$ 6,055, increasing it direct ownership interest in such company to 94.97%.

			On July 20, 2006, the Company acquired 3,500 shares of Empresa Eléctrica Pangue S.A. for ThCh$ 3,774, increasing its direct ownership interest in that company to 94.975189%.

	iii.		In Peru, on June 1, 2006, Empresa de Generación Termoeléctrica Ventanilla S.A. (Etevensa) was upstream merged into the subsidiary Edegel S.A.

			As a result of the merger and in accordance with Technical Bulletin N° 72 of the Chilean Institute of Accountants, this business combination subject to common control was recorded under the pooling of interests methodology and led to decreasing the interest in Edegel S.A. to 55.44% and recognizing a reduction in other reserves, under shareholders’ equity, by ThCh$ 6,183,922 (See note 22e).

	iv.		Through a Memorandum of Understanding signed on October 5, 2004, the Corporación Financiera del Valle will stop being shareholder of the Central Hidroeléctrica de Betania S.A. through an asset exchange operation which will take place between the Corfivalle Group and Endesa Chile when the legal processes defined by both parties prior to the delivery of the titles to the assets involved are completed. On December 29, 2006 the writ of the splitting of Betania was protocolized, and with that the transfer of ownership of the assets forming part of the Corfivalle group was formalized.

F - 56

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

			With this operation, the Endesa Chile Group gave to Corfivalle the electricity Sub-station of Betania S.A. E.S.P. and 3.81% of the ownership in Empresa de Energía de Bogotá S.A. E.S.P., in exchange for a 14.3% interest in Central Hidroeléctrica de Betania S.A. E.S.P which at that date was owned by Corfivalle; thus Endesa Chile Group increased its interest in Central Hidroeléctrica de Betania S.A. E.S.P from 85.62% to 99.99%.

			In accordance with Technical Bulletin N° 72 of the Chilean Institute of Accountants and Circular N°1697 of the Superintendence of Securities and Insurance, the Company evaluated the assets and liabilities acquired from Central Hidroeléctrica de Betania S.A. at their respective fair market values. As a result of this evaluation it was concluded that the fair market values do not differ substantially from the book values.

			As a result, the above mentioned purchase of the minority interest was recorded in conformity with Technical Bulletin No. 72 of the Chilean Institute of Accountants and involved recognizing negative goodwill amounting to ThCh$7, 855.746. (See note 13b).

	v.		On February 27, 2007, Empresa Nacional de Electricidad S.A. proceeded to acquire 19,574,798 ordinary, registered, non-endorsable shares of Southern Cone Power Argentina S.A. for ThCh$ 5,505,301. These shares represent 100% of the capital of Southern Cone Power Argentina S.A., which is the holder of 8,081,160 class A shares of Endesa Costanera S.A., representatives of 5.5% of this Company’s capital stock, which is the only asset of Southern Cone Power Argentina S.A.. As a result of the above, Endesa Chile now directly and indirectly owns 69.77% of the stock of Endesa Costanera S.A..

	vi.		On March 08, 2007, Empresa Nacional de Electricidad S.A. finalized signature of a contract to purchase all the shares of Central Hidroeléctrica El Chocón S.A., held directly or indirectly by CMS Generation S.R.L.. Endesa Chile made use of its “first refusal” option giving it the preferential purchase option under a shareholders’ agreement. The operation meant acquiring 2,734,110 class R shares and 1,733,390 class L shares equivalent to 25% of the stock capital of Hidroinvest S.A., the company which controls 59% of Hidroeléctrica El Chocón S.A., as well as 7,405,768 shares of Central Hidroeléctrica El Chocón S.A., equivalent to 2.4803% of the stock capital of the Company, which gave it the preferential purchase option under a shareholders’ agreement, for US$ 50,000,000 (ThCh$ 28,828,760). As a result of the above, Endesa Chile now directly and indirectly owns 67.67% of the stock capital of Central Hidroeléctrica El Chocón S.A.

			According to the provisions of Technical Bulletin 72 of the Chilean Institute of Accountants and the standards stipulated in 1.697 of the Superintendence of Securities and Insurance, the Company evaluated the assets and liabilities acquired from Endesa Costanera S.A. and Central Hidroeléctrica El Chocón S.A. at their respective fair values. This evaluation showed that the fair values do not differ significantly from book values.

			As a result of the above, the above minority interest was recorded as stipulated in Technical Bulletin 72 of the Chilean Institute of Accountants and a negative goodwill of ThCh$ 2,035,385 was recognized in Endesa Costanera S.A. and ThCh$ 5,356,840 in Central Hidroeléctrica El Chocón S.A. (See note 13b).

	vii.		On March 27, 2007, Sociedad Concesionaria Túnel el Melón S.A. increased its paid-in capital by issuing 3,169,614,306 shares at a total amount of ThCh$ 32,042,220, with the Company concurring 100%, through a cash payment of ThCh$ 16,927,339 and capitalization of loans in the amount of ThCh$ 15,114,821, thereby increasing the Company’s participation in that company by 0.01% to 100%

F - 57

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Dissolution of related parties:

	i.		As of October 3, 2005 Sociedad Lajas Inversoras S.A., owner of 99.61% of the Brazilian company Cachoeira Dourada S.A. was dissolved and liquidated. The assets of the company were allocated among all shareholders proportionally to their participation, meaning that the Company’s indirect subsidiary Edegel S.A. received 11.47% of these assets and the Company’s subsidiary Compañía Eléctrica Cono Sur S.A. received 88.53% of these assets.

	ii.		On November 29, 2005, the Company acquired 0.001% of Inversiones Lo Venecia Ltda. for the amount of ThCh$ 91. As a result of this purchase, Inversiones Lo Venecia Ltda. ceased to exist as a separate legal entity, given that the Company already owned the remaining 99.999% of its shares. All assets and liabilities owned by Lo Venecia Ltda. were transferred to Endesa Chile.

	iii.		On November 29, 2005, the Company transferred the assets of Inversiones Eléctricas Quillota S.A. to Endesa Chile (individual entity) through the dissolution of Inversiones Eléctricas Quillota

	iv.		As a company restructuring in Colombia, on January 30, 2006 Capital de Energía S.A. (Cesa), owner of 48.48% of Emgesa S.A. was liquidated. 51.00% of Cesa, in turn, was controlled by Central Hidroeléctrica Betania S.A.

			As a result of such restructuring, as stipulated in Technical Bulletin 72 of the Chilean Institute of Accountants, this transaction by companies under common control was booked using the pooling of interests methodology, which meant reducing the ownership interest of Emgesa S.A. to 23.45% and recognizing an equity increase in reserves of ThCh$ 2,054,422 (see note 22e).

Business Structure

As a result of the reduction of available capacity for power generation and the physical guarantee of energy and associated wattage, Companhia de Interconexão Energética (CIEN) is struggling to focus its business on a different compensation structure which would not be dependent on the energy coming from Argentina and Brazil for purchases and sales of power across borders. In this regard, CIEN is renegotiating its existing contracts for supplying energy while seeking at the same time a compensation that would be compatible with its position of transporter of energy across countries. CIEN expects to define its new business structure in the course of 2008.

Impairment of investment accounted for under the equity-method

			During the year ended December 31, 2007, the Company recorded an impairment charge of its investment in Inversiones Gas Atacama Holding Limitada and subsidiaries, as the Company believes that the investment is other-than-temporary impaired.

			Gas Atacama Holding Limitada and its subsidiaries operate gas pipelines between Argentina and Chile, as well as power generating thermoelectrical plants in the north of Chile.

			Gas Atacama’s subsidiary GasAtacama Generación S.A. (GAG), has been notified of the arbitration sentence in its dispute with the electricity distribution companies Empresa Eléctrica de Arica S.A., Empresa Eléctrica de Iquique S.A. and Empresa Eléctrica de Antofagasta S.A., before the arbitrator Ricardo Peralta, in which GAG demanded the termination of the electricity supply contracts signed with those distributors.

			The result of the arbitration has been unfavorable for GAG, thus further aggravating the entities’s delicate operative and financial situation.

			Due to the facts and circumstances described above, the Company believes that the impairment of its investment in Gas Atacama is other-than-temporary as it is rather influenced by changes in the economical environment, situation of raw material supply and other circumstances which are not deemed to be temporary in nature.

F - 58

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 12. Investments in other companies

Investments in other companies at December 31, 2006 and 2007 are as follows:


	Number		Percentage			As of December 31,
Company	of shares		owned			2006		2007
			%			ThCh$		ThCh$

CDEC-SIC Ltda.		—		14.36	%		146,315		175,836
CDEC-SING Ltda.		—		7.69	%		164,009		278,359
Club de la Banca y Comercio		1		—			2,212		1,892
Club Empresarial		1		1.00	%		24,749		21,538
Cooperativa Eléctrica de Chillán Ltda.		—		—			15,180		15,180
Electrificadora de la Costa Atlántica		6,795,148		0.14	%		98,271		85,398
Electrificadora del Caribe		42,784,058		0.10	%		1,293,404		1,123,983
Empresa Eléctrica de Aysén S.A.		2,516,231		—			2,326,312		2,326,312
Empresa Eléctrica de Bogotá S.A.		2,124,047		2.10	%		21,682,909		18,842,721
Financiera Eléctrica Nacional S.A.		4,098		0.10	%		118,415		102,905
Dardanelos Participaçóes S.A.		—		—			2,674		2,805

Total							25,874,450		22,976,929

Note 13. Goodwill and Negative Goodwill

In accordance with current standards, recognition has been given to the excess of purchase price of the proportional equity in the net assets acquired (goodwill) in the purchase of shares as of December 31, 2006 and 2007, as follows:


	As of December 31,
	Amortization									Net Balance
	2005			2006			2007			2006		2007
	ThCh$			ThCh$			ThCh$			ThCh$		ThCh$

Chilectra S.A. (formerly Elesur S.A.)		(7,310,127	)		(7,310,211	)		(7,310,303	)		95,748,564		88,438,262
Codensa S.A.		(964,502	)		(981,328	)		(852,786	)		10,631,045		8,385,727
Edegel S.A.		(32,079	)		(32,639	)		(25,967	)		353,587		281,305
Emgesa S.A.		(1,263,904	)		(777,630	)		(619,125	)		8,427,566		6,704,537
Empresa Eléctrica de Colina S.A.		(217,794	)		(217,794	)		(217,796	)		2,123,497		1,905,701
Empresa Eléctrica Pangue S.A.		(196,710	)		(196,711	)		(196,711	)		3,065,409		2,868,698
Empresa Nacional de Electricidad S.A.		(50,522,158	)		(50,522,158	)		(50,522,159	)		583,109,080		532,586,922
Gasoducto Atacama Chile S.A. (1)		(5,613	)		(5,613	)		(68,288	)		68,288		—
Inversiones Distrilima S.A.		(1,173	)		(1,193	)		(1,037	)		9,549		7,261


Total		(60,514,060	)		(60,045,277	)		(59,814,172	)		703,536,585		641,178,413


(1)		During the year ended December 31, 2007, in addition to ordinary annual amortization of ThCh$ 5,613, the Company recorded goodwill impairment amounting to ThCh$ 62,675, resulting in a complete impairment of goodwill recorded over this investment. See Note 11 j) for details.

F - 60

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Following current standards, recognition has been given to the excess of the equity in the net assets purchased over the purchase price (negative goodwill) in the purchase of shares as of December 31, 2006 and 2007 as follows:


	As of December 31,
Company	Amortization						Net Balance
	2005		2006		2007		2006			2007
	ThCh$		ThCh$		ThCh$		ThCh$			ThCh$

Endesa Costanera S.A. (1)		2,722,177		2,769,662		2,495,374		(7,616,584	)		(6,247,414	)
Edegel S.A.		8,050,476		1,819,292		1,580,988		(23,802,401	)		(19,103,601	)
Hidroeléctrica El Chocón (1)		—		—		208,709		—			(5,356,840	)
Emgesa S.A. (2)		6,016,058		1,895,278		97,005		(7,855,746	)		(6,296,047	)
Inversiones Distrilima S.A.		24,624		25,052		21,771		(386,228	)		(313,866	)
Synapsis Soluciones y Servicios IT Ltda.		18,012		18,012		18,012		(94,565	)		(76,552	)
Edelnor S.A.		161,473		—		—		—			—


Total		16,992,820		6,527,296		4,421,859		(39,755,524	)		(37,394,320	)


(1)		See Note 11 (g) vi

(2)		See Note 11 (g) iv

Note 14. Other Assets

Other assets as of each year end are as follows:


	As of December 31,
	2006		2007
	ThCh$		ThCh$

Bond discount (Note 18)		15,921,224		13,082,799
Bond issuance cost		5,554,818		3,913,279
Deferred expenses		4,819,179		913,773
Bank fees and interest expense		8,341,972		6,591,406
Post-retirement benefits		3,107,649		2,911,612
Security deposits for judicial obligations		63,301,022		62,703,989
Recoverable taxes		61,624,228		56,205,735
Reimbursable contributions		875,556		669,369
Deferred assets (Brazil)		76,304,778		59,537,262
Fair value derivative contracts		51,146,164		42,065,143
Others		3,782,523		3,603,180


Total		294,779,113		252,197,547

F - 61

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 15. Due to Banks and Financial Institutions

Short-term debt due to banks and financial institutions:


	Foreign currency
	US$						Other foreign currency						$ Readjusted						Ch$				As of December 31,
Financial Institution	2006			2007			2006			2007			2006			2007			2006		2007		2006			2007
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$		ThCh$		ThCh$			ThCh$

ABN Amro Bank		—			—			7,273,626			5,843,483			—			—			—		—		7,273,626			5,843,483
Banco Av Villas		—			—			8,250,424			9,906,699			—			—			—		—		8,250,424			9,906,699
Banco Bayerische Landes		15,805			14,031			—			—			—			—			—		—		15,805			14,031
Banco BBVA		—			—			25,895,982			46,791,820			—			—			—		—		25,895,982			46,791,820
Banco BBVA Bhif		—			—			—			—			—			—			1		5		1			5
Banco Continental		2,346			—			14,948,572			12,309,942			—			—			—		—		14,950,918			12,309,942
Banco Credicoop		—			—			185,005			—			—			—			—		—		185,005			—
Banco Crédito Perú		—			4,532,854			10,809,829			11,230,996			—			—			—		—		10,809,829			15,763,850
Banco Crédito e Inversiones		158,702			—			—			—			—			—			843		8		159,545			8
Banco de Bogotá		—			—			21,171,496			4,446,466			—			—			—				21,171,496			4,446,466
Banco de Chile		—			—			—			—			—			—			215,239		10		215,239			10
Banco de Galicia y Buenos Aires		634,838			885,686			—			—			—			—			—		—		634,838			885,686
Banco de la Ciudad de Buenos Aires		—			—			2,258,158			—			—			—			—		—		2,258,158			—
Banco de la Nación		—			—			24,323			33,167			—			—			—		—		24,323			33,167
Banco de la Provincia de Buenos Aires		1,447,296			—			—			—			—			—			—		—		1,447,296			—
Banco do Brasil		2,719,872			—			—			6,356,253			—			—			—		—		2,719,872			6,356,253
Banco do Nordeste do Brasil		—			—			101,049			185,227			—			—			—		—		101,049			185,227
Banco Estado		76,548			314,130			—			—			—			—			—		2,305		76,548			316,435
Banco Hipotecario		—			—			75,009			—			—			—			—		—		75,009			—
Banco Itau		1,099,429			1,219,637			736,453			1,114,970			—			—			—		—		1,835,882			2,334,607
Banco Popular		—			—			7,769,057			—			—			—			—		—		7,769,057			—
Banco Real		—			—			25,355			—			—			—			—		—		25,355			—
Banco Río de la Plata		—			—			12,571			1,082,368			—			—			—		—		12,571			1,082,368
Banco Safra		—			—			264,118			—			—			—			—		—		264,118			—
Banco Santander Central Hispano		—			—			786,680			892,315			—			—			—		—		786,680			892,315
Banco Santander Santiago		124,334			—			4,904,556			2,288,410			—			—			—		—		5,028,890			2,288,410
Banco Security		149			7			—			—			2,244			4,089			2,403		4,294		4,796			8,390
Bank Boston		—			—			—			—			—			—			3,945		1		3,945			1
Bancolombia		—			—			42,699			—			—			—			—		—		42,699			—
Barings		—			—			13,069,750			—			—			—			—		—		13,069,750			—
Bladex		2,620,087			2,415,322			—			—			—			—			—		—		2,620,087			2,415,322
Citibank N.A.		5,317			—			10,651,409			10,322,832			—			—			—		—		10,656,726			10,322,832
Citibank (Agencia Chile)		—			—			—			—			—			—			1		—		1			—
Colmena		—			—			—			4,984,892			—			—			—		—		—			4,984,892
Comafi		—			158			21,077			—			—			—			—		—		21,077			158
Deutsche Bank		7,958			6,516			—			—			—			—			—		—		7,958			6,516
Interbank		—			—			1,434,031			1,363,321			—			—			—		—		1,434,031			1,363,321
JP Morgan		—			—			110,930			—			—			—			—		—		110,930			—
Standard Bank		37,319			528			—			—			—			—			—		—		37,319			528
Scotiabank — Perú		—			—			4,197,276			13,422,455			—			—			—		—		4,197,276			13,422,455
Scotiabank — Chile		—			2,032,414			—			—			—			—			—		4		—			2,032,418
Unibanco		—			20,213,661			—			5,473,603			—			—			—		—		—			25,687,264


Total		8,950,000			31,634,944			135,019,435			138,049,219			2,244			4,089			222,432		6,627		144,194,111			169,694,879


Total principal		5,729,150			24,931,364			132,676,559			131,407,184			—			—			—		—		138,405,709			156,338,548


Weighted average annual interest rate		6.80	%		9.20	%		3.00	%		9.94	%		0.30	%		0.30	%		—		—		7.85	%		9.73	%


	As of December 31,
	2006			2007
	%			%

Percentage of debt in foreign currency:		99.84	%		96.25	%
Percentage of debt in local currency:		0.16	%		3.75	%


Total		100.00	%		100.00	%

F - 62

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Current portion of long-term debt due to banks and financial institutions:


	Foreign currency
	US$						Euros						Other foreign currency						Ch$						$ no Readjusted						As of December 31
Financial Institution	2006			2007			2006			2007			2006			2007			2006			2007			2006			2007			2006			2007
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Bancafe		—			—			—			—			1,315,277			—			—			—			—			—			1,315,277			—
ABN Amro Bank		38,928			35,024			—			—			—			—			—			—			—			—			38,928			35,024
Banco Alfa		—			—			—			—			—			332,402			—			—			—			—			—			332,402
Banco Bayerische Landes		710,376			617,908			—			—			—			—			—			—			—			—			710,376			617,908
Banco BBVA		123,641			111,076			—			—			1,087,464			2,453,214			—			—			—			—			1,211,105			2,564,290
Bnp Paribas		3,767,729			3,208,466			—			—			—			—			—			—			—			—			3,767,729			3,208,466
Banco Colpatria		—			—			—			—			876,944			—			—			—			—			—			876,944			—
Banco Continental		1,425,122			1,486,139			—			—			10,556,713			9,784,862			—			—			—			—			11,981,835			11,271,001
Banco de Crédito (Perú)		—			—			—			—			10,874			10,045,982			—			—			—			—			10,874			10,045,982
Banco Corfinsura		—			—			—			—			3,507,407			—			—			—			—			—			3,507,407			—
Banco Davivienda		—			—			—			—			3,046,376			938,051			—			—			—			—			3,046,376			938,051
Banco do Brasil		—			—			—			—			1,704,099			2,190,699			—			—			—			—			1,704,099			2,190,699
Banco do Nordeste do Brasil		—			—			—			—			—			3,972,149			—			—			—			—			—			3,972,149
Banco Estado		—			—			—			—			—			—			415,497			—			—			—			415,497			—
Banco Europeo de Investimentos		7,438,498			4,976,289			—			—			—			—			—			—			—			—			7,438,498			4,976,289
Banco Itau		—			19,213			—			—			—			—			—			—			—			—			—			19,213
Banco Medio Crédito		—			—			—			—			2,178,467			2,003,678			—			—			—			—			2,178,467			2,003,678
Banco Monte Paschi		13,347			12,008			—			—			—			—			—			—			—			—			13,347			12,008
Banco Pactual		—			—			—			—			453,528			522,209			—			—			—			—			453,528			522,209
Banco Santander Central Hispano		121,096			149,336			—			—			1,238,237			2,793,017			—			—			—			—			1,359,333			2,942,353
Bancolombia		—			—			—			—			4,786,166			2,884,954			—			—			—			—			4,786,166			2,884,954
Banesto		4,739,978			2,047,648			—			—			—			—			—			—			—			—			4,739,978			2,047,648
Bank of Tokyo — Mitsubishi		96,131			102,425			—			—			—			—			—			—			—			—			96,131			102,425
BNDES		—			1,152,278			—			—			9,317,863			35,513,066			—			—			—			—			9,317,863			36,665,344
Bradesco		—			—			—			—			30,866			1,079,868			—			—			—			—			30,866			1,079,868
Caja de ahorros de Galicia		26,692			24,016			—			—			—			—			—			—			—			—			26,692			24,016
Caja de Ahorros y Monte de Piedad de Madrid		139,167			111,076			—			—			—			—			—			—			—			—			139,167			111,076
Caixa General de Depósitos		—			—			884,787			—			—			—			—			—			—			—			884,787			—
Citibank N.A.		2,416,303			5,083,979			—			—			—			—			—			—			—			—			2,416,303			5,083,979
Citibank (Agencia en Chile)		—			—			—			—			—			—			—			—			32			32			32			32
Comafi		—			—			—			—			660,408			—			—			—			—			—			660,408			—
Compagnie Belge de la Webstlb		4,149,596			—			—			—			—			—			—			—			—			—			4,149,596			—
Conavi		—			—			—			—			2,192,130			—			—			—			—			—			2,192,130			—
Credit Suisse First Boston		12,048			4,278,999			—			—			—			—			—			—			—			—			12,048			4,278,999
Deutsche Bank A.G.		256,296			5,088,107			—			—			—			—			—			—			—			—			256,296			5,088,107
Dresdner		26,693			24,016			—			—			—			—			—			—			—			—			26,693			24,016
Export Develop. Corp.		1,933,960			1,681,779			—			—			—			—			—			—			—			—			1,933,960			1,681,779
Granahorrar		—			—			—			—			1,315,277			—			—			—			—			—			1,315,277			—
HSBC		77,856			70,048			—			—			—			343,970			—			—			—			—			77,856			414,018
Instituto Crédito Oficial		38,928			35,024			—			—			—			—			—			—			—			—			38,928			35,024
International Finance Corporation		5,075,181			4,144,063			—			—			—			—			—			—			—			—			5,075,181			4,144,063
J.P. Morgan Chase Bank		14,397,116			—			—			—			—			—			—			—			—			—			14,397,116			—
Kreditanstal Fur Weideraubau		322,269			276,815			—			—			—			—			—			—			—			—			322,269			276,815
San Pedro IMI S.p.A.		93,427			84,057			—			—			—			—			—			—			—			—			93,427			84,057
Scotiabank		—			3,639,187			—			—			98,246			8,380,864			—			—			—			—			98,246			12,020,051
Skandinaviska Enskilda Banken		947,920			—			—			—			—			—			—			—			—			—			947,920			—
Standard Bank		132,655			2,986,309			—			—			—			—			—			—			—			—			132,655			2,986,309
The Bank of Nova Scotia		—			24,016			—			—			—			—			—			—			—			—			—			24,016
Unibanco		—			—			—			—			9,092,762			861,177			—			—			—			—			9,092,762			861,177
Votorantim		—			—			—			—			—			3,610,197			—			—			—			—			—			3,610,197
West LB		2,479,074			131,165			—			—			—			—			—			—			—			—			2,479,074			131,165


Total		51,000,027			41,600,466			884,787			—			53,469,104			87,710,359			415,497			—			32			32			105,769,447			129,310,857


Total principal		39,417,434			40,498,614			882,636			—			53,469,104			80,014,889			415,497			—			—			—			94,184,671			120,513,503


Weighted average annual interest rate		7.85	%		8.44	%		4.03	%		0.00	%		10.92	%		9.93	%		9.00	%		0.00	%		0.30	%		0.30	%		9.37	%		9.45	%


	As of December 31,
	2006			2007
	%			%

Percentage of debt in foreign currency:		99.61	%		100.00	%
Percentage of debt in local currency:		0.39	%		0.00	%


Total		100.00	%		100.00	%

F - 63

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 16. Long-Term Portion of Debt Due to Banks and Financial Institutions


		As of December 31, 2007
		After 1 year		After 2 years		After 3 years		After 5 years						Total Long-term		Annual interest			Total long-term
Financial		but within		but within		but within		but within						portion		rate			portion -
Institution	Currency	2 years		3 years		5 years		10 years		After 10 years				2007		average			2006
		ThCh$		ThCh$		ThCh$		ThCh$		Years		ThCh$		ThCh$					ThCh$

ABN Amro Bank	US$		7,246,312		1,759,819		—		—		—		—		9,006,131		5.39	%		9,410,659
	$ Arg		—		—		—		—		—		—		—		0.00	%		1,867,059
Banco Alfa	Rs		—		—		19,636,453		—		—		—		19,636,453		12.18	%		—
Banco Bayerische Landes	US$		2,869,540		—		—		—		—		—		2,869,540		8.31	%		4,009,655
Banco BBVA	US$		22,981,162		5,279,456		—		—		—		—		28,260,618		5.39	%		30,069,863
	$ Colom		—		—		20,348,091		—		—		—		20,348,091		12.19	%		21,072,211
Banco Continental	US$		2,829,541		7,663,038		—		—		—		—		10,492,579		7.33	%		20,314,028
Banco Crédito Perú	Soles		—		—		—		—		—		—		—		0.00	%		18,247,278
Banco Estado	US$		—		—		4,475,116		—		—		—		4,475,116		5.18	%		589,655
Banco Europeo de Investimentos	US$		4,140,750		4,140,750		8,281,500		—		—		—		16,563,000		18.33	%		23,824,454
Banco Davivienda	$ Colom		—		—		7,780,630		—		—		—		7,780,630		12.19	%		8,057,469
Banco do Brasil	US$		166,994		146,439		254,194		103,609		16		1,379,633		2,050,869		4.31	%		2,596,089
	Rs		1,860,559		2,786,689		5,943,830		31,674,356		—		—		42,265,434		13.56	%		9,980,391
Banco do Nordeste do Brasil	Rs		5,350,038		9,585,340		19,834,978		9,882,372		—		—		44,652,728		7.68	%		4,403,437
Banco Hipotecario	$ Arg		—		—		—		—		—		—		—		0.00	%		3,976,836
Banco Itau	US$		1,490,670		2,981,340		2,981,340		—		—		—		7,453,350		7.63	%		—
	Rs		—		—		3,744,952		—		—		—		3,744,952		12.40	%		—
Banco Itau Chile	US$		3,975,122		—		—		—		—		—		3,975,122		5.44	%		—
Banco Medio Crédito	$ Arg		1,990,992		1,990,992		995,577		—		—		—		4,977,561		1.75	%		7,601,335
Banco Monte Paschi	US$		2,484,450		—		—		—		—		—		2,484,450		5.44	%		2,532,199
Banco Nacionale de Paris	US$		2,448,533		812,948		8,135,155		2,438,844		—		—		13,835,480		5.58	%		12,833,546
	$ Arg		—		—		—		—		—		—		—		0.00	%		1,344,283
Banco Pactual	Rs		9,389,506		—		—		—		—		—		9,389,506		19.93	%		8,295,048
Banco Río de la Plata	$ Arg		—		—		—		—		—		—		—		0.00	%		14,002,944
Bancolombia	$ Colom		—		—		23,927,531		—		—		—		23,927,531		12.19	%		24,778,886
Banco Santander Central Hispano	US$		14,101,209		3,590,030		10,984,374		—		—		—		28,675,613		5.30	%		22,579,625
	$ Colom		—		—		23,166,434		—		—		—		23,166,434		12.19	%		23,990,533
	Rs		—		56,104,512		112,209,025		—		—		—		168,313,537		14.84	%		160,463,977
Banco Votorantim	Rs		—		28,052,075		—		—		—		—		28,052,075		12.65	%		—
Banesto	US$		—		—		3,254,630		—		—		—		3,254,630		5.18	%		2,757,739
Bank Boston	$ Arg		—		—		—		—		—		—		—		0.00	%		8,401,767
Bank Tokio — Mitsubishi	US$		17,391,150		4,223,565		10,984,374		—		—		—		32,599,089		5.32	%		24,032,914
BNDES	US$		—		—		—		—		—		—		—		0.00	%		8,926,074
	Rs		—		1,705,532		64,281,184		—		—		—		65,986,716		12.30	%		76,949,295
Bradesco	Rs		18,566,326		—		3,744,952		—		—		—		22,311,278		12.39	%		11,460,398
Caja de Ahorro de Galicia	US$		4,968,901		—		—		—		—		—		4,968,901		5.44	%		5,064,400
Caja de Ahorros y Monte de Piedad de Madrid	US$		22,981,162		2,745,317		—		—		—		—		25,726,479		5.41	%		27,153,750
Citibank N.Y.	US$		27,950,062		5,279,456		10,984,374		—		—		—		44,213,892		5.41	%		42,952,935
Comafi	$ Arg		—		—		—		—		—		—		—		0.00	%		1,260,265
Credit Swiss First Boston	US$		4,259,057		6,388,585		—		—		—		—		10,647,642		10.95	%		17,153,606
Deutsche Bank A.G.	US$		17,808,837		7,204,822		10,351,958		—		—		—		35,365,617		8.30	%		63,739,482
Dresdner	US$		4,968,900		—		—		—		—		—		4,968,900		5.44	%		5,064,398
Export Develop. Corp.	US$		1,432,928		1,072,162		9,559,372		1,422,799		—		—		13,487,261		5.70	%		8,878,213
HBSC	US$		14,492,624		3,519,638		—		—		—		—		18,012,262		5.39	%		18,821,317
	Rs		—		—		42,078,113		—		—		—		42,078,113		12.09	%		—
ING Bank	US$		—		6,757,704		—		—		—		—		6,757,704		5.18	%		7,776,301
Instituto de Crédito Oficial	US$		7,246,312		1,759,819		6,509,259		—		—		—		15,515,390		5.30	%		10,268,340
International Finance Corporation	US$		5,356,008		5,179,780		11,514,111		28,530,517		11		1,926,447		52,506,863		7.83	%		64,997,300
J.P.Morgan Chase Bank	$ Arg		—		—		—		—		—		—		—		0.00	%		5,881,236
Kreditanstal Fur Weideraubau	US$		135,908		—		—		—		—		—		135,908		4.85	%		469,180
San Pablo IMI S.P.A.	US$		17,391,150		4,223,565		—		—		—		—		21,614,715		5.39	%		22,585,581
Scotiabank	US$		7,155,216		5,366,412		—		—		—		—		12,521,628		6.70	%		—
	Soles		—		—		—		—		—		—		—		0.00	%		8,942,554
Standard Bank	US$		5,796,967		5,796,967		10,351,958		—		—		—		21,945,892		9.19	%		40,025,079
The Royal Bank of Scotiand	US$		—		—		3,254,630		—		—		—		3,254,630		5.18	%		428,840
The Bank of Nova Scotia	US$		4,968,901		1,689,426		—		—		—		—		6,658,327		5.18	%		—
Unibanco	Rs		22,113,610		—		3,730,926		—		—		—		25,844,536		12.52	%		43,001,272
West LB	US$		7,950,240		—		—		—		—		—		7,950,240		6.83	%		9,148,589


Totals			296,259,637		187,806,178		463,299,021		74,052,497				3,306,080		1,024,723,413					972,982,285


	As of December 31,
	2006			2007
	%			%

Percentage of debt in foreign currency:		100.00	%		100.00	%
Percentage of debt in local currency:		0.00	%		0.00	%


Total		100.00	%		100.00	%

F - 64

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

In November 2004 the Company obtained a syndicated loan amounting to US$ 350 million through overdraft (revolving) lines. In 2005, the amount of US$ 265 million was prepaid; and US$ 80 million was prepaid in 2006, leaving a balance of US$ 5 million.

In November 2006, the Company made a second withdrawal, this time of US$ 310 million, from the revolving line. The US$ 315 million balance is due in November 2008. It is possible to prepay and draw down funds throughout the contract period. The interest (spread) depends on the corporate rating given by S&P. Currently, at BBB, the interest spread is 0.375%.

On December 7, 2006 Enersis S.A. signed a new revolving loan for US$ 200 million following due on December 7, 2009 with a spread above Libor + 0,250%. At December 31, 2007, no withdrawals have been made.

On November 10, 2004, Endesa Chile entered into a new credit for US$ 250 million, with was used to prepay a previous loan entered into on February 4, 2004. The Company has withdrawn US$ 85 million from this new credit at December 31, 2007.

The new Endesa Chile loan matures on November 11, 2010, and has a 0.375% Libor spread.

The operation was carried out without warranties, endorsements, or investment or indebtedness restrictions.

On January 26, 2006, Endesa Chile entered into a Revolving Facility for US$ 200 million, of which it has withdrawn US$ 131 million at December 31, 2007.

On December 7, 2006, Endesa Chile entered into a Revolving Facility for US$ 200 million, of which it has withdrawn US$ 0 at December 31, 2007.

In the case of Endesa Chile’s revolving overdraft lines, it is possible to prepay and draw down funds throughout the contract period. These revolving overdraft lines mature on July 26, 2011 and on December 7, 2009, and have 0.30% and 0.25% Libor spreads, respectively.

The operations were carried out without warranties, endorsements, or investment or indebtedness restrictions.

Note 17. Other Current Liabilities

Other current liabilities are as follows:


	As of December 31,
	2006		2007
	ThCh$		ThCh$

Advances and guarantee on construction		50,901		79,972
Taxes payables		2,733,491		2,982,582
Contingencies — third party claims		25,139,075		51,968,781
Reimbursable contributions		1,126,772		1,126,772
Energy efficiency program (Brazil)		30,183,048		32,107,184
Azopardo provision		3,044,643		840,384
Accrued employees benefits — other		2,917,001		2,653,051
Derivative contracts		4,490,119		10,886,369
Fair value — derivative contracts		2,110,604		4,451,629
Emergency energy provision (Brazil and Argentina)		8,445,192		19,969,795
Obligations of payment to third parties		11,772,142		1,182,542
Advances from clients		1,686,543		1,680,420
Other current liabilities		3,874.998		2,288,694


Total		97,574,529		132,218,175

F - 65

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 18. Bonds Payable

Details of the short-term portion of bonds payable is as follows:



		Face value			Interest	Maturity		As of December 31,
Instrument	Series	outstanding		Currency	rate	date	2006		2007
					%		ThCh$		ThCh$

Bond N°269 – Enersis	B-1		19,529	UF	5.50%	06-15-2009		183,272		192,188
Bond N°269 – Enersis	B-2		1,858,064	UF	5.75%	06-15-2022		1,646,336		1,726,036
Yankee Bonds – Enersis	Two		350,000,000	US$	7.40%	12-01-2016		1,101,122		765,224
Yankee Bonds – Enersis	Three		858,000	US$	6.60%	12-01-2026		2,698		2,345
Yankee Bonds II – Enersis	One		350,000,000	US$	7.38%	12-01-2014		6,764,656		5,878,571
Bonds Edelnor	One		4,981,900	Soles	9.61%	02-01-2011		7,281		6,433
Bonds Edelnor	I° Prog.		18,570,000	Soles	VAC + 6.2%	04-26-2007		3,714,517		—
Bonds Edelnor	I° Prog.		40,000,000	Soles	4.47%	09-11-2007		7,252,219		—
Bonds Edelnor	I° Prog.		30,000,000	Soles	5.86%	01-15-2008		141,356		5,106,572
Bonds Edelnor	I° Prog.		20,000,000	Soles	6.25%	01-15-2012		100,349		93,026
Bonds Edelnor	I° Prog.		20,000,000	Soles	VAC + 5.4%	04-22-2014		38,274		36,718
Bonds Edelnor	I° Prog.		20,000,000	Soles	8.56%	06-01-2009		17,872		16,568
Bonds Edelnor	I° Prog.		20,000,000	Soles	VAC + 6.5%	06-01-2014		14,101		13,527
Bonds Edelnor	I° Prog.		40,000,000	Soles	VAC + 6.5%	06-01-2014		8,043		7,716
Bonds Edelnor	I° Prog.		30,000,000	Soles	7.38%	06-10-2010		21,991		20,386
Bonds Edelnor	I° Prog.		30,000,000	Soles	8.75%	06-08-2009		26,091		24,187
Bonds Edelnor	II° Prog.		20,000,000	Soles	7.31%	01-05-2011		127,192		117,910
Bonds Edelnor	II° Prog.		4,000,000	Soles	7.84%	01-05-2013		27,286		25,295
Bonds Edelnor	II° Prog.		18,000,000	Soles	8.16%	01-05-2016		127,681		118,363
Bonds Edelnor	II° Prog.		20,000,000	Soles	7.06%	02-01-2011		104,593		96,960
Bonds Edelnor	II° Prog.		27,200,000	Soles	8.00%	02-01-2016		161,129		149,369
Bonds Edelnor	II° Prog.		19,250,000	Soles	6.63%	03-17-2009		65,280		60,516
Bonds Edelnor	II° Prog.		15,000,000	Soles	6.75%	05-22-2009		19,120		17,726
Bonds Edelnor	II° Prog.		15,000,000	Soles	7.56%	05-22-2013		21,422		19,859
Bonds Edelnor	II° Prog.		15,000,000	Soles	6.66%	10-06-2013		41,680		38,638
Bonds Edelnor	II° Prog.		20,000,000	Soles	5.69%	04-19-2012		—		37,207
Bonds Edelnor	II° Prog.		20,000,000	Soles	5.91%	04-19-2015		—		38,638
Bonds Edelnor	II° Prog.		15,000,000	Soles	7.22%	08-31-2016		64,574		59,862
Bonds Edelnor	II° Prog.		40,000,000	Soles	5.97%	07-06-2012		—		191,385
Bonds Edelnor	III° Prog.		40,000,000	Soles	6.94%	08-29-2015		—		154,691
Bonds Edelnor	III° Prog.		30,000,000	Soles	6.56%	09-12-2012		—		97,956
Bonds Codensa	B3		50,000,000,000	$ Col.	9.99%	03-15-2009		62,573		71,521
Bonds Codensa	B5		200,000,000,000	$ Col.	11.20%	03-15-2011		286,047		320,612
Bonds Codensa	B8		250,000,000,000	$ Col.	11.40%	03-15-2014		363,945		406,931
Bonds Codensa	A		13,980,000,000	$ Col.	10.06%	03-14-2010		—		277,803
Bonds Codensa	B		391,500,000,000	$ Col.	10.80%	03-14-2017		—		503,334
Bonds Codensa	C		33,720,000	$ Col.	10.94%	03-14-2012		—		44,867
Bonds Edesur	Six		20,000,000	$ Arg.	10.41%	10-05-2007		11,208,759		—
Bonds Edesur	Seven		165,000,000	$ Arg.	11.75%	06-19-2012		—		101,860
Bonds Ampla	1° serie		290,000,000	Reales	CDI+1.2% aa	03-01-2008		3,531,772		84,400,949
Bonds Ampla	2° serie		110,000,000	Reales	IGP-M+11.4%	03-01-2010		2,861,015		3,247,611
Bonds Ampla	Unit		370,000,000	Reales	DI + 0.85% aa	08-01-2012		5,766,376		4,920,086
Bonds Endesa Chile	F		1,500,000	UF	6.20%	08-01-2022		751,639		1,337,624
Bonds Endesa Chile	H		4,000,000	UF	6.20%	10-15-2028		1,002,184		998,591
Bonds Endesa Chile	K		4,000,000	UF	3.80%	04-15-2027		—		615,596
Bonds Endesa Chile	One		230,000,000	US$	7.88%	02-01-2027		3,871,740		3,369,834
Bonds Endesa Chile	Two		220,000,000	US$	7.33%	02-01-2037		3,839,312		3,336,409
Bonds Endesa Chile	Three		200,000,000	US$	8.13%	02-01-2097		844,131		769,352
Bonds Endesa Chile	One		400,000,000	US$	7.75%	07-15-2008		8,124,138		205,815,978
Bonds Endesa Chile	One		400,000,000	US$	8.50%	04-01-2009		4,860,188		4,223,565
Bonds Endesa Chile	G		4,000,000	U.F.	4.80%	10-15-2010		778,497		—
Bonds Endesa Chile	144A		400,000,000	US$	8.35%	08-01-2013		7,957,367		6,915,053
Bonds Endesa Chile	144A		200,000,000	US$	8.63%	08-01-2015		4,109,718		3,571,397
Bonds Edegel	Two		30,000,000	US$	8.41%	02-14-2007		17,700,586		—
Bonds Edegel	Three		30,000,000	US$	8.75%	06-13-2007		17,229,716		—
Bonds Edegel	5 A 2° issue		10,000,000	US$	3.75%	01-26-2009		91,724		79,710
Bonds Edegel	6 A 2° issue		30,000,000	Soles	5.88%	02-27-2008		107,702		5,073,714
Bonds Edegel	6 B 2° issue		20,000,000	Soles	8.50%	06-18-2008		10,980		3,325,311
Bonds Edegel	7 A 2° issue		10,000,000	US$	7.16%	07-26-2009		179,519		152,092
Bonds Edegel	8 A 2° issue		22,370,000	Soles	6.00%	03-10-2008		73,350		3,776,847
Bonds Edegel	8 B 2° issue		25,700,000	Soles	6.47%	03-30-2008		74,334		4,329,860
Bonds Edegel	9 A 2° issue		70,000,000	Soles	6.91%	06-01-2009		72,053		66,793
Bonds Edegel	10 A 2° issue		35,000,000	Soles	6.72%	10-21-2010		80,611		74,727
Bonds Edegel	11 A 2° issue		20,000,000	US$	6.06%	11-18-2012		80,884		70,289
Bonds Edegel	13 A 2° issue		25,000,000	Soles	6.47%	10-20-2013		56,240		52,135
Bonds Edegel	14 A 2° issue		25,000,000	Soles	6.09%	10-21-2010		47,682		44,201
Bonds Edegel	15 A 2° issue		30,000,000	Soles	6.16%	11-27-2011		30,278		28,069
Bonds Edegel	13 B 2° issue		25,000,000	Soles	6.16%	01-15-2014		—		116,953
Bonds Edegel	14 B 2° issue		25,000,000	Soles	5.91%	02-22-2011		—		87,043
Bonds Edegel	1 A 3° issue		25,000,000	Soles	6.31%	06-21-2022		—		6,541
Bonds Edegel	2 A 3° issue		8,000,000	US$	5.97%	07-18-2011		—		106,769
Bonds Edegel	3 A 3° issue		25,000,000	Soles	6.28%	03-07-2019		—		128,006
Bonds Edegel	4 A 3° issue		25,000,000	Soles	6.75%	08-31-2014		—		74,608
Bonds Edegel	5 A 3° issue		25,000,000	Soles	6.50%	03-18-2013		—		77,084
Bonds Edegel	6 A 3° issue		25,000,000	Soles	6.44%	05-21-2013		—		29,647
Bonds Edegel	7 A 3° issue		25,000,000	Soles	6.63%	06-13-2013		—		13,730
Bonds Emgesa	B-10 1° issue		229,825,000,000	$ Col.	11.31%	10-09-2009		1,242,288		1,475,623
Bonds Emgesa	B-10		60,000,000,000	$ Col.	11.43%	11-10-2009		204,277		226,963
Bonds Emgesa	C-10		9,684,517,481	$ Col.	9.88%	10-09-2009		101,125		102,994
Bonds Emgesa	C-10		17,235,158,229	$ Col.	10.25%	10-09-2009		54,765		55,771
Bonds Emgesa	A-10		210,000,000,000	$ Col.	10.32%	02-23-2015		622,367		570,961
Bonds Emgesa	A-10 1° issue		40,000,000,000	$ Col.	10.32%	02-23-2015		—		108,755
Bonds Emgesa	A-10 4° issue		170,000,000,000	$ Col.	10.84%	02-20-2017		—		3,921,727
Bonds Emgesa (Before Betania)	B		400,000,000,000	$ Col.	11.29%	11-10-2011		1,504,943		1,494,929


Total								121,584,960		366,034,697

F - 66

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Details of the long-term portion of bonds payable is as follows:


		Face value			Interest	Maturity	As of December 31,
Instrument	Series	outstanding		Currency	rate	date	2006		2007
								ThCh$	ThCh$

Bond N°269 – Enersis	B-1		19,529	UF	5.50%	06-15-2009		292,263		99,684
Bond N°269 – Enersis	B-2		1,858,064	UF	5.75%	06-15-2022		35,801,421		34,031,290
Yankee Bonds – Enersis	Two		350,000,000	US$	7.40%	12-01-2016		142,794,622		124,090,327
Yankee Bonds – Enersis	Three		858,000	US$	6.60%	12-01-2026		490,594		426,332
Yankee Bonds II – Enersis	One		350,000,000	US$	7.38%	12-01-2014		200,125,401		173,911,500
Bonds Edelnor	One		4,891,900	Soles	9.61%	02-01-2011		875,195		811,327
Bonds Edelnor	I° Prog.		30,000,000	Soles	5.86%	01-15-2008		5,367,211		—
Bonds Edelnor	I° Prog.		20,000,000	Soles	6.25%	01-15-2012		3,578,141		3,317,022
Bonds Edelnor	I° Prog.		20,000,000	Soles	VAC + 5,4%	04-22-2014		3,726,471		3,574,937
Bonds Edelnor	I° Prog.		20,000,000	Soles	8.56%	06-01-2009		5,367,211		4,975,535
Bonds Edelnor	I° Prog.		20,000,000	Soles	VAC + 6,5%	06-01-2014		3,718,694		3,567,477
Bonds Edelnor	I° Prog.		40,000,000	Soles	VAC + 6,5%	06-01-2014		7,424,472		7,122,566
Bonds Edelnor	I° Prog.		30,000,000	Soles	7.38%	06-10-2010		5,367,211		4,975,535
Bonds Edelnor	I° Prog.		30,000,000	Soles	8.75%	06-08-2015		3,578,141		3,317,022
Bonds Edelnor	II° Prog.		20,000,000	Soles	7.31%	01-05-2011		3,578,141		3,317,022
Bonds Edelnor	II° Prog.		4,000,000	Soles	7.84%	01-05-2013		715,628		663,404
Bonds Edelnor	II° Prog.		18,000,000	Soles	8.16%	01-05-2016		3,220,327		2,985,321
Bonds Edelnor	II° Prog.		20,000,000	Soles	7.06%	02-01-2011		3,578,141		3,317,022
Bonds Edelnor	II° Prog.		27,200,000	Soles	8.00%	02-01-2016		4,866,271		4,511,151
Bonds Edelnor	II° Prog.		19,250,000	Soles	6.63%	03-17-2009		3,443,960		3,192,635
Bonds Edelnor	II° Prog.		15,000,000	Soles	6.75%	05-22-2009		2,683,606		2,487,767
Bonds Edelnor	II° Prog.		15,000,000	Soles	7.56%	05-22-2013		2,683,606		2,487,767
Bonds Edelnor	II° Prog.		15,000,000	Soles	6.66%	10-06-2013		2,683,606		2,487,767
Bonds Edelnor	II° Prog.		20,000,000	Soles	5.69%	04-19-2012		—		3,317,022
Bonds Edelnor	II° Prog.		20,000,000	Soles	5.91%	04-19-2015		—		3,317,022
Bonds Edelnor	II° Prog.		15,000,000	Soles	7.22%	08-31-2013		2,683,606		2,487,767
Bonds Edelnor	II° Prog.		40,000,000	Soles	5.97%	07-06-2012		—		6,634,046
Bonds Edelnor	III° Prog.		40,000,000	Soles	6.94%	08-29-2015		—		6,634,046
Bonds Edelnor	III° Prog.		30,000,000	Soles	6.56%	09-12-2012		—		4,975,535
Bonds Codensa	B3		50,000,000,000	$ Col.	9.99%	03-15-2009		12,769,997		12,331,245
Bonds Codensa	B5		200,000,000,000	$ Col.	11.20%	03-15-2011		51,079,991		49,324,982
Bonds Codensa	B8		250,000,000,000	$ Col.	11.40%	03-15-2014		63,849,986		61,656,227
Bonds Codensa	A		139,800,000,000	$ Col.	10.06%	03-14-2010		—		55,436,347
Bonds Codensa	B		391,500,000,000	$ Col.	10.80%	03-14-2017		—		96,553,652
Bonds Codensa	C		33,720,000	$ Col.	10.94%	03-14-2012		—		8,316,192
Bonds Edesur	Seven		165,000,000	$ Arg.	11.75%	06-19-2012		—		26,006,931
Bonds Ampla	1° serie		290,000,000	Reales	CDI + 1,2% aa	03-01-2008		30,698,199		34,672,030
Bonds Ampla	2° serie		110,000,000	Reales	IGP-M+11,4% aa	03-01-2010		77,557,618		—
Bonds Ampla	Unit		370,000,000	Reales	DI + 0,85% aa	08-01-2012		98,952,825		103,793,429
Bonds Endesa Chile	F		1,500,000	UF	6.20%	08-01-2022		29,539,908		28,845,310
Bonds Endesa Chile	H		4,000,000	UF	6.20%	10-15-2028		78,773,088		78,490,640
Bonds Endesa Chile	K		4,000,000	UF	3.80%	04-15-2027		—		78,490,640
Bonds Endesa Chile	One		230,000,000	US$	3.80%	02-01-2027		117,720,051		102,300,210
Bonds Endesa Chile	Two		220,000,000	US$	7.33%	02-01-2037		125,793,109		109,315,800
Bonds Endesa Chile	Three		200,000,000	US$	8.13%	02-01-2097		23,109,337		20,082,306
Bonds Endesa Chile	One		400,000,000	US$	7.75%	07-15-2008		228,714,744		—
Bonds Endesa Chile	Unit		400,000,000	US$	8.50%	04-01-2009		228,714,744		198,756,000
Bonds Endesa Chile	G		4,000,000	U.F.	4.80%	10-15-2010		78,773,088		—
Bonds Endesa Chile	144A		400,000,000	US$	8.35%	08-01-2013		228,714,744		198,756,000
Bonds Endesa Chile	144A		200,000,000	US$	8.63%	08-01-2015		114,357,372		99,378,000
Bonds Edegel	5 A 2° issue		10,000,000	US$	3.75%	01-26-2009		5,717,869		4,968,900
Bonds Edegel	6 A 2° issue		30,000,000	Soles	5.88%	02-27-2008		5,365,532		—
Bonds Edegel	6 B 2° issue		20,000,000	Soles	8.50%	06-18-2008		3,577,021		—
Bonds Edegel	7 A 2° issue		10,000,000	US$	7.16%	07-26-2009		5,717,869		4,968,900
Bonds Edegel	8 A 2° issue		22,370,000	Soles	6.00%	03-10-2008		4,000,897		—
Bonds Edegel	8 B 2° issue		25,700,000	Soles	6.47%	03-30-2008		4,596,472		—
Bonds Edegel	9 A 2° issue		70,000,000	Soles	6.91%	06-01-2009		12,519,575		11,605,706
Bonds Edegel	10 A 2° issue		35,000,000	Soles	6.72%	10-21-2010		6,259,788		5,802,853
Bonds Edegel	11 A 2° issue		20,000,000	US$	6.06%	11-18-2012		11,435,737		9,937,800
Bonds Edegel	13 A 2° issue		25,000,000	Soles	6.47%	10-20-2013		4,471,277		4,144,895
Bonds Edegel	14 A 2° issue		25,000,000	Soles	6.09%	10-21-2013		4,471,277		4,144,895
Bonds Edegel	15 A 2° issue		30,000,000	Soles	6.16%	11-27-2011		5,365,533		4,973,874
Bonds Edegel	13 B 2° issue		25,000,000	Soles	6.16%	01-15-2014		—		4,144,895
Bonds Edegel	14 B 2° issue		25,000,000	Soles	5.91%	02-22-2011		—		4,144,895
Bonds Edegel	1 A 3° issue		25,000,000	Soles	6.31%	06-21-2022		—		4,144,895
Bonds Edegel	2 A 3° issue		8,000,000	US$	5.97%	07-18-2011		—		3,975,118
Bonds Edegel	3 A 3° issue		25,000,000	Soles	6.28%	03-07-2019		—		4,144,895
Bonds Edegel	4 A 3° issue		25,000,000	Soles	6.75%	08-31-2014		—		3,315,916
Bonds Edegel	5 A 3° issue		25,000,000	Soles	6.50%	03-18-2013		—		4,144,895
Bonds Edegel	6 A 3° issue		25,000,000	Soles	6.44%	05-21-2013		—		4,144,895
Bonds Edegel	7 A 3° issue		25,000,000	Soles	6.63%	06-13-2013		—		4,144,895
Bonds Emgesa	B-10		229,825,000,000	$ Col.	11.31%	10-09-2009		58,697,031		56,680,570
Bonds Emgesa	B-10		60,000,000,000	$ Col.	11.43%	11-10-2009		15,323,997		14,797,494
Bonds Emgesa	C-10		9,684,517,481	$ Col.	9.88%	10-09-2009		2,409,167		2,485,162
Bonds Emgesa	C-10		17,235,158,229	$ Col.	10.05%	10-09-2009		4,287,499		4,333,425
Bonds Emgesa	A-10		210,000,000	$ Col.	10.32%	02-23-2015		63,850,037		51,791,231
Bonds Emgesa	A-10 2° issue		40,000,000,000	$ Col.	10.32%	02-23-2015		—		9,864,996
Bonds Emgesa	B-10 3° issue		170,000,000,000	$ Col.	10.84%	02-20-2017		—		41,926,234
Bonds Emgesa (Before Betania)	B		400,000,000,000	$ Col.	11.29%	11-10-2011		102,160,015		98,650,075


Total								2,357,989,334		2,146,924,098


*		VAC (“Valor de activación constante”) is issued by the Banco Central de Reserva del Perú and calculated based in the inflation rate (represents an inflation — indexed new Peruvian Sol).


Year	%

2006		1.56
2007		3.44

F - 67

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Bonds payable consist of the following:

1.1 Domestic Bonds

On September 11, 2001, the Superintendence of Securities and Insurance registered the issue of adjustable bearer bonds of Enersis S.A. date June 14, 2001 in the Securities Register under No. 269. This placement was made in two series, as follows:


	Total amount		No. of bonds		Face value
Series	In UF		per series		In UF

B1		1,000,000		1,000		1,000
B1		3,000,000		300		10,000
B2		1,000,000		1,000		1,000
B2		1,500,000		150		10,000

The scheduled maturity of the Series B-1 bonds is 8 years, with no grace period; interest and principal are payable semi-annually. Annual interest is 5.5%, compounded semi-annually.

The scheduled maturity of the Series B-2 bonds is 21 years, principal payments beginning after 5 years, interest and principal payable semi-annually. Annual interest is 5.75%, compounded semi-annually.

1.2 International Bonds (Yankee Bonds)

On November 21, 1996, the Company, acting through its agency in the Cayman Islands, issued and placed Yankee Bonds for US$ 800 million in the US market. This placement was made in three series, as follows:


	Total amount		Years to		Stated annual
Series	in US$		maturity		interest rate

1		300,000,000		10		6.90	%
2		350,000,000		20		7.40	%
3		150,000,000		30		6.60	%

Interest is payable on a semi-annual basis and principal is due upon maturity. The Series 3 bond holders have a pre-redemption option in year seven, which was exercised by nearly all holders in November 2003 for US$ 149,142,000.

During the second quarter of 2004, UF/US$ swap contracts were entered into for US$ 100,000,000 associated with the series the tranche 1 bond and US$ 250,000,000 associated with Series 2.

F - 68

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

During November, 2006 US$ 300 million from series one of the Yankee Bonds were paid off. This operation meant liquidating swap for US$ 100 million associated with this bond.

During November, 2001, Enersis Internacional a 100% subsidiary of Enersis made a Tender Offer for total or partial cash purchase of the series 2 Yankee Bonds, with a face value of ThUS$ 350,000 maturing at 20 years in 2016, issued by the agency of the parent Enersis S.A. As a result of this offer, which expired on November 21, 2001, series 2 bonds for
ThUS$ 95,536, with a face value of ThUS$ 100,266, were bought.

As a result of the liquidation of Enersis Internacional S.A. on September 21, 2006, the parent Enersis S.A. was allocated its assets and liabilities, which included such bonds among its assets.

Given the above, at December 31, 2007 the bonds are presented net of the repurchase.

1.3 International Bonds (Yankee Bonds II)

On November 24, 2003, the Company, through its Cayman Islands Agency, issued and placed Yankee Bonds on the American market for US$ 350 million. This placement was made in a single tranche, whose features are as follows:


	Total amount		Years to		Stated annual
Series	in US$		Maturity		interest rate

1		350,000,000		10		7.375	%

Interest is paid semi-annually and amortization of capital is a single installment at the end of the term.

During the second half of 2004, debts have been re-denominated through US$/UF swap contracts for the total of this issue.

1.4 Chilectra S.A. Bonds

On October 13, 2003, Chilectra S.A. registered, in the Superintendence of Securities and Insurance, 2 lines of bonds corresponding to Nº 347 and 348 for a maximum line amount of UF 4,200,000 and UF 4,000,000 respectively; the placement has a maturity of 10 years from August 22, 2003. To date, the placement of the related bonds has not been made.

1.5 Edelnor Bonds (Subsidiary of Distrilima S.A.)


First issue
Date of Issue	:	March 1, 1996
Number of bonds subscribed	:	48,919 bonds.
Face value	:	S/. 100 (100 new soles) each
Redemption term	:	15 years
Interest rate	:	9.61% annual
Interest payment	:	Annually, on coupon maturity
Principal amortization	:	Amortization of total principal upon maturity

Seventh issue
Date of issue	:	January 16, 2004.
Number of bonds subscribed	:	6,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	4 years.
Interest rate	:	5.86%.
Interest payment	:	Semi-annual.

F - 69

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


Eighth issue
Date of issue	:	January 16, 2004.
Number of bonds subscribed	:	4,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	8 years.
Interest rate	:	6.25%.
Interest payment	:	Semi-annual.

Ninth issue
Date of issue	:	April 22, 2004.
Number of bonds subscribed	:	4,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	10 years.
Interest rate	:	VAC + 5.4%.
Interest payment	:	Semi-annual.

Tenth issue
Date of issue	:	June 9, 2004.
Number of bonds subscribed	:	4,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	5 years.
Interest rate	:	8.56%.
Interest payment	:	Semi-annual.

Eleventh issue
Date of issue	:	June 9, 2004.
Number of bonds subscribed	:	4,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	10 years.
Interest rate	:	VAC + 6.50%.
Interest payment	:	Semi-annual.

Twelfth issue
Date of issue	:	June 24, 2004.
Number of bonds subscribed	:	8,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	10 years.
Interest rate	:	VAC + 6.50%.
Interest payment	:	Semi-annual.

Thirteenth issue
Date of issue	:	June 10, 2005.
Number of bonds subscribed	:	6,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	10 years.
Interest rate	:	7.38%.
Interest payment	:	Semi-annual.

Fourteenth issue
Date of issue	:	June 10, 2005.
Number of bonds subscribed	:	6,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	15 years.
Interest rate	:	8.75%.
Interest payment	:	Semi-annual.

F - 70

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Second program of Corporate Bonds


First issue
Date of Issue	:	January 5, 2006
Number of bonds subscribed	:	4,000 bonds
Face value	:	5,000 (new soles) each
Redemption term	:	5 years
Interest rate	:	7.31%
Interest payment	:	Semi-annual

Second issue
Date of Issue	:	January 5, 2006
Number of bonds subscribed	:	800 bonds
Face value	:	5,000 (new soles) each
Redemption term	:	7 years
Interest rate	:	7.84%
Interest payment	:	Semi-annual

Third issue
Date of issue	:	January 5, 2006
Number of bonds subscribed	:	3,600 bonds
Face value	:	5,000 (new soles) each
Redemption term	:	10 years
Interest rate	:	8.16%
Interest payment	:	Semi-annual

Fourth issue
Date of issue	:	February 1, 2006
Number of bonds subscribed	:	4,000 bonds
Face value	:	5,000 (new soles) each
Redemption term	:	5 years
Interest rate	:	7.06%
Interest payment	:	Semi-annual

Fifth issue
Date of issue	:	February 1, 2006.
Number of bonds subscribed	:	5,440 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	10 years.
Interest rate	:	8.00%.
Interest payment	:	Semi-annual.

Sixth issue
Date of issue	:	March 17, 2006.
Number of bonds subscribed	:	3,850 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	3 years.
Interest rate	:	6.63%
Interest payment	:	Semi-annual.

Seventh issue
Date of issue	:	May 22, 2006.
Number of bonds subscribed	:	3,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	3 years.
Interest rate	:	6.75%.
Interest payment	:	Semi-annual.

F - 71

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


Eight issue
Date of issue	:	May 22, 2006.
Number of bonds subscribed	:	3,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	7 years.
Interest rate	:	7.56%.
Interest payment	:	Semi-annual.

Third issue — Series B
Date of issue	:	August 31, 2006.
Number of bonds subscribed	:	3,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	9 years.
Interest rate	:	7.22%.
Interest payment	:	Semi-annual.

Tenth issue — Series B
Date of issue	:	October 6, 2006.
Number of bonds subscribed	:	3,000 bonds.
Nominal value	:	5,000 (new soles) each.
Term	:	7 years.
Interest rate	:	6.66%.
Interest payment	:	Semi-annual.

Twelfth Issue — Series A
Date of Issue	:	April 19, 2007
Issuer	:	Edelnor S.A.A.
Bonds issued	:	Marketable Securities in thousands of new soles (4,000 bonds of S/. 5,000.00 each)
Number of bonds subscribed	:	S/. 30,000,000
Number of bonds placed	:	S/. 20,000,000
Principal due	:	All due on April 19, 2012
Interest rate	:	5.69%
Interest payment	:	Semi-annual.

Seventeenth Issue
Date of issue	:	July 6, 2007
Number of bonds subscribed	:	8,000
Nominal value	:	5,000 (new soles) each
Term	:	5 yean
Interest rate	:	5.97%
Interest payment	:	Semi-annual

Eighteenth Issue — Series A
Date of Issue	:	April 19, 2007
Issuer	:	Edelnor S.A.A.
Bonds issued	:	Marketable Securities in thousands of new soles (4,000 bonds of S/. 5,000.00 each)
Number of bonds subscribed	:	S/. 40,000,000
Number of bonds placed	:	S/. 20,000,000
Principal due	:	All due on April 19, 2015
Interest rate	:	5.91%
Interest payment	:	Semi-annual.

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ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Third program of Corporate Bonds


First Issue
Date of issue	:	August 29, 2007
Number of bonds subscribed	:	8,000
Nominal value	:	5,000 (new soles) each
Term	:	8 years
Interest rate	:	6.94%
Interest payment	:	Semi-annual

Second Issue
Date of issue	:	September 12, 2007
Number of bonds subscribed	:	6,000
Nominal value	:	5,000 (new soles) each
Term	:	5 years
Interest rate	:	6.56%
Interest payment	:	Semi-annual

1.6 Codensa S.A. issued bonds on March 11, 2004.


First Issue
Issuer	:	Codensa.
Issued securities	:	Securities negotiable in Colombian pesos.
Amount issued	:	500,000,000,000 Colombian pesos.

1st principal payment	:	Maturity in 2009 for 50,000,000,000 Colombian pesos.
Nominal interest rate	:	9.99% average annual rate.
Interest payment	:	Quarterly.
		Interest accrued at year end is ThCh$ 71,521 (ThCh$ 62,573 in 2006), and it is presented in current liabilities.

2nd principal payment	:	Maturity in 2011 for 200,000,000,000 Colombian pesos.
Nominal interest rate	:	11.20% average annual rate.
Interest payment	:	Quarterly.
		Interest accrued at year end is ThCh$ 320,612 (ThCh$ 286,047 in 2006), and it is presented in current liabilities.

3rd principal payment	:	Maturity in 2014 for 250,000,000,000 Colombian pesos.
Nominal interest rate	:	11.40% average annual rate.
Interest payment	:	Quarterly.
		Interest accrued at year-end is ThCh$ 406,931 (ThCh$ 363,945 in 2006), and it is presented in the current liabilities.

Second Issue

The first and second issues, which were distributed in two series, with terms of three and ten years, have been issued. These were placed at CPI + 4.60% and CPI + 5.30% respectively. A third issue was made, distributed in two series, with terms of three and five years. These were placed at DTF TA + 2.09% and DTF TA + 2.40%. Payment is quarterly in arrears.



1^st principal payment	:	Maturity in 2010 for 139,800,000,000 Colombian pesos.
Nominal interest rate	:	10.06% average annual rate
Interest payment	:	Quarterly.
		Year-end interest is ThCh$ 168,150 in 2007, and it is presented in current liabilities.

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ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)



2^nd principal payment	:	Maturity in 2017 for 391,500,000,000 Colombian pesos.
Nominal interest rate	:	10.80°/o average annual interest rate
Interest payment	:	Quarterly.
		Year-end interest is ThCh$ 503,344 in 2007, and it is presented in current liabilities.

3^rd principal payment	:	Maturity in 2017 for 84,980,000 Colombian pesos and 33,720,000 Colombian pesos

Nominal interest rate	:	10.06% average annual interest rate
Nominal interest rate	:	10.94% average annual interest rate
Interest payment	:	Quarterly.
		Year-end interest is ThCh$ 109,653 and ThCh$ 44,866 in 2007, respectively, and it is presented in current liabilities

1.7 Edesur S.A.

On October 5, 2004, under its medium-term certificate of indebtedness issue program, the Company issued negotiable bonds in Argentinean pesos for a total of ThUS$ 58,803 in two series — 18 month (class 5) and 3 years (class 6), respectively.


Issuer	:	Edesur S.A.
Issued securities	:	Negotiable bonds in Argentinean pesos.
Amount issued	:	ThUS$ 6,464.
Principal due	:	Maturity in 2007.
Nominal interest rate	:	10.41% average annual rate.
Interest payment	:	Quartely.

This issue has been redeemed through payment at December, 2007


Issuer	:	Edesur S.A.
Issued securities	:	Negotiable bonds in Argentinean pesos.
Amount issued	:	ThUS$ 52,339.
Principal due	:	Maturity in 2012.
Nominal interest rate	:	11.75% minimum annual nominal rate.
Interest payment	:	Quarterly.

1.8 Ampla Energía e Servicos S.A.

On March 1, 2005, the Company issued bonds in reales for a total amount of R$ 400,000,000 in two series.


First Series
Issuer	:	Ampla Energía e Servicos S.A.
Issued securities	:	Negotiable bonds in Brazilian reales.
Amount issued	:	R$ 290,000,000.
Principal due	:	Maturity in 2008.
Nominal interest rate	:	CDI + 1.2% per annum
Interest payment	:	Semi-annual.
Principal due	:	Maturity in 2008.

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ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


Second Series
Issuer	:	Ampla Energía e Servicos S.A.
Issued securities	:	Negotiable bonds in Brazilian reales.
Amount issued	:	R$ 110,000,000.
Principal due	:	Maturity in 2010.
Nominal interest rate	:	IGP - M + 11.4% per annum
Interest payment	:	Annual.
Principal due	:	Maturity in 2010

On August 1, 2006, the Company issued bonds in reales for R$ 370,000,000.00 in a single series.


Issuer	:	Ampla Energía e Servicos S.A.
Issued securities	:	Negotiable bonds in Brazilian reales.
Amount issued	:	R$ 370,000,000.
Principal due	:	Maturity in 2012
Nominal interest rate	:	DI + 0.85% per annum
Interest payment	:	Semi-annual.

1.9 Endesa Chile Individual

Our subsidiary Endesa Chile currently has two outstanding public bond issues on the domestic market on the following dates:

	•		On August 9, 2001, it registered the fourth bond issue of U.F. 7,500,000 under No.264; this was totally placed at December 31, 2001.

			Series E-1 and E-2 were totally redeemed through payment at July 31, 2006.

	•		On November 26, 2002, it registered the fifth bond issue of U.F. 8,000,000 under Nos. 317 and 318 and then amended it on October 2, 2003; this issue was totally placed at December 31, 2003.

	•		On April 15, 2007, it redeemed series G for U.F. 4,000,0000 (U.F. = Inflation index-linked unit of account) in advance, refinancing it by placing series K for the same amount; both series were registered under No.318 of November 26, 2002.

Risk rating of the last two bond issues is as follows at the date of these financial statements is as follows:


		Category

• Feller-Rate Clasificadora de Riesgo Ltda.		AA-
• Comisión Clasificadora de Riesgo		A+
• Fitch Chile Clasificadora de Riesgo Ltda.		AA-

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ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Issuance Terms


Fourth Issue
Issuer	:	Empresa Nacional de Electricidad S.A.
Securities issued	:	Bearer bonds in local currency, denominated in Unidades de Fomento (UF-Inflation Index-linked Units of Account)
Issuance Value (1)	:	Up to seven and a half million (UF 7,500,000) divided into:
		Series F: 150 bonds at UF 10,000 each.
Adjustment base	:	Variation in the UF
Amortization period	:	Series F: August 1, 2022.
Early redemption	:	Beginning February 1, 2012.
Nominal interest rate	:	6.20% annually, compounded semi-annually and effective on the outstanding principal adjusted for the value of the Unidad de fomento. The semi-annual interest rate will be 3.0534%.
Placement period	:	36 months from the registration date in the Chilean Securities Register of the Superintendence of Securities and Insurance
Security	:	There is no specific security, other than the general security of all the issuer’s properties
Interest payment	:	Interest will be paid semi-annually each August 1 and February 1, starting August 1, 2001. Accrued interest at year end is ThCh$ 748,944 (ThCh$ 751,639 in 2006) and it is presented in current liabilities.

Fifth Issue
Issuer	:	Empresa Nacional de Electricidad S.A.
Securities issued	:	Dematerialized bearer bonds in local currency, expressed in Unidades de Fomento (UF-Inflation Index-linked Units of Account)
Amount of issue	:	Eight million Unidades de Fomento (U.F. 8,000,000) divided into:
	•	Series H: 4,000 bonds U.F. 1,000 each.
	•	Series K: 4,000 bonds U.F. 1,000 each.
Adjustment base	:	Variation in Unidad de Fomento.
Amortization period	:	Series H: Semi-annually and successively as of April 15, 2010. Series K: As of April 15, 2027.
Early redemption	:	Only for series K bonds, as of October 16, 2011.
Nominal interest rate	:	Series K: 3.8% per year, compounded every six months and effective on the principal not fully paid adjusted by the value of the Unidad de Fomento. The interest rate to be applied every six months will be 1.8823%.
	:	Series H: 6.2% per year, compounded every six months and effective on the principal not fully paid adjusted by the value of the Unidad de Fomento. The interest rate to be paid every six months will be 3.0534%.
Placement deadline	:	36 months as of date of registration in Securities Register of the Superintendence of Securities and Insurance.
Security	:	No specific security, except for general security of all the issuer’s properties.
Interest payment	:	Interest will be paid semi-annually, due on April 15 and October 15 of each year starting from April 15, 2007. Interest accrued at year-end is ThCh$ 1,614,187 (ThCh$ 1,780,681 in 2006) an it is presented in current liabilities.

a.2 The Company has issued and placed four public offerings of bonds in the international market as follows:

The risk ratings of these bond issues at the date of these financial statements are as follows:


Rating entity		Category

• Standard & Poor’s		BBB
• Moodys Investors Services		Baa3
• Fitch		BBB

F - 76

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


First Issue
Issuer	:	Empresa Nacional de Electricidad S.A.
Securities issued	:	Marketable bonds denominated in US$ (Yankee bonds) in the US market.
Issuance Value	:	Six hundred and fifty million US Dollars (US$ 650,000,000) divided into:
		Series 1: US$ 230,000,000
		Series 2: US$ 220,000,000
		Series 3: US$ 200,000,000
Adjustment	:	Variation in the US Dollar in relation to the Chilean peso
Amortization period	:	Series 1 matures on February 1, 2027: Series 2 matures on February 1, 2037 (Put Option on February 1, 2009, on which date the holders may redeem 100% of bonds plus accrued interest).
		Series 3 matures on February 1, 2097.
Nominal interest rate	:	Series 1: 7.88% annually
		Series 2: 7.33% annually
		Series 3: 8.13% annually
Interest Payments	:	Interest will be paid semi-annually on February 1 and August 1 every year, starting January 27, 1997. Accrued interest at year end is ThCh$ 10,450,735 (ThCh$ 12,025,990 in 2006), and it is presented in current liabilities.

Second Issue
Issuer	:	Empresa Nacional de Electricidad S.A.
Securities issued	:	Marketable bonds denominated in US$ (Yankee bonds) in the US market.
Issuance Value	:	Four hundred million US Dollars (US$ 400,000,000)
Adjustment	:	Variation in the US Dollar in relation to the Chilean peso
Principal due	:	Series 1 matures on July 15, 2008
Nominal interest rate	:	Series 1: 7.75% annually
Interest Payment	:	Interest will be paid semi-annually on January 15 and July 15 of each year, starting January 15, 1999. Accrued interest at year end is ThCh$ 7,059,978 (ThCh$ 8,124,138 in 2006), and it is presented in current liabilities.

Third Issue
Issuer	:	Empresa Nacional de Electricidad S.A.
Securities issued	:	Marketable bonds denominated in US$ (Yankee bonds) in the US market.
Issuance Value	:	Four hundred million US Dollars (US$ 400,000,000).
Adjustment	:	Variation in the US Dollar in relation to the Chilean peso
Principal due	:	Series 1 matures on April 1, 2009.
Nominal interest rate	:	Series 1: 8.50% annually
Interest Payment	:	Interest will be paid semi-annually on October 1 and April 1 of each year, starting October 1, 1999. Accrued interest at year end is ThCh$ 4,223,565 (ThCh$ 4,860,188 in 2006), and it is presented in current liabilities.

Fourth Issue
Issuer	:	Empresa Nacional de Electricidad S.A.
Securities issued	:	Electronic bonds expressed in US dollars on the American and European markets, under “Rule 144A” and “Regulation S”.
Amount of issue	:	Six hundred million US dollars (US$ 600,000,000) divided into:
		Series August 1, 2013: US$ 400,000,000
		Series August 1, 2015: US$ 200,000,000
Adjustment	:	Variation in US dollar.
Principal due	:	Series of US$ 400 millions total maturity on August 1, 2013.
	:	Series of US$ 200 millions total maturity on August 1, 2015.
Nominal interest rate	:	Series of US$ 400 millions 8.35% per year.
		Series of US$ 400 millions 8.63% per year.
Payment of interest	:	Interest will be paid semi-annually on February 1 and August 1 each year starting from July 23, 2003. Interest accrued at year-end was ThCh$ 10,486,450 (ThCh$ 12,067,085 in 2006) and it is presented in current liabilities.

F - 77

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Repurchase of Cono Sur Bonds (former Endesa Chile Internacional)

Endesa Chile Internacional, 100% a subsidiary of Endesa Chile, made a tender offer in November 2001, for the total or partial purchase, in cash, of the first issue of the following bond series in US dollars (Yankee Bonds).

	•		Series 1: US$ 230 million at 30 years, maturing in 2027.

	•		Series 3: US$ 200 million at 100 years, maturing in 2097.

As a result of the offer which expired on November 21, 2001, series 1 and series 3 bonds, for ThUS$ 21,324 and
ThUS$ 134,828, respectively, were purchased, whose nominal values amounted to ThUS$ 24,119 and ThUS$ 159,584 for each series.

1.10 Subsidiaries of Endesa Chile

Edegel S.A. has made twenty eight bond issues as of December 31, 2007.

Current issues are as follows:

Terms of Issue


Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in US$ (110,000 bonds).
Issuance value	:	One hundred and ten million US dollars (US$ 110,000,000)
Principal due	:	June 3, 2006, February 14, 2007, June 13, 2007, and November 21, 2005, respectively.
Nominal interest rate	:	8.75%, 8.41%, 8.75% and 8.44% per year
Interest payment	:	Interest will be paid semi-annually. Accrued interest at year end is ThCh$ 708,922 (ThCh$ 708,922), and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable securities denominated Peruvian Soles (5,000 bonds).
Issuance Value	:	Twenty Five million Peruvian Soles (Peruvian Soles 25,000,000)
Capital amortization	:	Full expiration as of January 15, 2014.
Nominal interest rate	:	6.16% annually.
Interest Payments	:	Interest will be paid semi-annually. Accrued interest as of December 31, 2007 amounts to ThCh$ 116,953 (ThCh$ 0 in 2006) and is shown under other current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable Bonds in Soles (5,000 bonds)
Amount issued	:	Twenty five million soles (S/.25,000,000)
Principal due	:	Total maturity at February 22, 2011
Nominal interest rate	:	5.91%
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 87,043 and it is presented in current liabilities.

F - 78

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


Issuer	:	Edegel S.A.
Securities issued	:	Marketable Bonds in Soles (5,000 bonds)
Amount issued	:	Twenty five million soles (S/.25,000,000)
Principal due	:	Total maturity at June 21, 2022
Nominal interest rate	:	6.31%
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 6,541 and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable Bonds in Soles (8,000 bonds)
Amount issued	:	Eight million dollars (US$ 8,000,000)
Principal due	:	Total maturity at July 18, 2011
Nominal interest rate	:	5.97% per year
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 106,769 and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable Bonds in Soles (5,000 bonds)
Amount issued	:	Twenty five million soles (S/.25,000,000)
Principal due	:	Total maturity at July 3, 2019
Nominal interest rate	:	6.28% per year
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 128,006 and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable Bonds in Soles (4,000 bonds)
Amount issued	:	Twenty five million soles (S/.20,000,000)
Principal due	:	Total maturity at August 31, 2014
Nominal interest rate	:	6.75% per year
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 74,608 and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable Bonds in Soles (5,000 bonds)
Amount issued	:	Twenty five million soles (S/.25,000,000)
Principal due	:	Total maturity at March 18, 2013
Nominal interest rate	:	6.50% per year
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 77,084 and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable Bonds in Soles (5,000 bonds)
Amount issued	:	Twenty five million soles (S/.25,000,000)
Principal due	:	Total maturity at May 21, 2013
Nominal interest rate	:	6.44% per year
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 29,647 and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable Bonds in Soles (5,000 bonds)
Amount issued	:	Twenty five million soles (S/.25,000,000)
Principal due	:	Total maturity at June 13, 2013
Nominal interest rate	:	6.63% per year
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 13,730 and it is presented in current liabilities.

F - 79

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


Issuer	:	Edegel S.A.
Issued securities	:	Negotiable bonds in US dollars (10,000 bonds).
Amount issued	:	Ten million US dollars (US$ 10,000,000).
Principal due	:	Total maturity on January 26, 2009.
Nominal interest rate	:	3.75% per year
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 79,710 (ThCh$ 91,724 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Issued securities	:	Negotiable bonds in new Peruvian soles (6,000 bonds).
Amount issued	:	Thirty million new Peruvian soles (NS 30,000,000).
Principal due	:	Total maturity on February 27, 2008.
Nominal interest rate	:	5.88% per year
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 99,840 (ThCh$ 107,702 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Issued securities	:	Negotiable bonds in new Peruvian soles (4,000 bonds).
Amount issued	:	Twenty million new Peruvian soles (NS 20,000,000).
Principal due	:	Total maturity on June 18, 2008.
Nominal interest rate	:	8.5% per year.
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 9,395 (ThCh$ 10,980 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Issued securities	:	Negotiable bonds in US dollars (10,000 bonds).
Amount issued	:	Ten million US dollars (US$ 10,000,000).
Principal due	:	Total maturity on July 26, 2009.
Nominal interest rate	:	7,16% per year.
Interest payment	:	Semi-annual. Interest accrued at year end is ThCh$ 152,092 (ThCh$ 179,519 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in new Peruvian soles (4,474 bonds)
Amount of issue	:	Twenty two million three hundred seventy thousand new Peruvian soles (NS22,370,000).
Principal due	:	Total maturity on March 10, 2008.
Nominal interest rate	:	6.00% per year.
Interest payment	:	Semi-annual. Interest accrued at year-end is ThCh$ 67,995 (ThCh$ 73,350 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in new Peruvian soles (5,140 bonds)
Amount of issue	:	Twenty five million seven hundred thousand new Peruvian soles (NS25,700,000).
Principal due	:	Total maturity on March 30, 2008.
Nominal interest rate	:	6.47%
Interest payment	:	Semi-annual. Interest accrued at year-end is ThCh$ 68,908 (ThCh$ 74,334 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in new Peruvian soles (14,000 bonds)
Amount of issue	:	Seventy million new Peruvian soles (NS70,000,000).
Principal due	:	Total maturity on June 1, 2009.
Nominal interest rate	:	6.91%
Interest payment	:	Semi-annual. Interest accrued at year-end is ThCh$ 66,793 (ThCh$ 72,053 in 2006) and it is presented in current liabilities.

F - 80

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)


Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in new Peruvian soles (7,000 bonds)
Amount of issue	:	Thirty five million new Peruvian soles (NS35,000,000).
Principal due	:	Total maturity on October 21, 2010.
Nominal interest rate	:	6.72%
Interest payment	:	Semi-annual. Interest accrued at year-end is ThCh$ 74,727 (ThCh$ 80,611 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in US dollars (20,000 bonds)
Amount of issue	:	Twenty million US dollars (US$ 20,000,000).
Principal due	:	Total maturity on November 18, 2012.
Nominal interest rate	:	6.06%
Interest payment	:	Semi-annual. Interest accrued at year-end is ThCh$ 70,289 (ThCh$ 80,884 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in new Peruvian soles (5,000 bonds)
Amount of issue	:	Twenty Five million new Peruvian soles (NS25,000,000).
Principal due	:	Total maturity on October 20, 2013.
Nominal interest rate	:	6.47%
Interest payment	:	Semi-annual. Interest accrued at year-end is ThCh$ 52,135 (ThCh$ 56,240 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in new Peruvian soles (5,000 bonds)
Amount of issue	:	Twenty five million new Peruvian soles (NS25,000,000).
Principal due	:	Total maturity on October 21, 2010.
Nominal interest rate	:	6.09%
Interest payment	:	Semi-annual. Interest accrued at year-end is ThCh$ 44,201 (ThCh$ 47,682 in 2006) and it is presented in current liabilities.

Issuer	:	Edegel S.A.
Securities issued	:	Marketable bonds in Peruvian Soles (6,000 bonds)
Amount of issue	:	Twenty five million Peruvian Soles (S/. 30,000,000).
Principal due	:	Total maturity on November 27, 2011.
Nominal interest rate	:	6.16%
Interest payment	:	Semi-annual. Interest accrued at year-end is ThCh$ 28,069 (ThCh$ 30,279 in 2006) and it is presented in current liabilities.

Emgesa S.A. has made four bond issues as of December 31, 2007:


First Issue
Issuer	:	Emgesa S.A.
Securities issued	:	Marketable bonds in Colombian pesos
Issuance Value	:	$Col 530,000,000,000
Principal due	:	Maturities between 2004 and 2009 amounting to Col$ 316,744,675,710
Interest nominal rate	:	10,72% per year average rate
Interest payment	:	Interest will be paid on a quarterly and yearly basis. Accrued interest at year end is ThCh$ 1,861,351 (ThCh$ 1,602,445 in 2006) and it is presented in current liabilities.

F - 81

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Notes to the Consolidated Financial Statements — (Continued)


Third Issue
Issuer	:	Emgesa S.A.
Securities issued	:	Marketable bonds in Colombian pesos
Issuance value	:	$Col 250,000,000,000
Principal due	:	Maturity at February 23, 2015.
Nominal interest rate	:	10.32%
Interest payment	:	Annual. Accrued interest at year end is ThCh$ 679,716 (ThCh$ 622,367 in 2006) and it is presented in current liabilities.

Fourth Issue
Issuer	:	Emgesa S.A.
Securities issued	:	Marketable bonds in Colombian pesos
Issuance value	:	$Col 170,000,000,000
Principal due	:	Maturity at February 20, 2017.
Nominal interest rate	:	10.84% per year
Interest payment	:	Interest will be paid annually. Accrued interest at year end is ThCh$ 3,921,727 and it is presented in current liabilities.

Emgesa S.A. (former Central Hidroeléctrica Betania S.A.) issued bond on November 11, 2004, completing the first issue.


First issue
Issuer	:	Central Hidroeléctrica Betania S.A. E.S.P.
Issued securities	:	Bonds in Colombian pesos.
Amount issued	:	400,000,000,000 Colombian pesos.
Principal due	:	Maturity between 2009 and 2011, for 400,000,000,000 Colombian pesos.
Nominal interest rate	:	11,29% per year
Interest payment	:	Quarterly. Interest accrued at year end is ThCh$ 1,494,929 (ThCh$ 1,504,943 in 2006) and it is presented in current liabilities.

Deduction of the bond placements of Enersis and subsidiaries has been deferred in the same period as the respective issues. The long-term deferred value at December 31, 2006 is ThCh$ 15,921,224 and ThCh$ 13,082,799 in 2007 and it is presented in Other Long Term Assets (Note 14). The balance for deductions in short term bond placements classified under Other current assets is ThCh$ 1,007,009 (ThCh$ 1,045,668 in 2006) (Note 9).

F - 82

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 19. Accrued Expenses

(a) Short-term accruals:

Accrued expenses included in current liabilities are as follows:


	As of December 31,
	2006		2007
	ThCh$		ThCh$

Bonus and other employee benefits		42,353,181		42,188,329
Litigation and other contingencies		12,826,438		11,202,426
Post-retirement benefits foreign subsidiaries		9,728,468		12,470,086
Post-retirement benefits local subsidiaries		1,192,086		1,162,643
Suppliers and services		17,151,569		15,744,703
Others		1,970,839		2,287,765


Total		85,222,581		85,055,952

(b) Long-term accruals:


	As of December 31,
	2006		2007
	ThCh$		ThCh$

Post-retirement benefits-local subsidiaries		17,094,367		15,540,220
Employee and retired personnel benefits (Ampla-Coelce)		35,223,590		33,470,014
Severance indemnity (Note 20)		15,700,343		15,965,230
Legal, labor and tax contingencies (Ampla, Coelce and Cien)		179,286,307		160,444,874
Post-retirement benefits-foreign subsidiaries		77,071,460		70,361,582
Regulatory contingencies (Brazil)		23,369,570		30,828,546
Other		1,247,443		1,689,238


Total		348,993,080		328,299,704

In 2007, ThCh$ 1,734,841 (ThCh$ 1,115,428 in 2006) in uncollectible debts were written off.

F - 83

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 20.

Severance Indemnities

Long-term accruals include employee severance indemnities, calculated in accordance with the policy described in Note 2n. An analysis of the changes in the accruals in each year is as follows:


	As of December 31,
	2006			2007
	ThCh$			ThCh$

Opening balance as of January 1		14,445,331			15,700,343
Increase in accrual		3,647,409			2,097,948
Transfer to short-term		(200,093	)		(238,664	)
Payments during the period		(2,192,304	)		(1,594,397	)


Total		15,700,343			15,965,230

Note 21. Minority Interest

(a)

Minority shareholders’ participation in the shareholders’ equity of the Company’s subsidiaries is as follows:


	As of December 31, 2006									As of December 31, 2007
Company	Equity			Participation			Total			Equity			Participation			Total
	ThCh$			%			ThCh$			ThCh$			%			ThCh$

Soc. Agrícola Pastos Verdes Ltda.		75,051,973			45.00	%		33,773,388			76,759,777			45.00	%		34,541,899
Aguas Santiago Poniente S.A.		4,795,854			21.12	%		1,013,103			4,856,358			21.12	%		1,025,884
Ampla Energía e Servicios S.A.		517,566,929			8.07	%		41,751,639			444,907,878			8.07	%		35,890,302
Ampla Investimentos		43,824,715			8.07	%		3,535,298			38,539,151			8.07	%		3,108,917
Cam Argentina S.A.		341,390			0.001	%		4			285,292			0.001	%		4
Cam Brasil S.A.		3,550,857			0.0001	%		5			—			—			—
Cam Colombia S.A.		3,184,278			0.001	%		43			3,655,123			0.001	%		2
Cam Perú S.A.		—			—			—			5,246,695			0.0001	%		4
Central Hidroeléctrica Betania S.A.		363,482,619			0.01	%		21,961			—			—			—
Chilectra S.A. (ex Elesur S.A.)		740,198,338			0.92	%		6,734,658			759,014,600			0.92	%		6,902,320
Cía. Peruana de Electricidad S.A.		22,932,626			49.00	%		11,236,986			16,777,538			49.00	%		8,220,993
Codensa S.A.		563,056,451			78.19	%		440,227,954			445,351,089			78.19	%		348,199,548
Companhia Energetica Do Ceara – Coelce		489,745,614			41.14	%		201,465,843			413,535,909			41.14	%		170,115,582
Compañía de Transmisión del Mercosur S.A.		11,888,281			0.01	%		1,093			11,564,172			0.01	%		1,012
Constructora y Proyectos Los Maitenes S.A.		(1,587,080	)		45.00	%		(722,131	)		(1,522,263	)		45.00	%		(685,019	)
Edegel S.A.		498,365,151			44.56	%		222,058,918			407,048,817			44.56	%		181,370,667
Edelnor S.A.		152,041,634			40.00	%		60,816,654			111,739,732			40.00	%		44,695,893
Edesur S.A.		492,345,362			34.11	%		167,905,959			448,357,338			34.11	%		152,928,429
Emgesa S.A.		664,042,954			76.55	%		508,304,296			686,373,037			73.13	%		501,937,249
Empresa Eléctrica Pangue S.A.		125,430,647			5.01	%		6,291,852			118,093,601			5.01	%		5,923,811
Endesa Chile		1,927,088,780			40.02	%		771,203,118			1,884,226,640			40.02	%		754,049,950
Endesa Argentina S.A.		42,737,894			0.01	%		4,273			134,393,664			0.01	%		13,439
Endesa Brasil S.A.		1,079,738,211			28.48	%		307,536,005			948,146,991			28.48	%		270,055,452
Endesa Cachoeira S.A.		355,072,779			0.39	%		1,399,412			338,480,971			0.39	%		1,334,021
Endesa Costanera S.A.		150,100,911			35.74	%		53,638,422			119,304,734			30.23	%		36,071,676
Generandes Perú S.A.		252,455,436			40.37	%		101,913,786			206,672,674			40.37	%		83,431,733
Hidroeléctrica El Chocón S.A.		202,116,934			34.81	%		70,356,904			170,188,801			32.33	%		55,015,232
Hidroinvest S.A.		82,180,015			30.07	%		24,711,531			103,672,237			3.91	%		4,048,816
Inversiones Distrilima S.A.		84,486,888			31.61	%		26,706,305			67,065,126			31.61	%		21,199,286
Pehuenche S.A.		232,588,570			7.35	%		17,095,261			259,455,281			7.35	%		19,069,963
Soc. Agrícola de Cameros Ltda.		7,911,719			42.50	%		3,362,481			7,764,663			42.50	%		3,299,982
Túnel El Melón S.A.		(9,629,565	)		0.05	%		(4,815	)		—			—			—


Total								3,082,340,206									2,741,767,047

F - 84

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

(b)

Minority shareholders’ participation in the net (income) or loss of the Company’s subsidiaries is as follows:


	As of December 31, 2005									As of December 31, 2006									As of December 31, 2007
Company	Net income			Participation			Total			Net income			Participation			Total			Net income			Participation			Total
	ThCh$			%			ThCh$			ThCh$			%			ThCh$			ThCh$			%			ThCh$

Soc. Agrícola Pastos Verdes Ltda.		(1,656,818	)		45.00	%		(745,569	)		(5,272,789	)		45.00	%		(2,372,755	)		(6,227,268	)		45.00	%		(2,802,271	)
Aguas Santiago Poniente S.A.		93,566			45.00	%		42,104			107,570			41.70	%		44,858			(60,504	)		21.12	%		(12,781	)
Ampla Energía e Servicios S.A.		8,866,946			37.50	%		3,325,242			(27,002,236	)		8.07	%		(2,178,246	)		(6,224,959	)		8.07	%		(502,162	)
Ampla Investimentos		(1,507,291	)		8.07	%		(121,593	)		(4,465,169	)		8.07	%		(360,201	)		(2,588,340	)		8.07	%		(208,800	)
Cam Argentina S.A.		136,583			0.00	%		1			23,219			0.001	%		—			11,380			0.001	%		—
Cam Brasil S.A.		—			—			—			711,001			0.0001	%		1			(17,725	)		0.0002	%		—
Cam Colombia S.A.		(914,349	)		0.00	%		(12	)		(813,650	)		0.001	%		(11	)		(887,942	)		0.001	%		(1	)
Cam Perú S.A.		—			—			—			—			—			—			(1,205,347	)		0.0001	%		(1	)
Capital de Energía S.A.		(21,247,487	)		49.00	%		(10,411,268	)		—			—			—			—			—			—
Central Hidroeléctrica Betania S.A.		(2,663,802	)		14.38	%		(382,997	)		(1,088,685	)		0.01	%		(66	)		—			—			—
Chilectra S.A. (ex Elesur S.A.)		(85,400,916	)		1.76	%		(1,491,891	)		(249,208,722	)		0.92	%		(1,418,260	)		(122,314,926	)		0.92	%		(1,112,306	)
Cía. Peruana de Electricidad S.A.		(2,989,681	)		49.00	%		(1,464,944	)		(1,343,977	)		49.00	%		(658,549	)		(1,501,954	)		49.00	%		(735,957	)
Codensa S.A.		(73,240,681	)		78.19	%		(57,263,522	)		(93,599,914	)		78.19	%		(73,181,470	)		(67,811,187	)		78.19	%		(53,018,451	)
Compañía de Transmisión del Mercosur S.A.		229,182			0.02	%		217			(2,085,994	)		0.01	%		(363	)		(1,233,106	)		0.01	%		(62	)
Companhia Energetica Do Ceara - Coelce		(14,592,179	)		40.96	%		(5,976,760	)		(78,209,142	)		41.14	%		(32,172,765	)		(43,167,349	)		41.14	%		(17,757,682	)
Constructora y Proyectos Los Maitenes S.A.		459,738			45.00	%		206,882			(311,091	)		45.00	%		(139,991	)		(82,471	)		45.00	%		(37,112	)
Edegel S.A.		(37,855,704	)		36.44	%		(13,796,057	)		(9,277,188	)		44.56	%		(4,133,681	)		(3,803,113	)		44.56	%		(1,694,571	)
Edelnor S.A.		(19,779,365	)		40.00	%		(7,911,746	)		(9,096,431	)		40.00	%		(3,638,572	)		(10,711,550	)		40.00	%		(4,284,620	)
Edesur S.A.		19,233,791			34.11	%		6,559,475			25,121,561			34.11	%		8,567,279			(20,503,003	)		34.11	%		(6,991,928	)
Chilectra S.A.		4,886,905			0.001	%		53			—			—			—			—			—			—
Emgesa S.A.		(44,287,702	)		51.52	%		(22,815,651	)		(67,282,159	)		76.55	%		(51,502,407	)		(51,012,220	)		73.13	%		(46,295,004	)
Empresa Eléctrica Pangue S.A.		(21,247,201	)		5.02	%		(1,065,802	)		(41,830,532	)		5.01	%		(2,098,303	)		(34,138,191	)		5.01	%		(1,712,440	)
Endesa Chile		(121,304,086	)		40.02	%		(48,544,773	)		(203,567,376	)		40.02	%		(81,465,783	)		(192,439,270	)		40.02	%		(77,012,403	)
Endesa Argentina S.A.		10,435,679			0.01	%		1,044			2,592,233			0.01	%		259			(38,363,392	)		0.01	%		(3,836	)
Endesa Brasil S.A.		(34,853,976	)		28.48	%		(9,927,270	)		(99,049,397	)		28.48	%		(28,211,705	)		(109,050,767	)		28.48	%		(31,060,324	)
Endesa Cachoeira S.A.		(27,424,816	)		0.39	%		(108,086	)		(37,239,907	)		0.39	%		(146,770	)		(62,023,300	)		0.39	%		(244,446	)
Endesa Costanera S.A.		11,866,291			35.74	%		4,240,409			6,644,735			35.74	%		2,374,489			11,134,854			30.23	%		3,366,613
Generandes Perú S.A.		(32,011,576	)		40.37	%		(12,922,760	)		(6,844,543	)		40.37	%		(2,763,074	)		(3,514,474	)		40.37	%		(1,418,759	)
Hidroeléctrica El Chocón S.A.		(2,833,523	)		34.81	%		(986,349	)		(14,840,727	)		34.81	%		(5,166,057	)		(8,814,829	)		32.33	%		(2,860,563	)
Hidroinvest S.A.		131,228			30.07	%		39,461			(7,174,042	)		30.07	%		(2,157,234	)		(20,907,848	)		3.91	%		(1,058,126	)
Inversiones Distrilima S.A.		(12,001,368	)		31.61	%		(3,793,633	)		(5,209,454	)		31.61	%		(1,646,708	)		(6,366,811	)		31.61	%		(2,012,549	)
Investluz		(9,206,258	)		13.68	%		(1,259,115	)		—			—			—			—			—			—
Inversiones Eléctricas Quillota S.A.		11,028,656			50.00	%		5,514,328			—			—			—			—			—			—
Pehuenche S.A.		(65,995,226	)		7.35	%		(4,850,649	)		(72,668,962	)		7.35	%		(5,341,169	)		(138,741,293	)		7.35	%		(10,197,485	)
Soc. Agrícola de Cameros Ltda.		71,316			42.50	%		30,308			42,919			42.50	%		18,241			147,055			42.50	%		62,498
Túnel El Melón S.A.		1,958,659			0.05	%		979			(1,896,959	)		0.05	%		(948	)		—			—			—


Total								(185,879,944	)								(289,749,961	)								(259,605,529	)

F - 85

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 22. Shareholders’ Equity

(a)

Paid capital

The Extraordinary General Meeting of Shareholders of Enersis held on March 31, 2003 approved a capital increase of about US$ 2,000 million. The issue was registered in the Securities Register on May 23, 2003 under No.686 for Ch$ 1,473,225,403,563 pesos, divided into 24,382,994,488 shares.

(b)

Dividends


Dividend	Payment	Historical		Type of
Number	Date	value ($)		dividend

73	March 2006		1.000	Final 2005
74	December 2006		1.110	Interim 2006
75	May 2007		4.890	Final 2006
76	December 2007		0.530	Interim 2007

(c)

Number of shares

As of December 31,

2005

2006

2007

Shares

Capital stock authorized

32,651,166,465

(d)

Subscribed and paid in capital is as follows:


As of December 31,
2006		2007
ThCh$		ThCh$

	2,594,015,458		2,594,015,458

(e)

Other reserves

Other reserves at December 31, 2007 are composed of the following:


	Initial balance						Final balance at
	at January 1,			Reserve for			December 31,
	2007			the period			2007
	ThCh$			ThCh$			ThCh$

Reserve for entities using remeasurement method		(34,751,311	)		(7,702,898	)		(42,454,209	)
Reserve for accumulated conversion differences		(227,169,859	)		(115,113,442	)		(342,283,301	)
Reserve for Technical Bulletin No. 72 (1)		5,941,534			(56,695,443	)		(50,753,909	)


Total		(255,979,636	)		(179,511,783	)		(435,491,419	)


(1)		Decrease in other reserves in 2007 due to the merger of the Colombian subsidiaries Emgesa S.A. and Betania S.A. (see Note 11(f) vi).

		In 2006, other reserves diminished owing to the corporate restructuring conducted by generation companies subject to common control in Colombia and Perú, which had a net effect of ThCh$ 3,844,972, offset by ThCh$ 3,019,541 (see Note 11 (g) iii-iv), offset by Th$ 3,019,591 resulting from the Chilectra S.A. merger.

F - 86

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Detail of changes in the reserve for accumulated conversion differences is as follows:


	Initial											Final
	balance at			Reserve			Reserve for		Reserve for			balance at
	January 1, 2007			for assets			liabilities		the period			December 31, 2007
	ThCh$			ThCh$			ThCh$		ThCh$			ThCh$

Cumulative translation adjustment		(227,169,859	)		(214,590,405	)		99,476,963		(115,113,442	)		(342,283,301	)


Total		(227,169,859	)		(214,590,405	)		99,476,963		(115,113,442	)		(342,283,301	)


	Initial											Final
	balance at			Reserve		Reserve for			Reserve for			balance at
	January 1, 2006			for assets		liabilities			the period			December 31, 2006
	ThCh$			ThCh$		ThCh$			ThCh$			ThCh$
Cumulative translation adjustment		(243,029,396	)		20,117,934		(4,258,397	)		(15,859,537	)		(227,169,859	)


Total		(243,029,396	)		20,117,934		(4,258,397	)		(15,859,537	)		(227,169,859	)

The detail of the accumulated conversion difference reserve is as follows:


	As of December 31,
	2006			2007
	ThCh$			ThCh$

Edesur S.A.		(38,958,027	)		(62,330,178	)
Distrilec Inversora S.A.		(28,443,644	)		(39,343,811	)
Inversiones Distrilima S.A.		(11,856,206	)		(16,458,393	)
Cía. Peruana de Electricidad S.A.		(1,463,576	)		(2,856,029	)
Ampla Energia e Servicios S.A.		(51,625,860	)		(63,417,051	)
Ampla Investimentos e Servicios S.A.		3,029,420			575,883
Endesa Brasil S.A.		(21,009,568	)		(57,469,692	)
Codensa S.A.		(42,000,881	)		(56,108,490	)
Investluz S.A.		(6,723,652	)		(6,723,652	)
Central Geradora Termelétrica Fortaleza S.A.		(6,901,247	)		(6,901,247	)
Synapsis de Colombia S.A.		(1,035,087	)		(2,171,006	)
Endesa Market Place, S.S.		427,380			427,380
Endesa Argentina S.A.		(2,945,926	)		(6,911,186	)
Ingendesa Do Brasil Ltda.		(149,567	)		(249,213	)
Endesa Costanera S.A.		(830,454	)		(1,686,422	)
Cía. Eléctrica Cono Sur S.A.		(13,218,257	)		(17,361,846	)
Emgesa S.A. E.S.P.		(24,799	)		(890,605	)
Endesa Chile Internacional S.A.		(3,439,908	)		—
Gasatacama S.A.		—			(173	)
Electrogas S.A.		—			(284	)
Inversiones Electrogas S.A.		—			(408,128	)
Hidroeléctrica El Chocón S.A.		—			107,804
Hidroinvest S.A.		—			(1,684,495	)
Southern Cone Power Arg. S.A.		—			(397,162	)
Synapsis Argentina Ltda.		—			(25,305	)


Total		(227,169,859	)		(342,283,301	)

F - 87

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Other non-operating expenses are as follows:


	Year ended December 31,
	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Loss on sale of fixed assets and materials		(7,764,875	)		(1,999,747	)		(1,172,300	)
Obsolescence provision and write-off of fixed assets		(11,989,569	)		(13,788,047	)		(7,330,758	)
Effect of application of BT 64 (1)		(49,182,176	)		(50,645,523	)		(192,035,740	)
Contingencies and litigation		(38,782,998	)		(36,791,894	)		(60,680,663	)
SIC power settlement loss		(9,334,646	)		(11,300,155	)		(8,505,833	)
Pension plan expense		(3,519,305	)		(4,630,499	)		(6,375,473	)
Index UFIR Brazilian subsidiaries		(3,400,489	)		(3,504,739	)		(2,225,761	)
Penalties and fines		(8,192,358	)		(22,556,529	)		(17,556,721	)
Other taxes Colombia		(7,326,590	)		(5,318,897	)		(23,894,975	)
Other taxes Argentina and Brazil		(11,181,753	)		(9,845,648	)		(9,202,124	)
Other taxes Peru		(1,091,773	)		(3,452,989	)		(1,010,684	)
Energy efficiency Brazilian subsidiaries		—			(13,151,051	)		(1,231,974	)
Write-off of Copel and other contracts (Brazil)		—			(32,776,508	)		—
Other		(15,790,934	)		(15,000,424	)		(17,493,124	)


Total		(173,337,268	)		(224,762,650	)		(348,716,130	)


(1)		These amounts correspond to the net adjustments related to the translation of financial statements of foreign affiliates from the respective local country currency to US Dollars.

F - 89

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 24. Price-level Restatement

The (charge) credit to income for price-level restatement is as follows:


			Year ended December 31,
	Index		2005			2006			2007
			ThCh$			ThCh$			ThCh$
Assets

Inventory		I.P.C.		2,687,219			2,566,657			4,977,957
Current assets		I.P.C.		11,547,225			9,786,684			14,991,941
		U.F.		485,461			498,012			180,547
Property, plant and equipment		I.P.C.		89,972,923			51,988,282			186,012,200
Accounts receivable from subsidiaries		I.P.C.		4,149,796			1,960,997			4,986,582
Investment in subsidiaries		I.P.C.		7,558,264			2,230,396			8,529,791
Amortization of goodwill		I.P.C.		26,577,117			14,912,576			44,564,484
Other assets		I.P.C.		129,043,050			57,653,769			205,424,618
		U.F.		6,777,916			5,130,963			16,160,075
Price-level restatement of the income statement		I.P.C.		1,455,413			11,625,079			73,361,895


Net credits — assets				280,254,384			158,353,415			559,190,090


Liabilities and Shareholders’ equity

Shareholders equity		I.P.C.		(100,474,054	)		(57,748,451	)		(201,482,240	)
Current and long-term liabilities		I.P.C.		(109,615,299	)		(46,017,162	)		(161,207,878	)
		U.F.		(39,960,139	)		(21,916,955	)		(58,703,888	)
Minority interest		I.P.C.		(24,526,720	)		(14,425,570	)		(51,133,776	)
Accounts payable to subsidiaries		I.P.C.		(900,903	)		(369,663	)		(1,363,468	)
Non-monetary liabilities		U.F.		(72,387	)		—			—
Price-level restatement of the income statement		I.P.C.		(10,127,324	)		(16,568,770	)		(96,102,412	)


Net charge-liabilities and shareholders’ equity accounts				(285,676,826	)		(157,046,571	)		(569,993,662	)


Net credits (charge) to income				(5,422,442	)		1,306,844			(10,803,572	)

F - 90

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 25. Exchange Differences

The (charge) credit to income for foreign currency translation is as follows:


		Year ended December, 31
	Currency	2005			2006			2007
		ThCh$			ThCh$			ThCh$
Assets

Cash	US$		2,217,126			458,360			79,481
	Other		(252,114	)		(2,767	)		(49,732	)
Time deposits	US$		(1,032,316	)		78,362			(5,492	)
Marketable securities	US$		(24,199	)		74,670			(14,913	)
	Other		—			12,457			(277,529	)
Accounts receivable, net	US$		(804,992	)		270,592			(2,101,944	)
	Other		(24,054	)		(9,730	)		—
Prepaid expenses	US$		—			616			—
Other current assets	US$		(7,125,945	)		267,803			(2,208,995	)
	Other		(24,631	)		(2,655	)		(881	)
Amounts due from related companies	US$		(168,015	)		1,801,168			(16,214,178	)

Non-current assets
Long-term receivables	US$		(3,073,885	)		6,682,910			10,472,598
Amounts due from related companies	US$		(13,380,594	)		—			—
Other assets	US$		(25,328,078	)		224,869			—
Forward contracts and swaps	US$		—			23,660			(4,697,085	)


Total gain (loss)			(49,021,697	)		9,880,315			(15,018,670	)


Liabilities

Short-term debt due to banks and financial institutions	US$		5,446			(25,040	)		99,722
Current portion of long-term debt due to banks and financial institutions	US$		(3,486,004	)		21,580			1,480,231
	Yen		(55,078	)		—			—
	Other		(33,210	)		—			—
Current portion of bonds payable	Euro		1,358			—			—
Current portion of bonds payable	US$		10,685,875			(1,895,142	)		1,999,966
Current portion of notes payable	US$		(535,298	)		—			—
Accounts payable	US$		(2,015,036	)		(204,866	)		634,672
	Other		129			1,989			(12,747	)
Dividends payable	US$		—			—			(347,933	)
	Other								24,999
Miscellaneous payables	US$		(10,754	)		(170,399	)		856,623
Accrued expenses	US$		22,042			(5,829	)		—
	Other		17,414			—			—
Deferred income	US$		1,356,515			(588,811	)		(188	)
Other current liabilities	US$		3,693			(11,824	)		(6,549	)
Dividends payable	US$		—			—			—
Amounts due to related companies	US$		57			—			—

Long-term liabilities
Due to banks and financial institutions	US$		16,858,508			344,702			11,865,032
	Yen		70,636			—			—
	Euro		5,789			—			—
Notes payable	Other		45,214			—			—
Bonds payable	US$		20,810,444			(1,114,871	)		2,676,818
Accounts payable	US$		3,361,878			—			1,556,418
Other long-term liabilities	US$		(255,957	)		(510,057	)		978,085
Forward	US$		(4,676,597	)		—			—


Total gain (loss)			42,177,064			(4,158,568	)		21,805,149


Exchange difference			(6,844,633	)		5,721,747			6,786,479

Note 26. Extraordinary Items

There are no extraordinary items as of 2005, 2006 and 2007.

Note 27. Debt issuance costs

Expenses incurred for issuing and placing debt instruments incurred each year in placing bonds are as follows:


	As of December 31
	2006		2007
	ThCh$		ThCh$

Bank commissions		537,063		—


Total		537,063		—

F - 91

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 28. Cash flow statement

(a)

Other disbursements for financing:


	As of December 31
	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Commissions on debt refinancing		—			(636,449	)		—
Forward contract payments		(17,839,280	)		(6,628,444	)		(576,888	)
Reimbursable contributions		(1,154,451	)		(508,124	)		(787,571	)
Others		(16,455	)		(49,625	)		(16,338	)

Total		(19,010,186	)		(7,822,642	)		(1,380,797	)

(b)

Other receipts from investments:


	As of December 31
	2005		2006		2007
	ThCh$		ThCh$		ThCh$

Receipts from loans granted to former subsidiary		2,262,691		583,012		—
Margin call premiums		—		435,556		—
Capital reduction in Compañía Eléctrica de Bogotá S.A.		5,515,992		490,175		—
Sale of participation in Gas Atacama to Southern Cross (1)		—		—		43,172,429
Others		—		545,163		930,568

Total		7,778,683		2,053,906		44,102,997

(c)

Other investment disbursements:


	As of December 31
	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Payments associated with derivative contracts		—			(11,642,495	)		—
Payment Deutsche Bank Margin Call		—			—			(22,368,439	)
Intangible assets		(3,136,265	)		(1,285,594	)		(1,245,930	)
Purchase of participation in Gas Atacama from CMS (1)		—			—			(43,342,838	)
License software		—			—			(2,771,517	)
Other		—			(544,248	)		(2,631,300	)

Total		(3,136,265	)		(13,472,337	)		(72,360,024	)


(1)		On June 30, 2007, Endesa Chile notified CMS Enterprises Company (the entity controlling 50% of Inversiones Gas Atacama Holding and subsidiaries) of its decision to exercise its right of first offer to purchase the interest held by CMS Enterprises Company in Inversiones Gas Atacama Holding for US$ 80 million. Included in this amount was the purchase of a sponser loan that CMS had grants to Inversiones Gas Atacama Holding and its subsidiaries.

		On the same date, Endesa Chile and Southern Cross Latin America Private Equity Fund III L.P. (“Southern Cross”) subscribed a sale and purchase agreement for 50% of Endesa Chile’s participation in Inversiones Gas Atacama Holding S.A. and its subsidiaries and in its sponsor loans to Southern Cross for the amount of US$ 80 million.

		Endesa Chile, by exercising its right of first offer to purchase from CMS and selling this participation on the same date and in a linked transaction to Southern Cross acted as an agent and thus did not record any gains or losses related to the sale and purchase of the participation.

F - 92

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 29. Financial Derivatives

As of December 31, 2007 the Company and its subsidiaries held the following financial derivative contracts with financial institutions with the objective of decreasing exposure to interest rate and foreign currency risk, as follows:


					Description of contracts
						Purchase				Amount		Accounts
Type	Type	Nominal		Date of		sale				Hedged		Assets / Liabilities				Income
Derivative	Contract	Amount		Maturity	Item	position	Hedged Item	Amount		item		Account	Amount			Realized			Unrealized
		US$						ThCh$		ThCh$			ThCh$			ThCh$			ThCh$

S	CCTE		15,000,000	III quarter 11	Interest rate	P	Bank obligations		7,453,350		7,453,350	Other assets l/t		64,067			—			(1,450	)
S	CCTE		84,100,000	IV quarter 12	Interest rate	P	Bank obligations		41,788,449		41,788,449	Other liabilities l/t		(715,522	)		278,258			(715,522	)
S	CCTE		27,810,797	II quarter 14	Interest rate	P	Bonds		13,818,907		14,264,980	Other assets l/t		646,954			415,276			7,566
S	CCTE		19,615,085	IV quarter 15	Interest rate	P	Bank obligations		9,746,540		9,746,540	Other liabilities s/t		(462,433	)		—			(462,433	)
S	CCTE		13,313,609	II quarter 08	Exchange rate	P	Bank obligations		6,615,399		6,615,399	Other liabilities s/t		(1,520,230	)		—			(1,520,230	)
S	CCTE		45,502,728	III quarter 08	Exchange rate	P	Bank obligations		22,609,851		22,609,851	Other liabilities s/t		(3,212,183	)		—			(3,212,183	)
S	CCTE		125,000,000	III quarter 08	Exchange rate	P	Bonds		62,111,250		62,111,250	Other liabilities s/t		(3,877,756	)		(119,440	)		(4,645,735	)
S	CCTE		1,062,000	IV quarter 08	Exchange rate	P	Bank obligations		527,697		527,697	Other liabilities s/t		(626,901	)		—			(626,901	)
S	CCTE		41,666,667	II quarter 12	Exchange rate	P	Bank obligations		20,703,750		20,703,750	Other liabilities l/t		(8,856,504	)		—			(8,856,504	)
S	CCTE		350,000,000	I quarter 14	Exchange rate	P	Bonds		173,911,500		173,911,500	Other liabilities l/t		(105,889,080	)		(1,345,816	)		(228,878	)
S	CCTE		22,398,035	IV quarter 15	Exchange rate	P	Bank obligations		11,129,360		11,129,360	Other liabilities s/t		(3,100,150	)		—			(3,100,150	)
S	CCTE		250,000,000	IV quarter 16	Exchange rate	P	Bonds		124,222,500		124,222,500	Other liabilities l/t		(86,963,364	)		(1,870,943	)		(1,845,129	)
OE	CCTE		100,000,000	IV quarter 08	Interest rate	P	Bank obligations		49,689,000		49,689,000	Other liabilities s/t		(109,386	)		—			—
OE	CCTE		50,000,000	IV quarter 09	Interest rate	P	Bank obligations		24,844,500		24,844,500	Other liabilities s/t		(279,191	)		—			—
OE	CCTE		40,000,000	III quarter 10	Interest rate	P/S	Bank obligations		19,875,600		19,875,600	Other liab.l/t-Other assets l/t		(410,586	)		—			—
OE	CCTE		60,000,000	III quarter 09	Interest rate	P/S	Bank obligations		29,813,400		29,813,400	Other liab.l/t-Other assets l/t		(279,291	)		—			—
FR	CCTE		24,000,000	III quarter 07	Exchange rate	P	Bank obligations		—		—	Other liabilities s/t		—			(262,700	)		—

F - 93

ENERSIS S.A. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements — (Continued)

Note 30. Commitments and Contingencies

Collateral held by third parties:

Committed assets

Balance payable of related debt

Release of

Type

Book value

at December 31.

guarantees

Guarantee

Subsidiary

guarantee

Type

Currency

of collateral

Currency

2007

2006

2008

Creditors banks

Pangue S.A.

Mortgage and pledge

Real estate, properties

ThCh$

97,970,495

ThCh$

2,267,573

4,729,610

—

Sociedad de Energía de la República Argentina

Endesa Argentina - Endesa Costanera S.A.

Pledge

ThCh$

61,957,977

ThCh$

6,981,239

9,779,802

—

Mitsubishi

Endesa Costanera S.A.

Pledge

Combined cycle

ThCh$

75,093,649

ThCh$

34,039,097

32,359,706

—

Credit Suisse First Boston

Endesa Costanera S.A.

Pledge

Combined cycle

ThCh$

26,627,410

ThCh$

19,875,600

22,871,474

—

Other creditors

Endesa Chile

Bank bond

ThCh$

—

ThCh$

3,024,438

6,025,483

—

Other creditors

Edegel S.A.

Pledge

Real estate, properties

ThCh$

121,287,624

ThCh$

52,634,012

90,536,732

—

Deutsche Bank

Enersis S.A.

Deposits accounts

ThCh$

25,291,701

ThCh$

52,542,585

42,332,013

—

Other creditors

Ampla S.A.

Pledge over collections and others

ThCh$

25,711,300

ThCh$

134,723,938

26,284,050

—

Other creditors

Coelce S.A.

Pledge over collections and others

ThCh$

6,420,434

ThCh$

60,995,368

84,079,749

—

International Finance Corporation

CGT Fortaleza S.A.

Mortgage and pledge

Real estate, properties

ThCh$

231,150,771

ThCh$

56,637,549

70,068,426

—

Bndes

Cachoeira Dourada S.A.

Pledge

ThCh$

785,764

ThCh$

617,150

3,877,832

—

Guarantees of subsidiary obligations (1):


			Committed assets			Balance payable of related debt
		Type		Book value		as of December 31.					Release of guarantees
Guarantee	Subsidiary	guarantee	Type	of collateral		Currency	2007		2006		2007		2008		2009		2010

2^nd civil court of Quillota	Cía. Eléctrica San Isidro	Guarantees	ThCh$		10,000	ThCh$		10,000		10,740		—		10,000		—		—
Vestas Eólicas S.A.U.	Endesa Eco S.A.	Guarantees	ThCh$		7,468,361	ThCh$		7,468,361		7,704,323		—		7,468,361		—		—
Banco Español de Crédito	Cía. Eléctrica Tarapacá S.A.	Guarantees	ThCh$		2,047,648	ThCh$		2,047,648		7,068,876		—		2,047,648		—		—
Cédulas de crédito bancario	Cien	Guarantees	ThCh$		168,313,537	ThCh$		168,313,537		160,463,977		—		—		—		—


(1)		Unless otherwise stated, the guarantees in the table “Guarantees of Subsidiary Obligations” were provided by a subsidiary of the Company (the “Guarantor”) to a third party creditor that had entered into a new obligation with another subsidiary (the “Subsidiary Debtor”). If the Subsidiary Debtor is unable to meet the requirements of the related obligation, the Guarantor will be required to make future payments on behalf of the Subsidiary Debtor up to the remaining amount payable.

F - 94

Litigation and other legal actions

Enersis S.A.


Plaintiff	:	Enersis S.A., Chilectra S.A., Empresa Nacional de Electricidad S.A.
Defendant	:	The Republic of Argentina
Court	:	CIADI Arbitration Panel
Case/Identification	:	(CIADI Case ARB/03/21)

Compensation for losses caused to the Plaintiff’s investment in the Republic of Argentina is requested in connection with the participation of the power distribution concessionaire Edesur S.A. on the grounds of violation of the Investment Protection and Promotion Agreement entered into by the Republics of Chile and Argentina, and the Argentinean Government behavior through the passing of Public Emergency Law 25,561, dated January 6, 2002. The said behavior has also seriously affected the economic and financial balance of the Concession Contract between Edesur S.A. and the Argentinean National State. The said Law authorized a re-negotiation process of the Concession Contracts with the purpose of re-composing the economic-financial equation affected by the conversion to pesos, at US$ 1 = $1, of tariff values calculated in American dollars, and the prohibition to apply biased tariff updating. In practice, this process has not been promoted by the Government, and no measures to prevent losses for the Plaintiff have been formalized. Edesur S.A. has been deprived of receiving the tariffs indicated in the regulations and in the said Concession Contract, therefore being harmful to the investment the Plaintiff companies have made.

Process status: On October 18, 2004, a copy of the lack of jurisdiction petition filed by the Republic of Argentina was received. On December 17, 2004 the said petition was answered and confirmation of the International Center for the Settlement of Disputes regarding Investments between States and Nationals of Other States (CIADI) jurisdiction was requested.

On April 6, 2005, the allegations of the parties regarding this jurisdiction issue took place. The court decided to accept the re-petition and re-response of the parties, setting a brief term for them. And the parties met the term. On June 15, 2005, Edesur S.A. entered with the Unit for Renegotiation and Analysis of Public Services Contracts (UNIREN) into an Understanding Letter within the framework of the process for renegotiating Edesur S.A.’s Concession Contract, envisaged in Law No.25,561 and supplementary regulation. As a result of the Understanding Letter, on August 29, 2005, the Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy were entered into. At the request of the Argentine Government, the Minutes of Agreement were executed again, on the same terms and conditions, on February 15, 2006, to include the new female Minister of Economy and Production. The Minutes envisage a Transitional Rate Regimen, retroactively effective beginning on November 1, 2005; require approval of the authorities for paying dividends during the life of the transitional regime; and include other aspects associated with investments, quality of service, penalties applied to Edesur, and unpaid penalties. Also, it establishes a Full Rate Revision, by which a new rate regime is to be set, which was scheduled to become effective on November 1, 2006, and for the next 5 years, under the supervision of the Ente Nacional Regulador de la Electricidad (ENRE), in accordance with law 24,065.

In addition, the Understanding Letter imposes the obligation of initially suspending, and subsequently dropping, all actions filed against the Argentinean State by Edesur S.A. and its shareholders. Such requirement would cause Enersis S.A. to suspend the international arbitration started on April 25, 2003 with the CIADI.

After publication in the Official Gazette of the Republic of Argentina of the resolution approving the rates arising from the Full Rates Revision, Enersis S.A. and its subsidiaries Chilectra S.A., Empresa Nacional de Electricidad S.A. and Elesur S.A. (currently, Chilectra S.A.) would drop the abovementioned international arbitration started with the CIADI.

On September 16, 2005 the Republic of Argentina made a filing requesting the suspension of the proceedings. It was answered on September 22, 2005 by the plaintiffs, who opposed the suspension. On September 30, 2005 the court rejected the Argentinean request, for lack for consent. On October 7, 2005, Argentina made a new filing on the same issue, which the court communicated to us on October 11, 2005, and we answered the filing on October 18, 2005. On March 28, 2006, the court ordered the suspension of the proceedings for a term of 12 months, after which it will call on the parties to report on the status of the negotiation conducted in accordance with the Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy.

F - 95

Subsequently, the court will decide whether or not the proceedings should continue. The Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy, after being approved by the Congress of the Argentine Nation, were ratified by the Executive National Argentine Power through decree 1959 of 2006, published on the Official Gazette on January 8, 2007, and now their regulation by the ENRE is pending.

ENRE Resolution 50/2007, of January 30, 2007, published in the Official Gazette on February 5, 2007, proceeded to comply with certain stipulations of the Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy, approving the amounts of the new Edesur Rate Table that reflects the increases in cost provided for in the Transition Rate Regimen, and issuing certain rules governing predictions contained in the Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy. In particular, with regard to its most important effects, the ENRE adopted the following decisions among others: 1. Approval of the new Rate Table reflecting the Transition Rate Regimen: ENRE approved the amounts of Edesur’s Rate Table leading to the Transition Rate Regimen provided for in the Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy and, therefore implements the increase of 23% above typical distribution costs (which does not affect T1R1 and T1R2 rates), above connection costs and above service restoration costs incurred by Edesur, as well as also the additional average increase of 5% above the above typical distribution costs earmarked for executing a works plan. 2. Date of application of the new Rate Table reflecting the Transition Rate Regimen: ENRE Resolution 50/2007 decreed application of the above new Rate Table starting from the invoicing of the consumption recorded after zero hours of February 1, 2007. 3. Cost Monitoring Mechanism: ENRE Resolution No. 50/2007 stipulated application of a positive variation of 9.962% of the Cost Monitoring Mechanism Indices to the service costs, with such application being made starting from May 1, 2006 (on which date the first six-month period after November 1, 2005 for review of the prices provided for in the MMC ended). For invoicing the amounts of such variation, the Resolution also stipulated that it should be broken down and charged in 55 installments. The plaintiffs petitioned the court to extend the stay of the proceedings for a further 12 month period. In this regard, on March 9, the Court issued Resolution SE No. 433/2007 whereby the Minister of Energy extended the Contractual Transition Period, provided for in the Heads of Agreement, to the date on which the rate table resulting from the Full Rate Annulment comes into force, which is February 1, 2008. The Resolution also indicated that the stay of actions provided for in the Heads of Agreement was extended through to the time when the above rate table comes into force, when actions could be taken again always provided that Edesur S.A. had fulfilled certain obligations. On August 1, 2007, the Court decided to maintain the stay through January 8, 2008, at the request of the parties. Once this period has transpired, the Court will ask the parties to report the situation of the process of negotiation as per the Heads of Agreement. Once notified of the above, the Court will issue a decision as to whether the proceedings should continue or not.

Amount US$ 574,739,550


Plaintiff	:	Omaira Cely Vargas and Rosa Elvira Viracachá Tunarosa, through lawyer Martha Teresa Briceño de Valencia
Demanded	:	Cámara de Comercio de Bogotá, Mr. Alvaro Pérez (liquidator of Luz de Bogotá), Endesa Internacional S.A., Enersis S.A., Agencia Islas Cayman, Chilectra S.A., Agencia Islas Caymán y Enersis Internacional (shareholders of Luz de Bogotá)
Tribunal	:	Third Civil Court of Bogota Circuit
Case/Identification	:	Case file No. 2006-0315

On July 15, 2004, Mr. Alvaro Pérez Uz (linked to the Endesa, S.A:Group), liquidator of Luz de Bogotá S.A., registered minutes No. 26 of July 9, 2004, containing the final winding up count, in the Bogotá Chamber of Commerce. Payment for such registration was Col$ 48,000. The remainder that was distributed to the partners amounted to Col$ 1,764,208,721,394, which is the sum, according to the plaintiffs, making up the base to which 0.7% to be paid to the Department of Cundinamarca, should be applied, according to Ordinance 24 of 1997 and articles 226, 229 and 230 of Law 223 of 1995. The Chamber initially rejected the registration so that the liquidator should include the distribution of the surplus as a document with no value. Based on articles 89, 218 and 431 of the Commercial Code, the liquidator stated that the liquidation minutes did not need to state the amounts of the surplus. The Chamber accepted the argument and registered the minutes. According to the plaintiffs, the Department of Cundinamarca lost Col$ 12,349,461,050 as a result. Consequently, the plaintiff petitions for the Chamber to be ordered to pay that amount, plus penalty interest, plus a penalty of 160% for inaccurate declaration, plus 15% for the tax not paid as an incentive in affairs involving administrative morality. Mrs. Martha Teresa Briceño de Valencia bought the litigation rights of Mrs. Omayra Cely and Rosa Elvira Viracachá Tunarosa, who filed the original lawsuit, for Col$ 10 million.

F - 96

Process status: Process is in the petition and defense stage. All defendants submitted pleas for the defense. The case file was received by the Judge of the Third Civil Court of the Bogota Circuit with the pleas for the defense, the intervention of the Department of Cundinamarca and a petition for the precautionary measures petitioned by the Chamber of Commerce (Embargo of Enersis Agencia Islas Cayman and Chilectra Agencia Islas Cayman shares in Codensa) to be resolved. The Judge then refused the precautionary measures, so the Governor’s Office of Cundinamarca and the Chamber of Commerce filed an appeal for reconsideration of judgment and, failing that, an appeal to a higher court for reversal. The judge did not reconsider and sent the proceeding involving the precautionary measures to the Court of Appeal. A date was set for the agreement hearing, which is a procedure whereby the parties must propose formulas to reach an agreement. In parallel fashion, for the same concept, the Municipal Treasure has prepared a Liquidation Report on the Bogota Chamber of Commerce, which will probable lead to a proceeding related to an action under administrative law, where Endesa Internacional, Enersis Agencia and Chilectra Agencia could be included as defendants.

Amount Col$ 61.36 billion — US$ 30 million


Plaintiff	:	Internal Revenue Service
Defendant	:	Enersis S.A.
Court	:	Tax Court
Case/Identification	:	10.825-07RR

On April 28, 2007, Enersis S.A. was notified of Summons No. 21 of 2007 by the Internal Revenue Service, whereby this Agency requests that the Income Tax returns filed for business years 2003 and 2004 should be clarified, amended or confirmed. The above Summons refers to several operations performed in those years. On June 28, 2007, the Summons was answered.

Process Status: On July 31, 2007, the Internal Revenue Service notified Enersis S.A. of Resolution 151, whereby it accepted Enersis S.A.’s answer to several points in the summons while maintaining its position with regard to others. The Internal Revenue Service was requested to submit the points of disagreement to an Administrative Reconsideration with the alternative of an appeal. On December 6, 2007, Enersis S.A. was notified that the resolution held the appeal to have been filed and a report had been requested from the tax inspector.

Amount ThCh$ 42,517 — US$ 85.57 million

Chilectra S.A.


Plaintiff	:	Enersis S.A., Elesur S.A. (now Chilectra S.A.), Empresa Nacional de Electricidad S.A.
Defendant	:	The Republic of Argentina
Court	:	CIADI Arbitration Panel
Case/Identification	:	CIADI Case ARB/03/21

Compensation of losses caused to the Plaintiff’s investment in the Republic of Argentina is requested in connection with the participation in the power distribution concessionaire Edesur S.A. on the grounds of non-fulfillment of the Investment Protection and Promotion Agreement entered into by the Republics of Chile, and Argentina and the Argentinean Government behavior through the passing of Public Emergency Law 25,561, dated January 6, 2002. The said behavior has also seriously affected the economic and financial balance of the Concession Contract between Edesur S.A. and the Argentinean National State. The said Law authorized a re-negotiation process of the Concession Contracts with the purpose of re-composing the economic-financial equation affected by the conversion to pesos, at US$ 1 = $ 1, of tariff values calculated in American dollars, and the prohibition to apply biased tariff updating. In the practice, this process has not been promoted by the Government, and no measures to prevent losses for the Plaintiff have been formalized. Edesur S.A. has been deprived of receiving the tariffs indicated in the regulations and in the said Concession Contract, therefore being harmful to the investment the Plaintiff companies have made. Process status: On October 18, 2004, a copy of the lack of jurisdiction petition filed by the Republic of Argentina was received. On December 17, 2004 the said petition was answered and confirmation of the CIADI jurisdiction was requested.

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On April 6, 2005, the allegations of the parties regarding this jurisdiction issue took place. The court decided to accept the re-complaint and re-answer of the parties, setting a brief term for them, with which the parties complied.

On June 15, 2005, Edesur S.A. entered with the Unit for Renegotiation and Analysis of Public Services Contracts (UNIREN) into an Understanding Letter within the framework of the process for renegotiating Edesur S.A.’s Concession Contract, envisaged in Law No.25,561 and supplementary regulation. As a result of the Understanding Letter, on August 29, 2005, the Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy were entered into. At the request of the Argentine Government, the Minutes of Agreement were executed again, on the same terms and conditions, on February 15, 2006, to include the new female Minister of Economy and Production. The Minutes envisage a Transitional Rate Regimen, retroactively effective beginning on November 1, 2005; require approval of the authorities for paying dividends during the life of the transitional regime; and include other aspects associated with investments, quality of service, penalties applied to Edesur, and unpaid penalties. Also, it establishes a Full Rate Revision, by which a new rate regime is to be set, which was scheduled to become effective on November 1, 2006, and for the next 5 years, under the supervision of the Ente Nacional Regulador de la Electricidad (ENRE), in accordance with law 24,065.

On March 28, 2006, the court ordered the suspension of the proceedings for a term of 12 months, after which it will call on the parties to report on the status of the negotiation conducted in accordance with the Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy. Subsequently, the court will decide whether or not the proceedings should continue. The Minutes of Agreement for the Adequacy of the Concession Contract for the Public Service of Distribution and Marketing of Electric Energy, after being approved by the Congress of the Argentine Nation, were ratified by the Executive National Argentine Power through decree 1959 of 2006, published on the Official Gazette on January 8, 2007, and now only their regulation by the ENRE is pending

F - 98

being made starting from May 1, 2006 (on which date the first six-month period after November 1, 2005 for review of the prices provided for in the MMC ended). For invoicing the amounts of such variation, the Resolution also stipulated that it should be broken down and charged in 55 installments. The plaintiffs petitioned the court to extend the stay of the proceedings for a further 12 month period. In this regard, on March 9, the Court issued Resolution SE No. 433/2007 whereby the Minister of Energy extended the Contractual Transition Period, provided for in the Heads of Agreement, to the date on which the rate table resulting from the Full Rate Annulment comes into force, which is February 1, 2008. The Resolution also indicated that the stay of actions provided for in the Heads of Agreement was extended through to the time when the above rate table comes into force, when actions could be taken again always provided that Edesur S.A. had fulfilled certain obligations. On August 1, 2007, the Court decided to maintain the stay through January 8, 2008, at the request of the parties. Once this period has transpired, the Court will ask the parties to report the situation of the process of negotiation as per the Heads of Agreement. Once notified of the above, the Court will issue a decision as to whether the proceedings should continue or not.

Amount US$ 722,969,910


Plaintiff	:	Gladys Calderón Rojas
Defendant	:	Chilectra S.A.
Court	:	19th Civil Court of Santiago
Case/Identification	:	Case No. 5540-2000

Mrs. Gladys Calderón Rojas filed a claim against the appraisal by a Committee of Good Men setting the easement for Chilectra S.A. on the plaintiff’s property in Quilicura at 54 million Chilean pesos.

Process status: On July 19, the definitive appealable judgment, ordering payment to the plaintiff of 118,590 Unidades de Fomento (inflation index-linked units of account) for the easement for Chilectra S.A. on her property, was notified. Whereas clause 36 of the ruling states that, as provided for in article 68 of Statutory Decree 1 of 1982 of the Ministry of Mines, compensation should only be paid for the concepts listed, that is to say, land occupied by the towers; strip of land; protection strip; indirect influence strip; damage caused by use of access roads to the property; and reduction of the buildable surface area as a result of the easements. On July 31, an appeal for annulment on the form and appeal to a higher court for reversal, thereby challenging the resolution since the court of the first instance included aspects that should not be compensated according the aforementioned legislation. On December 20, the remedy of annulment filed by Chilectra’s defense was rejected and, therefore, the case will be heard only with a devolutive effect.

Amount 152,533 Unidades de Fomento (Inflation index-linked units of account). — US$ 6.0 million


Plaintiff	:	Municipality of Pedro Aguirre Cerda
Defendant	:	Chilectra S.A.
Court	:	1^st Civil Court of San Miguel.
Case/Identification	:	15.050-2006.

The municipality filed a claim for declaring, calculating and paying compensation and rentals because, according to its petition, the more than 10,000 lampposts in Pedro Aguirre Cerda belong to or are in the public domain or are municipal property.

Process status: On January 22, pleas of dilatory exception of the lack of jurisdiction of the court and substitution of the proceedings were raised. The court rejected them and an appeal was lodged. Plea for the defense against the lawsuit. The Court of Appeal determined that the resolution rejecting the dilatory exceptions is null and void, so a new ruling determining their merits needs to be issued. On October 1, a Judge who was not disqualified resolved that the First Civil Court of San Miguel does not hold jurisdiction to hear the claim filed by the municipality of Pedro Aguirre Cerda. The latter lodged an appeal on October 5. To date, the case has not been heard in the San Miguel Court of Appeal.

Undetermined amount.

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Plaintiff	:	Rosendo Andrés Contesso Beltra and María Elena Concha Camaño
Defendant	:	Chilectra S.A.
Court	:	4th Civil Court of Santiago.
Case/Identification	:	2571-2007.

Legal action for material damages and moral prejudice non-contractual liability as a result of serious injuries (partial amputation of both arms) suffered by Mr. Rosendo Andrés Contesso Beltra, a worker of Luis Estay V. Ingeniería Eléctrica Construcción Ltda., which event occurred on October 17, 2005, while he was changing a lightbulb on a lampost, a task commissioned to his employer by the Municipality of Pedro Aguirre Cerda.

Process status: A plea of dilatory exception due to incompetence of the petition was filed and rejected. On June 19, the plea for the defense against the lawsuit was raised. On June 29, the rebuttal was made. On July 13, Chilectra lodged the rejoinder. On July 19, the court summoned the parties to a reconciliation hearing. On September 28, the writ of evidence was ordered.

Amount Ch$ 3,000,000,000 — US$ 6.0 million


Plaintiff	:	Siderúrgica AZA S.A.
Defendant	:	Chilectra S.A.
Court	:	Arbitrator Ramón Cifuentes Ovalle.
Case/Identification	:	N/A

On January 16, 1997 the parties signed a power supply contract for the property located on the Panamericana Norte Highway in the community of Colina. This contract gave rise to a dispute between the parties. Chilectra informed AZA of its decision to not automatically renew the contract. AZA specified that it accepted the notification of non-renewal of the contract, but, in contrast to Chilectra, it specified that the contract expired on December 28, 2008. An arbitrator was appointed to settle the dispute, with Mr. Ramón Cifuentes Ovalle being appointed.

Process status: On May 29, the arbitration was set up and the procedure stipulated. On June 28, AZA presented its petition. On August 7, Chilectra presented its defense and filed a counterclaim. AZA presented its written rebuttal on August 24 and Chilectra its rejoinder on September 10. On October 11, AZA filed the rejoinder against the counterclaim. On November 15, the reconciliation hearing took place, with no agreement having been reached by the parties to date.

Amount: Undetermined.

Edesur S.A.


Plaintiff	:	Asociación Coordinadora de Usuarios Consumidores y Contribuyentes — Ente Nacional Regulador de la Electricidad (ENRE).
Defendant	:	Edesur S.A.
Court	:	N°2 Federal Civil and Commercial First Instance Court, Registry of the Court N° 6, La Plata
Case/Identification	:	38676/03

Summary of proceedings: The said institution filed a measure through which it expects ENRE and EDESUR to be ordered to suspend cabling works in Quilmes, Province of Buenos Aires, as well as the company’s “Sobral” sub-station due to the damage the installations may cause to the population’s health.

Process status: After a hearing convened by the court and another hearing at the ENRE, which were attended by the parties and the other entities mentioned in the preceding paragraph, a number of technical measures were implemented to diminish the CEM values, even below the values set in the applicable norms. No new developments have occurred in this trial ever since.

Amount: Undeterminable

F - 100


Plaintiff	:	Users affected by a mass power outage in Buenos Aires
Defendant	:	Edesur S.A.
Court	:	Courts and Civil and Commercial Courts of the Federal Capital of Buenos Aires
Case/Identification	:	(Various processes)

Summary of proceedings: As a result of a prolonged outage in February, 1999, which affected 160,000 clients, a large number of claims for damages caused to such users began to be received as of mid 2000.

Process status: This involves several proceedings, started on different dates, so each at its own procedural step depending on its degree of progress. Currently, 4501 proceedings are being handled.

Amount involved: Ar$ 24,948,773


Plaintiff	:	Edesur S.A.
Defendant	:	Transportes Metropolitanos Gral. Roca.
Court	:	First Instance National Commercial Court, Registry of the Court N° 1
Case/Identification	:	87934/03

Summary of proceedings: Edesur promoted an action to declare settlements in public property free-of-charge, taking into consideration that the company Transportes Metropolitanos General Roca S.A. (T.M.R.) intends to charge an annual rent for every crossing or power line wiring along the rails (existing or future) over land designated as railroad service property.

Process status: Edesur obtained from the corresponding Court a precautionary measure through which the company is not obliged to pay rent while the procedure is pending resolution. The proceedings returned to the Federal Court of La Plata and the trial is in the status in which the judge must issue a first instance sentence.

Amount: Undetermined


Plaintiff	:	Users and Consumers Union.
Defendant	:	Edesur S.A.
Court	:	N° 11 Federal Administrative First Instance National Court, Registry of the Court N° 21.
Case/Identification	:	142321/02

Summary of proceedings: The Users and Consumers Union want a modification of the type of rate applied to the many condominium owners consortiums existing in the City of Buenos Aires and EDESUR users. This would imply an important reduction of the values to be invoiced in the future to these consortiums, as well as the obligation for retrospective reimbursement of “unduly” received amounts.

Process status: Court is issuing ruling.

Amount: Undeterminable


Plaintiff	:	Edesur S.A.
Defendant	:	National State (Ministry of Economy)
Court	:	N° 3 Federal Administrative First Instance National Court, Registry of the Court N° 5.
Case/Identification	:	1856/97

Summary of proceedings: In accordance with a provision in Power Law 24065, the power sector concessionaire companies must pay a significant rate to the Power Regulating National Agency (ENRE) with the purpose of financing its controlling and regulating activities (the rate is paid by EDESUR, among other concessionaires.) These expenses must not exceed annually the amount of the rate paid, thus giving rise to a financial surplus which, instead of being allocated to the Argentinean government, must be refunded to the companies. In this regard, the action was filed to nullify a resolution of the General Agency for Management of the Economy Ministry, which allocates to the Argentinean Treasury these financial surpluses. Obviously, this resolution is confiscatory in nature, because the rate must always be a payment for a service provided, and no portion of it must become income for the government.

Process status: The Supreme Court is in the process of issuing its ruling

Amount: Undeterminable.

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Plaintiff	:	Edesur S.A.
Defendant	:	Municipality of Berazategui
Court	:	N° 2 Federal Administrative First Instance Court for Civil, Commercial and Administrative Trials, Registry of the Court N° 5. in La Plata
Case/Identification	:	11,859/05

Summary of proceedings: Legal action was taken against the Municipality of Berazategui, to the effect of declaring the right of Edesur S.A. to continue the necessary works to construct the “Rigolleau” Substation, located in the department of Berazategui, which were suspended by the sued Municipality through Decree N° 758/05, whose unconstitutionality and unenforceability is requested in the lawsuit.

Process status: Actions prior to issuing ruling.

Amount: Undeterminable.


Plaintiff	:	Edesur S.A.
Defendant	:	Municipalidad de Berazategui.
Court	:	N° 2 Federal Civil, Commercial and Administrative First Instance National Court, Registry of the Court N° 5, La Plata.
Case/Identification	:	11.893/05

Summary of proceedings: A lawsuit was filed against the Municipalidad de Berazategui, so that it allows Edesur S.A. to render public services consisting in distributing electricity, for which it must install an underground electrical line under the western sidewalk of street 5, between Avenida Mitre and Calle 146, in Berazategui. The installation was suspended by the defendant through Decree No.1207/05, of which the plaintiff is seeking that it be pronounced unconstitutional and inapplicable. Also, an injunction was requested from the court. The court granted the injunction, suspending the application of Decree No. 758/05, and ordering the district authorities to refrain from stopping the development and/or completion of the installation of the underground 132-Kw line linking the sub-station located there, as well as the adequacy and remodeling of the line.

Process status: The Court decided favorably with regard to the petition for a precautionary measure, suspending application of the Decree and enabling Edesur to set up its facilities and then energize them with the intervention of ENRE and Universidad Nacional de La Plata. The community appealed against the precautionary measure. The Municipality filed a plea against the service of process. Since the above precautionary measure had become a self-gratifying measure, a petition was filed to have the proceeding disregarded.

Amount: Undetermined


Plaintiff	:	Edesur S.A.
Defendant	:	Government of the Town of Buenos Aires (GCBA)
Court	:	N° 8 Administrative and Tax Court of the City of Buenos Aires, Registry of the Court N° 15
Case/Identification	:	25442/07

Summary of proceedings: Several administrative acts decreed by GCBA whereby it required that documentation from the 2003 tax period should be furnished were challenged, since such petition is time-barred according to the regulations of article 34 of the Edesur S.A. Concession Contract.

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In each of the acts being challenged, the GCBA Revenue Service has instituted preliminary proceedings and fined Edesur S.A., sustaining in its resolutions that the offense of failure to comply with formally ordered tax duties (Articles 89 and 91 of the Tax Code) had been constituted. Such decision-making is inadmissible insofar as it contravenes the tax regimen of the Public Power Utility, under national jurisdiction.

Process status: Step subsequent to filing the lawsuit. The lawsuit was elaborated on. Warrants were issued to GCBA for it to remit the respective administrative files involved in the proceedings to the case records.

Amount: Undetermined


Plaintiff	:	Consumidores del Sur Asociación Civil sin fines de lucro
Defendant	:	The State and Edesur S.A.
Court	:	N° 5 Administrative and Tax Court of the City of Buenos Aires, Registry of the Court N° 9
Case/Identification	:	8803/07

Summary of proceedings: This proceeding addresses the validity of retroactive collection of the rate increase stipulated in National Executive Decree 1959/06. Consequent to the above, the petition has been made for the defendants to return the amounts of money received pursuant to the above regulation and to rule that the obligations generated by it have been abated.

Process status: On his own initiative, prior to any step in the proceedings, the Judge has required that Edesur attach all the administrative records drawn up in its offices with regard to the Contract Renegotiation Agreement. The service of process has still not been served on Edesur.

Amount: Undetermined


Plaintiff	:	Edesur S.A.
Defendant	:	Buenos Aires City Government (“GCBA”)
Court	:	N° 7 Administrative and Tax Court of Buenos Aires City, Registry of the Court N° 13
Case/Identification	:	2955/00 — 6262/99

Summary of proceedings: The provision through which the Buenos Aires City Government tries to charge an annual rent for each underground transformation center installed by Edesur in public roads is contested. At the same time, the provision tries to force Edesur to cover the costs resulting from the removal of the said centers whenever removal is necessary. The contested provision violates the Concession Contract.

Process status: Ruling by the Appeal Court for Federal Administrative Matters ratifying the appealable ruling favorable to Edesur. Conclusion of the proceedings will depend on GCBA possibly filing an Extraordinary Remedy.

Amount: Undeterminable


Plaintiff	:	Edesur S.A.
Defendant	:	Buenos Aires City Government (GCBA)
Court	:	N° 7 Administrative and Tax Court of the City of Buenos Aires, Registry of the Court N° 13.
Case/Identification	:	2956/01

Summary of Proceedings: To contest a GCBA provision through which payment of procedure expenses on permits requested by Edesur for the installation of its lines is demanded, as well as payment for the corresponding inspections carried out by the GCBA, in addition to a rent for using public roads with power systems for the provision of power distribution public utilities.

Process status: A favorable appealable ruling was won, and the other party has filed an appeal. The prosecutor’s office of the Court of Appeal issued a ruling sustaining that, in its opinion, the ruling favorable to Edesur should be ratified. The ruling in the second instance is being issued.

Amount: Undetermined.

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Ampla Energia e Serviços S.A.


Plaintiff	:	Meridional S/A Servicios, Emprendimientos y Participaciones
Defendant	:	Ampla
Court	:	9th Chamber of Rio de Janeiro Public Finance
Case/Identification	:	98.001.048296-8

Summary of Proceedings: MERIDIONAL — Mistral and Civel, represented by Meridional, claim they are creditors of the former state electricity distribution company CELF, owing to the existence of contracts of jobs undertaken for said company. Meriodional in its representation demands payment of invoices supposedly outstanding and the payment of contractual fines for rescission of the contracts for the above mentioned jobs, for the sum of R$ 136,085,827.20

Process status: Appealable sentence favorable to Ampla. The Plaintiff lodged an appeal and Ampla was required to submit its pleas. On September 25, 2006, Ampla submitted its pleas and became a party to the appeal. Since the State of RJ could not have access to the case records, the resolution ordering filing of the counterarguments was notified again on January 22, 2007. The State did not file any other declaration and on March 23, 2007 the case records were remitted to the Office of the Attorney General. The 9th Prosecutor’s office of the Public Prosecutor’s Office of the Capital issued an opinion in favor of maintaining the sentence, in other words, rejecting the remedies filed. On April 16, 2007, the court records were remitted to the Courts of Law and the appeals sent to the 9th Civil Court. The court records were then remitted to the Office of the Attorney General and the 3rd Prosecutor’s Office also issued an opinion in favor of rejecting the remedies filed. Currently, the court records have been in the hands of the reporting clerk since May 14, 2007. The date of the appellate hearing was set for the Session of August 28, 2007. On August 27, 2007, Ampla formally filed a petition specifying a law and order issue and requiring a declaration by the Office of the Attorney General on the matter. Given the above, the case was removed from the list of the Session on August 28, 2007 and remitted to the Public Prosecutor’s Office on August 29, 2007. On September 5, 2007, the case records were returned with the opinion of the Public Prosecutor’s Office requesting certification of passage through the courts in the above proceedings. Currently, the case records have been with the reporting clerk since September 10, 2007.

Amount: MR$ 293.1 — US$ 165.6 million


Plaintiff	:	Enertrade — Comercializadora de Energía S.A
Defendant	:	Ampla
Court	:	Getulio Vargas Foundation Chamber for Conciliation and Arbitration
Case/Identification	:	Arbitration procedure No. 03/2005

Summary of Proceedings: On December 22, 2002, Ampla and ENERTRADE signed a 20-year electric energy sales contract (40MW average). This contract was sent to ANEEL (Agencia Nacional de Energía Eléctrica) (National Electric Energy Agency) for its evaluation and resulting official approval. ANEEL approved the contract because certain conditions were fulfilled, among them, a 25% reduction in the price of the contracted energy (from R$ 97.4 R$ 72,6/MWh). Given this determination, Ampla only paid the value authorized by ANEEL. ENERTRADE sustained that the contract was tacitly approved by ANEEL due to the passage of time and obtained, through judicial demand No.2003.34.00.023785-2 against ANEEL. a provisional judicial measure that suspended the effects of the condition imposed by ANEEL, declaring the contract tacitly approved by that entity.

ANEEL has not yet been able to have this provisional measure annulled. With the purpose of confirming the right assured by the provisional measure, ENERTRADE, in December 2005, established an arbitration procedure against AMPLA, under nº 3/2005 in the Cámara de Conciliación y Arbitraje of the Fundación Getúlio Vargas/RJ. Ampla continued to pay the reduced rate because, in addition to not being part of the process, it was not authorized to transfer the full cost to its tariffs

Process status: Arbitration in the evidence stage. On January 12, the parties presented graphs showing the stock ownership of the companies involved in the arbitration, as well as also information about the companies that audited the parties and the companies linked to them. At the request of the Court of Arbitration, Ampla clarified the information presented, indicating the other auditing companies of the Endesa, S.A.Group. On February 12, 2007, the petition for expert accounting and technical testimony required by Ampla was ordered, as well as also for expert witnesses. On March 2, 2007, the technical assistants were appointed and the legal standing and role of the witnesses presented. ENERTRADE challenged the issues presented by Ampla. On March 16, 2007 Ampla filed a reply to the challenge.

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On April 2, 2007, the Court of Arbitration notified the extension of the deadline for concluding the arbitration proceedings by 178 days. The new deadline is September 28, 2007. On May 21, 2007, the experts for the technical and accounting expert testimony were named. The end of confidentiality was signed by the experts and technical assistants of both parties. The technical and accounting expert testimony started. A hearing was set for September 27, 2007 with the presence of all the parties, experts and their respective technical assistants. On December 18, 2007, the Court of Arbitration extended the deadline for concluding the accounting expert testimony.

Amount MR$ 75.51 — US$ 42.66 million


Plaintiff	:	Ampla
Defendant	:	Enertrade — Comercializadora de Energía S.A
Court	:	Getulio Vargas Foundation Chamber for Conciliation and Arbitration
Case/Identification	:	Arbitration procedure No. 04/2006

Summary of Proceedings: Counterclaim by Ampla against ENERTRADE. The facts of this procedure are the same as arbitration procedure 03/2005. Bearing in mind that the arbitration rules of this Chamber do not consider counterclaims, Ampla petitioned for a new arbitration to be established, with a view to decreeing the nullity of the contract or, alternatively, its avoidance. In this case, the same arbitration court has jurisdiction for hearing the case, which shall be processed together with the other proceeding.

On August 28, 2006, Ampla petitioned in the arbitration court for the nullity of the contract entered into with ENERTRADE, or, alternatively, vacating it, maintaining simply that the contract is null and void, since it was not ratified by ANEEL, as stipulated in the law, which was an essential condition for entering into the contract; also null and void because it infringes Law 8.884/94; it was entered into in unfair terms and conditions, typifying the abuse of the power of control; and the contract fails to comply with its business function.

Process status: Rebuttal and rejoinder presented. On January 12, the parties presented graphs showing the stock ownership of the companies involved in the arbitration, as well as also information about the companies that audited the parties and the companies linked to them. At the request of the Court of Arbitration, Ampla clarified the information presented, indicating the other auditing companies of the Endesa, S.A. Group. On February 12, 2007, the petition for expert accounting and technical testimony required by Ampla was ordered, as well as also for expert witnesses. On March 2, 2007, the technical assistants were appointed and the legal standing and role of the witnesses presented. ENERTRADE challenged the issues presented by Ampla. On March 16, 2007 Ampla filed a reply to the challenge. On April 2, 2007, the Court of Arbitration notified the extension of the deadline for concluding the arbitration proceedings by 178 days. The new deadline is September 28, 2007. On May 21, 2007, the experts for the technical and accounting expert testimony were named.

Amount: US$ 22,698,805.08 — R$ 40,160,955.00


Plaintiff	:	Cibrapel S/A Industria de Papel y Embalajes
Defendant	:	Ampla
Court	:	Single Chamber of Guapimirim County
Case/Identification	:	1998.073.000018-6

Summary of Proceedings: 1) Plaintiff asks the court to order Ampla to indemnify the material and other damages caused by the poor quality of the services rendered by Ampla between the years 1991 and 1998. 2) Plaintiff asks the court to order Ampla to refund the amounts paid as a result of the price increase implemented following administrative resolutions 38 and 45 of 1986, which have been considered illegal, both by the government and by the courts.

Process status: The plaintiff raised its final pleas on December 6, 2006 and the counterpart raised its final pleas on December 18, 2006. After the final pleas, a judicial pronouncement was made that the evidentiary stage of the proceeding was closed and the judge was considering his judgment. A resolution was issued ordering the proceedings cited in the plea for the defense to be petitioned by the court so as to analyze the existence of a prior judgment. On February 15, 2007, the official requests addressed the courts specified in the plea for the defense were sent off. At this date, the court is waiting for compliance with such official requests.

Amount US$ 23,496,025.64 — R$ 41,587,965.38

F - 105


Plaintiff	:	Qualita’s Tecnología y Servicios Ltda and Symon de Souza Coury
Defendant	:	Ampla
Court	:	4th Civil Court of Niteroi County
Case/Identification	:	2005.002.024695-9

Summary of Proceedings: The plaintiff brought this suit pleading that it had been created to serve Ampla since October, 1999 and that this contract should be in force until March 31, 2009, being able to be extended. The plaintiff petitioned for redress for material damages and moral prejudice caused by an alleged unilateral annulment of the contract by Ampla, which would have caused the plaintiff damages of about R$ 54,000,000 (fifty four million reales).

Process status: Discussion about expert fees. The parties were required to declare their proposal for expert fees. On February 12, 2007, Ampla formally petitioned for the case records to be sent to an Expert so that the latter could distinguish exactly what constituted the expert testimony, what documentation would be analyzed and what method would be adopted to draw up the findings. The court records were remitted to the Expert on March 30, 2007 and returned on May 3, 2007. On July 6, 2007, court orders were issued for the parties to make a pronouncement about the clarifications made by the Expert. Qualita’s submitted a formal petition desisting from producing expert testimony and on July 16, 2007, Ampla informed the Court that it was not challenging the dropping of the production of expert testimony as petitioned by Qualita ’s, ratifying on that occasion all the arguments set forth in its negation and petitioning for the inadmissibility of the petitions filed by that plaintiff. Since there will not be any expert evidence, we will only have truer estimate of the amount of a possible sentence after the decision handed down by the court of the first instance.

Amount: US$ 36,981,858.02 — R$ 65,457,888.69


Plaintiff	:	Electrovidro S.A
Defendant	:	Ampla
Court	:	8th Tax Court of the County of Río de Janeiro
Case/Identification	:	1995.001.065045-7

Summary of proceedings: Ordinary lawsuit brought on 14.06.1995 in which it is argued that AMPLA infringed the rules of Statutory Decree 2283/86 which stipulated freezing of prices while the Cruzado Plan was in force. This plan corresponds to Porteria 45/86 of the DNAEE which increased the rate for electrical energy for industrial use by 20%. The plaintiff petitions for the charge to be declared illegal, and for restitution of the amounts paid incorrectly with penalty interest.

Process status: Sentence was decreed stating that the lawsuit was inadmissible. The Plaintiff lodged an appeal. The 4th Civil Chamber rejected the appeal in a unanimous decision. Remedies were filed against this decision. A Special Remedy was filed and the court unanimously heard the remedy and handed down a decision. Currently, after the writ to the Expert to answer consultations, the Court has named an assistant to help the Expert. Electrovidro filed instrument tort against the decision, which has already been defended by Ampla. The instrument tort formulated by Ampla was partially endorsed in the discharging sentence stage. Ampla filed a Special Remedy against the decision, which is waiting to be remitted to the Higher Court of Law.

Amount: US$ 8,943,866.28 — R$ 15,830,643.31


Plaintiff	:	Municipality of Teresópolis
Defendant	:	Ampla
Court	:	11th Tax Court
Case/Identification	:	2002.001.080661-4

Summary of proceedings: The Municipality of Teresópolis argues, based on the constitutional rule of immunity among state entities, that it should not pay the ICMS on electrical energy.

Process status: On November 16, 2004 the sentence stating that the petition was inadmissible was published. For now, no appeal has been filed

Amount US$ 40,809,522.03 — R$ 72,232,854.00

F - 106


Plaintiff	:	Compañía Brasileña de Antibióticos — CIBRAN.
Defendant	:	Ampla
Court	:	1st Civil Court of the County of Itaboraí and 13th Civil Court of the State of Río de Janeiro.
Case/Identification	:	Action to Annul Debit No. 2001.023.000549-6 and Civil Appeal No. 2005.001.26130.

Summary of proceedings: This is an Ordinary Action brought by CIBRAN arguing that AMPLA has been charging excessively high rates for electrical energy. The Plaintiff argues that it should only pay the ICMS on actual consumption of electrical energy.

Process status: On October 5, 2004 sentence was handed down and the parties lodged appeals. The appealable judgment was confirmed by the Court. It judged that the petition made by Cibran was partially admissible, in the sense of declaring that charging ICMS above the amount called “Contracted Demand”, and sentenced Ampla to return, via deductions from future invoices, what had been paid incorrectly over the past five years and to abstain from making that charge from the date of the sentence onwards. Ampla filed a Special Remedy with the Higher Court to attempt to revert the decision of the Court in Río de Janeiro.

Amount: Pending determination of the amount


Plaintiff	:	Brazilian Consumer Defense Association (ADCON)
Defendant	:	Ampla
Court	:	8th Business chamber of the County of Brasilia
Case/Identification	:	2004.001.017223-0

Summary of Proceedings: (i) No registration of consumers late in payments on records of Services for Credit Protection, and removal of registrations already made, while proceedings continue at court of law; (ii) the restoration of electric energy supply to all consumers whose supply was shut off and refrain from further electric energy shut-offs of any user or consumer due to illegal actions performed by them (whether stealing of energy or fraud) or because of the fact that they may be late in payments, if no ordinary administrative or legal proceedings have been started in connection with them; (iii) no collection of debts from consumers, unless they arise out of a regular court trial.

Process status: Ampla appealed against the decision that did not accept attachments on July 17, 2006, and the appeal was rejected. Against such court decision, Ampla filed a Special Recourse on August 28, 2006. On September 19, 2006, the court called on the Plaintiff to submit allegations. On October 27, 2006, the recourse went to “Procuraduría General de Justicia”. On December 6, 2006, the recourse is sent to the 3rd Vicepresident, who must decide whether or not the recourse meets the requirements to be discussed by the court. The Special Remedy was rejected on January 23, 2007; an appeal was lodged with the Higher Court on February 2, 2007. ON April 3, 2007, the original judge stipulated compliance with the sentence decreed in the first instance. On April 11, 2007, the case records were remitted to the Office of the Attorney General.

Amount: Undeterminable


Plaintiff:	:	Consumer Defence Commission of the Legislative Assembly of the State of Rio de Janeiro
Defendant	:	Ampla
Court	:	7th Business chamber of the State of Rio de Janeiro
Case/Identification	:	2005.001.084370-8

Summary of Proceedings: This is a Public Civil action launched in order to prevent the installation of electronic measurement meters. The plaintiff states that this modernization’s only purpose is to prevent theft of electricity and would actually deprive consumers of their right to information. Plaintiff argues that it is Ampla’s responsibility to detect electricity theft in other ways and not put the burden on the consumer.

F - 107

Process status: Ampla submitted allegations against the Appeal filed by the Plaintiff and the proceedings were then remitted to the Justice Court. The Appeal entered the court under No. 2006.001.22785 and was distributed to the 15th civil chamber of the court. The court, by unanimous decision, rejected the appeal, which was published on August 16, 2006. The Plaintiff then filed a Special Recourse, with the proceedings being remitted to the 3rd Vice-presidency of the court. On October 16, 2006 Ampla submitted its allegations. On October 25, 2006, the proceedings were remitted to the “Procuraduria General de Justicia” and were returned on November 22, 2006. On January 3, 2007, this remedy was rejected. On January 16, 2007, the Plaintiff filed instrument tort against the decision that rejected the special remedy. On March 6, 2007, the instrument tort was remitted to the Higher Court. On April 12, 2007, the case records were remitted to the reporting clerk, where they have been to this date. On September 11, 2007, the decision accepting hearing of the Special Remedy by the Higher Court was published.

Amount: Undetermined


Plaintiff	:	State Attorney General’s Office
Defendant	:	Ampla
Court	:	2nd Civil Chamber of Town of Saint Gonzalo
Case/Identification	:	2003.004.034117-9

Summary of Proceedings: Plaintiff launched the Public Civil Action requesting first that Ampla be ordered to “supply the regular consumers of Saint Gonzalo a quality electrical energy service without interruptions, and take all measures necessary to prevent such interruptions, even if in order to achieve this it must restructure all of its equipment; in the event it is absolutely necessary to interrupt the supply, then the restoration of supply must be immediate or the fine shall be R$ 10,000 a day.

Process status: On July 30, 2007, the court’s decision in which the Remedy of the 1st Appellant (Ampla) was rejected and the Remedy of the 2nd Appellant (Attorney General’s Office) was accepted, with the concessionary company being sentenced generally to pay material damages and moral prejudice under the terms of Article 95 of the Consumer Defense Code, CDC, was published. We were sentenced generally and the amounts will be determined by a court accountant in the procedural phase known as determining the amount of the sentence. On September 6, 2007, remedies were filed with a view to limiting the locations (consumers) considered in the sentence, a well as a date restriction.

Amount: Undetermined


Plaintiff	:	Town of Itaborai
Defendant	:	Ampla
Court	:	2nd Civil Chamber of County of Itaborai
Case/Identification	:	2003.023.041682-7

Summary of Proceedings: The Town of Itaborai filed a Public Civil Action against Ampla so that the Defendant (i) refrains from interrupting the supply of electrical energy of the consumers of this Town, even if they are in debt, because this is an essential and continuous service, compelling Ampla to forthwith take measures necessary to provide continuity and reliability of the supply service in the entire town, under penalty of a fine of R$ 200 (200 reales) per day for each consumer inconvenienced; (ii) be ordered to pay a fine of R$ 10,000 for each day that it fails to comply with the sentence.

Process status: On July 23, 2007, Ampla’s petition, filed in the proceedings involving different positions of the Court of Rio de Janeiro with regard to exempting the concessionary companies from any liability if the supply of electrical energy is interrupted due a surcharge caused by theft and fraud, was protocolized. On August 15, 2007, sentence was decreed: “.. I judge the petition to confirm guardianship to be granted and sentence Ampla to provide, in a suitable, continuous manner, the electrical energy supply services within the sphere of the Municipality of Itaboraí, under penalty of a daily fine in the initial amount set. Finally, I sentence the defendant to pay the costs of losing the case. I set the fees at 20% of the value of the case, duly corrected, which will be used as a guide for calculating court cost. ...”. On September 3, 2007, the sentence was published. We would like to clarify that this sentence does not presuppose any obligation to pay, only the duty to do in the sense of providing a suitable service.

F - 108

Amount: Undetermined


Plaintiff	:	Macao Consumer and Worker Defense Association — AMADECONT
Defendant	:	Ampla
Court	:	Single Chamber of the County of Río das Ostras
Case/Identification	:	2004.068.001287-1

Summary of Proceedings: The plaintiff launched this action requesting partial power in advance to prevent the Defendant from charging the TMIP (“Municipal Street Lighting Rate”), and requesting that Ampla be required to refund the amounts wrongly charged and pay the costs of the trial.

Process status: On August 7, 2007, Ampla stated its opinion once again on the unconstitutionality of the TMIP, for which reason it required advanced judgment of the conflict, given the abatement of the action in the face of a lack of procedural interest and the juridical possibility of the petition.

Amount: Undeterminable


Plaintiff	:	General Attorney’s Office of the State of Rio do Janeiro
Defendant	:	Ampla and Municipality of Paraty
Court	:	Single Court of Paraty County
Case/Identification	:	2005.041.001008-9

Summary of Proceedings: The plaintiff brought this suit petitioning, by way of advanced tutelage, sentencing of the Municipality of Paraty to abstain from collecting the Contribution for Street Lighting (CIP), under penalty of a fine of R$ 50,000.00 (US$ 23,277.46) and, additionally, that Ampla should be compelled to collect the CIP separately, although on the same energy consumption bill, using different bar codes, under penalty of a fine of R$ 10,000.00 (US$ 4,666.79).

Process status: On April 26, 2007 a court order was issued determining that the parties should specify the evidence that they intended to submit and state whether they have any interest in holding the reconciliation hearing. AMPLA complied with the order in due time.

Amount: Undetermined


Plaintiff	:	Municipality of Paraty
Defendant	:	Ampla
Court	:	Single Court of Paraty County
Case/Identification	:	2005.041.001124-0

Summary of Proceedings: The plaintiff brought this suit petitioning for: 1) Acceptance of the precautionary measure for Ampla to abstain from shutting off the power supply services, under penalty of a fine of R$ 10,000.00 (US$ 4,666.79) to be applied to each non-compliance of the delegated order, without detriment to any other possible penalties; 2) That Ampla should maintain the regularity of the system of supply and maintenance of the power transmission grid in satisfactory conditions for the users; 3) That Ampla should be sentenced to submit and execute within a reasonable period of time a project to modernize the grid, consisting of improvements to the power transmission equipment and lines in the area of the Municipality of Paraty; 4) the injunction for the Public Prosecutor’s Office to be a party to or to act in the case as custos legis; and 5) The injunction of the Granting Power in the case, the State of Río de Janeiro, to express an interest in the case through its legal representative.

F - 109

Process status: On August 16, 2007, a decision was published postponing the production of expert evidence, appointing the Expert for the Proceedings and determining that the parties should submit their recommendations and indicate their technical assistants. On August 21, 2007 Ampla made the formal petition indicating its technical assistance and making its recommendations. The pleas and proceedings have been completed since September 3, 2007.

Amount: Undetermined


Plaintiff	:	ASOBRAEE — Brazilian Association of Consumers of Water and Electricity
Defendant	:	Ampla
Court	:	5th Civil Court of Niteroi County
Case/Identification	:	2006.002.002621-4

Summary of Proceedings: The Plaintiff presented this action requiring that the DNAEE nº 038 and 045 Resolutions of 1986 be declared null. These resolutions established the rate adjustment, for which AMPLA may be condemned to the restitution of the improper charge, equivalent to 20% of what it would have charged all the consumer in the period from March to November 1986, as well as to force Ampla to present the complete schedule of payments made for all of the consumers in the period from March to November 1986.

Process status: On September 10, 2007, the petition to suspend execution of judgment during the appeal filed by Ampla was endorsed.

Amount involved: Undetermined.


Plaintiff	:	Union of Workers in the Niterói Electrical Energy Industry representing a class action suit by 2841 employees
Defendant	:	Ampla
Court	:	Niterói Work Chamber
Case/Identification	:	Labour Complaint 884/1989

Summary of Proceedings : In April 1989, the Niterói Union, in representation of 2841 employees, launched an action claiming salary differences of 26.05% since February 1989 that were related to the economic plan instituted by Decree Law 2.335/87, or “Summer Plan”.

Process status: Ordinary proceedings have finished. The current discussion centers around the execution of the ruling, because in this regard a filing has been made arguing that the ruling has already been executed.

Amount: US$ 24,296,738.59 — R$ 43,005,227.30


Plaintiff	:	Selma de Souza and 122 other plaintiffs
Defendant	:	Ampla
Court	:	2nd Employment Chamber of Niterói
ID Number	:	Work Complaint No.3142/1995

Summary of Proceedings : The plaintiffs were fired by the Company and demand to be reinstated and to have their right of employment stability recognized.

Process status: Accessory Innominate Action for Provisional Remedy filed, taking into account that the previous Action for Provisional Remedy, which kept the plaintiffs out of the company, was repealed by the effect of the Tort filed in the Claim proceedings submitted by the plaintiffs to the TST, which understood that it was competent to do justice to the suspensive effect in question. In the face of the position adopted by the TST, this Action for Provisional Remedy was filed seeking to stay the effects of the advanced tutelage and also have a suspensive effect on the ordinary remedy filed in the pleas and proceedings of the case, with such being favorable to the company’s position.

Amount US$ 35,304,772.88 — R$ 62,489,448.00

F - 110


Plaintiff	:	Secretary of Federal Collection Tax (SRF) (Brazilian IRS)
Defendant	:	Ampla
Court	:	Commissariat of the Niterói Federal Collection Tax
ID Number	:	Infraction Proceeding 0710200/00112/05 and Administrative Trial 10730.003110/2005-55 (d.38)

Summary of Proceedings: FRNs — In order to finance its investment in Coelce, in 1998 Ampla issued FRNs (bonds) for 350 MUSD maturing in 2008, which were subscribed by Cerj Overseas (Overseas subsidiary of Ampla). The bonds have a special tax regimen consisting of no withholding tax (15% or 25%) being applied on payment of interest abroad, always provided that, among other requirements, there is no advanced amortization before the average term of 96 months. In order to acquire these bonds, Crj Overseas obtained financing outside Brazil consisting of a six-month loan. At the end of the period (October, 1999) because of problems of access to other sources of financing, Cerj Overseas had to refinance with Ampla, which granted it a loan in reales. The Secretary of Federal Tax Collection argues that the tax concession had been lost in 1998, since the loans in reales granted to Cerj Overseas by Ampla were the equivalent of an advanced amortization of the debt before the average amortization period of 96 months. Currently there remain FRNs for 169 MUSD (The rest was capitalized in 2004).

Process status: The notice of infringement was notified in July, 2005. In August, 2005, Ampla filed a remedy with the 1st administrative instance, and it was rejected. In April, 2006, a remedy was filed with the Council of Taxpayers (2nd administrative instance). On December 6, 2006, the Council of Taxpayers issued its verdict completely favorable to Ampla. The period for executing the verdict and publishing the decision is estimated at about 6 months. After the publication of the decision, the SRF will have 30 days to file a remedy.

Amount R$ 538 million- US$ 304 million


Plaintiff	:	Unión Federal
Defendant	:	Ampla

Summary of Proceedings: COFINS — INMUNITY. In the nineties, a large number of the Brazilian public utility companies files remedies against the tax known as COFINS (Contribution for Financing Social Security) because they considered that the Brazilian Constitution exonerated them from that tax. Most of the companies lost the lawsuits. Ampla won the lawsuit (for the period from 1996 to 2001), because the Tax Administration forgot to file an appeal against the decision handed down by the court of appeal. However, the Prosecutor’s Office of the Federal Union brought an exceptional action known as “an action for annulment” to attempt to annul the unappealable judgment favorable to Ampla.

Process status: In December, 2003, the Regional Court of Rio de Janeiro (equivalent to the Court of Appeal) confirmed the inadmissibility of the action for annulment filed by the Federal Union. On December 21, 2007, the Federal Union filed a Special Remedy against the decision of the Rio de Janeiro Court rejecting unanimously all of its previous appeals. This Special Remedy is addressed to the Higher Court of Law (STJ), the court in Brasilia that rules on infraconstitutional issues.

Amount R$ 368 million — US$ 208 million


Plaintiff	:	Secretaria de Receita Federal (SRF) (Brazilian IRS)
Defendant	:	Ampla

Summary of Proceedings: COFINS — PERIOD AFTER IMMUNITY. In December, 2001, the article of the Federal Constitution on which Ampla had based its discussion of immunity with regard to the COFINS, pursuant to which AMPLA did not pay this tax, was amended. There is an article in the constitution that states that legislative changes come into force 90 days after their publication. Based on this article, Ampla started paying the COFINS tax as of April, 2002. However, the SRF argues that this constitutional regulation only applies to changes to regulations involving laws, but not the Constitution itself, whose amendments should come into force immediately. The SRF also claims that, as a result of Ampla’s change in tax regimen (from earned to accrued), the taxable amount of the COFINS tax increased during the first semester of 2002.

F - 111

Process status: The action was notified in 2003. The decision of the 1st administrative instance went against Ampla and the latter filed an appeal with the second administrative instance in October, 2004. The remedy was ruled on recently in the 2nd administrative instance, partly favorable to the Treasury in terms of the period when changes to the Constitution come into force and partly favorable to Ampla in terms of the tax on income due to the change in tax regimen from earned to accrued. The incorrectly returned part is estimated to be 35%. Once the amount owed by the SRF is determined, it may be enforced.

Amount R$ 118 million — US$ 67 million


Plaintiff	:	Ampla
Defendant	:	State of Rio de Janeiro
Court	:	Superior Court of Justice — STJ
Case/Identification	:	Trial No.2002.001.110494-9 (d.46)

Summary of Proceedings: ICMS FINE. In 2002, the State of Rio de Janeiro stipulated via a decree that the ICMS should be calculated and paid on the 10th, 20th and 30th of the same month accrued. Because of cash problems, Ampla continued to pay the ICMS under the former system (payment until the 5th of the month after it accrued).

Process status: Notwithstanding an informal agreement with the State of Rio de Janeiro, and 2 amnesty laws, in October, 2004, the State of Rio de Janeiro brought a proceeding against Ampla to collect the fine for late payments; Ampla appealed against the fine in the same year. In February, 2007, Ampla was notified of the decision of the 1st administrative instance, which confirmed the proceeding brought by the State of Rio de Janeiro. On March 23, 2007, an appeal was lodged with the Council of Taxpayers of the State of Rio de Janeiro (2nd administrative instance). Ampla obtained a preliminary ruling in its favor that enabled it to bring this remedy without having to make a deposit of furnish a guarantee for 30% of the value of the updated fine. Waiting for the decision of the Council of Taxpayers.

Amount R$ 120 million — US$ 69 million


Plaintiff	:	Ampla
Defendant	:	Federal Union
Court	:	4th Federal Chamber of Niterói and 4th Group of the TRF of the 2nd Region
Case/Identification	:	Ordinary Action No.96.0035387-5 and Civil Appeal No.1999.02.01.047064-8 (d.4)

Summary of Proceedings: FINSOCIAL — Ampla seeks to obtain the declaration that the tax-legal relationship (tax immunity) does not exist as regards the payment of the tax called FINSOCIAL, which would have an impact on its gross monthly revenue. It also seeks to have the Federal Union forced to refund the total amount collected in the last five years, starting from October 1996 and, if the foregoing is not possible, that the Federal Union be made to refund the difference between the amount paid in accordance with Laws 7,787/89, 7,784/89 and 8,147/90, and that due in accordance with Decree Law No.1.940/82, in the same period referred to above..

Process status: The lower court’s decision declared without grounds the request for immunity, but accepted the petition to declare unconstitutional the increases in the FINSOCIAL tax rate above 0.5% and the right to offset the said excess in current and future taxes due. The appeals of Federal Union and Ampla were filed. The proceedings were sent to Federal Regional Court where they are currently awaiting a judgment on the two appeals.

Amount: R$ 16,894,365.20 (US$ 9,544,839.10)


Plaintiff	:	Ampla
Defendant	:	Unión Federal
Court	:	2nd Federal Court of Niterói.
Case/Identification	:	Ordinary Proceeding 96.0035652-1 and Civil Appeal 98.02.09149-9. (d.3)

Summary of proceedings: PIS — This is an ordinary proceeding in which AMPLA seeks to obtain tax immunity for collection of the tax known as PIS. It also seeks for the Federal Union to be sentenced to reimbursing all the amounts collected over the past five years since August, 1996, based on paragraph 3 of article 155 of the Federal Constitution.

F - 112

Process status: Unfavorable appealable judgment for AMPLA. Appeal to the Federal Regional Court (TRF) pending. The petition was judged inadmissible, so Ampla filed appeals, which were endorsed and the petition was judged to be admissible in part, with reimbursement of the difference between payment according to Statutory Decrees 2.445/88 and 2.449/88, and what was owed according to LC 7/70, being determined. With Ampla’s appeal and the counterarguments of the Federal Union having been brought, the majority decided in favor of the appeal. The court’s decision having been published, the Federal Union filed remedies and Ampla brought its counterarguments. The case was decided in favor of the remedies.

Ampla filed appeals for reconsideration of judgment with the TRF, and the TRF rejected them. The proceeding had passage through the courts having been decided favorably for Ampla in terms of the unconstitutionality of Statutory Decrees 2.445/88 and 2.449/88. On April 19, 2006 the case records returned to the original court. Waiting for the petition of compensation of the amounts recognized by the sentence in terms of the difference between Statutory Decrees 2445/88 and 2449/88.

Amount R$ 21,983,259.59 (US$ 12,419,920.67)

Coelce S.A.


Plaintiff	:	Inácio Nunes Arruda & Others.
Defendant	:	Coelce.
Court	:	2nd Court of Public Finance — Ceará
Case/Identification	:	2000.0122.6248-0/0

Summary of proceedings: Popular action whose objective is to cancel the sales process of Coelce. The plaintiffs allege that in the process of privatization of Coelce there was no participation of the employees of Coelce; shares were not offered to the employees in sufficient numbers, and thus they were prevented from gaining control of the Company; that the bidding terms and conditions favored the participation of foreign companies and removed the incentive for employees of the Company; that there was insufficient publicity in the bidding; that the public stockholders’ equity of Fortaleza was damaged; etc.

Process status: Faced with the activation of the process there was no protest of any kind by the plaintiffs. The trial awaits the judge’s verdict.

Amount: Undeterminable.


Plaintiff	:	Libra — Ligas Do Brasil S/A.
Defendant	:	Coelce.
Court	:	Court of Ceara State, in Brazil
Case/Identification	:	2000.0013.4212-7 (Court of appeals) — 1997.02.22643-0 (lower court)

Summary of proceedings: This is a “Trial for Tarifazo”, that corresponds to the different trials begun as a result of the dictation of rate decrees 38, 45 and 153 of 1986, by the National Department of Water and Electrical of Brazil (formerly ANEEL), which enabled the different electricity companies of Brazil to increase their rates considerably between the months of March and November 1996.

Process status: The trial returned to the lower court. It is in the provisional executory process state. The amount petitioned in the provisional executory process is R$ 10,634,814.20. Coelce filed a special appeal against the sentence enforcing the payment, which stayed this provisional executory process stage. The process returned to the lower court for expert testimony, for which Coelce was ordered to show given documents. The expert investigation was carried out, recognizing the debit to the plaintiff of about R$ 53,000,000.00. Instrument tort was filed and the Court annulled the expert testimony and ordered a new expert investigation to be made by another expert. The new expert testimony is being implemented as ordered by the court, since the initial expert testimony was annulled.

Amount: R$ 35,105,013

F - 113


Plaintiff	:	Sindicato da Indústria de Fiação e Tecelagem
Defendant	:	Coelce
Court	:	1st Federal Court of Ceará.
Case/Identification	:	2003.81.00.014020-7

Summary of proceedings: Action to declare the 31.29% rate adjustment determined by ANEEL unconstitutional. An action was brought petitioning for advanced protection, which was granted by the Judge, thereby enabling the Plaintiffs to pay their electrical consumption minus the 31.29%, without Coelce being able to cut-off their power supply.

Process status: On June 17, 2003, the Judge reconsidered his previous decision and rejected the petition for advanced protection since such was in the jurisdiction of the Federal Courts. Waiting for the result of the action brought.

Amount: Undetermined.


Plaintiff	:	Bar of Lawyers of Brazil and Others
Defendant	:	Coelce.
Court	:	Supreme Court of Justice
Case/Identification	:	None

Summary of proceedings: Civil public action launched with the objective of preventing the application of the rate adjustment (percentage 23.59%) authorized by ANEEL in April 2005.

Process status: The Supreme Court judge suspended on October 7, 2005 the guarantee that prevented the adjustment from being applied. Thereby, the concessionaire may apply from that date on the above mentioned adjustment. Coelce had to suspend the retroactive collection of the installments generated by the time in which the guarantee made it impossible to put the adjustment into effect. The guarantees are expected to be annulled and Coelce will be able to re-begin collecting the remaining installments.

Amount: R$ 92.4 million — US$ 52.20 million


Plaintiff	:	State Deputy Luiz Carlos Andrade Moraes and Federal Deputy Francisco Lopes da Silva
Defendant	:	COELCE, CGTF, ANEEL AND UNION FEDERAL
Court	:	10th Federal Court of Ceará
Case/Identification	:	2007.81.00.006310-3

Summary of proceedings: Popular Lawsuit — Lawsuit brought by a State Deputy and Federal Deputy against Coelce, CGTF, ANEEL and the Federal Union on April 23, 2007. They are petitioning for immediate recalculation of Coelce’s rate review ratio for 2007, replacing the thermal energy purchase price with the cheapest available energy; the avoidance of the contract signed by Coelce and CGTF because of its high cost (high cost of steam-electric energy compared to hydroelectric energy, which would de detrimental to the consumers of the State of Ceará); and for the additional income obtained by Coelce from May to October, 2005 to be included in the calculations of Coelce’s rate review. The latter refers to another lawsuit, where Coelce had a provisional precautionary measure limiting its rate adjustment revoked. During that proceeding, a precautionary measure was in force from May to October, 2005 and, despite it, Coelce charged this difference retroactively to the consumers. According to the plaintiffs, Coelce should wait for end of the case to charge these amounts.

Process status: On June 18, 2007, the Lower Court decided not to grant the provisional measure petitioned by the plaintiffs (they were asking for ANEEL to immediately recalculate Coelce’s rate review ratio for 2007, replacing the thermal energy purchase price with the energy offered at the lowest cost in the market). Coelce and CGTF raised their pleas for the defense on July 9, 2007. The amount specified by the plaintiffs was challenged. A decision was made regarding the challenge to the amount specified by the plaintiffs in the lawsuit, but such decision has not been published, so its contents are not known.

Amount R$ 466.6 million — U$ 263.6 million

F - 114


Plaintiff	:	Romério Moreira de Deus
Defendant	:	Coelce
Court	:	Court of the State of Ceará (TJCE)
Case/Identification	:	2000.0161.6981-7.

Summary of proceedings: The Plaintiff is the owner of a plot of land in Aracati/Ceará, where Coelce built several electrification networks, without having compensated the client. Thus, the plaintiff intends to prevent the construction of new electrification networks and have the existing ones removed. Coelce won the lawsuit in the first instance by having it dismissed. However, the sentence was revoked on appeal and Coelce was sentenced to remove the new networks in the process of being installed and pay about US$ 3,347,381 as compensation. As a result of the above, the plaintiff filed for enforcement of the sentence, petitioning a credit based on a compensation of nearly US$ 3,347,381. In parallel fashion, Coelce has appealed for the sentence by the Court of Appeal, in terms of the compensation granted beyond what was petitioned, to be voided. The plaintiff has already raised a plea against Coelce’s appeal and notification of the pleading was made to the other party for the rejoinder.

Process status: Coelce filed a new action for annulment (2000.0015.1858-6) with a view to annulling the decision won by the plaintiffs that determined that Coelce should proceed to remove the pylons from its property. This action for annulment is pending a resolution.

Amount R$ 30,079,689.26


Plaintiff	:	Cooperativa de Eletrificação Rural do Vale do Acaraú Ltda.
Defendant	:	Coelce
Court	:	1st Federal Court of the Ceará Judicial Section
Casel/Identification	:	2001.81.00.008007-0

Summary of the proceedings: An action was filed to review the clause regarding the amount of the lease entered into by the parties for power grids owned by the plaintiff.

Process status: In its defense, Coelce pleaded that the issue involved interests of ANEEL. Consequently, ANEEL entered the fray and the proceeding was remitted to the Federal Court. The Federal Court granted the petition made by the plaintiff and increased the monthly rent to R$ 35,000.00. Coelce deposited the amount for the first three months after the decision stipulating the increase. Coelce also appealed for the decision increasing the monthly rent to be repealed.

Amount: R$ 136,842,218.68

Compañía de Interconexion Energética S.A.


Plaintiff	:	CIEN
Defendant	:	Federal Union
Court	:	21st Federal Court of the Rio de Janeiro Judicial Section
Case/Identification	:	2005.5101.011614-6

Summary of proceedings: A lawsuit was brought challenging the declaration of unconstitutionality of Law 9.718/98 (enlarging the base and calculation of PIS and COFINS taxes) and establishing the right to credit and compensation, considering that the Constitutional Court (STF) found in favor of the taxpayers.

Process status: On February 12, 2007, the decision handed down with regard to the appeal from the Treasury was published, determining that CIEN should submit a declaration regarding the appeal. On March 12, 2007, the decision regarding the declarations submitted by CIEN and the supplementary appeal, aimed at considering a barring by limitation after 10 years, not 5, as the lower court judge had considered, was published. With the declaration by the Public Prosecutor’s Office regarding the declarations and appeal filed by CIEN having been submitted, the appeals were sent to the judge for final sentencing. Waiting for the decision regarding the appeals filed.

Amount R$ 46,292,618.80 (Active contingency — recovery of credits)

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Plaintiff	:	Municipality of Itá
Defendant	:	CIEN
Court	:	Single Court County of Itá (SC)
Case/Identification	:	068.03.000397-8

Summary of proceedings: The Municipality of Itá (SC) filed a legal claim against CIEN petitioning advanced protection to determine that Itá was the place where the event taxed with ICMS (VAT) in selling electrical energy imported from Argentina, occurred, and also to determine that the invoices for such operation should obligatorily be issued in Itá—Santa Catarina subsidiary, not in Garruchos — Rio Grande do Sul, as CIEN normally does.

Process status: The claim was judged to be abated without any decision on the substance by the court of appeal, due to the illegitimacy of the Municipality of Itá in the case. The municipality lodged an appeal with the Supreme Court (STJ) to change the decision of the Court of Appeal.

Amount: None


Plaintiff	:	Federal Treasury of Rio de Janeiro — MF
Defendant	:	CIEN — COMPANHIA DE INTERCONEXÃO ENERGÉTICA
Court	:	National Tax Court of Rio de Janeiro
Case/Identification	:	18471.000814/2007-48

Summary of proceedings: FINE FOR LACK OF IMPORT DOCUMENTATION — On July 11, 2007, the Federal Tax Authorities (SRF) issued an “Infringement Proceeding” against CIEN for imports of energy in 2002. According to the Tax inspector formal requirements required by general regulations for tax documentation of imports were not met, so a fine equivalent to 100% of the value of the imports was being imposed. However, there was no approved law whatsoever regulating tax documentation to be prepared when importing electrical energy until May, 2006. Since May, 2006, CIEN has all the documentation required by the law.

Process status: On August 10, 2007, an appeal was filed with the first administrative instance. On September 14, 2007, the Claim was judged inadmissible. On the same date, the decision of the first administrative instance was sent to the second administrative instance (Council of Taxpayers) for a resolution. On December 6, 2007, the SRF published an Interpretative Declaratory Ruling stipulating that no penalty of fine whatsoever was imposed by reason of the non-existence of electrical energy import and export records for operations performed until May 2, 2006, the date on which Regulatory Instructions 649 of April 28, 2006 came into force. This ruling definitively resolves the administrative process dealing with the lack of import records, which has already been won in the first instance, in CIEN’s favor. A copy of the interpretative ruling was submitted to the Council of Taxpayers, asking for the proceeding to be closed. Waiting for the Council of Taxpayers to declare the proceeding closed.

Amount R$ 351 million — US$ 198 million

Endesa Cachoeira S.A.


Plaintiff	:	Wildson Sebastiao Fraga Guimaraes (shareholder of Centrais Elétricas de Goias (CELG) and chairman of the “Sindicato dos Trabalhadores nas Industrias Urbanas no Estado de Goias”.
Defendant	:	State of Goias, Centrais Elétricas de Goias (CELG), Centrais Elétricas Cachoeira Dourada S/A (CDSA).
Court	:	3rd Court of Public Finance of the County of Goiania
Case/Identification	:	97.00904507-3

Summary of proceedings: Politically motivated lawsuit launched on September 23, 1997, asking for the cancellation of the public auction to privatize Cdsa. This lawsuit has been presented against the State of Goiás, CELG and Cdsa. The plaintiff asks also for free justice.

Process status: The plaintiff also asked for the benefit of cost-free legal proceedings. In October, 2005, the appeal court definitively granted cost-free legal proceedings for the plaintiff. On February 28, 2007, the issue of cost-free legal proceedings for the plaintiffs was resolved with no further appeals against that decision. On December 13, 2007, the lawsuit was declared to be in abatement without resolving the substance given the discontinuance of the proceedings by the plaintiff. The plaintiff has until January 17, 2008 to appeal against that decision. If the plaintiff does not appeal within that period, this lower court decision will be final.

Amount R$ 594.65 million — US$ 335.96 million

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Plaintiff	:	Municipality of Cachoeira Dourada
Defendant	:	Centrais Elétricas Cachoeira Dourada S.A. — CDSA
Court	:	Public Finance Court of Itumbiara County
Case/Identification	:	200503342330

Summary of proceedings: As a result of the unbundling of CELG, one of whose successors was Dourada S.A. (CDSA), and the privatization of CDSA, the Municipality of Cachoeira Dourada brought two proceedings against the company charging the ITBI (Tax on Conveyance of Real Estate).

Process status: 1. Proceeding regarding the conveyance of real estate. Arguments for the defense: The Federal Constitution and the Labor Code stipulate word for word that the ITBI does not apply to conveyance of real estate in unbundling operations. CDSA’s appeal against this proceeding is still pending a decision by the second administrative instance (The decision was unfavorable to CDSA in the first administrative instance — May, 2003). 2. Proceeding regarding the transfer of shares: Arguments for the defense: The ITBI does not apply to the transfer of movable property (shares), which as recognized by the Court of Goiás (Court of Appeal). In June, 2006, the Municipality filed for enforcement of the amount of this claim against CDSA, despite it having been declared null and void by the Court Goiás. CDSA filed a plea of prior judgment with effect of res judicata, and in June, 2007, the Court of Goias declared the legal enforcement abated since it understood that the writ of execution of the Municipality was not enforceable. On August 21, 2007, the Municipality of Cachoeira Dourada lodged an appeal against this decision. We lodged our rejoinder on October 1, 2007.

Amount R$ 204 million — US$ 115 million


Plaintiff	:	Municipality of Cachoeira Dourada
Defendant	:	Centrais Elétricas Cachoeira Dourada S.A. — CDSA
Court	:	Municipal Secretary of Finance

Summary of proceedings: ISS (Services Tax) — The municipality of Cachoeira Dourada has notified CDSA, through a Claim, that the Company owes the Municipality the Services Tax (ISS) on generation of electrical energy produced between 1997 and 2000. The municipality understands that the generation of energy is a service. However, the generation of energy is not on the list of ISS taxable services (Federal legislation) and, therefore, cannot be considered a taxable event under that tax. The Brazilian Federal Constitution expressly prohibits application of any tax on electrical energy operations other than the ICMS (VAT), II (Import Tax) or IE (Export Tax).

Process status: Administrative proceeding: Waiting for the Municipality to make a decision regarding the appeal lodged. If lost, an appeal will be lodged with the second administrative process. Court proceedings: In parallel fashion, on September 12, 2007, a legal action was brought to void such administrative collection and declare it inadmissible. On September 28, 2007, the petition was approved provisionally by the judge and the requirement to pay tax was stayed until the admissibility of the administrative collection was resolved.

Amount: R$ 81 million — US$ 47 million

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Endesa Fortaleza S.A.


Plaintiff	:	CGTF — Central Geradora Termelétrica Fortaleza S.A.
Defendant	:	Federal Union
Court	:	1st Federal Court of Ceará
Case/Identification	:	2002.81.00.020687-1

Summary of proceedings: GENERATOR SET — CGTF filed a lawsuit against the Federal Union towards the end of 2002, with a view to it recognizing that the goods imported for the turbogenerator sets are “Other Generator Sets”, so as to be able claim the 0% Import Tax (II) and Tax on Industrialized Products (IPI). The Federal Union argues that the imported goods are not generator sets. CGTF won an accessory resolution in its favor allowing it to clear the goods through customs at a 0% rate, subject to R$ 56 million (US$ 29 million) — updated at June, 2007 with the court. In order to prevent the taxes from becoming null and void, the Federal Tax Authorities brought an action requiring the suspension of the tax until the proceedings pending against the Federal Union are resolved.

Process status: The lawsuit against the Federal Union is pending resolution in the lower court. In parallel fashion, the Action brought by the Federal Tax Authorities (whose enforcement is suspended until the lawsuit against the Federal Union is resolved) was declared null and void in the first administrative instance because it did not comply with the requirements of form. The Tax Authorities may well bring another action correcting the errors.

Amount R$ 63 million — US$ 36 million


Plaintiff	:	Treasury
Defendant	:	CGTF — Central Geradora Termelétrica Fortaleza S.A

Summary of Proceedings: The Federal Tax Authorities have issued a Resolution to collect PIS/COFINS taxes allegedly owed in 2003 to 2004.

Process status: The resolution was received on February 12, 2007. Pleas for the defense were raised on March 14, 2007. The Resolution was judged to be partially admissible on November 5, 2007. The appealable judgment considered that the income from the contract for the purchase and sale of energy with Coelce is not subject to paying cumulative PIS/COFINS but is subject to non-cumulative ones. However, the resolution was judged admissible with regard to the month of October, 2004. An appeal was lodged on December 5, 2007.

Amount R$ 34,368,082.63


Plaintiff	:	State Deputy Luiz Carlos Andrade Moraes and Federal Deputy Francisco Lopes da Silva
Defendant	:	COELCE, CGTF, ANEEL AND UNION FEDERAL
Court	:	10th Federal Court of Ceará
Case/Identification	:	2007.81.00.006310-3

Summary of proceedings: POPULAR LAWSUIT — Lawsuit brought by a State Deputy and Federal Deputy against Coelce, CGTF, ANEEL and the Federal Union on April 23, 2007. They are petitioning for immediate recalculation of Coelce’s rate review ratio for 2007, replacing the thermal energy purchase price with the cheapest available energy; the avoidance of the contract signed by Coelce and CGTF because of its high cost (high cost of steam-electric energy compared to hydroelectric energy, which would de detrimental to the consumers of the State of Ceará); and for the additional income obtained by Coelce from May to October, 2005 to be included in the calculations of Coelce’s rate review. The latter refers to another lawsuit, where Coelce had a provisional precautionary measure limiting its rate adjustment revoked. During that proceeding, a precautionary measure was in force from May to October, 2005 and, despite it, Coelce charged this difference retroactively to the consumers. According to the plaintiffs, Coelce should wait for end of the case to charge these amounts.

Process status: On June 18, 2007, the Lower Court decided not to grant the provisional measure petitioned by the plaintiffs (they were asking for ANEEL to immediately recalculate Coelce’s rate review ratio for 2007, replacing the thermal energy purchase price with the energy offered at the lowest cost in the market). Coelce and CGTF raised their please for the defense on July 9, 2007. The amount specified by the plaintiffs was challenged. A decision was made regarding the challenge to the amount specified by the plaintiffs in the lawsuit, but such decision has not been published, so its contents are not known.

Amount R$ 466.6 million — U$ 263.6 million

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Comercializadora de Energia Del Mercosur S.A. (Cemsa)


Plaintiff	:	Central Piedra Buena S.A.
Defendant	:	CEMSA
Court	:	Court of Arbitration of the Buenos Aires Stock Exchange
Case/Identification	:	718/06

Summary of proceedings: In 1998, CEMSA and CPB signed an Agreement to sell 250 MW of energy aimed at backing up imports of energy from Brazil under the contracts entered into between CEMSA and CIEN. Due to the serious energy situation in Argentina, in March, 2005 the authorities started restricting exports of energy to other countries, which affected the obligations assumed by CEMSA towards CIEN. CPB attempted to terminate the Agreement for 250 MW, but CEMSA was opposed. Furthermore, CIEN demanded the contracted energy from CEMSA and the latter, in turn, demanded that CPB should fulfill its promises under the 250 MW Agreement, but it was unable to do so. In November, 2006, CPB filed for compensation for damages resulting from non-performance of the contract from CEMSA. For indirect, special or consequential damages, CPB is claiming the price of the 250 MW of firm power and the price of energy supplied, but not paid, since April, 2005. For loss of earnings, CPB is claiming the losses from not being able to sell the power committed under the 250 MW Agreement in the Argentinean market or in other firm power export operations. The claim also petitions for the 250 MW Agreement to be declared null and void as of February 1, 2006 and for a direct order to be issued to CAMMESA for the power generated by CPB to be removed from the export to Brazil so that CPB may thereby have it available in the Argentinean market. CEMSA raised pleas for the defense against the claim, rejecting all of its terms and also filed a counterclaim against CPB for damages caused by the premature rupture of the contractual relationship. It also reserved the right to claim possible damages that might arise from CPB’s attitude.

Process status: Presentation of evidence in the arbitration hearing of the Court of Arbitration of the Buenos Aires Stock Exchange (made up by Carlos Ferrario, Juan Carvajal and Angel Vergara del Carril), is being discussed and prepared. The date has still not been set.

Amount: Ar$ 86,304,914 — US$ 27.2 million

Transportadora de Energía S.A. (Tesa)


Plaintiff	:	Transportadora de Energía S.A. (Tesa)
Defendant	:	Province of Corrientes
Court	:	Supreme Court of the Nation
Case/Identification	:	T-53/03

Summary of proceedings: Tesa initiated a statement of certainty action against the Province of Corrientes, for the Supreme Court to declare that the activity carried out by the company in the province is under federal jurisdiction and therefore exempt from the Gross Business Income Tax that the Province of Corrientes currently demands.

It also requested an injunction, to order the General Revenue Department of the Province of Corrientes to abstain from demanding Tesa the payment of the mentioned tax.

Process status: The Supreme Court (the “Court”) on July 15, 2003, resolved

(i)		That it was competent to see the cause;

(ii)		Notify the Province of Corrientes of proceedings;

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(iii)

Issue the injunction requested by Tesa (to not innovate) in relation to the payment of the gross business income tax included in the Fiscal Code of the Province of Corrientes with regard to the activity carried our by Tesa, in the following terms: “Decree the injunction requested, and consequently, orders the Province of Corrientes to abstain from pursuing the fiscal execution of the gross business income tax regarding the contract signed on July 12, 2002 between the National State and Transportadora de Energía S.A. for the construction, operation and maintenance of the second circuit for electric energy transport of the Nodo Rincón de Santa María-Nodo Frontera Garabí section (Province of Corrientes).

On August 29, 2003, the Government of Corrientes was notified by official letter of the injunction granted by the Court.

After being notified, the Province of Corrientes answered the demand stating that the Provincial Revenue Department had made no current and concrete requirement to Tesa for the payment of the Gross Business Income Tax and therefore there was no controversy between the parts that entitled the intervention of the Court.

In spite of the Province having stated in their reply that it corresponded charging Tesa the Gross Business Income Tax to the activity performed by Tesa, the Court stated that no there was no case, since the there is no requirement from the Provincial Revenue Department demanding the payment of the Gross Business Income Tax. Once there is a requirement to pay the Gross Business Income Tax, the demand can be raised again. Notwithstanding the archiving of the demand, the Court regulated fees in favor of the lawyer for the Province of Corrientes for Ar$ 37,600, amount that has already been paid by Tesa. On July 6, 2005, the lawyer for the Province of Corrientes presented a letter of payment in favor of Tesa and manifesting that he had no further claim. In the case that the Provincial Revenue Department makes a concrete requirement that Tesa pay the Gross Business Income Tax, the demand must be reopened. Until that happens, this is the last report regarding this lawsuit.

Amount involved: Undeterminable

Compañía de Transmisión del Mercosur S.A. (Ctm)


Plaintiff	:	Compañía de Transmisión del Mercosur S.A. (Ctm)
Defendant	:	Province of Corrientes (in Argentina)
Court	:	Supreme Court of the Nation
Case/Identification	:	C-222/03

Summary of proceedings: Ctm initiated a statement of certainty action against the Province of Corrientes, for the Supreme Court to declare that the activity carried out by the company in the province is under federal jurisdiction and therefore exempt from the Gross Income Tax that the Province of Corrientes currently demands. It also requested an injunction, to order the General Revenue Department of the Province of Corrientes to abstain from demanding Ctm the payment of the mentioned tax.

Process status: The Supreme Court (the “Court”) on August 21, 2003, resolved

(i)		That it was competent to see the cause;

(ii)		Notify the Province of Corrientes of proceedings;

(iii)		Issue the injunction requested by Ctm (to not innovate) in relation to the payment of the gross business income tax included in the Fiscal Code of the Province of Corrientes with regard to the activity carried our by Ctm, in the following terms: “Decree the injunction requested, and consequently, orders the Province of Corrientes to abstain from pursuing the fiscal execution of the gross business income tax regarding the contract signed on June 14, 2000 between the National State and Compañía de Transmisión del Mercosur S.A. for the construction, operation and maintenance of the second circuit for electric energy transport of the Nodo Rincón de Santa María-Nodo Frontera Garabí section (Province of Corrientes). The Province of Corrientes was notified of the demand and answered stating that there was no current and concrete requirement for the payment of the gross business income tax.

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Likewise, it stated that according to express dispositions of the Provincial Fiscal Code, it corresponded that Ctm S.A. pay the Gross Business Income Tax and the inapplicability Federal Pact for Employment, Production and Growth by which some provinces, including Corrientes, had committed to eliminate the Gross Business Income Tax. Ctm S.A. rebutted each of the arguments invoked by the province in its presentation.

Later, the Province of Corrientes requested the lifting of the injunction, presentation that was opportunely answered by Ctm S.A. On April 5, 2005, the Court rejected the request for the lifting of the injunction.

On September 9, 2005, Ctm S.A. requested the cause be opened to evidence and the CSJN set the conciliation audience for November 9, 2005.

In the mentioned audience, the parties manifested that it was not possible to achieve conciliation. As a result, the case was opened to evidence.

On March 13, 2006 the Court certified that the term for evidence was expired without any evidence pending and it instructed the parties to present their arguments regarding the evidence presented.

Ctm argued on the evidence produced. The proceedings passed to the Attorneys Office on September 8, 2006. At December 27, 2006, the proceedings had not returned from the Attorneys Office. The case records returned from the Public Prosecutor’s Office on April 30, 2004 with a negative verdict on the admissibility of the lawsuit, since it considered that there was no “case”, as required by article 322 of the Procedural Code, since it is understood that there was no specific requirement from the Province. The proceedings were ready for sentencing on May 2, 2007, but no sentence has so far been issued.

Amount involved: Undeterminable

Codensa S.A.


Plaintiff	:	Electroenergía S.A.
Defendant	:	Codensa.
Court	:	12th Civil Court of the Bogota Circuit.
Case/Identification	:	Case records No.11001310302120040037901.

Summary of proceedings: In 1997, by means of a competitive call for bids, the EEB awarded Electroenergía S.A. ESP the supply of energy to the regulated market, which today represents 14% of Codensa’s demand. The contract should have begun to be processed on January 1, 2003. In his claim, the plaintiff states, (a) the first 4 years of the contract were awarded to Central Hidroeléctrica de Betania and the next 11 years to Electroenergía; (b) this caused a financial imbalance for Electroenergía; (c) In light of this complaint, the EEB awarded the contract for 13 years; (d) the contract was established in Codensa’s name; (e) on April 30, 1998, officers of the two companies met and stipulated the following obligations: (e.1) negotiation of a contract from 2000 to 2015; (e.2) the need to agree to a risk hedge clause; (f) Electroenergía insisted on entering into a new, additional contract, without having received any reply from Codensa to date; (g) Codensa cannot seek to obtain a declaration of non-performance by Electroenergía of obligations that are still not enforceable, because the contract has not been registered with the administrator of the SIC; (h) Electroenergía made a series of investments to set up an energy plant (Termobiblis), and signed contracts, all of which was frustrated by the Codensa’s behavior totally contrary to precontractual “good faith”; and (i) Codensa is liable for loss of earnings and indirect, special or consequential damages suffered by Electroenergía.

Process status: The process is in its petition and plea for the defense stage. It has been in the Judge’s hands since September 10, 2007 with Electroenergía’s rejoinder to the pleas raised by Codensa. On December 6, 2007 the reconciliation hearing was held and declared to have failed due to non-attendance of the legal representative of Electroenergía, who presented his apologies for not attending. Court orders for taking of evidence.

Amount: Col$ 220,000 million.

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Plaintiff	:	Roberto Ramírez Rojas (Class action lawsuit).
Defendant	:	Codensa, Bogotá Capital District and Alcaldía Zonal de San Cristóbal.
Court	:	Cundinamarca Administrative Court, Third Section — Sub-section “B”.
Case/Identification	:	Case file 03-1473.

Summary of proceedings: The Circo Victoria transmission line I and II was built by Empresa Eléctrica de Bogotá in 1962, when the site in which the towers holding it are located, was not populated. However, when Codensa was born as a legal entity, on October 23, 1997, one of those towers (No.731) was surrounded by buildings put up after 1983 but prior to 1996. The plaintiff demands protection for the following collective rights: a healthy environment; sanitization, security and prevention of technically foreseeable disasters; that buildings abide by statutory regulations.

Process status: The State Council is to decide on the appeals filed by each party.

Amount: Undeterminable.


Plaintiff	:	Conjunto Residencial Iguazú (Class action lawsuit).
Defendant	:	Codensa and Soacha City Government.
Court	:	Cundinamarca Administrative Court, Fourth Section — Sub-section “B”.
Case/Identification	:	Case file 03-01342.

Summary of proceedings: Codensa S.A. ESP was providing the service of public lighting to the Soacha district since the inception of the company (on October 23, 1997). The public lighting infrastructure in the Soacha district is mostly owned by Codensa, through a contribution from Empresa Eléctrica de Bogotá (together with other assets).

Soacha district called on bidders for the service of public lighting, the winner being “Soacha Ciudad Luz”, a temporary entity with which district representatives entered into concession contract No.004 on January 19, 1999. Codensa did not take part in the concession contract. However, after that contract had been executed, Sociluz hired Codensa to supply electricity, and rented the Codensa infrastructure, billing and collection systems. These are the conditions under which Codensa is related to the rendering of public lighting services in Soacha.

Process status: The State Council is to decide on the appeals filed by all the parties.

Amount: Indeterminable


Plaintiff	:	Jorge Ernesto Salamanca Cortés y Luis Alejandro Montero.
Defendant	:	Codensa, Nación — Ministerio de Minas — Unidad de Planeación Minero Energética.
Court	:	3rd Administrative Court of Bogotá Circuit
Case/Identification	:	Case file 05-2357

Summary of proceedings: In 14 areas of Bogotá there are at least 35 built-up quarters more than 25 years old where the high and medium voltage grid is “located in an anti-technical manner at several points, including in the front gardens of several houses”, so that people are seen to be exposed to the risk of electrocution. The players consider that, as it is laid out, the grid creates a huge risk to which Codensa has not paid sufficient attention. Consequently, they are petitioning the Constitutional Judge to order the Company to lay the grid underground.

Process status: It is in the period allowed for producing evidence.

Amount: Undeterminable

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Plaintiff	:	Sonia Andrea Ramírez Lamy
Defendant	:	Ministry of the Environment, Housing and Territorial Development; Autonomous Regional Corporation of Cundinamarca — CAR; Technical Administrative Department of the Environment — DAMA; Administrative Department of District Planning, and others.
Court	:	Administrative Court of Cundinamarca, Section Two, Sub-section “B”.
Case/Identification	:	Case file No. 2005-00662.

Summary of proceedings: The action seeks to make the environmental authorities preserve the Eastern Hills of Bogota as a forest reserve, and also recover the resources affected by illegal settlements, illicit mine workings, irregular building permits, tree-felling and exploitation of flora and fauna.

Process status: The process is in the hands of the State Council to make a decision regarding the appeals filed. Codensa submitted a technical report from Distribution Management, warning of the consequences of eliminating the electrical infrastructure in the area in question.

Amount: undetermined

Endesa Chile


Plaintiff	:	Jaime Arrieta Correa and others
Defendant	:	Treasury of Chile, General Direction of Water and EndesaChile.
Court	:	First Civil Court of Valdivia
Case/Identification	:	Case file 198-2005

Summary of proceedings: The annulment by operation of public law is requested of the resolution No.134, of March 22, 2000, issued by the General Direction of Water, which constitutes in favor of Endesa Chile a right to use water to carry out the Neltume Power Plant project, with payment of damages. Failing the foregoing, plaintiffs request payment of damages supposedly caused to them, namely the fact that their properties no longer are located on the shores of Lake Pirehueico and the deterioration of their value.

Process status: Endesa Chile made pleas for its defense, whereas the Treasury of Chile filed dilatory exceptions, which were rejected by the Court.

Amount: Undeterminable


Plaintiff	:	Inversiones M.D. Ltda. and others
Defendant	:	Treasury of Chile, General Direction of Water and Endesa Chile.
Court	:	24th Civil Court of Santiago
Case Identification	:	Case file 7957-2005

Process status: Evidence has been taken regarding the substance of the case. Endesa Chile requested that the case should be accumulated with the following: Lawsuit of the 9th Civil Court, case No. 15279-2005, called “Arriega vs. Treasury of Chile and Others”; and the lawsuit in the 10th Civil Court, case No. 1608-2005, called “Jordan vs. Treasury of Chile and Others”, which was rejected by the Court. Endesa Chile filed an appeal for reconsideration of judgment and, failing that, an appeal to a higher court for reversal of the above decision, with the Santiago Court of Appeal having endorsed the appeal by allowing the accumulation of proceedings.

Amount: Undeterminable

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Plaintiff	:	José Manuel Jordán Barahona and others
Defendant	:	Treasury of Chile, General Direction of Water and Endesa Chile
Court	:	10th Civil Court of Santiago
Case Identification	:	Case file 1608-2005

Process status Evidence has been taken regarding the substance of the case, against which resolution the plaintiff has filed an appeal for reconsideration, which is pending. On October 23, 2007, the parties filed for a 90 day stay of the proceedings.

Amount: Undetermined


Plaintiff	:	Endesa Chile, Pangue S.A. and Pehuenche S.A.
Defendant	:	Treasury of Chile
Court	:	Ninth Civil Court of Santiago
Case Identification	:	Case file 13084-04

Summary of proceedings: The annulment by operation of public law is requested of ministerial resolution No.35, dated June 15, 2004, issued by the Minister of Economy, Development and Reconstruction, in which the latter authority pronounces on an issue that was originally not contentious, that of instructing CDEC-SIC to determine the times of day with the highest probability of loss of electric current.

Process status: The lower court decision was issued, rejecting the lawsuit. The plaintiffs filed an appeal to a higher court for reversal and appeal for dismissal due to an error of form against them. The appeals are being heard by the Santiago Court of Appeal.

Amount: Undetermined


Plaintiff	:	Luis Danús Covian and other fifteen people
Defendant	:	Endesa Chile and Pangue S.A.
Court	:	Santa Bárbara lower court
Case/Identification	:	Case file 4563

Summary of proceedings: A lawsuit was filed calling on the court to declare that over Fundo Ralco (Ralco Ranch) there is a commonwealth of which plaintiffs and defendants are members and on which they all have co-owners’ rights.

Process status: Final, unappealable judgment favorable to the defendants rejecting all parts of the claim and sentencing the plaintiff to pay costs. The plaintiff has filed an appeal to a higher court for reversal and appeal for dismissal due to an error of form against them. The appeals are being heard by the Concepción Court of Appeal.

Amount: Undetermined.


Plaintiff	:	Endesa Chile
Defendant	:	CMPC Celulosa S.A
Case/Identification	:	2144-J
Court	:	Court of Arbitration

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Summary of proceedings: The conflicts between the parties stem from the Supply Contract signed by Endesa Chile and CMPC Celulosa S.A. on May 31, 2003 regarding the supply to the latter’s plants in Region Eight. They mainly involved Endesa Chile’s decision to challenge part of the consumptions required by CMPC Celulosa S.A. because it considers that they are not covered by the above contract.

Process status: The taking of evidence stage has been completed, with certain evidence-related orders issued by the judge still pending.

Amount: Undetermined


Plaintiff	:	Endesa Chile
Defendant	:	General Water Board
Case/Identification	:	6746-2007
Court	:	Santiago Court of Appeal

Summary of proceedings: A remedy of complaint has been filed against General Water Board Exempt Resolution 2144 of September 11, 2007, whereby the conditions for auctioning the Manso River water rights were stipulated. These water rights had been applied for simultaneously by Endesa Chile and AES Gener S.A., with the latter desisting on September 7, 2006. The complaint is based on the fact that, in light of the above, the General Water Board has no right to auction off these water rights, because it infringes articles 6 and 7 of the Constitution and article 142 of the Water Code, among other legal provisions.

Process status: The trial is pending.

Amount: Undetermined


Plaintiff	:	Endesa Chile
Defendant	:	Chilean Treasury
Case/Identification	:	26.499-2007
Court	:	Third Civil Court of Santiago

Summary of proceedings: The Treasury is being sued for the court to declare that, in the operation of its power stations and reservoirs, Endesa Chile, as an electrical energy generating company, is governed by the General Electrical Utilities Law, other legal provisions of the electricity statute and the instructions issued by the respective Interconnected Grid Economic Load Dispatch Center, not by the resolutions and instructions issued by the Overwatch Committees (regulated in the Water Code).

Process status: Endesa Chile brought the action on November 30, 2007 and the Treasury has been notified.

Amount: Undetermined

Pangue S.A.


Plaintiff	:	Endesa Chile, Pangue S.A. and Pehuenche S.A.
Defendant	:	Treasury of Chile
Court	:	Ninth Civil Court of Santiago
Case Identification	:	Case file 13084-04

Summary of proceedings: The annulment by operation of public law is requested of ministerial resolution No.35, dated June 15, 2004, issued by the Minister of Economy, Development and Reconstruction, in which the latter authority pronounced on an issue that was originally not contentious, that of instructing CDEC-SIC to determine the times of day with the highest probability of loss of electric current.

Process status: The lower court issued its verdict, rejecting the claim. The plaintiffs filed an appeal to a higher court for reversal and an appeal for dismissal due to an error of form against them. The appeal is being heard in the Santiago Court of Appeal.

Amount: Undeterminable


Plaintiff	:	Luis Danús Covian and other fifteen people
Defendant	:	Endesa Chile and Pangue S.A.
Court	:	Santa Bárbara lower court
Case/Identification	:	Case file 4563

F - 125

Amount: Undetermined.


Plaintiff	:	Municipality of Nacimiento
Defendant	:	PANGUE S.A
Court	:	Lower Court of Nacimiento
Case/Identification	:	16.757-2007

Summary of proceedings: The plaintiff is suing under Law 19.300 on the Enviroment for reparation and compensation for damage to the environment caused by the Operation of the Pangue Power Station, especially by the dumping in July, 2006. The amount claimed is Ch$ 13,194,921. The defendant is also being sued to adopt the measures of protection and mitigation specified — construction of a containment wall, construction of a bridge joining the town of Nacimiento to other nearby locations and community buildings at a cost of Ch$ 4,914,000,000.

Process status: The order for evidence has been decreed but not notified to the parties.

Amount: Ch$ 4,927,194,921

Pehuenche S.A.


Plaintiff	:	Endesa Chile, Pangue S.A. and Pehuenche S.A.
Defendant	:	Treasury of Chile
Court	:	Ninth Civil Court of Santiago
Case Identification	:	Case file 13084-04

Amount: Undetermined

Edegel S.A.


Plaintiff/Tax Creditor	:	Sunat
Defendant/Taxpayer	:	Edegel
Court	:	Sunat

Summary of proceedings: Edegel Re-assessment (2000) — On September 10, 2004, the Tax Court notified a favorable resolution for Edegel confirming (i) Edegel’s right to depreciate the negative goodwill from the re-assessment because it had a legal stability agreement in force and also (ii) the non-application of Regulation VIII of the Tax Code to the unbundling (there is no fraud or simulation). However, the resolution stipulated that SUNAT has to check that the re-assessment of assets done by Edegel was not at a higher value than the market value. Since then, Edegel has been receiving a series of resolutions from SUNAT aimed at determining the excess of the re-assessment and the tax to be paid.

Process status: Appeals have been filed against the resolutions (the part where it considers that it is in the right) and are pending a decision by the Tax Court.

Amount: Sol$ 78 million — US$ 26 million

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Generandes Perú S.A.


Plaintiff	:	SUNAT
Defendant	:	Generandes Perú S.A.
Court	:	SUNAT
Case/Identification	:	0260340031172

Summary of proceedings: Services — Tax Action against various Resolutions Determining and Imposing Fines on Sales Tax and Income Tax — year 2000

Process status: The process is pending a determination of its merits by Tax Administration.

Amount: Sol$ 46 million — US$ 15 million

Emgesa S.A.


Plaintiff	:	Fariel San Juan
Defendant	:	Emgesa S.A. (Formerly Central Hidroeléctrica de Betania S.A. E.S.P.)
Court	:	3rd and 4th Civil Courts of Neiva Circuit
Case/Identification	:	Class action motivated by the impact that the construction of the dam will have on the economy of the region.

Summary of proceedings: Construction of system that would allow transit of fish at mating season. Keeping water at fair level and ordering CHB to conduct compensatory development projects, such as a fish processor and packing.

Process status: The proposed compliance agreement was submitted to the 3rd Court on April 18 of this year. This agreement was approved by the judge by means of a judicial writ issued on September 25, 2006. This activity is already being carried out through the Company’s Environmental Division. Once the commitments acquired have been complied with, the termination of the proceedings and filing of the case records will be decided. The compliance agreement hearing was held last August 30, 2006 in the Fourth Court. The resulting obligation for the Company involves undertaking two studies for developing tourist projects in the region, which shall be developed by the municipality of Yaguará and/or by the Governor’s Office of Huila. On August 29, 2007, Betania sent the two studies performed for developing tourism projects in the region to the Court, as agreed in the compliance agreement. On December 10, 2007, the court deemed that the defendant had fulfilled its obligations arising from the compliance agreement, so it ordered the case records to be filed and the case finished.

Amount: Undetermined


Plaintiff	:	Emgesa (Formerly Central Hidroeléctrica de Betania S.A. ESP)
Defendant	:	Municipality of Yaguará
Court	:	Administrative Court of Huila
Case/Identification	:	2004-1328

Summary of proceedings: MUN. YAGUARÁ — ICA — The Municipality seeks to penalize the company for not filing its Industry and Commerce Tax (ICA) returns, based on Law 14 of 1981, not recognizing the payments made by Betania in applying the special regulation aimed at electrical energy generating companies (Law 56 of 1981), paying a tax of Col$ 4,160 million, and it issued a penalty resolution for Col$ 98,437 million. The company filed for annulment of the actions imposing the penalty (Penalty Resolution 1998 to 2002).

Process status: Both payment of the tax and the Resolution imposing the penalty have been appealed against and are pending the decision of the Court for Actions under Administrative Law in the Department of Huila. This Court does not have any specified deadline for issuing its verdict.

Amount Col$ 102.59 million (US$ 51.26 million)

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Plaintiff	:	Orlando Enrique Guaqueta and Inhabitants of Sibaté
Defendant	:	Emgesa S.A. ESP. Empresa de Energía de Bogotá S.A. ESP.- EEB- Corporación Autónoma Regional — CAR -
Court	:	Administrative Court of Cundinamarca — First Section
Case/Identification	:	Class Action

Summary of proceedings: The claim was filed so that the Entities are severally liable for the damage caused by the pollution in El Muña dam, as a result of the pumping by Emgesa S.A. ESP of polluted waters from the river Bogotá.

Process status: In a decision of August 9, 006, the Administrative Court of Cundinamarca decreed that this proceeding should be attached to the Miguel Ángel Chávez — Nancy Stella Martínez Pulido and Others against Emgesa and 17 municipal entities and government agencies, being heard in Section Four of this same Administrative Court and also seeking compensation for damages caused by dumping polluted water from the Bogota River into the Muña Reservoir. By an administrative process of May 16, 2007, the case records were sent to the State Council for a decision regarding the appeals filed by the industries (including Encomcables, Hospital Juan N Corpas, Agrinal S.A., Líquido Carbónico Colombiana S.A. Tinzuque, Refisal, Peldar, Icollantas), which companies consider that they cannot be summoned to form part of the proceeding as direct defendants by reason of the negation of the guarantee appeal, since it would be being presumed that they were polluting agents. Once the above appeals have been resolved, the evidence stage in the lower court will begin.

Amount: Col$ 3,000,000 million — US$1,500 million


Plaintiff	:	Gustavo Moya
Defendant	:	Emgesa S.A. ESP, Empresa de Energía de Bogotá S.A. ESP, the Capital District of Bogotá, Empresa de Acueducto y Alcantarillado de Bogotá, the City Hall of Sibaté and other plants and government agencies that presumably contribute to the pollution of the river Bogotá by action or omission.
Court	:	Administrative Court of Cundinamarca — Fourth Section
Case/Identification	:	2001-479

Summary of proceedings: Class Action seeking for the entities being sued to be declared liable for damages caused to the environment as a result of storing raw sewage above the El Muña Reservoir and, therefore, to be sentenced to making good the collective damage caused.

Process status: The appeal to the lower court decision is being heard by the State Council. The verdict endorsed the proposal for a compliance agreement submitted by EEB y Emgesa, exonerating the latter from any liability.

Amount: Undetermined


Plaintiff/Tax Creditor	:	Emgesa S.A. ESP.
Defendant/Taxpayer	:	Corporación Autónoma Regional de Cundinamarca — CAR
Court	:	Administrative Court of Cundinamarca — First Section
Case/Identification	:	2005-1476

Summary of proceedings : That the administrative decrees issued by the CAR (Resolution 506 of March 28, 2005 and 1189 of July 8, 2005) should be declared null and void and Emgesa’s rights, which had been violated by their issue, since they impose works to be performed in the Muña reservoir, on whose effectiveness maintenance of the water concession depends, should be reestablished.

Process status: Ordering of evidence requested by the parties is pending.

Amount: Col$ 167,638 million — US$ 83.8 million

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Endesa Costanera S.A.

On July 25, 1990 the Italian Government authorized Banco Medio Crédito Centrale to grant the Argentinean Government a loan up to US$ 93,995,562 intended for financing the acquisition of assets and the rendering of Italian source services, used in the reconditioning of four groups of the steam-electric powerplant owned by Servicios Eléctricos del Gran Buenos Aires (“SEGBA”). Such loan financed the acquisition of assets and services indicated in the Work Order No.4322 (the Order) issued by SEGBA on behalf of a trust leaded by Ansaldo S.p.A., an Italian company.

In virtue of the terms in the “Agreement regarding the Work Order No.4322”: i) SEGBA granted Endesa Costanera S.A. a mandate through which it administered the rendering of the services included in the Order and performed the work and services that corresponded to SEGBA, in conformity with the Order; and ii) Endesa Costanera S.A. was obliged to pay the Energy Department the capital installments and interest related to the loan granted by Medio Crédito Centrale, at a 1.75% annual rate (the Agreement).

To guarantee the compliance with the financial obligations assumed by Costanera S.A., the buyers (holders of class “A” shares of Endesa Costanera S.A.) pledged all their own class “A” shares. In the event of non-compliance resulting in executing the guarantee, the Energy Department could immediately sell the pledged shares through public bidding and could exercise the political rights applicable to pledged shares.

In accordance with Law No.25,561, decree No.214/02 and regulatory provisions, the payment obligation of Endesa Costanera S.A. as a result of the Agreement has become “pesified” to the peso exchange rate equivalent to one US dollar, plus the application of the reference stabilization coefficient and maintaining the original interest rate of the obligation.

On January 10, 2003 the National Executive issued decree No.53/03, which modified decree 410/02 and added subsection j) in Article 1. In conformity with this regulation, the “pesification” is not applied to the obligation of the provincial states, city halls, private and public companies of giving sums of foreign money to the National Government as a result of subsidiary or other loans and guarantees, originally financed by multilateral credit entities, or as a result of liabilities assumed by the National Treasury and refinanced by other external creditors.

Endesa Costanera S.A. considers that the loan resulting from the Agreement does not agree with any of the assumptions include in Decree No.53/03 and even though in the assumption that it agrees, there are strong arguments that determine the unconstitutionality of Decree No.53/03, because it would violate the principle of equality and the right of property established by the National Constitution. The most significant contingency that could result, if the aforementioned assumption becomes real at December 31, 2007, would be a shareholders’ equity decrease, net of tax effects, of approximately US$ 19 million. To date the Energy Department has not filed a claim for the “pesified” payments made by Endesa Costanera S.A.

At December 31, 2007, the debt of Endesa Costanera S.A. with regard to the Agreement, including accrued interest, is US$ 14,049,868.-

On September 29, 2005 Endesa Costanera S.A. formalized a loan of US$ 30,000,000 with Credit Suisse First Boston International to the Syndicated Loan and Loan from JP Morgan Chase Bank for a 54 month period, amortizable in seven equal quarterly installments, with the first maturing on September 30, 2008 and the last on March 31, 2010.

The loan accrues a 90 day LIBOR rate plus 575 basic points. A first degree collateral has also been furnished to the creditor on the Siemens Combined Cycle.

On September 30, 2005 the banks participating in the Syndicated Loan and JP Morgan Chase Bank assigned all the pending balance of the debt at that date to Credit Suisse First Boston International.

The principal and interest on the debt at December 31, 2007 is US$ 30,040,132.

Pursuant to the provisions of Appendix VI A of the “International Public Call for Bids for the Sale of Shares of Endesa Costanera S.A.”, the ownership of the property of Endesa Costanera S.A was transferred, subject to condition subsequent that it is encumbered as the site for a power station operating for twenty five years as of the take-over.

F - 129

If, for any reason, the property ceases to be encumbered by that purpose during the above term, the title will be considered to have been revoked as a result, with title of ownership being returned immediately and ipso facto to SEGBA S.A. or, if applicable, the State.

At December 31, 2004, Endesa Costanera S.A. had pledged a first degree collateral of about US$ 52,000,000 on its Siemens Combined Cycle to the Banks Bilbao Vizcaya Argentaria S.A., Bank Boston N.A., Bank of América N.A., HSBC Bank plc, Banco Latinoamericano de Exportaciones S.A., Banco Comafi (formerly Scotiabank Quilmes S.A.) and JP Morgan Chase Bank (“the Banks”). As a result of the refinancing of the above loan referred to in Note 5.b), at December 31, 2007 Credit Suisse First Boston International is the beneficiary of the collateral, which was reduced to US$ 40,000,000.

Endesa Costanera S.A. furnished a first degree pledge on the financed asset to Mitsubishi Corporation. According to the provisions stipulated in the agreement signed by both companies on December 3, 2007, Endesa Costanera S.A. promised to increase the above pledge to US$ 68,504,291.

Restrictions

Enersis S.A. and some of its subsidiaries have the following restrictions:

Enersis S.A.

The Company’s loan agreements establish an obligation to comply with the following financial ratios:

•

Ratio of debt and cash flow for four quarters of Enersis and its Chilean subsidiaries does not exceed 6.5 in 2007, ending at 6.00 in 2009;

•

The ratio of consolidated debt to consolidated EBITDA for four consolidated quarters, does not exceed 4.0 in 2007, ending at 3.00 in 2009;

•

The ratio of Enersis and its Chilean subsidiaries cash flow to financial expenses for four quarters, not less than 2.10 in 2007, ending at 2.20 in 2009;

•

The consolidated debt to shareholders’ equity plus minority interest does not exceed 100%;

•

No less than 50% of the total consolidated assets of Enersis S.A., steadily until 2009, should belong to companies whose business is regulated;

•

Minimum shareholders’ equity plus minority interest at least equal to U.F.27 million (UF = Inflation index-linked units of account

The financial covenants of the loan signed in 2006 are less demanding that those indicated above.

At December 31, 2007 and 2006 all these obligations have been met.

Endesa Chile

On a consolidated level, Endesa Chile must comply with financial covenants and requirements derived from loan agreements with financial institutions, among which are the following:

•

Ratio between debt and cash flow for four quarters of Endesa Chile and its Chilean subsidiaries does not exceed 8.40 in 2007, which evolves up to 7.50 in 2010;

•

The ratio of consolidated debt to consolidated EBITDA for four consolidated quarters, not exceeding 5.00 in 2007, which evolves up to 4.20 time in 2010;

•

The ratio of Endesa Chile and its Chilean subsidiaries cash flow to financial expenses for four quarters, not less than 1.70 in 2007, which evolves up to 2.00 times in 2010;

•

The ratio of consolidated debt to shareholders’ equity plus minority interest not exceeding 102% in 2007, which evolves up to 100% in 2010;

•

Not less than 50% of Endesa Chile’s total consolidated assets must be devoted to activities involving the generation, transmission and selling of electrical energy:

•

Minimum shareholders’ equity at least equal to U.F.45 million.

F - 130

The financial covenants for loans entered into in 2006 are less strict than those indicated above.

At December 31, 2007 all these obligations and restrictions have been met

Endesa Costanera S.A.

By virtue of the arrangement in Annex VI-A of the “Concurso Público Internacional para la Venta de las Acciones de Central Costanera Sociedad Anónima” (International Public Tender for the Sale of shares of Central Costanera Sociedad Anonima), the ownership of Central Costanera S.A.’s land was transferred subject to the condition that it must be used as the location for an electric power plant for a term of twenty five years as of the date of possession.

If under any circumstance whatsoever the land ceases to be used for that purpose during the indicated years, its ownership shall be considered revoked due to this cause and return of such title will be effective immediately, and as a matter of law, to SEGBA S.A. or, as applicable, to the Chilean State.

The most demanding requirements in respect to financial coefficients are those contained in the loan, as amended at September 30, 2005, with CSFBi, which are the following: The long-term debt with third parties may not exceed US$ 215 million (excluding short-term debt, commercial debt, inter-company loans and balance of debt with MedioCrédito Italiano); the debt for less than 180 days may not exceed US$ 10 million. There are, also, clauses restricting the change of control of the company and clauses that restrict payments to shareholders, including subjecting the related debt to meeting certain financial indicators.

At December 31, 2007 all these obligations have been met.

El Chocón S.A.

The loan obtained on September 7, 2006 requires the Company to comply with the following financial covenants: ratio of Ebitda to financial expenses not lower than 3.5, debt to Ebitda not greater than 3.0; net shareholders’ equity not lower than 690 million Argentine pesos.

As of December 31, 2007 these obligations have been met.

Edegel S.A.

Debt ratio of not more than 1.50 in the second Bond issue.

The loan known as the Facility Operation Contract, assumed as a result of the merger with Etevensa, has the following indicators: interest hedge greater than 1.25; shareholders’ equity long-term debt ratio greater than 0.67 and debt service hedge greater than 1.10.

Bank loans include a debt to Ebitda of less than 4.0; interest hedge of more than 3.25 and level of indebtedness of less than 1.50.

At December 31, 2007, this obligation has been met.

F - 131

Emgesa S.A.

•

Restrictions on changes of controller, under these circumstances.

At December 31, 2007, this obligation has been met.

Other restrictions

As a common and habitual practice for some bank loan debts and also in capital markets, a substantial portion of the financial indebtedness of Enersis and its subsidiary Endesa Chile is subject to cross-failure provisions. Some failures of relevant subsidiaries, if not corrected in time, might result in the cross-failure at the Endesa Chile and Enersis S.A. level, and, in this case, a significant percent of the liabilities of these companies might eventually become due on demand.

Non-payment, after any applicable grace period, of these companies’ debts or of those corresponding to some of their most relevant subsidiaries for an individual amount exceeding the equivalent of 30 million US dollars, would cause advanced payment of syndicated credits contracted in 2004. In the credits contracted by Endesa Chile in January and December of 2006, and by Enersis S.A in December 2006, the threshold is 50 million US dollars. Also, non-payment, after any applicable grace period, of these companies’ debts or of those corresponding to any of their subsidiaries for individual amounts exceeding the equivalent of 30 million dollars, would cause advanced payment of Yankee bonds. In addition, some credit agreements contain provisions according to which certain events different from non-payment in these companies or in any of their most relevant subsidiaries, such as bankruptcy, insolvency, adverse executed legal sentences for amounts larger than US$ 50 million, and expropriation of assets, may cause those credit acceleration clauses to be in effect.

There are no clauses in the credit agreements through which changes in these companies corporate or debt classification by risk classification agencies may cause an obligation to make debt prepayments. However, according to the Standard & Poor (S&P) risk classification agency, a variation in the foreign currency debt risk classification produces a change in the applicable margin of syndicated credits contracted in 2004 and 2006.

At December 31, 2007, these obligations and restrictions have been fully met.

Note 31. Collateral Obtained from Third Parties

Enersis S.A.

The Company has received certificates of deposit for ThCh$ 8,586 at December 31, 2007 (ThCh$ 21,965 in 2006).

Chilectra S.A.

The Company presents among its current liabilities, deposits received in cash for the use of temporary connections by customers of the company for ThCh$ 36,167 and ThCh$ 49,503 at December 31, 2006 and 2007, respectively.

Inmobiliaria Manso de Velasco Ltda.

The Company has received guarantees from third parties to guarantee obligations incurred in the acquisition of assets of ThCh$ 1,831,885 as of December 31, 2007 (ThCh$ 3,829,249 in 2006).

Compañía Americana de Multiservicios Ltda.

The Company has delivered bank bonds for ThCh$ 4,794,639 (ThCh$ 5,093,621 in 2006) and has received bank bonds for ThCh$ 285,692 (ThCh$ 296,444 in 2006).

Endesa Chile . (Parent Company)

The Company has received performance bonds from contractors and third parties to guarantee jobs and construction (mainly the Ralco Project), for ThCh$ 36,387,567 as of December 31, 2007 (ThCh$ 1,711,237 in 2006).

F - 132

Enigesa S.A.

The Company has received guarantee documents amounting to ThCh$ 28,000 as of December 31, 2007 (ThCh$ 68,331 in 2006).

Edesur S.A.

The Company has received sureties of ThCh$ 8,477,937 from contractors and third parties at December 31, 2007 to guarantee works.

Note 32. Foreign Currencies

As of December 31, 2006 and 2007, foreign currency denominated assets and liabilities are as follows:

(a) Current assets


		As of December 31,
Account	Currency	2006		2007
		ThCh$		ThCh$

Cash and banks	$ no Reaj.		2,354,162		2,893,987
	US$		3,866,720		8,396,302
	Euro		6,946		3,475
	Yen		243		225
	$ Col.		25,091,123		21,313,555
	Soles		7,964,917		6,279,420
	$ Arg.		2,393,314		2,833,888
	Real		65,501,566		40,258,759
Time deposits	US$		64,291,303		71,942,208
	$ Col.		57,597,837		64,647,410
	Soles		10,720,537		1,658,511
	$ Arg.		23,838,520		15,190,337
	Real		146,554,231		251,145,475
Marketable securities	$ no Reaj.		4,189		5,498
	US$		2,257,140		275,098
	$ Col.		4,724,898		10,302,981
	Soles		894,255		—
	$ Arg.		1,907,876		1,213,886
Accounts receivable, net	$ no Reaj.		189,337,670		224,064,233
	US$		2,496,976		6,665,624
	Euro		—		92,970
	$ Col.		216,646,461		211,529,800
	Soles		57,581,020		44,351,663
	$ Arg.		76,056,387		96,590,032
	Real		359,090,323		404,089,150
Notes receivable	$ no Reaj.		2,712,947		4,191,613
	US$		141,469		32,783
	Soles		52,812		—
	$ Arg.		21,250		—
	Real		5,092,371		7,614,720
Other receivables	$ Reaj.		116,292		2,801,441
	$ no Reaj.		33,775,426		36,262,666
	US$		13,876,861		11,524,012
	$ Col.		23,388,787		13,659,977
	Soles		6,231,535		5,868,565
	$ Arg.		927,703		1,127,557
	Real		30,210,249		28,525,803

F - 133

(c) Other assets

Other assets


		As of December 31,
Account	Currency	2006			2007
		ThCh$			ThCh$

Investments in related companies	$ no Reaj.		81,687,494			55,631,617
	US$		41,757,737			3,564,027
Investments in other companies	$ no Reaj.		2,651,817			2,795,686
	US$		21,682,898			18,842,721
	$ Col.		1,510,100			1,312,286
	Soles		26,962			23,431
	Real		2,673			2,805
Goodwill, net	$ no Reaj.		684,114,838			625,799,583
	US$		10,994,180			8,674,293
	$ Col.		8,427,567			6,704,537
Negative goodwill, net	$ no Reaj.		(7,711,148	)		(12,017,963	)
	US$		(8,241,974	)		(6,272,756	)
	Soles		(23,802,402	)		(19,103,601	)
Long-term accounts receivable	$ Reaj.		9,950,282			5,960,919
	$ no Reaj.		953,209			732,467
	US$		2,200,940			—
	$ Col.		6,890,342			59,460,267
	Soles		162,464			65,662
	$ Arg.		67,763,155			99,616,044
	Real		59,732,796			29,702,484
Amounts due from related companies	$ no Reaj.		—			626,547
	US$		97,222,765			—
Deferred taxes	Real		13,155,686			—
Other long-term assets	$ Reaj.		242,777			1,346,395
	$ no Reaj.		99,696,320			29,957,885
	US$		117,740			55,220,674
	$ Col.		21,205,966			19,399,101
	Soles		4,068,785			3,754,498
	$ Arg.		28,660,732			15,152,751
	Real		179,405,710			162,780,692


Total other assets			1,404,530,411			1,169,733,052


Total assets by currency	$ Reaj.		17,027,742			14,358,949
	$ no Reaj.		3,851,044,235			3,934,702,079
	US$		261,279,338			335,980,507
	Euro		6,946			96,445
	Yen		243			225
	$ Col.		2,243,738,111			2,091,918,597
	Soles		1,157,890,454			971,913,305
	$ Arg.		1,309,981,678			1,184,454,094

	Real		3,043,134,974			2,904,342,443

Total assets by currency			11,884,103,721			11,437,766,644

F - 136

(d) Current liabilities


		Within 90 days										91 day to 1 year
		As of December 31, 2006					As of December 31, 2007					As of December 31, 2006					As of December 31, 2007
				Average					Average					Average					Average
Account	Currency	Amount		Rate			Amount		Rate			Amount		Rate			Amount		Rate
		ThCh$					ThCh$					ThCh$					ThCh$

Short-term debt due to banks and	$ Reaj.		2,244		0.30	%		4,089		0.30	%		—		—			—		—
financial institutions	$ no Reaj.		222,432		0.96	%		6,627		0.00	%		—		—			—		—
	US$		7,427,503		10.49	%		8,218,800		6.03	%		1,522,497		6.94	%		23,416,144		10.30	%
	Yen		—		—			57,386		12.75	%		—		—			6,298,867		12.75	%
	$ Col.		98,951,084		8.35	%		83,609,969		12.01	%		—		—			—		—
	Soles		31,414,031		5.62	%		38,359,881		5.55	%		—		—			—		—
	$ Arg.		591,727		13.70	%		1,114,970		7.90	%		2,240,837		8.72	%		—		—
	Reales		1,284,987		16.58	%		5,774,621		8.10	%		—		—			2,833,525		5.58	%
	Others		536,769		2.80	%		—		0.00	%		—		—			—		—
Current portion of long-term debt	$ no Reaj.		32		—			32		0.30	%		—		—			—		—
due to banks and financial institutions	$ Reaj.		—		—			—		—			415,497		9.00	%		—		—
	US$		19,150,148		11.05	%		18,227,924		7.73	%		31,849,879		8.68	%		23,372,542		9.41	%
	Euro		—		—			—		—			884,787		4.23	%		—		—
	$ Col.		19,365,278		9.85	%		9,069,236		12.19	%		—		—			—		—
	Soles		10,665,834		5.00	%		28,211,708		5.96	%		—		—			—		—
	$ Arg.		333,672		12.11	%		—		0.00	%		2,505,203		3.10	%		2,003,678		1.75	%
	Reales		4,069,981		17.86	%		780,784		12.75	%		16,529,136		15.45	%		47,644,953		13.52	%
Current portion of bonds payable	$ Reaj.		1,829,608		5.63	%		1,918,224		5.71	%		2,532,320		5.61	%		2,951,811		5.71	%
	US$		43,150,904		5.38	%		6,287,431		7.78	%		33,606,595		8.22	%		228,769,157		7.78	%
	$ Col.		4,442,330		10.15	%		9,582,791		10.95	%		—		—			—
	Soles		1,824,899		6.55	%		18,879,245		6.07	%		10,830,382		7.19	%		4,975,532		6.07	%
	$ Arg.		3,740,523		10.43	%		101,860		11.75	%		7,468,236		10.43	%		—
	Reales		—		—			—		—			12,159,163		14.53	%		92,568,646		13.23	%
Current portion of long-term	$ no Reaj.		1,693		—			—		—			—		—			—
notes payable	US$		21,914,304		7.42	%		12,224,280		7.42	%		11,662,164		7.42	%		7,205,899		7.42	%
	$ Arg.		—		—			1,063,998		13.10	%		—		—			2,920,274		13.10	%
	Reales		—		—			—		—			2,962,525		—			769,241		5.00	%
Dividends payable	$ no Reaj.		1,668,202		—			4,142,562		—			—		—			—		—
	$ Col.		63,055,251		—			14,194,394		—			—		—			—		—
	Soles		2,255,472		—			18,402		—			—		—			—		—
	$ Arg.		2,127		—			—		—			—		—			—		—
	Reales		13,232,333		—			14,530,457		—			—		—			—		—
Accounts payable	$ Reaj.		38,103		—			112,058		—			—		—			—		—
	$ no Reaj.		95,114,000		—			167,648,213		—			—		—			—		—
	US$		12,573,019		—			33,623,137		—			532,187		—			8,194,660		—
	Euro		1,153,194		—			1,025,690		—			—		—			—		—
	$ Col.		57,380,444		—			61,943,498		—			—		—			—		—
	Soles		33,005,936		—			25,970,113		—			2,199,029		—			1,344,926		—
	$ Arg.		62,637,722		—			61,367,588		—			—		—			—		—
	Reales		86,527,665		—			109,124,490		—			45,929,107		—			44,401,473		—
Short-term notes payables	Reales		3,253,625		—			6,526,529		—			13,636,854		—			9,435,198		—
Miscellaneous payables	$ no Reaj.		5,744,671		—			9,511,986		—			—		—			—		—
	US$		15,104,101		—			551,597		—			837,358		—			6,981,468		—
	Euro		610		—			—		—			—		—			—		—
	$ Col.		15,453,115		—			24,943,812		—			—		—			—		—
	Soles		18,816,805		—			6,859,649		—			216,775		—			2,183,671		—
	$ Arg.		80,831		—			41,077		—			—		—			201,647		—
	Reales		28,092,534		—			19,894,017		—			35,275,963		—			34,924,981		—
	Others		7,244		—			6,745		—			—		—			—		—
Amounts payable to related	$ no Reaj.		1,095,955		—			321,644		—			—		—			—		—
companies	US$		3,039,973		—			3,006,074		—			—		—			—		—
	Soles		1,431,079		—			383,347		—			—		—			—		—
	$ Arg.		26,505,339		—			28,140,054		—			—		—			—		—
Accrued expenses	$ Reaj.		—		—			—		—			1,336,697		—			2,463,021		—
	$ no Reaj.		14,567,202		—			12,150,816		—			19,232,520		—			20,552,346		—
	US$		2,421,289		—			6,630		—			37,078		—			77,915		—
	$ Col.		13,118,853		—			15,922,583		—			—		—			—		—
	Soles		7,085,207		—			5,167,546		—			260,427		—			938,180		—
	$ Arg.		5,388,567		—			5,879,657		—			—		—			—		—
	Reales		8,557,241		—			8,834,674		—			13,217,500		—			13,062,584		—
Withholdings	$ no Reaj.		11,166,123		—			21,662,709		—			—		—			—		—
	$ Col.		3,214,796		—			5,463,809		—			—		—			—		—
	Soles		6,818,513		—			5,144,901		—			144,470		—			227,112		—
	$ Arg.		14,396,065		—			16,533,702		—			—		—			—		—
	Reales		36,384,853		—			25,359,740		—			35,260,806		—			31,641,193		—
Income tax payable	$ no Reaj.		338,827		—			—		—			38,409,552		—			121,265		—
	$ Col.		33,147,732		—			—		—			—		—			—		—
	Soles		12,013,445		—			—		—			—		—			—		—
	$ Arg.		4,252,372		—			14,722,948		—			759,904		—			91,243		—
	Reales		16,129,535		—			2,490,801		—			51,863,663		—			916,818		—
Reimbursable financial contributions	$ no Reaj.		3,661,246		—			4,907,779		—			757,744		—			2,552,735		—
	$ Col.		972,978		—			369,014		—			—		—			—		—
	$ Reaj.		1,542		—			1,691		—			4,628		—			5,071		—
	$ no Reaj.		8,017		—			8,062		—			1,112,585		—			1,325,255		—

F - 137


		Within 90 days								91 day to 1 year
		As of December 31, 2006				As of December 31, 2007				As of December 31, 2006				As of December 31, 2007
				Average				Average				Average				Average
Account	Currency	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
		ThCh$				ThCh$				ThCh$				ThCh$

Other current liabilities	$ Reaj.		—		—		—		—		65,846		—		—		—
	$ no Reaj.		17,382		—		9,460		—		85,798		—		107,564		—
	US$		1,167,359		—		2,150,224		—		—		—		4,309,486		—
	$ Col.		16,275,624		—		5,444,461		—		—		—		—		—
	Soles		583,319		—		1,043,626		—		—		—		—		—
	$ Arg.		31,176,603		—		57,215,594		—		—		—		—		—
	Reales		30,011,605		—		42,519,118		—		17,064,223		—		18,078,563		—


Total current liabilities by currency	$ Reaj.		1,871,497				2,036,062				4,354,988				5,419,903
	$ no Reaj.		133,605,782				220,369,890				59,598,199				24,659,165
	US$		125,948,600				84,296,097				80,047,758				302,327,271
	Euro		1,153,804				1,025,690				884,787				—
	Yen		—				57,386				—				6,298,867
	$ Col.		325,377,485				230,543,567				—				—
	Soles		125,914,540				130,038,418				13,651,083				9,669,421
	Reales		227,544,357				235,835,231				243,898,940				296,277,175
	$ Arg.		149,105,548				186,181,448				12,974,180				5,216,842
	Others		544,013				6,745				—				—


Total current liabilities			1,091,065,626				1,090,390,534				415,409,935				649,868,644

F - 138

(e) Long-term liabilities as of December 31, 2006


		1 to 3 years					3 to 5 years					5 to 10 years					More than 10 years
									Average					Average					Average
				Average					Rate					Rate					Rate
Rubro	Currency	Amount		Rate			Amount		anual			Amount		anual			Amount		anual
		ThCh$					ThCh$					ThCh$					ThCh$

Due to bank and financial	US$		308,377,641		7.34	%		141,153,408		7.75	%		50,923,749		7.90	%		8,549,013		8.66	%
institucions	$ Arg.		31,742,485		12.14	%		12,593,240		10.18	%		—		—			—		—
	$ Col.		77,899,099		9.16	%		—		—			—		—			—		—
	Soles		27,189,832		4.00	%		—		—			—		—			—		—
	Reales		76,187,005		13.25	%		58,861,461		14.75	%		179,505,352		12.06	%		—		—
Bonds payable	$ Reaj.		79,247,549		6.20	%		78,773,088		4.80	%		—		—			65,159,131		5.95	%
	US$		468,865,225		8.08	%		—		—			697,427,876		7.96	%		267,113,092		7.56	%
	$ Col.		93,487,692		8.84	%		153,240,006		10.16	%		127,700,022		10.47	%		—		—
	Soles		46,921,486		6.54	%		25,024,007		7.20	%		47,821,518		8.21	%		—		—
	Reales		30,698,200		17.71	%		77,557,619		11.63	%		98,952,823		11.63	%		—		—
Long-term notes payable	US$		32,008,627		7.42	%		25,191,665		7.42	%		—		—			—		—
	$ Arg.		4,171,878		—			—		—			—		—			—		—
	Reales		40,599,400		10.61	%		9,033,548		10.61	%		8,042,343		10.61	%		1,657,815		10.61	%
Miscellaneous payable	$ Reaj.		—		—			—		—			—		—			140,457		—
	$ no Reaj.		8,251,163		—			—		—			—		—			—		—
	US$		32,967,048		0.58	%		39,107,921		0.18	%		36,224,581		6.50	%		15,159,777		6.50	%
	$ Arg.		234,839		—			17,260		—			—		—			—		—
	Reales		18,607,777		—			4,579,241		—			9,876,189		—			—		—
Amounts payable to related companies	US$		12,082,887		—			—		—			—		—			—		—
Accrued expenses	$ Reaj.		137,735		—			—		—			—		—			—		—
	$ no Reaj.		3,764,289		—			3,607,093		—			8,924,645		—			16,498,685		—
	$ Col.		78,175,913		—			—		—			—		—			—		—
	Reales		237,884,720		—			—		—			—		—			—		—
Reimbursable financial contributions	$ Reaj.		14,254		—			—		—			—		—			—		—
	$ no Reaj.		1,329,353		—			661,677		—			502,560		—			—		—
	Soles		556,931		—			39,754		—			66,258		—			—		—
Other long-term liabilities	$ Reaj.		2,480,808		—			1,653,872		—			3,652,284		—			—		—
	$ no Reaj.		169,215,213		—			780,961		—			32,531		—			—		—
	US$		326,615		—			636,337		—			—		—			—		—
	$ Col.		5,920,854		—			—		—			—		—			—		—
	$ Arg.		19,364,959		—			3,943,803		—			7,776,433		—			—		—
	Reales		16,160,213		—			—		—			—		—			—		—


Total long-term liabilities by currency	$ Reaj.		81,880,346					80,426,960					3,652,284					65,299,588
	$ no Reaj.		182,560,018					5,049,731					9,459,736					16,498,685
	US$		854,628,043					206,089,331					784,576,206					290,821,882
	$ Col.		255,483,558					153,240,006					127,700,022					—
	Soles		74,668,249					25,063,761					47,887,776					—
	$ Arg.		55,514,161					16,554,303					7,776,433					—
	Reales		420,137,315					150,031,869					296,376,707					1,657,815


Total long-term liabilities			1,924,871,690					636,455,961					1,277,429,164					374,277,970

F - 139

(f) Long-term liabilities as of December 31, 2007


		1 to 3 years					3 to 5 years					5 to 10 years					More than 10 years
				Average					Average					Average					Average
Account	Currency	Amount		Rate			Amount		Rate			Amount		Rate			Amount		Rate
		ThCh$					ThCh$					ThCh$					ThCh$

Due to banks and financial institutions	US$		324,569,644		6.71	%		111,876,345		6.30	%		32,495,769		8.63	%		3,306,080		10.43	%
	$ Arg.		3,981,984		1.75	%		995,577		1.75	%		—		—			—		—
	$ Col.		—		—			75,222,686		12.19	%		—		—			—		—
	Reales		155,514,187		13.81	%		275,204,413		13.80	%		41,556,728		13.65	%		—		—
Bonds payable	$ Reaj.		99,684		5.50	%		—		—			—		—			219,857,880		5.27	%
	US$		310,994,010		8.22	%		13,912,918		4.36	%		596,135,827		7.92	%		129,824,438		7.45	%
	$ Col.		146,064,243		10.69	%		156,291,249		11.24	%		261,792,340		10.83	%		—		—
	Soles		38,843,435		6.90	%		27,345,848		6.38	%		73,000,046		6.80	%		8,289,790		6.30	%
	$ Arg.		—		0.00	%		26,006,931		11.75	%		—		—			—		—
	Reales		34,672,030		14.70	%		103,793,429		12.80	%		—		—			—		—
Long-term notes payable	US$		29,099,369		7.42	%		27,888,796		7.42	%		—		—			—		—
	$ Arg.		6,059,723		13.10	%		—		0.00	%		—		—			—		—
	Reales		35,600,085		10.61	%		15,044,209		10.61	%		9,275,471		10.61	%		—		—
Miscellaneous payable	$ Reaj.		—		—			—		—			—		—			157,111		—
	$ no Reaj.		9,577,891		0.00	%		2,832,747		—			—		—			—		—
	US$		12,862,368		11.50	%		29,595,608		11.50	%		46,849,488		6.50	%		11,808,090		6.50	%
	$ Arg.		650,185		—			473,626		—			—		—			—		—
	Reales		13,942,945		—			5,323,307		—			9,875,274		—			—		—
Amounts payable to related companies	US$		—		—			8,161,792		—			—		—			—		—
Accrued expenses	$ no Reaj.		3,529,014		—			3,475,280		—			9,578,252		—			14,941,681		—
	$ Col.		71,951,638		—			—		—			—		—			—		—
	Reales		224,748,944		—			—		—			74,895		—			—		—
Deferred taxes	$ no Reaj.		—		—			—		—			22,440,908		—			—		—
Reimbursable financial contributions	$ Reaj.		7,439		—			—		—			—		—			—		—
	$ no Reaj.		1,857,133		—			924,411		—			672,401		—			—		—
	Soles		290,345		—			72,260		—			—		—			—		—
Other long-term liabilities	$ Reaj.		—		—			—		—			7,063,927		—			—		—
	US$		689,877		—			718,987		—			204,462,123		—			—		—
	$ Col.		4,663,840		—			—		—			—		—			—		—
	Soles		268,393		—			15,554		—			646,954		—			—		—
	$ Arg.		19,063,473		—			397,881		—			774,996		—			—		—
	Reales		12,474,586		—			—		—			—		—			—		—


Total long-term liabilities by currency	$ Reaj.		107,123					—					7,063,927					220,014,991
	$ no Reaj.		14,964,038					7,232,438					32,691,561					14,941,681
	US$		678,215,268					192,154,446					879,943,207					144,938,608
	$ Col.		222,679,721					231,513,935					261,792,340					—
	Soles		39,402,173					27,433,662					73,647,000					8,289,790
	$ Arg.		29,755,365					27,874,015					774,996					—
	Reales		476,952,777					399,365,358					60,782,368					—


Total long-term liabilities			1,462,076,465					885,573,854					1,316,695,399					388,185,070

Note 33. Sanctions

Chilectra S.A.

a.		On April 27, 2004, through Exempt resolution 814, the Superintendence of Electricity and Fuel (S.E.F.) penalized the Company for a total amount of 1,830 UTA, as a result of the blackout which occurred on January 13, 2003, that affected the area between Tal Tal and Santiago. On May 7, 2004, the Company filed an appeal whose jurisdiction and solution belongs to the Superintendence of Electricity and Fuel (S.E.F.). The S.E.F. rejected the appeal and a claim petition was filed with the Santiago Court of Appeals. Waiting for the case to be put on the weekly list of cases to be heard by that Court.

		The resolution issued by the Santiago Court of Appeal can be appealed against in the Supreme Court.

		To this date, the Company cannot exactly forecast the effects the final resolution will have on its financial statements.

F - 140

b.		Summary trial to complain about the fine imposed by the Superintendence of Securities and Insurance, 10 thCivil Court of Santiago (Case No. 4394-97). This summary trial was brought by Chilectra S.A. (formerly Elesur S.A.) according to the regulations of Statutory Decree 3538 (Basic Law on the Superintendence of Securities and Insurance) against such Superintendence, and its purpose is to petition for the line imposed by such inspection agency via exempt resolution No. 337 of October 31, 1997 (U.F. 100,000 — 100,000 inflation index-linked units of account) to be declared null and void. On November 17, 2000, the court ruled an appealable judgment endorsing the claim by Chilectra S.A. (formerly Elesur S.A.), declaring the fine imposed by the Superintendence null and void. The ruling states, in sum, that there was no use of privileged information since it was one of the parties to the contract’s own information. The Superintendence lodged an appeal for annulment of the ruling (case number 82-2001). On June 6, 2006, the Santiago Court of Appeals revoked the ruling, maintaining al1 parts of Exempt Resolution 337 of the Superintendence. On June 23, 2006, appeals for annulment in form and substance were lodged with the Supreme Court. On May 8, 2007, the pleas were raised in the Supreme Court. On July 26, the Supreme Court rejected the appeals for annulment in form and substance, stating, with regard to the latter remedy, that “the judgment issued by the Court of Appeal established as a fact of the case that, given its position, ELESUR had access to privileged information and that it used this information to its benefit, which cannot be reviewed by an appeal for annulment or review by a higher court on the grounds of an error of law or breach of procedural rights because there has not been any breach or infringement of the regulations regulating evidence. In point of fact, there has been no alteration of the burden of proof.” (whereas clause 19). On August 16, 2007, an interest rebate was applied for to the Treasury, which, via Official Letter 1773, endorsed the request made by Chilectra S.A., reducing interest by 50%. On August 31, 2007, Chilectra S.A. deposited Ch$ 3,562,253,019 in the Treasury, thereby concluding the proceeding.

		The Company and the Board of Directors have not been the target of any other sanctions by the SVS or by any other administrative authorities.

Note 34. Environment

Chilectra S.A.

The Company has disbursed ThCh$697,476 during the year mainly for the following:

Investments:

•

“Space cape” and pre-assembling for maintenance and improvement of installations.

Expenses:

•		Associated with handing dangerous waste controlled via the Management System

•		Environmental to comply with current legislation.

•		Pruning and felling associated with the need to keep the lines clear.

Endesa Chile

During 2007, the Company and its subsidiaries have made disbursements for a value of ThCh$ 2,689,343, which mainly correspond to:

Operation expenses: They correspond to laboratory studies, monitoring, follow-up and analysis, which were treated as fiscal year expenses of ThCh$ 2,344,963 and environmental protection at Hidroeléctrica El Chocón and Endesa Costanera S.A. (environment monitoring, cleaning of hydrocarbon separator chambers, measurement of gas emissions, nitrogen oxide and sulphur dioxide) equivalent to ThCh$ 184,949.

F - 141

Investments related to the following projects, which have been capitalized in the amount of ThCh$ 344,380:

•		Tarapacá — Performance of works promised in its SGA under ISO 14,001.

•		Los Molles — Resolution of environmental liabilities.

•		Cipreses — Performance of environment works promised in River Maule.

•		Sauzal — Performance of environment works promised in River Cachapoal and the power station, by its Environmental Management System (SGA).

•		San Isidro — Performance of works promised in its SGA under ISO 14,001.

•		Bocamina — Development and execution of a project to abate noise levels, which involves the power station’s noisiest equipment, as part of its SGA under ISO 14,001.

•		Rapel — Resolution of environment liabilities and replacement and disposal of condensators with PCB.

•		Sausalito — Replacement and disposal of condensators with PCB.

•		Isla — Replacement and disposal of condensators with PCB.

•		Pehuenche — Resolution of environment liabilities and landscape restoration in dome of them.

•		Abanico — Performance of works associated with contaminated water traps.

•		El Toro — Performance of works associated with contaminated water traps and measuring ecological flow.

•		Pangue — Construction of containment spillways for oil spills from transformers.

•		Ralco — Construction of containment spillways for oil spills from transformers.

•		Tal Tal — Performance of works promised in its SGA under ISO 14,001.

•		Diego de Almagro — Performance of works promised in its SGA under ISO 14,001.

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Note 35. Subsequent Events

Endesa Chile.

On April 29, 2008, Gas Atacama Generación (“GAG”) a subsidiary of the Company’s equity method investee Inversiones Gas Atacama Holding Ltda. (“GAT”) signed a memorandum of understanding (“MOU”) with several important northern mining companies and its owners, Endesa Chile and Southern Cross, allowing GAG to continue operations while seeking a definite solution to the company’s situation.

The MOU called for a definitive contract covering a substantial part of the EMEL deficit, which has been growing over time. This back-up contract was signed on April 29, 2008, with the participation of mining companies representing 85.93% of the 1,554 MW (maximum demand at peak hour in the SING, excluding demand arising from distribution companies). Among the principal objectives of the contract, are the following: (1) continuity of electricity supply in the SING, with a back-up of up to 600 MW operating continuously through December 31, 2013, with diesel if necessary, so as to minimize the risk of electricity rationing, and the concurrent losses to production for the copper mines; and (2) the achievement of a generation capacity cushion until 2013 which would permit failure of other operating units or delays in the beginning of operations of new coal-burning plants. The mining companies that were signatories to the agreement include BHP Billiton (Escondida, Spence, Cerro Colorado), Codelco (Chuquicamata, Radomiro Tomic and Gabriela Mistral), Collahuasi, Freeport (El Abra), Barrick (Zaldívar), Anglo American (Mantos Blancos), Xstrata (Lomas Bayas), SQM, Antofagasta Minerals (El Tesoro), Teck-Cominco (Quebrada Blanca) and Yamana (Meridian Gold). In a parallel manner, GAT entered into a long-term contract with Compañía de Petróleos de Chile Copec S.A., a large Chilean distributor of petroleum-derived hydrocarbons, in order to secure the availability of diesel through the end of 2013, for a daily consumption of up to 3,400 cubic meters.

The recent contract with the mining companies requires that the latter pay a price for the back-up service that accounts for approximately 71% of the EMEL deficit and the remaining 29% is to be financed by GAT, Southern Cross and Endesa Chile, with caps of US$ 50 million each for the latter two owners. The mining companies cap their price at US$ 650 million, and if oil prices exceed US$ 120/barrel during the period, or for any other reason, this capped amount should be reached, they have a right to an early termination of the contract. This solution, although reducing significantly the probability of bankruptcy at GAG, implies certain risks and costs to GAT and its owners. In addition, the price of diesel, as of the time of this report, has shown an upward trend, already exceeding the US$ 120/barrel reference level, making the operating monthly cost exceed the amount which allows the cap to be extended beyond December 2011. Therefore, there is no reason, as of the date of this report, to expect a reversal of the investment impairment provision taken in the 2007 financial statements, in connection with GAT, our affiliate.

Management is not aware of other significant events have occurred after year-end that could affect the presentation of the financial statements.

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Note 36. Differences between Chilean and United States Generally Accepted Accounting Principles

Chilean GAAP varies in certain important respects from U.S. GAAP. Such differences involve certain methods for measuring the amounts shown in the financial statements.

I. Differences in Measurement Methods

The principal differences between Chilean GAAP and U.S. GAAP are described below together with an explanation, where appropriate, of the method used in the determination of the adjustments that affect net income and total shareholders’ equity. References below to “SFAS” are to Statements of Financial Accounting Standards issued by the Financial Accounting Standards Board in the United States.

(a) Inflation accounting

The cumulative inflation rate in Chile as measured by the Consumer Price Index for the three-year period ended December 31, 2007, was approximately 13.1%. Pursuant to Chilean GAAP, the Company’s financial statements recognize certain effects of inflation. As allowed pursuant to Item 17 c (iv) of Form 20-F the reconciliation included herein of consolidated net income, comprehensive income and shareholders’ equity, as determined in accordance with U.S. GAAP, excludes adjustments attributable to the effect of differences between the accounting for inflation under Chilean GAAP versus U.S. GAAP.

(b) Reversal of revaluation of property, plant and equipment

In accordance with standards issued by the SVS, certain property, plant and equipment are recorded in the financial statements at amounts determined in accordance with a technical appraisal. The difference between the carrying value and the revalued amount is included in shareholders’ equity, beginning in 1989, in “Other reserves”, and is subject to adjustments for price-level restatement and depreciation. Revaluation of property, plant and equipment is prohibited under U.S. GAAP. The effects of the reversal of this revaluation, as well as of the related accumulated depreciation and depreciation expense are included in paragraph (ee) below.

(c) Depreciation of property, plant and equipment

Under Chilean GAAP, certain costs related to the acquisition of Edesur S.A., at the time of the acquisitions in 1992 and 1994 by Distrilec Inversora S.A., were charged to earnings as incurred. Under U.S. GAAP, these costs have been included in the purchase price and allocated to the net assets acquired based upon fair values. For purposes of the reconciliation to U.S. GAAP, these costs were considered to be of part of property, plant, and equipment, the primary assets of Edesur S.A.

As discussed in paragraph (i), under Chilean GAAP, assets acquired and liabilities assumed are recorded at their carrying value, and the excess of the purchase price over the carrying value is recorded as goodwill. Under U.S. GAAP, assets acquired and liabilities assumed are recorded at their estimated fair values, and the excess of the purchase price over the estimated fair value of the net identifiable assets and liabilities acquired is recorded as goodwill. As part of the purchase of the majority ownership interest in Endesa Chile, under U.S. GAAP, the cost of the purchase price would have been allocated to the fair value of property, plant and equipment.

The effect on shareholders’ equity and net income for the years presented is included in paragraph (ee) below.

The company has considered the factors which could be considered changes in circumstances which would trigger an impairment review and, in accordance with SFAS No. 144, “Accounting for the Impairment or Disposa1 of Long-Lived Assets” beginning in 2002, the Company evaluates the carrying amount of property, plant and equipment and other long-lived assets, in relation to the operating performance and future undiscounted cash flows of the underlying grouping of assets at the lowest level which generates cash flow. These standards require that an impairment loss be recognized in the event that facts and circumstances indicate that the carrying amount of an asset may not be fully recoverable. Impairment is recorded based on the excess carrying amounts of long-live assets (or asset group) over fair value. There were no impairment charges recorded under Chilean GAAP and U.S. GAAP.

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(d) Special obligations

At the end of 2006, the Brazilian National Electric Power Agency (“Agencia Nacional de Energia Eléctrica” -ANEEL) published the Normative Resolution N°234 that established general concepts, methodologies and procedures to carry out the second round of the periodic Tariff review for public concessionaires engaged in the electric distribution sector services. These modifications were incorporated into the regulation issued by ANEEL during the year 2007, which contain the provisional parameters of the fix Tariff model for the following years. According to this, for US GAAP purposes a regulatory liability has been recognized and a charge to current year earnings for ThCh$ 128,867,428, in accordance to the provisions of FAS No. 71, “Accounting for the Effects of Certain Types Regulation”.

Under Chilean GAAP, regulatory accounting described in FAS No 71, does not apply and therefore the adjustment above mentioned has not been recorded.

(e) Deferred income taxes

Under Chilean GAAP, until December 31, 1999, deferred income taxes were recorded based on non-recurring timing differences between the recognition of income and expense items for financial statement and tax purposes. Accordingly, there was an orientation toward the income statement focusing on differences in the timing of recognition of revenues and expenses in pre-tax accounting income and taxable income. Chilean GAAP also permitted not providing for deferred income taxes where a deferred tax asset or liability was either offsetting or not expected to be realized. Starting January 1, 2000, the Company recorded income taxes in accordance with Technical Bulletin No. 60 and its related amendments issued by the Chilean Association of Accountants, recognizing, using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities. As a transitional provision, a contra (referred to as “complementary”) asset or liability has been recorded against the deferred tax assets and liabilities recognized as of January 1, 2000. Such complementary assets and liabilities are being amortized to income over the estimated average reversal periods of the underlying temporary differences to which the corresponding deferred tax asset or liability relates.

Under U.S. GAAP, companies must account for deferred taxes in accordance with SFAS No. 109, which requires an asset and liability approach to financial accounting and reporting for income taxes, using the following basic principles:

i.		A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and tax loss carryforwards.

ii.		The measurement of deferred tax liabilities and assets is based on the provisions of the enacted tax law. The effects of future changes in tax laws or rates are not recognized prior to the period in which such changes are enacted into law.

iii.		Deferred tax assets are reduced by a valuation allowance, to the extent that, based on the weight of available evidence, it is deemed more likely than not that the deferred tax assets will not be realized.

Temporary differences are defined as any difference between the financial reporting basis and the tax basis of an asset and liability that at some future date will reverse, thereby resulting in taxable income or expense. Temporary differences ordinarily become taxable or deductible when the related asset is recovered or the related liability is settled. A deferred tax liability or asset represents the amount of taxes payable or refundable in future years as a result of temporary differences at the end of the current year.

The principal difference between U.S. GAAP and Chile GAAP relates to the reversal of the complementary assets and liabilities recorded as a transitional provision for unrecorded deferred taxes as of January 1, 2000 and their corresponding amortization into income. Additionally, under U.S. GAAP, temporary differences arising in connection with fair value adjustments on business combinations result in deferred taxes and a corresponding adjustment to goodwill. An adjustment is required in the reconciliation to U.S. GAAP to record goodwill arising from deferred tax liabilities related to past business combinations (see note 36 II (c)). When required, the income tax effects of U.S. GAAP adjustments are recorded in our reconciliations to U.S. GAAP. The effect of these differences on the net income and shareholders’ equity of the Company is included in paragraph (ee) below.

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(f) PIS-COFIN

Brazilian Tax Dispute — PIS and COFINS

In 1998, Brazilian Law 9718/98 was enacted, which increased the base for both PIS (Contribuição aos Programas de Integração Social — Contributions to Social Integration Programs) and COFINS (Contribuição para Financiamento da Seguridade Social — Contributions to the Financing of Social Security), which are social contributions taxation on revenues, beginning in 1999 to be levied on other revenue lines and not only sales, while at the same time, increasing the rate for COFINS from 2% to 3%.

The Company’s subsidiary in Brazil, Ampla, has decided not to pay such PIS and COFINS taxes under Law 9718/98 and has filed a tax lawsuit dispute challenging that the payment of PIS and COFINS on other revenues was unconstitutional. During 2007, such subsidiary received a favorable verdict from local courts, agreeing with the Company and ruling in favor of it on the grounds of the unconstitutionality of Law 9718/98. Such ruling, however, could be appealed by the Brazilian Government and would only achieve a final resolution upon the final decision of the Brazilian Federal Supreme Court. In this respect, several other companies have filed similar lawsuits on the same basis and have obtained a favorable ruling on the matter from the Brazilian Federal Supreme Court. Such cases have set a base jurisprudence ground that makes virtually certain that the final verdict will be in favor of the Company and, therefore, reducing to a remote, if any, the probability of the Company to make any payment in relation to this tax dispute.

Under Chilean GAAP, after the favorable verdict by a local court of the Company’s dispute and considering the base jurisprudence, the Company considered that it is not probable that it will have to pay any amount in relation to PIS and COFINS taxes as a result of Law 9718/98. As such, we have reversed the provision in 2007.

Under US GAAP, the probability of payment is irrelevant if settlement of the liability is required by current law or by contract. When the obligating event or transaction has occurred (in this instance, through sales or other revenues), the probability of payment is not relevant in determining whether a contractual or legal obligation is a liability or a loss contingency. That is, when the obligating event or transaction has occurred, the enterprise has incurred a liability; and accordingly, there is no contingency. Therefore, until the Brazilian Federal Supreme Court announces a favorable and final ruling the amount should stay provisioned by not recording the reversal made under Chilean GAAP.

The effect of this difference on the net income and shareholder’s equity of the Company is included in paragraph (ee) below.

(g) Pension and post-retirement benefits

During 2006, the Company adopted FAS 158 “Employer’s Accounting for Defined Pension and Other Postretirement Plans — an amendment of FASB Statements N°87, 88, 106 and 132 (R)”. These statements required the recognition of the funded status of a benefit plan in the statement of financial position. It also requires the recognition as a component of other comprehensive income (OCI), net of tax, of the gains or losses and prior service costs or credits that arise during the period, but are not recognized as components of net periodic benefit cost pursuant to statements 87 or 106. The adoption resulted in the recognition through AOCI for accumulated effect through the 2006 year - end of prior service costs and related plan assets in the balance sheet of the certain Brazilian subsidiaries. The effects of the adoption of SFAS 158 are presented in paragraph (ee) below.

The effects of accounting for post-retirement benefits under US GAAP have been presented in paragraph (ee).

(h) Investments in related companies

Under Chilean GAAP, until December 31, 2003 for all investments accounted for by the equity method, the proportionate net book value of the investee company was recorded as an investment and the difference between the cost of investment and the proportionate net book value of the investee was recorded as goodwill. The goodwill is to be amortized to income over a maximum period of twenty years. The investment account is adjusted to recognize the investor’s share of the earnings or losses of the investee determined under Chilean GAAP subsequent to the date of the purchase. Technical Bulletin No. 72 issued by Chilean Association of Accountants requires using fair value of acquired assets and liabilities assumed for the accounting for all acquisitions after January 1, 2004 and recording the differential between the cost and the fair value as goodwill/negative goodwill as well as prospectively designating all investments of 20% to 50% as having significant influence rather than the 10% to 50% level previously defined as having significant influence in Chilean GAAP. No retroactive changes or cumulative effects of changes in accounting principles were required under Technical Bulletin No. 72.

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Under US GAAP, in accordance with Accounting Principles Board Opinion No. 18, The Equity Method for Accounting for Investment in Common Stock” (“APB No. 18”), the carrying amount of an investment accounted for under the equity method is initially recorded at cost and shown as a single amount in the balance sheet of the investor. It is adjusted to recognize the investor’s share of the earnings or losses of the investee determined under US GAAP subsequent to the date of investment. The investment reflects adjustments similar to those made in preparing consolidated financial statements, including adjustments to eliminate inter-company gains and losses and to account for the differences, if any, between the investor’s cost and the underlying equity in net assets of the investee at the date of investment. The investment is also adjusted to reflect the investor’s share of change in the investee capital accounts.

The Company’s equity share of the effect of the adjustments from Chilean GAAP to U.S. GAAP for equity method investees is included in paragraph (ee) below. The principal U.S. GAAP adjustments affecting the Company’s equity investees are as follows:

(i)		Reversal of capitalized foreign currency exchange differences related to capitalized interest.

(ii)		Reversal of complementary accounts (asset or liability) recorded as a transitional provision in connection with the adoption of Technical Bulletin N°60 as of January 1, 2000.

(iii)		Organizational costs deferred under Chilean GAAP that, under U.S. GAAP, should have been included in income.

(iv)		The recording of derivative instruments in accordance with SFAS No. 133.

(v)		The deferred income tax effects of adjustments (i), (iii) and (iv).

(i) Goodwill

(i)		Under Chilean GAAP, for acquisitions that occurred until December 31, 2003 assets acquired and liabilities assumed were recorded at their carrying value and the excess of the purchase price over the carrying value is recorded as goodwill. Circular No. 1358, dated December 3, 1997 issued by the SVS, extended the maximum amortization period of goodwill to 20 years from the previous 10 years.

		Under US GAAP, assets acquired and liabilities assumed are recorded at their estimated fair values, and the excess of the purchase price over the estimated fair value of the net identifiable assets and liabilities acquired are recorded as goodwill. Prior to January 1, 2002 under US GAAP, the Company amortized goodwill on a straight-line basis over the estimated useful lives of the assets, ranging from 20 to 40 years.

		On January 1, 2002, the Company adopted SFAS 142 and thus ceased amortizing goodwill under US GAAP. Instead, impairment tests are preformed at least annually on the level of reporting units.

		Technical Bulletin No. 72 issued by Chilean Association of Accountants requires using fair value of acquired assets and liabilities assumed for the accounting for all acquisitions after January 1, 2004, and consequently after that date difference in accounting treatment related to the recognition of assets acquired and liabilities assumed between Chilean GAAP and US GAAP no longer exists.

(ii)		Under Chilean GAAP, the Company evaluates the carrying amount of goodwill for impairment on the level of cash-generating units. The Company determines the impairment losses using a discounted cash flow approach and recent comparable transactions in the market. In order to estimate recoverable value, the Company makes assumptions about future events that are highly uncertain at the time of estimation. The results of this analysis showed no impairment of goodwill for the years ended December 31, 2006 and 2007, apart from the impairment of goodwill over the Company’s equity method investee Gas Atacama Holding. See Note 11(j).

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Under US GAAP, goodwill is tested for impairment at least annually on the level of reporting units, which the Company defined to be as operation units. In addition, goodwill is evaluated for impairment between these annual tests if events or changes in circumstances indicate that goodwill might be impaired. The impairment test is performed based on a two-step approach:

The first step is to compare each reporting unit’s fair value with its carrying amount including goodwill. If a reporting units carrying amount (including goodwill) exceeds its fair value, goodwill might be impaired and the second step is required

The second step is to compare the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill. The implied fair value is computed by allocating the reporting unit’s fair value to all of its assets and liabilities in a manner that is similar to a purchase price allocation in a business combination accounted for in accordance with SFAS 141. The difference between the fair value of the reporting unit and the fair value of its net assets is the implied fair value of goodwill. If the implied fair value of goodwill is less than its carrying amount, the carrying amount is written-down against income to the implied fair value of goodwill.

			The Company carried out the required annual impairment test of goodwill in the fourth quarter of each year.

			The following effects are included in the net income and shareholders’ equity reconciliation to US GAAP under paragraph (ee) below:

	(i)		differences in the amount of goodwill under US GAAP related to basis differences in the original determination and subsequent amortization methodology between Chilean GAAP and US GAAP;

	(ii)		the reversal of negative goodwill impairment under Chilean GAAP, as under US GAAP negative goodwill is treated as an adjustment to the net book value of the related fixed assets to their fair value;

	(iii)		the reversal of goodwill amortization recorded under Chilean GAAP.

(j) Negative Goodwill

Under Chilean GAAP, until December 31, 2003, the excess of the carrying value of the assets assumed in a business combination over the purchase price is recorded as negative goodwill. Circular No. 1358, dated December 3, 1997 issued by the SVS, extended the maximum amortization period of negative goodwill to 20 years from the previous 5 years. Technical Bulletin No. 72 issued by Chilean Association of Accountants requires using fair value accounting for all acquired assets and liabilities assumed for all acquisitions after January 1, 2004. Technical Bulletin No. 72 states that whenever the negative goodwill exceeds the fair value of identified non-monetary assets, the excess must be recognized immediately as income.

Under U.S. GAAP, the fair value of the net assets acquired in excess of the purchase price is allocated proportionately to reduce the values assigned to long-lived assets. If the allocation reduces the long-lived assets to zero, the remainder of the excess is recorded as an extraordinary gain to income.

The effect of reduced depreciation expense on the long-lived assets (for which no circumstances changed requiring an impairment test under SFAS N°144) to which negative goodwill had been allocated under U.S. GAAP net of reversals of both amortization and write-offs of negative goodwill recorded in Chilean GAAP (over the appropriate useful lives as defined in the first paragraph) are included in paragraph (ee) below.

Adjustments related to negative goodwill necessary to make the consolidated financial statements conform to US GAAP are included in paragraph (ee) below and are as follows:

	•		The reversal of negative goodwill amortization and write-offs described in paragraph (i) above, which did not meet the US GAAP impairment criteria for long-lived assets under SFAS 144 and the reversal of negative goodwill amortization recorded under Chilean GAAP;

	•		The effects of reducing depreciation expense, due to the proportionate allocation of the excess purchase price to property, plant and equipment and other effects on income.

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(k) Capitalized interest and exchange differences

In accordance with Chilean GAAP, the Company has capitalized both interest on debt directly related to property, plant and equipment under construction and finance costs corresponding to exchange differences generated by the loans associated with such assets. The capitalization of interest costs associated with projects under construction is optional when incurred on debt that is not directly related to such projects. The Company has optioned for not capitalizing indirect interest cost under Chilean GAAP.

Under U.S. GAAP, the capitalization of interest on qualifying assets under construction is required, regardless of whether interest is associated with debt directly related to a project to the extent that interest cost would have been avoided if the project had not been done. In addition, under U.S. GAAP, foreign translation exchange differences may not be capitalized. The accounting differences between Chilean and U.S. GAAP for financing costs and the related depreciation expense are included in the reconciliation to U.S. GAAP under paragraph (ee) below.

(l) Accumulated deficit during the development stage

Prior to the adoption of Circular 1819 issued by the SVS on January 1, 2007, under Chilean GAAP, the net income (loss) incurred during the development stage of subsidiary companies are recorded directly in the parent company’s equity, rather than in income. Furthermore, companies in the development stage were not consolidated even if the Company owned the majority of voting rights.

Under US GAAP, such results must be included in the consolidated statement of income. As of December 31, 2005 no company was classified as development stage company. For the year ended December 31, 2006 and 2007, the effects of the adjustment are included in paragraph (ee) below.

On January 1, 2007 the Company adopted Circular 1819 issued by the SVS (see note 3), requiring consolidation of subsidiaries in development stage and recording income derived from development stage companies in accordance with accounting principles for consolidation or investments in related companies, respectively. Thus, subsequent to the adoption of Circular 1819, the accounting treatment under Chilean GAAP is the same as under US GAAP

(m) Minimum dividend

As required by the Chilean Companies Act, unless otherwise decided by the unanimous vote of the holders of issued and subscribed shares, the Company must distribute a cash dividend in an amount equal to at least 30% of its net income for each year as determined in accordance with Chilean GAAP, unless and except to the extent the Company has unabsorbed prior year losses or interim dividends have been paid to shareholders. Net income related to the amortization of negative goodwill can only be distributed as an additional dividend by the approval of the shareholders, and accordingly, is not included in the calculation of the minimum dividend to be distributed. Since the payment of the 30% dividend out of each year’s income is required by Chilean law, an accrual has been made in the reconciliation in paragraph (ee) below to reflect the unrecorded dividend liability for 2006 and 2007, whenever and to the extent the recorded interim dividends do not reach the 30% minimum dividend.

(n) Capitalized general and administrative expenses

Under Chilean GAAP, Endesa Chile and certain Brazilian subsidiaries capitalize a portion of its administrative and selling expenses as part of the cost of construction in progress because a substantial portion of the efforts of management were involved in the administration of major projects. Under U.S. GAAP, general and administrative expenses are charged to expense unless they can be directly identified with the supervision of the construction of specific projects. Under Chilean GAAP the Company has also capitalized other administrative expenses into other long-term assets, which under US GAAP would not be allowed. The effects of eliminating capitalized general and administrative expenses and the related depreciation and amortization for U.S. GAAP purposes are shown below under paragraph (ee).

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(o) Involuntary employee termination benefits

Under Chilean GAAP, the Argentine subsidiaries, Endesa Argentina S.A., recorded an accrual of certain involuntary employees termination benefits related to the restructuring plan announced in 1997. Additionally, during 2003 the Company increased the amount of the accrual recorded under Chilean GAAP. In accordance with US GAAP, in order to recognize a liability at the balance sheet date for the cost to terminate employees involuntarily, the following conditions have to be met:

	•		Management, having the authority to approve the action, commits to a plan of termination

	•		The plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date

	•		The plan establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination (including but not limited to cash payments), in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated, and

	•		Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

As of December 31, 2005, 2006 and 2007, respectively, this requirement had not been met. The effect of eliminating the accrued liability recognized is presented in paragraph (ee) below.

(p) Revenue recognition in Edesur

During 2005, Edesur reached final agreement with the relevant Argentinean authorities regarding an increase in tariffs related to electricity distribution services. This increase is currently pending ratification via formal decree by the executive power of the Argentinean government (PEN). At December 31, 2005 the Company believed were probable that the economic benefits associated with the tariff increase will flow to the enterprise, and that all other revenue recognition criteria established by Chilean GAAP has been met. Accordingly, the effects of the rate increase were included in 2005 revenues under Chilean GAAP. During 2006 there have been no ratification regarding the increase in tariffs; hence, the initial probable belief of the Company was reassessed and is not longer considered. Therefore, under Chilean GAAP the effects of the rates tariffs recognized as of December 31, 2005 has been adjusted and recognized in 2006. However, the effects of the increase in tariffs have not been included in revenues under U.S. GAAP, because management believes that the persuasive evidence of an arrangement criterion under SAB Topic 13 is not met until the agreement is formally ratified by the PEN.

The effect on net income for the years presented is included in (ee) below. Additionally, due to the adjustment recognized in 2006, there are no differences between Chilean and US GAAP in shareholders’ equity in the presented years.

(q) Elimination of capitalized interest in Brazil

Until 1999, under Chilean GAAP, the Company capitalized interest to property, plant and equipment as a result of the creation of a legal reserve specifically permitted in Brazil for the electricity industry by crediting interest expense. Under U.S. GAAP, interest capitalized must be based on actual interest incurred, and as such the effects of the elimination of the interest capitalized to property, plant and equipment and the effects on depreciation expense are included in paragraph (ee) below.

(r) Organizational and start-up costs

Certain costs related to the organization and creation of certain subsidiaries of the Company are deferred, capitalized and amortized under Chilean GAAP.

Under U.S. GAAP, such organizational and start-up costs may not be deferred and must be included in income as incurred.

The effects of the difference are included in paragraph (ee) below.

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(s) Translation of Financial Statements of Investments Outside of Chile

Under Chilean GAAP, in accordance with Technical Bulletin 64 (“B.T. 64”) the financial statements of foreign subsidiaries that operate in countries exposed to significant risks (“unstable” countries), and that are not considered to be an extension of the parent company’s operations, are remeasured into US dollars. The Company’s foreign subsidiaries in Argentina, Peru, Brazil, and Colombia all meet the criteria of foreign subsidiaries that operate in countries exposed to significant risks under BT 64, and are remeasured into US dollars. The Company has remeasured its foreign subsidiaries into US dollars under this requirement as follows:

•		Monetary assets and liabilities are translated at year-end rates of exchange between the US dollar and the local currency.

•		All non-monetary assets and liabilities and shareholder’s equity are translated at historical rates of exchange between the US dollar and the local currency.

•		Income and expense accounts are translated at average rates of exchange between the US dollar and local currency.

•		The effects of any exchange rate fluctuations between the local currency and the US dollar are included in the results of operations for the period.

Under BT 64, the investment in the foreign subsidiary is price-level restated, the effects of which are reflected in income, while the effects of the foreign exchange gains or losses between the Chilean Peso and the US dollar on the foreign investment measured in US dollars, are reflected in equity in the account “Cumulative Translation Adjustment”.

The amounts of foreign exchange losses included in income that is attributable to operations in unstable countries because these amounts have been remeasured into US dollars were ThCh$ 27,270,956, ThCh$ 38,086,824 and ThCh$ 152,609,657 for the years ended December 31, 2005, 2006 and 2007, respectively (See Note 23).

Under US GAAP, the functional currency is determined based on criteria provided by SFAS 52, resulting in the functional currency of an entity being the currency of the primary economic environment of operations of the entity. Differences resulting from fluctuation of exchange rates between foreign currencies and functional currency are recorded in income, whereas translation differences from converting the financial statements from functional currency to the group’s presentation currency are recorded in other comprehensive income.

Company’s Management believes that, foreign currency translation procedures described above are part of the comprehensive basis of preparation of price-level adjusted financial statements required by Chilean GAAP. Inclusion of inflation and translation effects in the financial statements is considered appropriate under the inflationary conditions that have historically affected the Chilean economy, and accordingly, are not eliminated in the reconciliation to U.S. GAAP as permitted by Form 20-F.

(t) Derivative instruments

The Company engages in derivative activity for hedging purposes. These derivatives are considered accounting hedges under Chilean GAAP. Under Chilean GAAP the accounting treatment of hedging activity is similar to the accounting treatment of fair value hedges and cash flow hedges under SFAS 133. The documentation and hedge effectiveness requirements under Chilean GAAP though are not as burdensome as under SFAS 133.

Under US GAAP, if the derivative is designated as a fair value hedge, changes in fair value of the derivative and of the hedged item attributable to the hedged risk are recognized directly in earnings. If the derivative is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative are recorded in Other Comprehensive Income (“OCI”) and are reclassified into earnings in the same period during which the hedged item affects earnings. Ineffectiveness, if any, is reflected directly in earnings. Finally, the gain or loss on a hedging derivative instrument that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation shall be reported in the same manner as a translation adjustment to the extent it is effective as a hedge. The ineffective portion of net investment hedges shall be reported in earnings. If the derivative is not designated as a hedge, or if it does not meet the requirements for hedge accounting under SFAS 133, changes in fair value of the derivative instrument are recorded directly in earnings.

F - 151

Until December 31, 2004 the Company applied hedge accounting only to some derivative instruments under US GAAP. All those derivative instruments where hedge accounting did not apply have been accounted at fair value with changes in fair value recognized directly in earnings. However, hedge accounting was applied under Chilean GAAP to other derivative instruments in addition to those applied under US GAAP in those periods. Starting as of and for the years ended December 31, 2005, 2006 and 2007, the Company applied hedge accounting under both Chilean and US GAAPs to a portfolio of derivative instruments executed in those years.

The Company has designated under Chilean GAAP certain non-derivative financial instruments as hedges of the foreign currency exposure of net investments in foreign operations. The gain or loss on the non-derivative financial instrument that is designated as a hedge is reported as a translation adjustment to the extent it is effective as a hedge, any ineffectiveness is recorded in earnings. This accounting treatment is consistent with SFAS 52 and SFAS 133.

SFAS 133 also requires that certain embedded derivatives be separated and reported on the balance sheet at fair value and be subject to the same rules as other derivative instruments. Current Chilean accounting rules do not consider the existence of derivative instruments embedded in other contracts and therefore they are not reflected in the financial statements under Chilean GAAP.

The effects of the adjustment with respect to financial derivatives, commodity derivatives, and embedded derivatives for the years ended December 31, 2005, 2006 and 2007 are included in the net income and shareholders’ equity reconciliation to US GAAP under paragraph (ee) below.

(u) Fair value of long-term debt assumed

As part of the purchase of the majority ownership interest in Endesa Chile, a portion of the purchase price was allocated to the fair value of long-term debt. As discussed in paragraph (i), up until December 31, 2003, under Chilean GAAP, assets acquired and liabilities assumed were recorded at their carrying value, and the excess of the purchase price over the carrying value was recorded as goodwill. Under U.S. GAAP, assets acquired and liabilities assumed are recorded at their estimated fair values, and the excess of the purchase price over the estimated fair value of the net identifiable assets and liabilities acquired is recorded as goodwill.

The effect on shareholders’ equity and net income for the years presented is included in paragraph (ee) below.

(v) Deferred income

During 2000, fiber optic cable was contributed to the Company in return for granting the contributing company access to the fiber optic network after installation in the Company’s electricity distribution system. Under Chilean GAAP, the contributed assets were recorded at their fair market value, with a corresponding credit recognized as income in 2000. Under U.S. GAAP, the amount was deferred and amortized over the life of the related service contract. This adjustment reverses the gain under Chilean GAAP and records the amortization of the deferred income recognized under U.S. GAAP.

The effect on shareholders’ equity and net income for the years presented is included in (ee) below.

(w) Regulated assets and deferred costs

The electricity sector in Chile and other Latin American countries is regulated pursuant to applicable laws. Most of the Company’s sales are subject to node price regulation, which is designed to ensure an adequate supply of energy at reasonable, determined prices, which considers a variety of factors. The marginal cost pricing model is not solely based upon costs incurred by the Company, and as a result, the requirements of U.S. GAAP under SFAS No.71, “Accounting for the Effects of Certain Types of Regulation”, related to a businesses whose rates are not regulated are not applicable, except for the Company’s operations in Brazil as described below.

As a result of changes in Brazilian Electricity Laws and Regulations, the Company’s distribution subsidiaries in Brazil, Ampla Energia e Serviços S.A. (AMPLA, ex CERJ) and Companhia Energética do Ceará (Coelce), are subject to the provisions of SFAS No. 71 beginning on January 1, 2001. With the new regulations issued by the National Agency of Electric Energy (ANEEL), the rate-setting structure in Brazil is now designed to provide recovery for allowable costs incurred, which will be recovered through future increases in energy tariffs in order to recover losses experienced during the period of Brazilian Federal Government mandated energy rationing from June 1, 2001 to December 31, 2001. The Company estimates remaining costs will be recovered approximately over a period of five years, from the balance date.

F - 152

Accordingly, the Company capitalizes incurred costs as deferred regulatory assets when it is probable that future revenue equal to the costs incurred will be billed and collected as a direct result of the inclusion of the costs in an increased rate set by the regulator. The deferred regulatory asset is eliminated when the Company collects the related costs through billings to customers. ANEEL perform a rate review on an annual basis. If ANEEL excludes all or part of a cost from recovery, that portion of the deferred regulatory assets is impaired and is accordingly reduced to the extent of the excluded cost. The Company has recorded deferred regulatory assets, which it expects to pass on to its customers in accordance with and subject to regulatory provisions.

The regulations also included certain fixes costs or VPA costs, which each distribution company is permitted to defer and pass on to their customers using future rate adjustments. VPA costs are limited by concession contracts to the cost of purchased power and certain other costs and taxes. Due to uncertainty in the Brazilian economy, ANEEL delayed the approval of such VPA rate increases. An Executive Order in October 2001 created a tracking account mechanism, in order to calculate the variation in the VPA costs for future rate adjustment calculation purposes. The Company has not recognized any regulatory assets for VPA costs incurred prior to 2001, because costs incurred prior to January 1, 2001, are not recoverable through the tracking account.

Under Chilean GAAP, the Company recognized revenue and deferred costs related to those assets. Under U.S. GAAP, in accordance with EITF 92-7, “Accounting by Rate Regulated Utilities for the Effects of Certain Alternate Revenue Programs”, revenue amounts not expected to be collected within 24 months, have been deferred.

The effect of deferring revenues expected to be collected after two years is included in (ee) below.

(x) Reorganization of subsidiaries

This adjustment corresponds to the following reorganizations of the Company’s subsidiaries:

	•		Endesa Costanera S.A. and Central Buenos Aires (CBA) during 2001, in which Endesa Costanera acquired the minority interest in CBA from third parties and exchanged shares with Endesa Argentina S.A.

	•		During 2006, the Company’s subsidiary Edegel was merged with Etevensa, an entity which was controlled by Endesa Internacional S.A., the Company’s parent company. This reorganization included a purchase of a minority interest portion in exchange for shares of Edegel and cash.

	•		On April 1, 2006 the Company’s subsidiaries Chilectra S.A. was merged with Elesur S.A. (currently Chilectra S.A.) which is 99.09% owned by Enersis S.A. This reorganization included a purchase of a minority interest portion by cash.

	•		During 2007, the Company’s subsidiaries Betania and Emgesa were merged into a new entity Emgesa (merged entity). (See note 11 (f) vi). The merger was materialized through a stock exchange where the Company exchanged the shares it owned in Betania and Emgesa for shares issued by the new entity Emgesa (merged entity). In addition, as a result of the share-exchange, the Company purchased a portion of minority interest from a third party.

Under Chilean GAAP, the Company recorded these transactions under the pooling of interests method, using the book values of the net assets acquired under merger accounting as prescribed by Technical Bulletin 72 for reorganizations under common control.

Under US GAAP, to the extent minority interest was acquired from a related party, the transaction shall be accounted for as a transaction under common control, using the pooling-of-interest method and thus book values to reflect the increase in participation, with any difference between purchase price consideration and book value of net assets acquired being recorded in shareholders’ equity. However, the purchase of minority interest to the extent that this minority interest was purchased from an unrelated party shall be accounted for under the purchase method pursuant to SFAS 141, measuring the assets acquired and liabilities assumed at fair values.

The effect of this difference on the net income and shareholder’s equity of the Company is included in paragraph (ee) below.

F - 153

(y) Effects of minority interest on the U.S. GAAP adjustments

The net income and shareholders’ equity under Chilean GAAP is adjusted in the U.S. GAAP for the impact of the U.S. GAAP reconciling items on the allocation of income and loss to minority interests. The sum of this adjustment and the minority interest reflected in our consolidated income statement and balance sheet for each period presented under Chilean GAAP represents the allocation of our results and shareholders’ equity to our minority shareholders under U.S. GAAP.

The effect of this adjustment is included in net income and shareholders’ equity reconciliation to US GAAP under paragraph (ee) below.

(z) Amortization of bond discount and deferred debt issuance costs

Under Chilean GAAP the company amortized bond discounts and deferred debt issuance costs using the straight line method over the estimate maturity of the related debt. Under U.S. GAAP, deferred debt issuance costs and bond discounts have to be amortized using the effective interest method. The effect of this adjustment included in the net income and shareholders equity reconciliation to US GAAP under paragraph (ee) below.

(aa) Asset retirement obligations

Under Chilean GAAP, there is no requirement to record obligations associated with the retirement of tangible long-lived assets. Under U.S. GAAP, the Company adopted SFAS No. 143, “Accounting for Asset Retirement Obligations” effective January 1, 2003. Previously, the Company had not been recognizing amounts related to asset retirement obligations under U.S. GAAP. This standard requires the Company to record the fair value of the legal obligation it has to make certain environmental restorations upon closure of its facilities. The fair value of the liability is estimated by discounting the future estimated expenditures related to the restoration. The Company then measures changes in the liability due to passage of time by applying an interest method of allocation to the amount of the liability at the beginning of the period. The interest rate used to measure that change is the credit-adjusted risk-free rate that existed when the liability, or portion thereof, was initially measured. For new liabilities, as well as for increases in fair value due to changes in estimates that are treated like new liabilities, the interest rate used for subsequent valuations is the interest rate that was valid at the time the new liability was incurred or when the change in estimate occurred. That amount is recognized as an increase in the carrying amount of the liability and the expense is classified as an operating item in the statement of income, referred to as accretion expense.

At the same time the standard requires the Company to capitalize the new asset retirement obligation costs arising as the result of additional liabilities incurred, such as the activation of a new generation facility, and subsequently allocate that asset retirement cost to expense over the life of the plant based on the useful life of the plant. At December 31, 2005, 2006 and 2007, the adjustment to US GAAP income from continuing operations represents the accreted interest expense and depreciation of the costs capitalized for the asset retirement obligations.

In Peru, where we have eight hydroelectric plants and one thermoelectric plant, existing legislation includes the requirement for entities with electrical assets to conduct retirement activities when operations cease. In Chile, under certain concession decrees governing six distribution lines, we are similarly required to conduct retirement activities upon cessation of operations.

The effects of this U.S. GAAP adjustment on net income and shareholders’ equity are presented in note (ee) below.

(bb) Creation of Endesa Brasil

On September 30, 2005, certain Brazilian affiliates under common control were reorganized under a newly created holding company, Endesa Brasil S.A. In connection with this reorganization, Enersis transferred its interest in certain investees to Endesa Brasil in exchange for a 53.57% direct and indirect interest therein (see Note 2.a.iii). The Company began accounting for Endesa Brasil as a consolidated subsidiary as of that date. The difference between net assets contributed and received generated a difference if ThCh$ 6,795,425 presented as reserve in equity. Although the transaction received the same accounting treatment under both Chilean GAAP and US GAAP, as a result of the existing adjustment to US GAAP in the subsidiaries which were the subject of the reorganization, an incremental charge to equity of ThCh$ 1,420,056 was recorded.

The effect of this adjustment is included in the net income and shareholders’ equity reconciliation to US GAAP under paragraph (ee) below.

F - 154

(cc) Accounting for the Impairment or Disposal of Long-Lived Assets

In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company evaluates the carrying amount of property, plant and equipment and other long-lived assets, in relation to the operating performance and future undiscounted cash flows of the underlying business. This standard requires that an impairment loss be recognized in the event that facts and circumstances indicate that the carrying amount of an asset may not be fully recoverable, when compared to the estimated future undiscounted cash flows. Impairment is recorded based on estimates of future discounted cash flows, as compared to carrying amounts. For the years ended December 31, 2005, 2006, and 2007 no additional amounts were recorded for impairment under US GAAP.

(dd) Exchange of non-financial assets and acquisition of minority interest

As stated in Note 11 (f) vi, during 2007, the Company’s subsidiaries in Colombia were subject to a reorganization which involved the purchase of a minority interest portion. Under Chilean GAAP, the transaction was accounted for as a transaction under common control using book valued of the involved assets and liabilities, with any differences between net assets given up and net assets received being recorded in other reserves within shareholders’ equity. Under US GAAP, the several steps to materialize the transaction were accounted for as follows:

	a.		The exchange of the participation in Betania against participation of Emgesa (merged entity) was accounted for as an exchange of financial assets, realizing a loss to the extent the transaction did not represent a common control transaction

	b.		To the extent that minority interest was purchased from third parties, the transaction was accounted for under the purchase method pursuant to SFAS 141, with any excess of the purchase price consideration over the fair value of identifiable net assets acquired being accounted for as goodwill.

	c.		To the extent third parties were involved, the disposal of a portion of participation of Emgesa (merged entity) was accounted for as a partial disposal of investments, affecting net income of the period to the extent the fair value of consideration received exceeded the book value of the investment together with the pro-rata portion of goodwill, fair value increment to net assets and accumulated other comprehensive income previously accounted for.

To the extent the transaction was carried out among parties under common control, book values were used and differences between consideration given (step a. and b.) and consideration received (step c.) over the book value of net assets received (step a. and b.) and book value of net assets given up (step c.) being recorded in other reserves of shareholders’ equity.

F - 155

(ee) Effect of conforming to U.S. GAAP

The reconciliation of reported net income required to conform to U.S. GAAP is as follows:


	As of December 31,
	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Net income in accordance with Chilean GAAP		74,584,165			307,121,433			188,376,410

Reversal of amortization of revaluation of property, plant and equipment (paragraph b)		1,206,772			1,009,653			1,008,914
Depreciation of property, plant and equipment and difference in fixed assets value at acquisition date (paragraph c)		(1,172,796	)		(1,208,247	)		(941,192	)
Special Obligations (paragraph d)		—			—			(128,867,428	)
Deferred income taxes (paragraph e)		6,385,846			12,756,498			12,460,703
PIS — COFIN (paragraph f)		—			—			(13,498,514	)
Pension and post-retirement benefits (paragraph g)		1,646			167,004			915,409
Investments in related companies (paragraph h)		(36,326,106	)		5,126,657			2,141,201
Amortization and impairment of goodwill (paragraph i)		59,884,018			59,418,178			59,160,536
Amortization of negative goodwill (paragraph j)		966,615			19,067,114			14,035,838
Capitalized interest (paragraph k)		12,379,696			12,783,397			8,302,776
Depreciation capitalized interest (paragraph k)		(1,814,000	)		(2,188,351	)		(1,461,799	)
Difference foreign exchange capitalized (paragraph k)		7,152			33,735			28,819
Depreciation difference foreign exchange capitalized (paragraph k)		530,125			532,415			514,936
Accumulated deficit during the development stage (paragraph l)		—			(325,438	)		—
Capitalized general and administrative expenses (paragraph n)		(3,216,816	)		(3,147,648	)		(9,756,672	)
Involuntary employee termination benefits (paragraph o)		(18,546	)		(22,871	)		(18,385	)
Revenue recognition in Edesur (paragraph p)		(4,277,821	)		4,373,242			—
Elimination of amortization of capitalized interest in Brazil (paragraph q)		493,421			501,458			436,268
Amortization of organizational and start-up costs (paragraph r)		3,969,110			2,561,453			1,818,152
Derivative instruments operating income (paragraph t)		36,185,238			1,137,349			1,933,724
Derivative instruments non operating income (paragraph t)		(2,061,584	)		(91,411	)		(2,114	)
Fair value of long-term debt assumed (paragraph u)		(1,050,635	)		(29,396	)		(29,395	)
Deferred income (paragraph v)		137,839			140,244			121,784
Regulated assets and deferred cost (paragraph w)		13,231,912			(3,826,352	)		479,460
Reorganization of subsidiaries (paragraph x)		(250,083	)		(254,446	)		(936,438	)
Effects of minority interest on the U.S. GAAP adjustments (paragraph y)		(7,505,287	)		(7,745,228	)		62,097,447
Deferred tax effects on the U.S. GAAP adjustments		(18,198,488	)		(20,213,677	)		(9,727,849	)
Amotization of bond discount and deferred debt issuance cost (paragraph z)		—			2,511,606			(494,011	)
Asset retirement cost — (paragraph aa)		(69,240	)		(12,985	)		(25,048	)
Asset retirement obligations — liabilities (paragraph aa)		159,403			(1,224,564	)		(19,889	)

Net income in accordance with U.S. GAAP		134,161,556			388,950,822			188,053,643


Net income in accordance with U.S. GAAP		134,161,556			388,950,822			188,053,643

Other comprehensive income (loss):
Cumulative translation adjustment determined under Chilean GAAP net of minority interest		(113,524,133	)		16,948,488			(122,816,340	)
Cumulative translation adjustment related to U.S GAAP adjustments net of minority interest		22,703,029			(3,581,052	)		4,597,060
Fair value change of hedging instruments used in cash flow hedges		1,414,993			(48,057,287	)		1,987,463
Application of FAS 158		—			—			(481,754	)


Comprehensive income in accordance with U.S.GAAP		44,755,445			354,260,971			71,340,072

F - 156

The reconciliation to conform shareholders’ equity amounts to U.S. GAAP is as follows:


	2006			2007
	ThCh$			ThCh$

Shareholders’ equity in accordance with Chilean GAAP		3,082,253,169			2,903,209,631

Reversal of revaluation of property, plant and equipment net of accumulated amortization revaluation of property, plant and equipment (paragraph b)		(9,921,971	)		(8,899,184	)
Depreciation of property, plant and equipment and difference in fixed asset value at acquisition date (paragraph c)		(10,749,051	)		(12,267,623	)
Special Obligations (paragraph d)		—			(128,867,428	)
Deferred income taxes (paragraph e)		(196,296,393	)		(175,986,589	)
PIS — COFIN (paragraph f)		—			(13,498,514	)
Pension and post-retirement benefits (paragraph g)		8,653,946			2,900,844
Investments in related companies (paragraph h)		(2,463,392	)		(19,365	)
Goodwill (paragraph i)		515,047,345			568,247,561
Goodwill gross amount (paragraph i)		94,960,410			95,336,070
Negative goodwill (paragraph j)		(364,500,726	)		(306,250,170	)
Capitalized interest (paragraph k)		85,072,971			80,770,462
Exchange difference (paragraph k)		(21,378,757	)		(20,003,141	)
Minimum dividend (paragraph m)		(51,240,560	)		(37,842,392	)
Capitalized general and administrative expenses (paragraph n)		(31,546,887	)		(39,130,341	)
Involuntary employee termination benefits (paragraph o)		41,741			17,888
Elimination of capitalized interest in Brazil (paragraph q)		(5,441,695	)		(4,292,633	)
Organizational and start-up costs (paragraph r)		(8,406,751	)		(5,487,421	)
Derivative instruments (paragraph t)		(35,814,533	)		(30,543,260	)
Fair value of long-term debt assumed (paragraph u)		176,373			146,978
Deferred income (paragraph v)		(2,103,656	)		(1,706,320	)
Regulated assets and deferred cost (paragraph w)		(551,729	)		—
Reorganization of subsidiaries (paragraph x)		14,838,595			30,276,263
Effects of minority interest on the U.S. GAAP adjustments (paragraph y)		205,265,271			272,692,694
Deferred tax effects on the U.S. GAAP adjustments		(7,837,957	)		(11,624,865	)
Amotization of bond discount and deferred debt issuance cost (paragraph z)		2,511,606			2,017,595
Asset retirement cost (paragraph aa)		587,644			1,020,950
Asset retirement obligations — liabilities (paragraph aa)		(2,297,416	)		(2,584,425	)


Shareholders’ equity in accordance with U.S. GAAP		3,258,857,597			3,157,633,265

F - 157

The changes in shareholders’ equity in U.S. GAAP as of each year-end are as follows:


	As of December 31,
	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Shareholders equity in accordance with U.S. GAAP — January 1		2,992,920,758			3,006,539,862			3,258,857,597

Dividends paid during the year		(14,913,701	)		(73,992,114	)		(177,019,145	)
Reversal of dividends payable as of previous balance sheet date		9,270,240			17,277,401			51,240,560
Minimum dividend payable (paragraph m)		(17,277,401	)		(51,240,560	)		(37,842,392	)
Reorganization under common control (paragraph x and bb)		(8,215,479	)		(5,150,688	)		(8,943,427	)
Fair value change of hedging instruments used in cash flow hedges, net of deferred tax		1,414,993			(48,057,287	)		1,987,463
Adoption of FAS 158, Brazilian subsidiaries, net of deferred tax		—			11,162,725			(481,754	)
Cumulative translation adjustment		(90,821,104	)		13,367,436			(118,219,280	)
Net income in accordance with U.S. GAAP for the year		134,161,556			388,950,822			188,053,643


Shareholders equity in accordance with U.S.GAAP — December 31		3,006,539,862			3,258,857,597			3,157,633,265

II. Additional disclosure requirements:

(a) Goodwill and negative goodwill

The following is an analysis of goodwill and negative goodwill, determined on Chilean GAAP basis, as of December 31, 2006 and 2007, respectively:


	As of December 31,
	2006			2007
	ThCh$			ThCh$

Goodwill		1,934,856,476			1,932,312,476
Less: accumulated amortization		(1,231,319,891	)		(1,291,134,063	)


Goodwill, net		703,536,585			641,178,413


Negative goodwill		(510,622,612	)		(512,683,267	)
Less: accumulated amortization		470,867,088			475,288,947


Negative goodwill, net		(39,755,524	)		(37,394,320	)

Amortization expense under Chile GAAP is disclosed in Note 13.

F - 158

(c) Income taxes:

The provision (benefit) for income taxes charged to the results of operations determined in accordance with U.S. GAAP is as follows:


	2005
	Chile			Argentina			Peru			Brazil			Colombia			Total
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Income tax provision under Chilean GAAP
Current income taxes as determined under Chilean GAAP		(13,701,386	)		(6,531,384	)		(26,415,914	)		(27,948,702	)		(80,639,390	)		(155,236,776	)
Deferred income taxes as determined under Chilean GAAP		(30,218,063	)		(6,508,785	)		(2,296,864	)		2,768,480			508,596			(35,746,636	)


Total income tax provision under Chilean GAAP		(43,919,449	)		(13,040,169	)		(28,712,778	)		(25,180,222	)		(80,130,794	)		(190,983,412	)

U.S. GAAP adjustments:
Deferred tax effect of applying SFAS No. 109		256,721			138,476			5,990,649			—			—			6,385,846
Deferred tax effect of adjustments to U.S. GAAP		(11,178,775	)		1,877,464			(1,137,897	)		(7,672,408	)		(86,873	)		(18,198,489	)
U.S. GAAP reclassifications (1)		1,747,136			—			—			—			1,719,123			3,466,259


Total U.S. GAAP adjustments:		(9,174,918	)		2,015,940			4,852,752			(7,672,408	)		1,632,250			(8,346,384	)


Total Income tax provision under U.S. GAAP		(53,094,367	)		(11,024,229	)		(23,860,026	)		(32,852,630	)		(78,498,544	)		(199,329,796	)


	2006
	Chile			Argentina			Peru			Brazil			Colombia			Total
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Income tax provision under Chilean GAAP
Current income taxes as determined under Chilean GAAP		(52,091,521	)		(4,841,426	)		(36,242,876	)		(71,858,002	)		(91,513,462	)		(256,547,287	)
Deferred income taxes as determined under Chilean GAAP		89,843,031			(11,685,157	)		(8,792,806	)		59,784,655			25,140,834			154,290,557


Total income tax provision under Chilean GAAP		37,751,510			(16,526,583	)		(45,035,682	)		(12,073,347	)		(66,372,628	)		(102,256,730	)

U.S. GAAP adjustments:
Deferred tax effect of applying SFAS No. 109		6,267,246			134,009			6,355,243			—			—			12,756,498
Deferred tax effect of adjustments to U.S. GAAP		(7,609,644	)		(3,842,324	)		(8,024,614	)		1,830,848			(2,567,942	)		(20,213,676	)

U.S. GAAP reclassifications (1)		92,404			—			—			—			195,709			288,113


Total U.S. GAAP adjustments:		(1,249,994	)		(3,708,315	)		(1,669,371	)		1,830,848			(2,372,233	)		(7,169,065	)


Total Income tax provision under U.S. GAAP		36,501,516			(20,234,898	)		(46,705,053	)		(10,242,499	)		(68,744,861	)		(109,425,795	)


	2007
	Chile			Argentina			Peru			Brazil			Colombia			Total
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Income tax provision under Chilean GAAP
Current income taxes as determined under Chilean GAAP		(38,247,208	)		(26,513,785	)		(34,017,695	)		(61,188,995	)		(56,808,612	)		(216,776,295	)
Deferred income taxes as determined under Chilean GAAP		(33,827,978	)		(6,759,289	)		33,297			6,259,829			(2,077,000	)		(36,371,141	)


Total income tax provision under Chilean GAAP		(72,075,186	)		(33,273,074	)		(33,984,398	)		(54,929,166	)		(58,885,612	)		(253,147,436	)

U.S. GAAP adjustments:
Deferred tax effect of applying SFAS No. 109		6,415,518			114,733			5,930,452			—			—			12,460,703
Deferred tax effect of adjustments to U.S. GAAP		(8,167,573	)		537,798			(7,977,720	)		5,537,104			342,542			(9,727,849	)

Total U.S. GAAP adjustments:		(1,752,055	)		652,531			(2,047,268	)		5,537,104			342,542			2,732,854


Total Income tax provision under U.S. GAAP		(73,827,241	)		(32,620,543	)		(36,031,666	)		(49,392,062	)		(58,543,070	)		(250,414,582	)


(1)		Certain tax-related income under Chilean GAAP are classified as non-operating, but under US GAAP would be classified as income taxes.

F - 160

Deferred tax assets (liabilities) as of balance sheet dates are summarized as follows:


	2006									2007
	SFAS No. 109									SFAS No. 109
	Applied to			SFAS No.			Total			Applied to			SFAS No.			Total
	Chilean			109 applied			Deferred			Chilean			109 applied			Deferred
	GAAP			to U.S. GAAP			Taxes under			GAAP			to U.S. GAAP			Taxes under
	Balances			Adjustments			SFAS No. 109			Balances			Adjustments			SFAS No. 109
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$
Deferred income tax assets:

Property, plant and equipment		2,941,948			109,536,827			112,478,775			2,579,361			120,457,544			123,036,905
Allowance for doubtful accounts		72,545,891			—			72,545,891			78,634,782			—			78,634,782
Actuarial deficit (companies in Brazil)		11,277,352			—			11,277,352			12,297,971			—			12,297,971
Deferred income		2,401,696			—			2,401,696			2,373,336			—			2,373,336
Provision real estate projects		2,543,050			—			2,543,050			2,430,203			—			2,430,203
Derivative contracts		—			9,864,280			9,864,280			—			9,313,092			9,313,092
Vacation accrual		1,232,038			—			1,232,038			1,264,274			—			1,264,274
Tax loss carryforwards (1)		259,712,688			—			259,712,688			195,709,604			—			195,709,604
Contingencies		91,587,680			—			91,587,680			79,105,066			4,589,495			83,694,561
Salaries for construction-in progress		4,310,885			—			4,310,885			4,291,425			—			4,291,425
Allowance for tariff decree		—			—			—			6,897,750			—			6,897,750
Intangible		—			—			—			1,016,092			—			1,016,092
Valuation allowance		(42,958,129	)		(1,186,363	)		(44,144,492	)		(16,109,759	)		(3,477,139	)		(19,586,898	)
Others		15,411,698			1,339,636			16,751,334			13,041,523			735,864			13,777,387
Provision for employee benefits		5,958,815			(2,942,342	)		3,016,473			4,156,789			(986,287	)		3,170,502


Total deferred income tax assets		426,965,612			116,612,038			543,577,650			387,688,417			130,632,569			518,320,986


Deferred income tax liabilities:

Property, plant and equipment (2)		442,046,191			90,014,428			532,060,619			425,638,818			110,984,264			536,623,082
Severance indemnities		1,801,981			—			1,801,981			1,701,576			—			1,701,576
Regulated assets		31,118,055			(187,588	)		30,930,467			25,690,403			—			25,690,403
Finance costs		16,490,104			—			16,490,104			19,427,055			—			19,427,055
Derivative contracts		—			5,251,174			5,251,174			—			3,444,913			3,444,913
Bond discount		1,587,909			426,973			2,014,882			1,311,724			342,991			1,654,715
Cost of studies		9,043,752			—			9,043,752			8,960,610			—			8,960,610
Imputed interest on construction		4,034,502			—			4,034,502			3,959,224			—			3,959,224
Materials used		871,574			—			871,574			806,387			—			806,387
Exchange difference		20,060,608			—			20,060,608			6,798,246			—			6,798,246
Capitalized expenses		2,288,007			—			2,288,007			2,352,113			—			2,352,113
Capitalized interest		—			28,915,023			28,915,023			—			27,454,019			27,454,019
Others		14,652,117			29,983			14,682,100			21,060,616			31,247			21,091,863


Total deferred income tax liabilities		543,994,800			124,449,993			668,444,793			517,706,772			142,257,434			659,964,206


Net deferred assets (liabilities)		(117,029,188	)		(7,837,955	)		(124,867,143	)		(130,018,355	)		(11,624,865	)		(141,643,220	)


Complementary Account		196,296,393			(196,296,393	)		—			175,986,589			(175,986,589	)		-


Net deferred assets (liabilities)		79,267,205			(204,134,348	)		(124,867,143	)		45,968,234			(187,611,454	)		(141,643,220	)


(1)		Tax loss carryforwards relate primarily to Chilean and Brazilian entities. In accordance with the current enacted tax law in Chile such tax losses may be carried-forward indefinitely.

(2)		In September 2004, the Peruvian tax court ruled invalid the tax basis of certain assets held by Edegel S.A. Based on this ruling, the Company has increased the long-term deferred tax liability ThCh$ 80,429,245, in order to reflect the write-off of the corresponding tax-basis assets held in Peru. As such estimate of future deductible amounts was determined prior to the acquisition of Edegel in connection with the acquisition of Endesa Chile in 1999, the Company has adjusted goodwill by a corresponding amount in accordance with SFAS No. 109 “Accounting for Income Taxes” (“SFAS No. 109”) and EITF 93-7 “Uncertainties Related to Income Taxes in a Business Combination”.

F - 161

Accumulated tax losses by country as of December 31, 2006 and 2007, are as follows:

December 31, 2006

December 31, 2007

Year of

Amount

expiration

Amount

expiration

ThCh$

Chile

1,181,387,591

Do not expire

998,365,867

Do not expire

Argentina

10,812,910

2007/2008

143,333,455

2008/2012

Colombia (a)

77,220,205

2007

—

Brazil

211,058,851

2007/2012

182,723,059

2012

Total

1,480,479,557

1,324,422,381


(a)		During the years ended December 31, 2005 and 2006, management did not expect that the subsidiaries in Colombia will be able to recover deferred tax assets related to tax loss carry forwards. Thus, as of December 31, 2006, a valuation allowance has been recorded, which covered the whole amount of the deferred tax asset related to tax loss carryforwards. However, due to the merger of the Company’s Colombian Subsidiaries, the tax loss carryforwards were applied against income during the year ended December 31, 2007.

A reconciliation of the U.S. GAAP Statutory Income Tax rate to the Company’s effective tax rate on net income is as follows:


	2005
	Chile			Argentina			Peru			Brazil			Colombia			Total
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Statutory US GAAP tax		(33,125,972	)		7,771,672			(15,296,579	)		(17,237,282	)		(33,041,753	)		(90,929,914	)
Effect of higher foreign tax rates		—			8,228,830			(14,846,679	)		(15,706,840	)		(39,018,124	)		(61,342,813	)
Increase (decrease) in rates resulting from:
for tax purposes		4,895,231			(7,175,270	)		—			—			122,679			(2,157,360	)
Non-taxable items		14,586,454			2,128,394			10,135,640			18,215,005			9,591,781			54,657,274
Non-deductible items		(40,376,479	)		(20,487,565	)		(2,502,421	)		(18,101,813	)		(16,083,300	)		(97,551,578	)
Effect of change in valuation allowance		(673,630	)		—			—			—			1,447,967			774,337
Prior years income tax		838,164			—			—			—			—			838,164
Other		(985,271	)		(1,490,290	)		(1,349,987	)		(21,700	)		(3,236,917	)		(7,084,165	)
US GAAP reclassifications (1)		1,747,136			—			—			—			1,719,123			3,466,259


Tax (benefit) expense at effective tax rate		(53,094,367	)		(11,024,229	)		(23,860,026	)		(32,852,630	)		(78,498,544	)		(199,329,796	)


	2006
	Chile			Argentina			Peru			Brazil			Colombia			Total
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Statutory US GAAP tax		(58,205,735	)		(2,417,482	)		(11,249,822	)		(28,977,913	)		(37,038,593	)		(137,889,545	)
Effect of higher foreign tax rates		—			(2,559,686	)		(10,918,944	)		(28,977,912	)		(46,842,928	)		(89,299,470	)
Increase (decrease) in rates resulting from:
for tax purposes		(5,699,395	)		(6,541,127	)		—			—			25,582,390			13,341,868
Non-taxable items		17,762,225			5,932,875			1,723,076			58,367,613			4,184,675			87,970,464
Non-deductible items		(67,774,434	)		(14,634,403	)		(26,354,807	)		(16,600,274	)		(16,017,548	)		(141,381,466	)
Effect of change in valuation allowance		140,610,577			—			—			—			(62,458	)		140,548,119
Prior years income tax		6,509,183			—			—			—			—			6,509,183
Other		3,206,691			(15,075	)		95,444			5,945,987			1,253,892			10,486,939

US GAAP reclassifications (1)		92,404			—			—			—			195,709			288,113


Tax (benefit) expense at effective tax rate		36,501,516			(20,234,898	)		(46,705,053	)		(10,242,499	)		(68,744,861	)		(109,425,795	)


	2007
	Chile			Argentina			Peru			Brazil			Colombia			Total
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Statutory US GAAP tax		(41,950,759	)		(16,113,212	)		(7,775,767	)		(6,303,694	)		(30,519,420	)		(102,662,851	)
Effect of higher foreign tax rates		—			(17,686,209	)		(6,803,359	)		(6,303,694	)		(30,365,782	)		(61,159,044	)
Increase (decrease) in rates resulting from:
for tax purposes		(21,163,460	)		1,097,453			(14,337	)		—			—			(20,080,344	)
Non-taxable items		97,632,701			22,271,833			4,847,780			63,859,533			13,083,912			201,695,758
Non-deductible items		(104,811,652	)		(22,190,408	)		(25,504,480	)		(102,252,106	)		(36,504,252	)		(291,262,898	)
Effect of change in valuation allowance		(4,038,454	)		—			—			—			25,352,804			21,314,350
Prior years income tax		1,996,665			—			—			—			—			1,996,665
Other		(1,492,282	)		—			(781,503	)		1,607,899			409,668			(256,218	)


Tax (benefit) expense at effective tax rate		(73,827,241	)		(32,620,543	)		(36,031,666	)		(49,392,062	)		(58,543,070	)		(250,414,582	)


(1)		US GAAP reclassifications are tax related income that under Chilean GAAP are classified as non-operating income, but under US GAAP would be classified as income taxes.

F-162

Additionally, effective January 1, 2007, the Company adopted FASB Interpretation No. 48: “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109: “Accounting for Income Taxes” (“FAS 109”). The Interpretation prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken within an income tax return. For each tax position, the enterprise must determine whether it is more likely than not that the position will be sustained upon examination by taxing authorities, based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is then measured to determine the amount of benefit to be recognized within the financial statements. No benefits may be recognized for tax positions that do not meet the more likely than not threshold. For tax positions that meet the more likely than not threshold, the benefit to be recognized is the largest amount that is greater than 50% likely of being realized upon ultimate settlement.

As a result of implementing FIN 48, there was no impact on the Company’s financial statements from the adoption of this interpretation. In addition, as of the date of the adoption of FIN 48, the Company did not have any accrued interest and penalties related to unrecognized tax benefits. The Company and its subsidiaries will recognize interest and penalties related to unrecognized tax benefits in interest expense and other operating expense, respectively.

We are potentially subject to income tax audits in numerous jurisdictions in Chile and internationally until the applicable statute of limitations expire. Tax audits by their nature are often complex and can require several years to complete. The following is a summary of tax years, potentially subject to examination, in the significant tax and business jurisdictions in which we operate.


Jurisdiction	Tax Years Subject to Examination
Chile		2003-2007
Argentina		2002-2007
Brazil		2003-2007
Colombia		2005-2007
Peru		2003-2007

F - 163

(d) Segment disclosures

The Company is primarily engaged in the distribution and generation of electricity in Chile, Argentina, Brazil, Colombia and Peru. Enersis provides these and other services through four business segments:

Generation
Distribution
Transmission
Engineering Services and Real Estate
Corporate and other

Generation involves the generation of electricity primarily through its subsidiary Endesa Chile. Distribution involves the supply of electricity to regulated and unregulated customers. Transmission involves the transmission of high voltage the electricity produced by generation companies Engineering Services and Real Estate includes engineering services and real estate development. Corporate and other includes computer-related data processing services and the sale of electricity-related supplies and equipment. The Company’s reportable segments are strategic business units that offer different products and services and are managed separately. The methods of revenue recognition by segment are as follows:

Generation

Revenue is recognized when energy and power output is delivered and capacity is provided at rates specified under contract terms or prevailing market rates.

Distribution — Operating Revenues

Revenue is recognized when energy and power is provided at rates specified under contract terms or prevailing market rates.

Distribution — Non Operating Revenues

Revenue is recognized as services are provided, such as public light posts, telephone poles, and other services related to distribution services.

Transmission

Revenue is recognized as services are provided, through to tolls for the transmission service of high voltage the electricity produced by generation companies..

Engineering Services and Real Estate

Revenue is recognized as services are provided, or when projects are sold.

Corporate and Other

Revenue is recognized as services are provided, or when supplies or equipment are sold.

F - 164

The following segment information has been disclosed in accordance with U.S. reporting requirements; however, the information presented has been determined in accordance with Chilean GAAP:


							Engineering
							services and		Corporate
2005	Generation		Transmission		Distribution		real estate		and other			Eliminations			Consolidated
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$			ThCh$			ThCh$

Sales to unaffiliated customers		947,742,300		14,056,856		2,432,503,410		22,633,334		69,574,227			414,183			3,486,924,310
Intersegment sales		306,514,148		16,673,990		18,585,396		13,937,630		122,686,858			(431,872,273	)		46,525,749


Total revenues		1,254,256,448		30,730,846		2,451,088,806		36,570,964		192,261,085			(431,458,090	)		3,533,450,059


Operating income		452,810,056		14,326,046		421,409,513		3,405,471		(505,819	)		(1,481,541	)		889,963,726


Participation in net income of affiliate companies		14,724,108		—		3,408,393		166,880		164,747,114			(175,649,321	)		7,397,174


Depreciation and amortization		175,993,345		2,966,483		212,312,699		2,198,904		62,283,939			—			455,755,370


Identifiable assets including investment in related companies		5,938,310,259		536,874,481		5,195,639,865		116,488,706		5,276,402,995			(5,820,098,656	)		11,243,617,650


Capital expenditures		65,846,330		352,780		275,010,348		1,543,585		5,347,116			—			348,100,159


								Engineering
								services and		Corporate
2006	Generation		Transmission			Distribution		real estate		and other			Eliminations			Consolidated
	ThCh$		ThCh$			ThCh$		ThCh$		ThCh$			ThCh$			ThCh$

Sales to unaffiliated customers		1,228,746,687		85,946,998			2,696,892,920		36,413,907		71,404,808			—			4,119,405,320
Intersegment sales		355,255,370		68,601,502			20,363,576		17,045,631		143,436,094			(568,262,790	)		36,439,383


Total revenues		1,584,002,057		154,548,500			2,717,256,496		53,459,538		214,840,902			(568,262,790	)		4,155,844,703


Operating income		627,179,827		(814,646	)		503,791,673		10,596,057		(10,322,791	)		1,200,522			1,131,630,642


Participation in net income of affiliate companies		45,256,636		—			22,464,422		126,273		419,403,570			(481,839,080	)		5,411,821


Depreciation and amortization		203,770,406		14,559,129			221,967,138		2,422,318		64,538,367			—			507,257,358


Identifiable assets including investment in related companies		6,248,239,898		494,745,281			5,727,091,588		127,625,355		5,237,344,916			(5,954,019,468	)		11,881,027,570


Capital expenditures		186,351,958		2,033,816			360,721,841		1,752,111		5,223,478			—			556,083,204


								Engineering
								services and		Corporate
2007	Generation			Transmission		Distribution		real estate		and other			Eliminations			Consolidated
	ThCh$			ThCh$		ThCh$		ThCh$		ThCh$			ThCh$			ThCh$

Sales to unaffiliated customers		1,519,129,481			209,542,985		2,805,878,497		35,442,673		60,612,108			—			4,630,605,744
Intersegment sales		395,673,119			51,827,205		16,747,611		19,302,084		142,200,614			(569,680,818	)		56,069,815


Total revenues		1,914,802,600			261,370,190		2,822,626,108		54,744,757		202,812,722			(569,680,818	)		4,686,675,559


Operating income		662,072,640			23,180,273		562,686,523		8,452,765		(4,585,296	)		3,759,788			1,255,566,693


Participation in net income of affiliate companies		(10,699,853	)		—		29,990,247		262,095		291,009,242			(365,322,784	)		(54,761,053	)


Depreciation and amortization		204,838,817			12,391,572		196,841,035		2,562,866		64,184,754			—			480,819,044


Identifiable assets including investment in related companies		6,005,952,696			424,670,546		5,529,312,433		83,146,627		4,935,684,441			(5,541,000,099	)		11,437,766,644


Capital expenditures		210,021,708			162,528		378,287,983		1,430,656		4,152,446			—			594,055,321

F - 165

A summary of activities by geographic area is as follows:


	Chile		Argentina		Peru		Brazil		Colombia		Total
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
2005
Total revenues		1,169,994,549		432,381,788		322,484,538		964,421,327		644,167,857		3,533,450,059


2006
Total revenues		1,329,850,962		529,308,911		394,823,067		1,187,880,330		713,981,433		4,155,844,703


Long lived assets (net) (1)		2,601,413,450		1,089,978,390		1,073,768,221		1,999,399,701		1,921,348,006		8,685,907,768


Total assets		3,655,331,862		1,409,448,181		1,197,079,103		3,218,526,524		2,403,718,051		11,884,103,721


2007
Total revenues		1,672,000,731		564,779,021		359,779,927		1,311,140,787		778,975,093		4,686,675,559


Long lived assets (net) (1)		2,705,339,585		928,594,019		919,360,304		1,798,513,681		1,655,538,527		8,007,346,116


Total assets		3,812,322,629		1,295,898,049		1,018,879,010		3,130,195,643		2,180,471,313		11,437,766,644


(1)		Long-lived assets include property, plant and equipment.

(e) Concentration of risk:

The Company does not believe that it is exposed to any unusual credit risk from any single customer. The Company’s debtors are dependent on the economy in Latin America, which could make them vulnerable to downturns in the economic activity in the countries in which the Company operates.

No single customers accounted for more than 10% of revenues for the years ending December 31, 2005, 2006 and 2007.

(f) Schedule of debt maturity:

Following is a schedule of debt maturity in each of the next five years and thereafter:


	As of
	December 31, 2007
	ThCh$

2008		689,224,125
2009		697,315,381
2010		345,274,845
2011		493,478,977
2012		321,564,335
Thereafter		1,436,981,624


Total		3,983,839,287

(g) Disclosure regarding interest capitalization:


	Year ended December 31,
	2005		2006		2007
	ThCh$		ThCh$		ThCh$

Interest expense incurred		384,527,149		419,622,162		407,285,992
Interest capitalized under Chilean GAAP		—		6,211,632		5,220,177
Interest capitalized under U.S. GAAP		12,379,696		18,995,028		13,522,953

F - 166

(h) Cash flow information:

(i)

The statement of cash flows under Chile GAAP differs in certain respects from the presentation of a statement of cash flow under U.S. GAAP. Marketable securities under Chile GAAP qualify as cash flow equivalent, whereas under U.S. GAAP they are classified as available — for -sale securities (See note 36 II (q))


	As of December 31,
	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Cash flow from operating activities — Chile GAAP and US GAAP		899,097,063			926,226,558			954,434,311


Cash flow from financing activities — Chile GAAP and US GAAP		(820,816,598	)		(319,074,513	)		(178,482,376	)


Cash flow investing activities Chile GAAP		(362,654,441	)		(545,249,093	)		(691,537,359	)
Differences between Chilean GAAP and US GAAP:
Purchase of marketable securities during period		(5,823,226	)		(9,687,242	)		(10,299,039	)

Sale of marketable securities during period		13,997,635			5,823,226			9,687,242


Cash flow investing activities US GAAP		(354,480,032	)		(549,113,109	)		(692,149,156	)

Net cash flow		(276,199,567	)		58,038,936			83,802,779


Effect of price-level restatement and foreign exchange differences		(22,990,227	)		15,657,548			19,449,757


Net increase (decrease) in cash and cash equivalent		(299,189,794	)		73,696,484			103,252,536
Cash and cash equivalent at beginning of the year		607,680,365			389,273,345			462,969,829
Additional cash resulting from creation of Endesa Brasil		80,782,774			—			—


Cash and cash equivalent at end of the year		389,273,345			462,969,829			566,222,365

(ii)

The reconciliation of cash and cash equivalents from Chilean GAAP to U.S. GAAP as of December 31, 2005, 2006 and 2007 is as follows:


	Year ended December 31,
	2005			2006			2007
	ThCh$			ThCh$			ThCh$

Cash and cash equivalent under Chilean GAAP		395,096,571			472,657,071			576,521,404
Elimination of marketable securities		(5,823,226	)		(9,687,242	)		(10,299,039	)


Total cash and cash equivalents under US GAAP		389,273,345			462,969,829			566,222,365

(iii)

Additional disclosures required under U.S. GAAP are as follows:


	Years ended December 31,
	2005		2006		2007
	ThCh$		ThCh$		ThCh$

Interest paid during the year		316,999,583		321,298,206		326,615,508
Income taxes paid during the year		107,426,016		167,453,325		151,919,528

F - 167

Long-term debt

The fair value of long-term debt was based on rates currently available to the Company for debt with similar terms and remaining maturities.

Derivative instruments

Estimates of fair values of derivative instruments for which no quoted prices or secondary market exists have been made using valuation techniques such as forward pricing models, present value of estimated future cash flows, and other modeling techniques. These estimates of fair value include assumptions made by the Company about market variables that may change in the future. Changes in assumptions could have a significant impact on the estimate of fair values disclosed. As a result such fair value amounts are subject to significant volatility and are highly dependent on the quality of the assumptions used.

The estimated fair values of the Company’s financial instruments compared to Chilean GAAP carrying amounts are as follows:


	2006						2007
	Carrying			Fair			Carrying			Fair
	amount			Value			amount			Value
	ThCh$			ThCh$			ThCh$			ThCh$

Cash		107,178,991			107,178,991			81,979,611			81,979,611
Time deposits		303,002,428			303,002,428			404,583,941			404,583,941
Marketable securities		9,788,358			9,788,358			11,797,463			11,797,463
Accounts receivable		901,208,837			901,208,837			987,383,472			987,383,472
Notes receivable, net		8,020,849			8,020,849			11,839,116			11,839,116
Other accounts receivable, net		108,526,853			108,526,853			99,770,021			99,770,021
Amounts due from related companies		14,568,778			14,568,778			152,384,020			152,384,020
Long-term accounts receivable		147,653,188			147,653,188			195,537,843			195,537,843
Accounts payable and other		(634,218,821	)		(634,218,821	)		(565,984,736	)		(565,984,736	)
Notes payable		(146,537,354	)		(146,537,354	)		(180,031,021	)		(180,031,021	)
Long-term debt		(3,859,766,099	)		(4,232,403,090	)		(3,983,839,289	)		(4,174,128,168	)
Derivative instruments		(156,922,494	)		(156,922,494	)		(215,719,609	)		(215,719,609	)

(j) Derivative instruments

The Company is exposed to the impact of market fluctuations in the price of electricity, primary materials such as natural gas, petroleum, coal, and other energy-related products, interest rates, and foreign exchange rates. The Company has policies and procedures in place to manage the risks associated with these market fluctuations on a global basis through strategic contract selection, fixed-rate and variable-rate portfolio targets, net investment hedges, and financial derivatives. All derivatives that do not qualify for the normal purchase and sales exemption under SFAS No. 133 are recorded at their fair value. On the date that swaps, futures, forwards or option contracts are entered into, the Company designates the derivatives as a “hedge”, if the documentation is not appropriate to designate as a “hedge”, the derivative’s mark-to-market adjustment flows through the income statement.

The Company has classified its derivatives into the following general categories: commodity derivatives, embedded derivatives, and financial derivatives. Certain energy and other contracts for the Company’s operations in Chile are denominated in the US dollar. According to SFAS No. 133, an embedded foreign currency derivative should be separated from the host contract because none of the applicable exclusions are met (See Embedded Derivative Contracts below). For purposes of evaluating the functional currency of the Company’s subsidiaries in Argentina, Peru, Brazil, and Colombia, the Company applied BT 64, consistent with the methodology described in Note 36 I paragraph (s), thus the functional currency of these subsidiaries was the US dollar as these subsidiaries were remeasured into US dollars because foreign subsidiaries operate in countries exposed to significant risks as determined under BT 64.

F - 169

The following is a summary of the Company’s derivative contracts as of December 31, 2006 and 2007.


	2006
	Distribution			Generation			Total
	ThCh$			ThCh$			ThCh$

Embedded derivatives		5,549,209			24,821,508			30,370,717
Commodity derivatives		—			(8,303,771	)		(8,303,771	)
Financial derivatives		(157,341,520	)		419,026			(156,922,494	)


Derivative instruments U.S.GAAP
Shareholders equity adjustment		(151,792,311	)		16,936,763			(134,855,548	)


	2007
	Distribution			Generation			Total
	ThCh$			ThCh$			ThCh$

Embedded derivatives		4,026,797			19,247,459			23,274,256
Financial derivatives		(206,873,883	)		(8,845,726	)		(215,719,609	)


Derivative instruments U.S.GAAP
Shareholders equity adjustment		(202,847,086	)		10,401,733			(192,445,353	)

The following is the reconciliation of the Company’s derivative contracts from Chile GAAP to US GAAP:


	2006
	Chile
	GAAP			Adjustment			US GAAP
	ThCh$			ThCh$			ThCh$

Embedded derivatives		—			30,370,717			30,370,717
Commodity derivatives		—			(8,303,771	)		(8,303,771	)
Financial derivatives		(99,041,015	)		(57,881,479	)		(156,922,494	)


Shareholders equity adjustment		(99,041,015	)		(35,814,533	)		(134,855,548	)


	2007
	Chile
	GAAP			Adjustment			US GAAP
	ThCh$			ThCh$			ThCh$

Embedded derivatives		—			23,274,256			23,274,256
Financial derivatives		(161,902,093	)		(53,817,516	)		(215,719,609	)


Shareholders equity adjustment		(161,902,093	)		(30,543,260	)		(192,445,353	)

Certain Company’s generation and distribution commodity contracts in 2006 could be seen as contracts that meet the definition of a derivative under SFAS No. 133 and are required to be accounted for at fair value. These conditions are (i) have an underlying, which is the market price of power at the delivery location and a notional amount specified in the contract; (ii) have no initial payment on entering into the contract; and (iii) have a net settlement provision or have the characteristic of net settlement because power is readily convertible to cash, as it is both fungible and actively traded in the country of generation or country of distribution.

F - 170

The Company assessed that its commodity contracts that are requirements contracts do not meet the above definition because the contracts, do not have notional amounts, as they only have maximum amounts or no specified amounts, and do not include an implicit or explicit minimum amount in a settlement or a default clause. A requirements contract allows the purchaser to use as many units of power as required to satisfy its actual needs for power during the period of the contract, and the party is not permitted to buy more than its actual needs. Such assessment is in line to US GAAP Derivates Implementation Group (“DIG”) response to Issuse A6 (“DIG Issue A6”) Additionally, note that there were no such similar commodity contracts in 2007.

The Company has commodity contracts that are unique, due to their long-term nature and complexity. In establishing the fair value of contracts management makes assumptions using available market data and pricing models. Factors such as commodity price risk are also included in the fair value calculation. Inputs to pricing models include estimated forward prices of electricity and natural gas, interest rates, foreign exchange rates, inflation indices, transmission costs, and others. These inputs become more difficult to predict and the estimates are less precise, the further out in time these estimates are made. As a result, fair values are highly sensitive to the assumptions being used.

Until December 31, 2005 the Company’s Argentine generation entities had access to the Brazilian energy market through an interconnection system between those two countries. Due to action taken by Argentine Regulation Authorities, the exportations of energy from Argentina to Brazil were limited, resulting in a default of most energy supply contracts the Company had entered into. However, during 2006 the Brazilian regulator issued a statement that allowed these interconnection contracts to reduce their amounts of power and energy to be delivered, and to accelerate their maturity date to December 2007. As a result of action taken by Argentine and Brazilian regulation authorities, the contracts the Argentine subsidiaries had entered into ceased to exist as of the December 31, 2006.

Derivative instruments

The use of derivative instruments is one of the Company’s tools to mitigate these risks. Hedging strategies applicable according to the terms established by our Board of Directors are as follows:

(a) Exchange rate risk hedging policy

The exchange rate risk hedging policy for the Enersis Group is based on cash flow. Its objective is to balance foreign currency indexed flows and the assets and liability structure in such currency. In order to mitigate the exchange rate risk, the company has entered into financial derivative contracts, such as cross currency swaps (“CCS”) and currency forwards, which have reduced the impact of fluctuations of the exchange rate applicable to assets and liabilities subject to foreign currency volatility.

(b) Interest rate risk hedging policy

The interest rate risk hedging policy for the Enersis Group is based on maintaining a significant level of debt not subject to interest rate variations. We have set the desired level of fixed interest rate debt (which includes both variable rate instruments that have been swapped to fixed rate, as well as variable rate instruments with a hedging option which limits the interest variability around a desired minimum and maximum band) at approximately 70% of total debt. When the level of variable debt increases significantly above a 30% threshold, the Company uses derivative instruments, typically interest rate swaps and interest rate collars, as a tool to remain close to the desired level of maximum unhedged variable debt.

As a result of the foregoing hedging policies, the Company uses cash flow hedges primarily. The exchange and interest rate hedging policies convert variable cash flows into fixed cash flows. As of December 31, 2007, the maximum amount of time over which future cash flows are hedged is 9 years approximately, which corresponds to a CCS with a notional value of ThCh$ 124,222,500 and a negative fair value of approximately ThCh$ 86,955,750.

F - 171

Under US GAAP, for the years ended December 31, 2005, 2006 and 2007, the derivative portfolio for the Enersis Group is the following:


			Year ended December 31,
			(thousands Ch$)
			2005					2006					2007
Accounting	Risk	Derivative	Notional		Fair			Notional		Fair			Notional		Fair
Classification	Hedged	Instrument	Value		Value			Value		Value			Value		Value
Cash Flow	Exchange	CCS		393,388,748		(108,856,286	)		414,545,474		(152,724,270	)		360,245,250		(196,718,751	)

	Rate	Forward		168,595		—			—		—			—		—

	Interest	Collar		56,198,393		(168,595	)		182,971,795		—			124,222,500		(1,093,158	)

	Rate	Swap		9,385,132		56,198			84,338,562		285,893			72,807,246		(596,268	)

Fair Value	Exchange	CCS		—		—			28,589,343		(3,545,079	)		61,058,360		(16,695,504	)

Hedge	Rate	Forward		—		—			—		—			—		—

	Interest	Collar		—		—			—		—			—		—

	Rate	Swap		—		—			—		—			—		—

Investment	Exchange	CCS		70,809,975		(26,469,443	)		1,429,467		(937,791	)		527,697		(596,268	)

	Rate	Forward		—		—			—		—			—		—

	Interest	Collar		47,768,634		—			—		—			—		—

	Rate	Swap		—		—			—		—			—		—

		Total		577,719,477		(135,438,126	)		711,874,641		(156,921,247	)		618,861,053		(215,699,949	)

In order to allow hedge accounting classification under SFAS 133, it was necessary to fulfill strict documentation and effectiveness requirements. Hedge accounting cannot be applied to derivatives that do not satisfy documentation requirements, and accordingly, such operations are registered according to the general treatment of derivatives (“investment contracts”). As a result, fair value adjustments to investment contracts have a direct effect on the income statement. This is a significant difference when compared to Chilean GAAP, which is more flexible in its documentation requirements.

The Company performs tests on a quarterly basis in order to measure the effectiveness level of its accounting hedge, which may be either a cash flow or fair value hedge. Test results for 2005, 2006 and 2007 revealed that the ineffective portion of our hedging contracts were immaterial.

Net Investment Hedges

Company has designated certain non-derivative instruments as hedges of net investments in foreign operations. Accounting classification for such operations is the same under Chilean GAAP and under US GAAP (see Note 22 (e). The changes in the cumulative translation adjustment are shown net of foreign currency gains or losses of debt designated as hedges for foreign net investments. Gains (Loss) related to debt designated as hedges of Ch$ 29.8 billion, (Ch$ 4.0 billion) and Ch$ 99.5 billion were included in the cumulative translation adjustment for the years ended December 31, 2005, 2006 and 2007, respectively.

The Company is also exposed to foreign currency risk arising from long-term debt denominated in foreign currencies, the majority of which is the US dollar. This risk is mitigated, as a substantial portion of the Company’s revenues are either directly or indirectly linked to the US dollar. Additionally, the Company records the foreign exchange gains and losses on liabilities related to net investments in foreign countries which are denominated in the same currency as the functional currency of those foreign investments. Such unrealized gains and losses are included in the cumulative translation adjustment account in shareholders equity’, and in this way act as a net investment hedge of the exchange risk affecting the investments (see Note ll (c) and Note 22 (e) for further detail).

F - 172

Embedded Derivative Contracts

The Company enters into certain contracts that have embedded features that are not clearly and closely related to the host contract. As specified in SFAS No. 133, bifurcation analysis focuses on whether the economic characteristics and risks of the embedded derivative are clearly and closely related to the economic characteristics and risks of the host contract. In certain identified contracts, the host service contract and the embedded feature are not indexed to the same underlying and changes in the price or value of service will not always correspond to changes in the price of the commodity to which the contract is indexed. U.S. GAAP requires embedded features to be measured at fair value as freestanding instruments. Unless the embedded contracts are remeasured at fair value under otherwise applicable GAAP, the embedded feature must be valued at fair value with changes in fair value reported in earnings as they occur.

Embedded foreign currency derivative instruments are not separated from the host contract and considered a derivative instrument if the host contract is not a financia1 instrument and it requires payments denominated in either: (1) the currency of any substantial party to the contract. (2) the local currency of any substantial party to the contract, (3) the currency used because the primary economic environment is highly inflationary, or (4) the currency in which the good or service is routinely denominated in international commerce.

(k) Presentation to U.S. GAAP

Certain reclassifications and adjustment would be made to the Chilean GAAP income statement in order to present the amounts in accordance with U.S. GAAP. For example, certain non-operating income and expenses under Chilean GAAP would be included in the determination of operating income under U.S. GAAP. Such reclassifications from non-operating to operating income and expense include the following:

	•		Losses arising from contingencies and litigation, and reversals thereof

	•		Gains and losses from disposals of fixed assets

	•		Taxes, other than income taxes

	•		Penalties and fines

In addition to the above, recovered taxes included in other non-operating revenues under Chilean GAAP would be recorded as part of income tax expense under U.S. GAAP, and equity in net income or loss of related companies included in non-operating results under Chilean GAAP would be presented after income taxes and minority interest under U.S. GAAP.

F - 173

The following reclassifications and adjustment disclose amounts in accordance with U.S. GAAP presentation:


	2005
	Chilean			U.S. GAAP						U.S. GAAP
	GAAP			Reclassification			Sub-total			Adjustments			U.S. GAAP
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Operating income		889,963,726			(103,514,322	)		786,449,404			118,046,451			904,495,855
Non-operating expense, net		(455,509,025	)		109,643,710			(345,865,315	)		(2,825,025	)		(348,690,340	)
Income taxes		(190,983,412	)		3,466,258			(187,517,154	)		(11,812,642	)		(199,329,796	)
Minority interest		(185,879,944	)		—			(185,879,944	)		(7,505,287	)		(193,385,231	)
Equity participation in income of related companies, net		—			7,397,174			7,397,174			(36,326,106	)		(28,928,932	)
Amortization of negative goodwill		16,992,820			(16,992,820	)		—			—			—


Net income		74,584,165			—			74,584,165			59,577,391			134,161,556


	2006
	Chilean			U.S. GAAP						U.S. GAAP
	GAAP			Reclassification			Sub-total			Adjustments			U.S. GAAP
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Operating income		1,131,630,642			(127,620,432	)		1,004,010,210			89,528,074			1,093,538,284
Non-operating expense, net		(439,029,814	)		128,447,793			(310,582,021	)		2,702,503			(307,879,518	)
Income taxes		(102,256,730	)		288,113			(101,968,617	)		(7,457,178	)		(109,425,795	)
Minority interest		(289,749,961	)		—			(289,749,961	)		(7,745,229	)		(297,495,190	)
Equity participation in income of related companies, net		—			5,411,822			5,411,822			4,801,219			10,213,041
Amortization of negative goodwill		6,527,296			(6,527,296	)		—			—			—


Net income		307,121,433			—			307,121,433			81,829,389			388,950,822


	2007
	Chilean			U.S. GAAP						U.S. GAAP
	GAAP			Reclassification			Sub-total			Adjustments			U.S. GAAP
	ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

Operating income		1,255,566,693			(186,416,555	)		1,069,150,138			(53,270,235	)		1,015,879,903
Non-operating expense, net		(558,859,177	)		245,599,467			(313,259,710	)		(14,024,034	)		(327,283,744	)
Income taxes		(253,147,436	)		—			(253,147,436	)		2,732,854			(250,414,582	)
Minority interest		(259,605,529	)		—			(259,605,529	)		62,097,447			(197,508,082	)
Equity participation in income of related companies, net		—			(54,761,053	)		(54,761,053	)		2,141,201			(52,619,852	)
Amortization of negative goodwill		4,421,859			(4,421,859	)		—			—			—


Net income		188,376,410			—			188,376,410			(322,767	)		188,053,643

Certain reclassifications and adjustments would be made to the Chilean GAAP balance sheet in order to present Chilean GAAP amounts in accordance with U.S. GAAP. Deferred taxes from depreciation differences that are recorded as short-term under Chilean GAAP would be recorded as long-term under U.S. GAAP. Additionally, the regulated asset recorded during 2001 by Coelce and Ampla, Brazilian subsidiaries, has been partially recorded in trade receivables and an additional component was recorded in current assets by Coelce under Chilean GAAP. However, under U.S. GAAP the presentation of these regulated assets should be classified as non-current assets as the recovery of these assets is not expected in the short term. Assets and liabilities related to financial derivatives have been recorded in the balance sheet at their gross amounts for Chilean GAAP purposes, whereas under US GAAP unrealized derivative gains and losses are recorded in earnings or directly to shareholders’ equity for qualifying cash flow hedges. Under U.S. GAAP, negative goodwill is allocated to long-lived assets instead of a separate line term in the other assets. Until December 31, 2006, investments in subsidiaries in the development stage would be consolidated under US GAAP, as opposed to being presented as equity method investees, under Chilean GAAP (see also Note 3).

F - 174

The effect of the reclassifications and adjustment discloses amounts using a U.S. GAAP presentation:


	2006
	Chilean		U.S. GAAP					U.S. GAAP
	GAAP		Reclassification			Sub-total		Adjustments			U.S. GAAP
	ThCh$		ThCh$			ThCh$		ThCh$			ThCh$

Current assets		1,793,665,542		(56,831,048	)		1,736,834,494		—			1,736,834,494
Property, plant and equipment, net		8,685,907,768		(39,755,524	)		8,646,152,244		6,622,254			8,652,774,498
Other assets		1,404,530,411		8,586,979			1,413,117,390		248,923,751			1,662,041,141


Total assets		11,884,103,721		(87,999,593	)		11,796,104,128		255,546,005			12,051,650,133


Current liabilities		1,506,475,561		(3,156,272	)		1,503,319,289		(3,486,708	)		1,499,832,581
Long-term liabilities		4,213,034,785		(84,843,321	)		4,128,191,464		287,693,556			4,415,885,020
Minority interest		3,082,340,206		—			3,082,340,206		(205,265,271	)		2,877,074,935
Shareholder’s equity		3,082,253,169		—			3,082,253,169		176,604,428			3,258,857,597


Total liabilities and shareholders’ equity		11,884,103,721		(87,999,593	)		11,796,104,128		255,546,005			12,051,650,133


	2007
	Chilean		U.S. GAAP					U.S. GAAP
	GAAP		Reclassification			Sub-total		Adjustments			U.S. GAAP
	ThCh$		ThCh$			ThCh$		ThCh$			ThCh$

Current assets		2,260,687,476		(52,222,233	)		2,208,465,243		—			2,208,465,243
Property, plant and equipment, net		8,007,346,116		(37,394,320	)		7,969,951,796		(2,801,513	)		7,967,150,283
Other assets		1,169,733,052		13,929,790			1,183,662,842		382,102,938			1,565,765,780


Total assets		11,437,766,644		(75,686,763	)		11,362,079,881		379,301,425			11,741,381,306


Current liabilities		1,740,259,178		(1,464,423	)		1,738,794,755		51,323,018			1,790,117,773
Long-term liabilities		4,052,530,788		(74,222,340	)		3,978,308,448		346,247,467			4,324,555,915
Minority interest		2,741,767,047		—			2,741,767,047		(272,692,694	)		2,469,074,353
Shareholder’s equity		2,903,209,631		—			2,903,209,631		254,423,634			3,157,633,265


Total liabilities and shareholders’ equity		11,437,766,644		(75,686,763	)		11,362,079,881		379,301,425			11,741,381,306

F - 175

(l) Employee Benefit Plans

Enersis S.A. and its subsidiaries sponsor various benefit plans for its current and retired employees. A description of such benefits follows:

Severance indemnities

The provision for severance indemnities, included in the account “Accrued expenses” short and long-term is calculated in accordance with the policy set forth in Note 2 (n), using the current salary levels of all employees covered under the severance indemnities agreement, an assumed discount rate 6.5% for the years ended December 31, 2005, 2006 and 2007, and an estimated average service period based on the years of services for the Company.

Benefits for Retired Personnel

Other benefits provided to certain retired personnel of Enersis include electrical service rate subsidies, additional medical insurance and additional post-retirement benefits. Descriptions of these benefits for retired personnel are as follows:

i) Electrical rate service

This benefit is extended only to certain retired personnel of Enersis. These electric rate subsidies result in the eligible retired employees paying a percentage of their total monthly electricity costs, with Enersis paying the difference.

ii) Medical benefits

This benefit provides supplementary health insurance, which covers a portion of health benefits not covered under the institutional health benefits maintained by employees of Enersis. This benefit expires at the time of death of the pensioner.

iii) Supplementary pension benefits

Eligible employees are able to receive a monthly amount designed to cover a portion of the difference between their salary at the point of retirement and the theoretical pension that would have been received had the employee reached the legal retirement age of the Institución de Previsión Social (Institute of Social Welfare). This benefit expires upon the death of the pensioner for the Enersis employee, however, continues to cover the surviving-spouse in the case of employees of the subsidiary Endesa Chile.

iv) Worker’s compensation benefits

Employees that were entitled to Worker’s compensation insurance in prior years for work related injuries receive benefits from the Company when that insurance expires. This benefit continues at the time of death of the pensioner, to cover the surviving-spouse.

The Company has recognized liabilities related to complementary pension plan benefits and other postretirement benefits as stipulated in collective bargaining agreements. Under U.S. GAAP, post-retirement employee benefits have been accounted for in accordance with SFAS No. 87 and SFAS No. 106, with inclusion of prior-period amounts in current year’s income as the amounts are not considered significant to the overall financial statement presentation. The effects of accounting for post-retirement benefits under U.S. GAAP have been presented in paragraph (ee), above. The following data represents Chile GAAP amounts presented under FAS N°132 Revised 2003 Employers’ Disclosures about Pensions and other Postretirement Benefits, for Company’s post-retirement benefit plans.

F - 176


	At December 31, 2006
	Pension Benefits									Other Benefits
	Non
	Contributory			Contributory			Total			Total
	ThCh$			ThCh$			ThCh$			ThCh$
Assets and obligations

Accumulated benefit obligation		(65,291,460	)		(269,922,100	)		(335,213,560	)		(60,341,708	)
Plan assets at fair value		—			258,563,955			258,563,955			—


Unfunded accumulated benefit		(65,291,460	)		(11,358,145	)		(76,649,605	)		(60,341,708	)


Changes in benefit (obligations)

Benefit (obligations) at January 1		(62,361,916	)		(56,737,896	)		(119,099,812	)		(55,665,179	)

Foreign exchange effect		(2,771,585	)		(989,134	)		(3,760,719	)		212,793
Net periodic expense		(7,158,898	)		(370,425	)		(7,529,323	)		(9,428,661	)
Benefits paid		6,823,032			(7,957,679	)		(1,134,647	)		3,898,044
Company contributions		—			20,999,472			20,999,472			1,776,542
Effect of exchange adjustment		—			(2,761,157	)		(2,761,157	)		(1,230,485	)
Recognized net prior service cost (application SFAS 158)		—			29,735,157			29,735,157			(3,368,396	)


Benefit (obligations) at December 31		(65,469,367	)		(18,081,662	)		(83,551,029	)		(63,805,342	)


Funded Status of the Plans
Projected Benefit Obligation		(65,469,367	)		(276,645,617	)		(342,114,984	)		(63,805,342	)
Fair value of the plans assets		—			258,563,955			258,563,955			—


Funded Status		(65,469,367	)		(18,081,662	)		(83,551,029	)		(63,805,342	)


Net liability recorded under U.S. GAAP		(65,469,367	)		(18,081,662	)		(83,551,029	)		(63,805,342	)


Change in the plan assets

Fair value of the plan assets, beginning		—			195,199,826			195,199,826			—
Foreign exchange effect		—			22,888,510			22,888,510			—
Actual return on the plan assets		—			40,991,175			40,991,175			—
Employer contributions		—			17,190,994			17,190,994			—
Plan participant contributions		—			3,667,536			3,667,536			—
Benefits paid		—			(21,374,086	)		(21,374,086	)		—


Fair value of plans assets, ending		—			258,563,955			258,563,955			—


Service cost		(415,682	)		1,054,478			638,796			(23,865	)
Interest cost		(6,904,460	)		(4,293,870	)		(11,198,330	)		(6,426,597	)
Expected return on assets		—			3,586,473			3,586,473			—
Amortization gain (loss)		161,244			6,973,673			7,134,917			(2,978,199	)
Amortization of transition asset		—			(7,691,179	)		(7,691,179	)		—


Net periodic expenses		(7,158,898	)		(370,425	)		(7,529,323	)		(9,428,661	)


	Pension Benefits						Other Benefits
Assumptions as of December 31, 2006	Brazil			Colombia			Chile			Brazil			Colombia

Weighted — discount rate (1)		12.0	%		10.4	%		6.5	%		10.4	%		12.3	%
Weighted — salary increase		5.8	%		5.3	%		3.5	%		—			—
Weighted — return on plan assets (1)		14.1	%		—			—			—			—
Weighted — long term inflation (2)		4.7	%		5.3	%		3.0	%		4.5	%		5.3	%


(1)		Includes fixed long term inflation assumption detail in (2)

F - 177


	At December 31, 2007
	Pension Benefits									Other Benefits
	Non
	Contributory			Contributory			Total			Total
	ThCh$			ThCh$			ThCh$			ThCh$
Assets and obligations

Accumulated benefit obligation		(62,065,477	)		(315,518,838	)		(377,584,315	)		(62,088,313	)
Plan assets at fair value		—			310,739,614			310,739,614			—


Unfunded accumulated benefit		(62,065,477	)		(4,779,224	)		(66,844,701	)		(62,088,313	)


Changes in benefit (obligations)

Benefit (obligations) at January 1		(65,469,367	)		(18,081,662	)		(83,551,029	)		(63,805,342	)

Foreign exchange effect		2,421,427			(890,183	)		1,531,244			1,837,302
Net periodic expense		(5,857,433	)		(652,968	)		(6,510,401	)		(11,764,440	)
Benefits paid		6,717,299			(9,388,536	)		(2,671,237	)		6,327,314
Company contributions		—			10,522,129			10,522,129			1,875,295


Benefit (obligations) at December 31		(62,188,074	)		(18,491,220	)		(80,679,294	)		(65,529,871	)


Funded Status of the Plans
Projected Benefit Obligation		(62,188,074	)		(329,230,834	)		(391,418,908	)		(65,529,871	)
Fair value of the plans assets		—			310,739,614			310,739,614			—


Funded Status		(62,188,074	)		(18,491,220	)		(80,679,294	)		(65,529,871	)


Net liability recorded under U.S. GAAP		(62,188,074	)		(18,491,220	)		(80,679,294	)		(65,529,871	)


Change in the plan assets

Fair value of the plan assets, beginning		—			240,748,561			240,748,561			—
Foreign exchange effect		—			30,463,667			30,463,667			—
Actual return on the plan assets		—			53,055,877			53,055,877			—
Employer contributions		—			6,432,948			6,432,948			—
Plan participant contributions		—			4,068,703			4,068,703			—
Benefits paid		—			(24,030,142	)		(24,030,142	)		—


Fair value of plans assets, ending		—			310,739,614			310,739,614			—


Service cost		(398,286	)		651,298			253,012			107,751
Interest cost		(6,185,964	)		(7,501,481	)		(13,687,445	)		(4,704,967	)
Expected return on assets		—			9,650,128			9,650,128			—
Amortization gain (loss)		726,817			(6,143,241	)		(5,416,424	)		(7,167,224	)
Amortization of transition asset		—			2,690,328			2,690,328			—


Net periodic expenses		(5,857,433	)		(652,968	)		(6,510,401	)		(11,764,440	)


	Pension Benefits						Other Benefits
Assumptions as of December 31, 2007	Brazil			Colombia			Chile			Brazil			Colombia

Weighted — discount rate (1)		11.2	%		9.8	%		6.5	%		12.1	%		9.8	%
Weighted — salary increase		6.1	%		4.8	%		3.5	%		—			—
Weighted — return on plan assets (1)		12.8	%		—			—			—			—
Weighted — long term inflation (2)		4.7	%		4.8	%		3.0	%		5.0	%		4.8	%


(1)		Includes fixed long term inflation assumption detail in (2)

F - 178

(m) Comprehensive income (loss)

In accordance with U.S. GAAP, the Company reports a measure of all changes in shareholders’ equity that result from transactions and other economic events of the period other than transactions with owners (“comprehensive income”). Comprehensive income is the total of net income and other non-owner equity transactions that result in changes in net shareholders’ equity.

The following represents accumulated other comprehensive income balances as of December 31, 2005, 2006 and 2007 (in thousands of constant Chilean pesos as of December 31, 2007).


	2005
	Chilean GAAP					Fair value
	cumulative			Effect of U.S. GAAP		of financial		Accumulated other
	translation			adjustments on cumulative		instruments used in		comprehensive
	adjustment			translation adjustment		cash flow hedge		income (loss)
	ThCh$			ThCh$		ThCh$		ThCh$

Beginning balance		(135,773,731	)		56,919,125		—		(78,854,606	)
Credit (charge) for the period		(113,524,133	)		22,703,029		1,414,993		(89,406,111	)


Ending balance		(249,297,864	)		79,622,154		1,414,993		(168,260,717	)


	2006
	Chilean GAAP			Effect of U.S. GAAP			Application		Fair value
	cumulative			adjustments on			of SFAS 158 in		of financial			Accumulated other
	translation			cumulative			Ampla and Coelce		instruments used			comprehensive
	adjustment			translation adjustment			see Note 36 I g		in cash flow hedge			income (loss)
	ThCh$			ThCh$			ThCh$		ThCh$			ThCh$

Beginning balance		(249,297,864	)		79,622,154			—		1,414,993			(168,260,717	)
Credit (charge) for the period		16,948,488			(3,581,052	)		11,162,725		(48,057,287	)		(23,527,126	)


Ending balance		(232,349,376	)		76,041,102			11,162,725		(46,642,294	)		(191,787,843	)


	2007
	Chilean GAAP			Effect of U.S. GAAP		Application			Fair value
	cumulative			adjustments on		of SFAS 158 in			of financial			Accumulated other
	translation			cumulative		Ampla and Coelce			instruments used			comprehensive
	adjustment			translation adjustment		see Note 36 I g			in cash flow hedge			income (loss)
	ThCh$			ThCh$		ThCh$			ThCh$			ThCh$

Beginning balance		(232,349,376	)		76,041,102		11,162,725			(46,642,294	)		(191,787,843	)
Credit (charge) for the period		(122,816,340	)		4,597,060		(481,754	)		1,987,463			(116,713,571	)


Ending balance		(355,165,716	)		80,638,162		10,680,971			(44,654,831	)		(308,501,414	)

The Company does not recognize deferred tax assets associated with cumulative translation reclassification as the investment they are associated with is permanent in nature.

(n) Goodwill and intangible assets

As discussed in Note 36 paragraph (i), Enersis S.A. adopted SFAS 142, which requires companies to stop amortizing goodwill and certain intangible assets with an indefinite useful life. Instead, SFAS 142 requires that goodwill and intangible assets deemed to have an indefinite useful life be reviewed for impairment upon adoption of SFAS 142, effective January 1, 2002 and annually thereafter. Under SFAS 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. The Company’s reporting units are at the operating subsidiary level. This methodology differs from Enersis’s previous policy, as provided under accounting standards existing at that time of using undiscounted cash flows on an enterprise-wide basis to determine if goodwill was recoverable. Subsequent to adoption in 2002 of SFAS No. 142, due to changes in circumstances, the Company recognized a non-cash charge of ThCh$ 699,100,913 to reduce the carrying value of goodwill.

F - 180

In calculating the impairment charge, the fair values of the impaired reporting units’ goodwill underlying the segments were estimated using discounted cash flow methodology. The ThCh$ 699,100,913 goodwill impairment is associated entirely with goodwill associated with investments in Argentina and Brazil. The impairment reflects the decline in the Company’s revenues and forecasted cash flows in their Argentina and Brazilian subsidiaries and the increase in inflation and interest rates and decreasing expectations of the currencies in Argentina and Brazil. Prior to performing the review for impairment, SFAS 142 required that all goodwill deemed to be related to the entity as a whole be assigned to all of the Company’s reporting units, including the reporting units of the acquirer.

A summary of the changes in the Company’s goodwill under U.S. GAAP during the year ended December 31, 2006 and 2007, by country of operation and segment is as follows:


	2006
			Acquisitions		Translation				Reclassification
Goodwill by Country	January 1,		(Disposals)		adjustment		Impairment		(1)			December 31,
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$			ThCh$

Chile		1,251,487,495		—		—		—		—			1,251,487,495
Colombia		43,067,893		—		751,252		—		(9,100,166	)		34,718,979
Peru		16,660,517		3,430,721		290,168		—		—			20,381,406


Total		1,311,215,905		3,430,721		1,041,420		—		(9,100,166	)		1,306,587,880


	2006
			Acquisitions		Translation
Goodwill by Segment	January 1,		(Disposals)		adjustment		Impairment		Reclassification			December 31,
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$			ThCh$

Generation		1,145,974,443		3,430,721		684,605		—		(9,100,166	)		1,140,989,603
Distribution		165,167,803		—		356,816		—		—			165,524,619
Other		73,658		—		—		—		—			73,658


Total		1,311,215,904		3,430,721		1,041,421		—		(9,100,166	)		1,306,587,880


	2007
			Acquisitions		Translation			Impairment
Goodwill by Country	January 1,		(Disposals)		adjustment			(2)			Reclasification		December 31,
	ThCh$		ThCh$		ThCh$			ThCh$			ThCh$		ThCh$

Chile		1,251,487,495		—		—			(96,353	)		—		1,251,391,142
Colombia		34,718,979		—		(4,547,526	)		—			—		30,171,453
Peru		20,381,406		—		(2,669,324	)		—			—		17,712,082


Total		1,306,587,880		—		(7,216,850	)		(96,353	)		—		1,299,274,677


	2007
			Acquisitions		Translation			Impairment
Goodwill by Segment	January 1,		(Disposals)		adjustment			(2)			Reclasification		December 31,
	ThCh$		ThCh$		ThCh$			ThCh$			ThCh$		ThCh$

Generation		1,140,989,603		—		(4,491,100	)		(96,353	)		—		1,136,402,150
Distribution		165,524,619		—		(2,725,750	)		—			—		162,798,869
Other		73,658		—		—			—			—		73,658


Total		1,306,587,880		—		(7,216,850	)		(96,353	)		—		1,299,274,677


i.		See Note 11 h) iv

ii.		See Note 11 a) (7)

To perform goodwill impairment tests, the Company determines the fair value of its reporting units based on a valuation model which draws on medium-term planning data that the Company uses for internal reporting and planning purposes. The model uses the discounted cash flow approach and market comparables. The fair value of each reporting unit exceeded its carrying amount as of December 31, 2006 and 2007. During the year ended, due to the impairment recorded in the equity’s investee Gas Atacama Holding (see note 11 (j)), a goodwill impairment test was carried out, testing the goodwill recorded over the investment. As a result of the impairment test, the goodwill recorded over Gas Atacama Holding was impaired during the year ended December 31, 2007.

F - 181

The Company’s intangible assets were ThCh$ 97,475,614 and ThCh$ 95,326,429 and related accumulated amortization were ThCh$ 58,856,697 and ThCh$ 59,911,980 as of December 31, 2006 and 2007, respectively. There is no difference between Chilean and U.S. GAAP in the amortization of intangible assets because all of the Company’s intangible assets are subject to amortization, since they relate to finite contracts or concessions.

The estimated amortization expense for the intangible assets with definite lives, which now mainly consist of rights of way for US GAAP purposes (which is equivalent under Chile GAAP) for each of the five succeeding fiscal years is as follows:


Year	Amortization
	ThCh$

2008		5,998,383
2009		5,907,071
2010		3,770,772
2011		2,109,776
2012		1,834,160

(o)

Asset retirement obligations

As discussed in Note 36 paragraph (aa), the Company adopted SFAS No. 143 effective January 1, 2003. The following table describes all changes to the Company’s U.S. GAAP asset retirement obligation during the year ended December 31, 2006 and 2007:


	As of December 31,
	2006			2007
	ThCh$			ThCh$

Balance as of January 1,		(1,072,591	)		(2,297,416	)
Cumulative Translation Adjustment		(261	)		191,576
Liabilities incurred in the period		(879,946	)		(458,696	)
Accretion expense		(344,618	)		(19,889	)


Balance as of December 31,		(2,297,416	)		(2,584,425	)

(p)

Capital lease obligations

Minimum lease obligations for capital lease are presented net of interest expense, and as of December 31, are summarized as follows:


	Year ended December 31,
	2006			2007
	ThCh$			ThCh$

Short-term:
Lease obligations		16,491,226			11,368,008
Less: interest expense		(10,253,751	)		(4,134,550	)


Net short-term lease obligations		6,237,475			7,233,458


Long-term:
Lease obligations		132,415,674			74,737,287
Less: interest expense		(43,679,563	)		(17,138,727	)


Net long-term lease obligations		88,736,111			57,598,560


Weighted-average interest rate		8.47	%		7.18	%

F - 182

Future payments under capital leases are summarized as follows:


	Year ended
	December 31, 2007
	ThCh$

2008		11,368,008
2009		9,448,674
2010		10,782,271
2011		9,137,991
2012		21,354,469
2013 and thereafter		23,413,882


Total		85,505,295

(q)

Available for sale securities

Under US GAAP, the company classifies marketable securities as available for sale securities

Realized gains and losses are determined using the proceeds from sales less the cost of the investment identified to be sold. Gross gains and losses realized on the sale of available for-sale securities for the years ended December 31, 2005, 2006 and 2007 are as follows:


			Gross
			unrealized		Fair
	Cost		gains		value
	ThCh$		ThCh$		ThCh$

Securities available for sale at December 31, 2005		5,823,226		—		5,823,226
Securities available for sale at December 31, 2006		9,687,242		—		9,687,242
Securities available for sale at December 31, 2007		10,299,039		—		10,299,039

Information on sales of available for sale securities during the three years in the period ended December 31, 2005, 2006 and 2007 is as follows:

2005

2006

2007

ThCh$

Proceeds from sales

13,997,635

5,823,226

9,687,242

As of December 2005, 2006 and 2007, the Company has no securities that are considered to be trading securities or debt securities to be held to maturity. The cost of available for sale securities is determined using the average cost method.

(r)

Recent accounting pronouncements

Fair Value Measurement

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement”. SFAS No. 157 which standardizes the measurement of fair value for companies who are required to use a fair value measure for recognition or disclosure purposes. The FASB defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 for financial assets and financial liabilities and November 15, 2008 for non-financial assets and non-financial-liabilities and interim periods within those fiscal years. The Company is currently evaluating the impact, if any, of the adoption of SFAS No. 157.

F - 183

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Options for Financial Assets and Financial Liabilities”. SFAS No. 159 permits an entity, on a contract-by-contract basis, to make an irrevocable election to account for certain types of financial instruments and warranty and insurance contracts at fair value, rather than historical cost, with changes in the fair value, whether realized or unrealized, recognized in earnings. SFAS No. 159 is effective as of the beginning of the entity’s first fiscal year that begins after November 15, 2007. The Company is evaluating the impact, if any, of the adoption of SFAS No. 159.

Business Combinations

In December 2007, FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”). The objective of SFAS No. 141R is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, this Statement establishes principles and requirements for how the acquirer (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquire, (2) Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination SFAS No. 141R shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is evaluating the impact, if any, of the adoption of SFAS No. 141R.

Noncontrolling Interest in Consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements”. SFAS No. 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. According to SFAS No. 160, “a noncontrolling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent”. The objective of SFAS No. 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company is evaluating the impact, if any, of the adoption of SFAS No. 160.

Derivative Instruments and Hedging Activities

In March 2008, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is evaluating the impact, if any, of the adoption of SFAS No. 161.

IFRS Adoption

F - 184

SCHEDULE I

Rule 5-04 of the Securities and Exchange Commission requires presentation of condensed financial statements of the registrant (parent company) when restricted net assets, defined as assets not to be transferred to the parent company in the form of loans, advances or cash dividends of the subsidiary without the consent of a third party.

Following are the parent company Chilean GAAP balance sheets as of December 31, 2006 and 2007 and results of operations and cash flows for the years ended December 31, 2005, 2006 and 2007. Note that there are no differences in shareholders’ equity and net income under Chilean GAAP between the parent company and the consolidated company in any of the presented periods.

ENERSIS S.A.
BALANCE SHEETS

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2007 and thousands of US dollars)


	As of December 31,
	2006			2007			2007
	ThCh$			ThCh$			ThUS$

ASSETS

CURRENT ASSETS:
Cash		174,992			179,342			361
Time deposits		7,463,806			13,292,082			26,751
Notes receivable, net		792			—			—
Other accounts receivable, net		8,772,327			1,650,327			3,321
Amounts due from related companies		102,349,384			188,220,255			378,797
Income taxes recoverable		4,204,604			12,215,173			24,583
Prepaid expenses		22,635			6,432			13
Deferred income taxes		38,921,808			19,231,570			38,704
Other current assets		11,922,391			73,040,942			146,996


Total current assets		173,832,739			307,836,123			619,526


PROPERTY, PLANT AND EQUIPMENT:
Buildings and infrastructure		24,222,977			24,222,818			48,749
Machinery and equipment		3,176,763			3,309,052			6,660
Other assets		803,902			861,640			1,734
Technical appraisal		38,573			38,528			78


Sub — total		28,242,215			28,432,038			57,221

Less: accumulated depreciation		(16,235,387	)		(17,372,491	)		(34,962	)


Total property, plant and equipment, net		12,006,828			11,059,547			22,259


OTHER ASSETS:
Investments in related companies		2,531,675,829			2,460,391,657			4,951,582
Investment in other companies		13,326,869			11,581,217			23,307
Goodwill, net		684,890,775			625,779,400			1,259,392
Negative goodwill, net		(480,792	)		(390,418	)		(786	)
Amounts due from related companies		518,365,497			327,695,685			659,493
Deferred income taxes long-term		—			8,209,361			16,521
Intangibles		1,674,368			1,674,368			3,370
Accumulated amortization		(744,904	)		(828,780	)		(1,668	)
Other assets		64,240,088			59,299,872			119,342


Total other assets		3,812,947,730			3,493,412,362			7,030,553


TOTAL ASSETS		3,998,787,297			3,812,308,032			7,672,338

F - 185

SCHEDULE I

ENERSIS S.A.
BALANCE SHEETS

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2007 and thousands of US dollars)


	As of December 31,
	2006			2007			2007
	ThCh$			ThCh$			ThUS$

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt due to banks and financial institutions		935,221			840,604			1,692
Current portion of bonds payable		9,698,084			8,564,364			17,236
Dividends payable		16,715			387,478			780
Accounts payable		397,032			205,287			413
Miscellaneous payables		167,090			348,244			701
Amounts payable to related companies		38,543,585			162,240,863			326,513
Accrued expenses		5,651,885			5,040,586			10,144
Withholdings		64,546			316,385			637
Income tax		—			121,265			244
Other current liabilities		1,167,359			2,150,224			4,327


Total current liabilities		56,641,517			180,215,300			362,687


LONG -TERM LIABILITIES:
Due to banks and financial institutions		180,112,861			173,911,500			350,000
Bonds payable		379,504,301			332,559,133			669,281
Amounts payable to related companies		108,433,809			—			—
Accrued expenses		22,992,104			17,950,345			36,125
Deferred income taxes		2,758,006			—			—
Other long-term liabilities		166,091,530			204,462,123			411,484


Total long-term liabilities		859,892,611			728,883,101			1,466,890


SHAREHOLDERS’ EQUITY:
Paid-in capital, no par value shares		2,594,015,458			2,594,015,458			5,220,502
Additional paid-in capital		184,861,405			184,861,405			372,037
Other reserves		(255,979,636	)		(435,491,419	)		(876,434	)
Retained earnings		291,354,472			388,982,534			782,834
Net income for the year		307,121,433			188,376,410			379,111
Provisional dividends		(38,924,762	)		(17,534,757	)		(35,289	)
Deficit of subsidiaries in development stage		(195,201	)		—			—


Total shareholders’ equity		3,082,253,169			2,903,209,631			5,842,761


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		3,998,787,297			3,812,308,032			7,672,338

F - 186

SCHEDULE I

ENERSIS S.A.
INCOME STATEMENT

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2007 and thousands of US dollars)


	Years ended December 31,
	2005			2006			2007			2007
	ThCh$			ThCh$			ThCh$			ThUS$

OPERATING INCOME:
SALES		5,031,087			5,043,877			5,010,645			10,084
COST OF SALES		(1,254,845	)		(1,418,416	)		(1,500,984	)		(3,021	)


GROSS PROFIT		3,776,242			3,625,461			3,509,661			7,063

ADMINISTRATIVE AND SELLING EXPENSES		(18,694,028	)		(18,099,914	)		(20,083,426	)		(40,418	)


OPERATING LOSS		(14,917,786	)		(14,474,453	)		(16,573,765	)		(33,355	)


NON-OPERATING INCOME AND EXPENSES:
Interest income		27,817,661			28,473,502			35,975,390			72,401
Equity in income of related companies		190,014,375			427,222,877			291,111,546			585,867
Other non-operating income		13,502,877			7,066,726			12,481,103			25,118
Equity in losses of related companies		(25,283,292	)		(10,384,222	)		(9,789	)		(20	)
Amortization of goodwill		(58,378,541	)		(58,388,173	)		(58,314,582	)		(117,359	)
Interest expense		(62,002,468	)		(52,920,897	)		(54,591,866	)		(109,867	)
Other non-operating expenses		(3,136,364	)		(3,221,075	)		(878,026	)		(1,766	)
Price-level restatements, net		(1,775,690	)		(811,507	)		(6,331,550	)		(12,742	)
Exchange difference, net		(7,169,771	)		(4,764,421	)		(19,551,085	)		(39,347	)


NON-OPERATING RESULT		73,588,787			332,272,810			199,891,141			402,285


INCOME BEFORE INCOME TAXES AND AMORTIZATION OF NEGATIVE GOODWILL		58,671,001			317,798,357			183,317,376			368,930

INCOME TAX		15,870,528			(10,719,988	)		5,019,251			10,101


INCOME BEFORE AMORTIZATION OF NEGATIVE GOODWILL		74,541,529			307,078,369			188,336,627			379,031

AMORTIZATION OF NEGATIVE GOODWILL		42,636			43,064			39,783			80


NET INCOME FOR THE YEAR		74,584,165			307,121,433			188,376,410			379,111

F - 187

SCHEDULE I

ENERSIS S.A.
STATEMENTS OF CASH FLOWS

(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2007 and thousands of US dollars)


	As of December 31,
	2005			2006			2007			2007
	ThCh$			ThCh$			ThCh$			ThUS$

CASH FLOWS FROM OPERATING ACTIVITIES :
Net income for the year		74,584,165			307,121,433			188,376,410			379,111

Charges (credits) to income which do not represent cash flows:
Depreciation		1,201,309			1,364,542			1,446,589			2,911
Amortization of intangibles		83,876			83,876			83,876			169
Equity in income of related companies		(190,014,375	)		(427,222,877	)		(291,111,546	)		(585,867	)
Equity in losses of related companies		25,283,292			10,384,222			9,789			20
Amortization of goodwill		58,378,541			58,388,173			58,314,582			117,359
Amortization of negative goodwill		(42,636	)		(43,064	)		(39,783	)		(80	)
Price-level restatement, net		1,775,690			811,507			6,331,550			12,742
Exchange difference, net		7,169,771			4,764,421			19,551,085			39,347
Other credits to income which do not represent cash flows		(5,114,908	)		(134,960	)		(5,061,638	)		(10,187	)
Other charges to income which do not represent cash flows		7,853,872			3,012,956			956,226			1,925

Changes in assets which affect cash flows:
Decrease in dividends receipts		94,349,840			—			—			—
Decrease in other assets		(2,740,381	)		124,314,098			166,654,589			335,395

Changes in liabilities which affect cash flows:
Increase (decrease) in accounts payable associated with operating results		(4,721,766	)		(13,425,606	)		(2,512,921	)		(5,057	)
Increase in interest payable		(1,038,372	)		6,536,088			11,932,377			24,014
Decrease in income tax payable		(10,105,968	)		12,039,833			(2,511,756	)		(5,055	)
Increase in other accounts payable associated with non-operating results		(41,338	)		(21,280,817	)		(4,627,170	)		(9,312	)
Net decrease in value added tax and other similar taxes payable		(330,443	)		45,717			1,005,149			2,023


Net cash flows provided by operating activities		56,530,169			66,759,542			148,797,408			299,458


CASH FLOWS FROM FINANCING ACTIVITIES:
Loans obtained		—			175,972,374			19,912,551			40,074
Other loans obtained from related companies		1,265,737			35,964,282			41,299,507			83,116
Loans obtained from related companies		27,669,499			10,012,887			—			—
Other sources of financing		487,066			—			—			—
Dividends paid by related company		(9,276,422	)		—			—			—
Dividends paid		(6,129,286	)		(74,720,123	)		(186,375,808	)		(375,085	)
Payment of loans		(163,916,186	)		(46,059,269	)		—			—
Payment of bonds		(158,830	)		(171,391,836	)		(1,538,137	)		(3,094	)
Payment of loans granted by related companies		—			(12,544,422	)		—			—
Payment of other loans obtained from related companies		(42,405,920	)		—			—			—
Other disbursements for financing		(6,409,172	)		—			—			—


Net cash used in financing activities		(198,873,514	)		(82,766,107	)		(126,701,887	)		(254,989	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of property, plant and equipment		—			201,356			—			—
Other receipts from investment		61,320,751			25,806,797			2,901,695			5,840
Proceeds from loans granted to related companies		238,196,180			24,585,175			67,433,082			135,710
Long-term investments		(26,646,364	)		(13,020,863	)		(260,834	)		(525	)
Loans granted to relates companies		(148,166,158	)		(220,746	)		—			—
Other loans to related companies		(10,133,728	)		(6,609,226	)		(22,312,422	)		(44,904	)
Sales of other investment		1,188,192			—			—			—
Additions to property, plant and equipment		(159,421	)		(194,572	)		(564,366	)		(1,136	)
Other disbursement for investments		—			(539,592	)		22,368,439			(45,017	)


Net cash provided by investing activities		115,599,452			30,008,329			24,828,716			49,968


NET CASH FLOW FOR THE YEAR		(26,743,893	)		14,001,764			46,924,237			94,437

EFECT OF PRICE-LEVEL RESTATEMENT ON CASH AND CASH EQUIVALENTS		(221,065	)		26,209			(879,288	)		(1,770	)


NET INCREASE IN CASH AND CASH EQUIVALENTS		(26,964,958	)		14,027,973			46,044,949			92,667

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR		27,095,032			130,074			14,158,047			28,493


CASH AND CASH EQUIVALENTS AT END OF THE YEAR		130,074			14,158,047			60,202,996			121,160

F - 188

SCHEDULE I

ENERSIS S.A.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Expressed in thousands of historical Chilean pesos, except as stated)


											Deficit of
			Additional								subsidiaries in
	Paid-in		paid-in		Other			Retained			development			Interim			Net income
	capital		capital		reserves			earnings			stage			dividends			for the year			Total
	ThCh$		ThCh$		ThCh$			ThCh$			ThCh$			ThCh$			ThCh$			ThCh$

As of January 1, 2005		2,283,404,124		162,725,820		(122,588,994	)		194,378,259			(2,673,664	)		—			44,307,596			2,559,553,142
Transfer of prior year income to retained earnings		—		—		—			41,633,932			2,673,664			—			(44,307,596	)		—
Changes in equity of affiliates		—		—		(5,851,418	)		—			—			—			—			(5,851,418	)
Dividend paid		—		—		—			(13,600,517	)		—			—			—			(13,600,517	)
Cumulative translation adjustment		—		—		(97,676,664	)		—			—			—			—			(97,676,664	)
Reserve Technical Bulletin No. 72		—		—		(6,197,072	)		—			—			—			—			(6,197,072	)
Price-level restatement of capital		82,202,548		5,858,130		(4,413,203	)		7,979,618			—			—			—			91,627,092
Net income for the year		—		—		—			—			—			—			68,016,865			68,016,865


As of December 31, 2005		2,365,606,672		168,583,950		(236,727,351	)		230,391,292			—			—			68,016,865			2,595,871,428


As of December 31, 2005(1)		2,594,015,458		184,861,406		(259,584,324	)		252,636,493			—			—			74,584,165			2,846,513,198


As of January 1, 2006		2,365,606,672		168,583,950		(236,727,351	)		230,391,292			—			—			68,016,865			2,595,871,429
Transfer of prior year income to retained earnings		—		—		—			68,016,865			—			—			(68,016,865	)		—
Investment equity variations		—		—		(10,585,093	)		—			—			—			—			(10,585,093	)
Accumulated deficit of subsidiaries in development stage		—		—		—			—			(181,751	)		—			—			(181,751	)
Final dividend 2005		—		—		—			(32,651,166	)		—			—			—			(32,651,166	)
Cumulative translation adjustment		—		—		14,766,794			—			—			—			—			14,766,794
Reserve Technical Bulletin No. 72		—		—		(825,381	)		—			—			—			—			(825,381	)
Price-level restatement		49,677,740		3,540,263		(4,971,274	)		5,522,778			—			—			—			53,769,506
Interim dividend		—		—		—			—			—			(36,242,795	)		—			(36,242,795	)
Net income for the year		—		—		—			—			—			—			285,960,366			285,960,366


As of December 31, 2006		2,415,284,412		172,124,213		(238,342,305	)		271,279,769			(181,751	)		(36,242,795	)		285,960,366			2,869,881,909


As of December 31, 2006 (1)		2,594,015,458		184,861,405		(255,979,636	)		291,354,472			(195,201	)		(38,924,762	)		307,121,433			3,082,253,169


As of January 1, 2007		2,415,284,412		172,124,213		(238,342,305	)		271,279,769			(181,751	)		(36,242,795	)		285,960,366			2,869,881,909
Transfer of prior year income to retained earnings		—		—		—			249,535,820			181,751			36,242,795			(285,960,366	)		—
Investment equity variations		—		—		(7,702,898	)		—			—			—			—			(7,702,898	)
Final dividend 2006		—		—		—			(159,675,172	)		—			—			—			(159,675,172	)
Reserve Technical Bulletin No. 72		—		—		(56,695,443	)		—			—			—			—			(56,695,443	)
Cumulative translation adjustment		—		—		(115,113,442	)		—			—			—			—			(115,113,442	)
Price-level restatement		178,731,046		12,737,192		(17,637,331	)		27,842,117			—			(190,784	)		—			201,482,240
Interim dividend		—		—		—			—			—			(17,343,973	)		—			(17,343,973	)
Net income for the year		—		—		—			—			—			—			188,376,410			188,376,410


As of December 31, 2007		2,594,015,458		184,861,405		(435,491,419	)		388,982,534			—			(17,534,757	)		188,376,410			2,903,209,631


As of December 31, 2007 (2)		5,220,502		372,037		(876,434	)		782,834			—			(35,289	)		379,111			5,842,761


(1)		Restated in thousands of constant Chilean pesos as of December 31, 2007.

(2)		Expressed in thousands of US$ as of December 31, 2007

The following table presents the dividends received by Enersis individual in the years ended December 31, 2005, 2006 and 2007:

Years ended December 31,

2005

2006

2007

ThCh$

Dividends received

94,343,388

136,940,476

188,142,044

The Company has subsidiaries that must abide by certain financial ratios and covenants that require minimum equity levels or that contain other characteristics that restrict the transfer of assets to the parent company. The amounts of Enersis ’s proportionate share of restricted net assets in consolidated subsidiaries as of December 31, 2007 is
ThCh$ 1,171,236,566.

* * * * * *

F - 189

EXHIBIT INDEX


Exhibit		Description
1.1		By-laws (Estatutos) of Enersis, as amended.*
1.2		By-laws (Estatutos) of ENERSIS S.A., as amended (English translation).*
4.1		Assignment of Rights Contract, dated January 27, 2004, between Endesa Internacional S.A. and Enersis (Spanish version).**
4.2		Assignment of Rights Contract, dated January 27, 2004, between Endesa Internacional S.A. and Enersis (English version).**
8.1		List of Subsidiaries as of December 31, 2006.
12.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
12.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
13.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.


*		Incorporated by reference to Enersis annual report on Form 20-F for the year ended December 31, 2006 filed with the Securities and Exchange Commission on May 14, 2007.

**		Incorporated by reference to Enersis annual report on Form 20-F for the year ended December 31, 2004 filed with the Securities and Exchange Commission on June 10, 2005.

We will furnish to the Securities and Exchange Commission, upon request, copies of any unfiled instruments that define the rights of holders of long-term debt of Enersis.


	As of and for the year ended December 31,
	2003		2004		2005		2006		2007		2007(1)
	(constant Ch$ millions as of December 31, 2007,										(Millions of $)
	except Share and ADS data)
OTHER CONSOLIDATED FINANCIAL DATA

CHILEAN GAAP

Capital Expenditures		301,339		302,110		348,101		556,083		594,055		1,196
Depreciation and amortization of intangibles(2)		471,593		438,840		412,234		453,739		425,427		856

U.S. GAAP

Capital Expenditures		301,339		302,110		348,101		556,083		594,055		1,196
Depreciation and amortization		470,933		416,640		394,869		428,970		407,555		820


	Page

GLOSSARY		3

INTRODUCTION		6

Financial Information		6

Technical Terms		7

Calculation of Economic Interest		7

Forward-Looking Statements		8

PART I		9

Item 1. Identity of Directors, Senior Management and Advisers		9

Item 2. Offer Statistics and Expected Timetable		9

Item 3. Key Information		9

Item 4. Information on the Company		21

Item 4A. Unresolved Staff Comments		71

Item 5. Operating and Financial Review and Prospects		71

Item 6. Directors, Senior Management and Employees		114

Item 7. Major Shareholders and Related Party Transactions		122

Item 8. Financial Information		124

Item 9. The Offer and Listing		125

Item 10. Additional Information		128

Item 11. Quantitative and Qualitative Disclosures about Market Risk		143

PART II		148

Item 13. Defaults, Dividend Arrearages and Delinquencies		148

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds		148

Item 15. Controls and Procedures		148

Item 16. [Reserved]		149

Item 16A. Audit Committee Financial Expert		149

Item 16B. Code of Ethics		149

Item 16C. Principal Accountant Fees and Services		149

Item 16D. Exemptions from Listing Requirements for Audit Committees		151

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Persons		151

PART III		152

Item 17. Financial Statements		152

Item 18. Financial Statements		152

Item 19. Exhibits		153

Exhibit 8.1
Exhibit 12.1
Exhibit 12.2
Exhibit 13.1


(1)		Solely for the convenience of the reader, peso amounts have been translated into dollars at the rate of Ch$496.89 per dollar, the Observed Exchange Rate as of December 31, 2007.

(2)		Does not include goodwill and negative goodwill amortization.


Report of Independent Accountants:

Report of Deloitte Auditores y Consultores Ltda. Independent Registered Accounting Firm — ENERSIS S.A. 2005, 2006 and 2007			F-2

Report of Deloitte Auditores y Consultores Ltda. Independent Registered Accounting Firm — ENERSIS S.A. Internal Control over Financial Reporting as of December 31, 2007			F-4

Report of Ernst & Young Ltda. — Endesa Chile S.A. 2005, 2006 and 2007			F-6

Report of Ernst & Young Ltda. — Endesa Chile S.A. — Internal Control over Financial Reporting as of December 31, 2007			F-7

Report of Deloitte & Touche Ltda. — Emgesa S.A. E.S.P. 2005, 2006 and 2007			F-8

Report of Deloitte & Touche Co. S.R.L. — Endesa Argentina S.A. 2005, 2006 and 2007			F-9

Report of Deloitte Auditores y Consultores Ltda. — Endesa Brasil S.A. 2005, 2006 and 2007			F-10

Report of Independent Registered Public Accounting Firm — Centrais Elétricas Cachoeira Dourada S.A. 2005			F-12

Report of Independent Registered Public Accounting Firm — Central Geradora Termelétrica Fortaleza S.A. 2005			F-13

Report of Independent Registered Public Accounting Firm — CIEN — Companhia de Interconexão Energética 2005			F-14

Report of Independent Registered Public Accounting Firm — Centrais Elétricas Cachoeira Dourada S.A. 2006, and 2007			F-15

Report of Independent Registered Public Accounting Firm — Central Geradora Termelétrica Fortaleza S.A. 2006, and 2007			F-16

Report of Independent Registered Public Accounting Firm — CIEN — Companhia de Interconexão Energética 2006 and 2007			F-17

Report of Deloitte & Touche Co. S.R.L. — Transportadora de Energía S.A. 2005, 2006 and 2007			F-19

Report of Deloitte & Touche Co. S.R.L. — Compañía de Transmisión del Mercosur S.A. 2005, 2006 and 2007			F-20

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2006 and 2007			F-21

Consolidated Statements of Income for the years ended December 31, 2005, 2006 and 2007			F-23

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007			F-24

Consolidated Statements of Changes in Shareholder’s Equity for the years ended December 31, 2005, 2006 and 2007			F-25

Notes to the Consolidated Financial Statements			F-26

SCHEDULE I Financial Statements of Enersis Parent Company			F-186


Ch$		Chilean pesos

US$		United States dollars

UF		The UF is a Chilean inflation-indexed, peso-denominated monetary unit that is set daily in advance based on the previous month’s inflation rate (See Note 2(c)).

ThCh$		Thousand of Chilean pesos

ThUS$		Thousand of United States dollars.


ENERSIS S.A.
By:	/s/ Ignacio Antoñanzas A.
	Name:	Ignacio Antoñanzas A.
	Title:	Chief Executive Officer


2005 Statement of operations reclassifications

	Charges			Credits
	ThCh$			ThCh$

Sales		3,385,164	Administrative and selling expenses		3,385,164
Other non-operating expenses		4,539,012	Income taxes		4,539,012


2006 Balance sheet reclassifications

	Charges			Credits
	ThCh$			ThCh$

Inventories		1,003,656	Other accounts receivable, net		1,395,571
Investments in related companies		352,011	Other long term liabilities		352,011
Income tax recoverable		31,229,752	Other long term assets		27,409,678
Buildings and infrastructure		27,745,609	Income tax payables		3,428,159
Other fixed assets		21,840,519	Technical appraisal		58,408,028
Accumulated depreciation		8,821,900


2006 Statement of income reclassifications

	Charges			Credits
	ThCh$			ThCh$

Interest income		5,260,636	Sales		24,232,820
Income tax		15,247,327	Other non-operating income		5,060,041
Cost of sales		3,745,825	Interest expenses		971
Administrative and selling expenses		5,040,044


(1)		To allow comparison with the years 2007 and 2006, results for the entire year 2005 is presented.


(1)		The balance payable correspond to financing granted to Cien (Compañía Interconexcao Energética S.A.) to purchase machinery and equipment necessary to complete the construction of the second transmission line. The loan is denominated in US dollars accrues interest at rate 8.08% per annum an are due in May, 2012.


(1)		See detail in Note 30 (a)

(2)		This is a subsidy to be collected from the Brazilian Government for investments in the rural area of the state of Ceará.

(3)		The detail of reverse repurchase agreements is as follows:


	For the year ended December 31,
	2005		2006		2007
	Ch$		Ch$		Ch$

Chilean GAAP earnings per share		2.28		9.41		5.77

Basic and diluted U.S. GAAP earnings per share		4.11		11.91		5.76

Total number of common outstanding shares at December 31,		32,651,166		32,651,166		32.651.166

Weighted average number of common shares outstanding (000’s)		32,651,166		32,651,166		32.651.166


	Before			Adjustment			After
Liabilities and Equity:	SFAS 158			SFAS 158			SFAS 158
	ThCh$			ThCh$			ThCh$

Accrued Pension Cost		(113,286,184	)		29,735,155			(83,551,029	)

Other Benefits Cost		(60,436,946	)		(3,368,396	)		(63,805,342	)

Deferred taxes – long term		(115,902,445	)		(8,964,698	)		(124,867,143	)

Accumulated Other Comprehensive Income, net of tax		(209,189,905	)		17,402,063			(191,787,842	)


	2006			2007
Asset Category	Plan asset			Plan asset

Equity securities		22.11	%		25.84	%
Debt securities		70.75	%		67.55	%
Real estate		4.80	%		5.76	%
Other		2.34	%		0.86	%