20-F 1 enia-20191231x20f.htm 20-F enia_Current_Folio_20F

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 20-F 

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

OR

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

For the fiscal year ended December 31, 2019

OR

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

For the transition period from              to  

OR 

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

Date of event requiring this shell company report,

Commission file number: 001-12440

 

 

ENEL AMÉRICAS S.A.

 

(Exact name of Registrant as specified in its charter)

 

 

ENEL AMÉRICAS S.A.

 

(Translation of Registrant’s name into English)

 

CHILE

 

(Jurisdiction of incorporation or organization)

 

Santa Rosa 76, Santiago, Chile

 

(Address of principal executive offices)

 

Nicolás Billikopf, phone: (56-2) 9343-5500, nicolas.billikopf@enel.com, Av. Santa Rosa 76, Piso 15, Comuna de Santiago, Santiago, Chile

 

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

 

 

 

 

 

 

Title of Each Class

 

Trading Symbol(s)

Name of Each Exchange on Which Registered

 

American Depositary Shares Representing Common Stock

ENIA

New York Stock Exchange

Common Stock, no par value *

*

New York Stock Exchange

US$ 600,000,000 4.00% Notes due October 25, 2026

ENIA26A

New York Stock Exchange

US$ 858,000 6.60% Notes due December 1, 2026

ENIA26

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: None

 

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:    76,086,311,036

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      Yes      No

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      No 

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      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes      No

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

 

 

 

 

 

 

Large accelerated filer 

Accelerated filer

Non-accelerated filer     

Emerging growth company   

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act.  

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.     

 

 

 

 

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

 

 

 

                        U.S. GAAP

International Financial Reporting Standards as issued

by the International Accounting Standards Board

Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.      Item 17      Item 18

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      No

 

 

 

Enel Américas Simplified’ Organizational Structure (1) 

As of the date of this Report

 

Picture 11

 


1)

Only principal operating subsidiaries are presented here. The percentage listed in the box for each of Enel Américas’ consolidated subsidiaries represents our economic interest in such subsidiary. Please refer to “Presentation of Information” for an explanation of the calculation of economic interest.

2)

As of December 31, 2019, Enel S.p.A. owned 57.3% of Enel Américas, and as of the date of this Report Enel S.p.A. owns 61.5% of Enel Américas. Upon the termination and settlement of two swap transactions entered into with respect to our ADSs, which are expected to occur on May 11 and May 27, 2020, Enel’s beneficial ownership interest in us is expected to increase to 62.3%. Enel may continue to acquire additional shares under the swap transactions during 2020 to increase its ownership interest in us up to 65% by the end of 2020.  

 

2

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

    

Page

GLOSSARY 

 

4

 

 

 

INTRODUCTION 

 

10

 

 

 

PRESENTATION OF INFORMATION 

 

11

 

 

 

FORWARD-LOOKING STATEMENTS 

 

13

 

 

 

 

 

 

 

 

PART I  

 

 

 

 

 

 

 

Item 1. 

Identity of Directors, Senior Management and Advisers

 

14

 

 

 

 

Item 2. 

Offer Statistics and Expected Timetable

 

14

 

 

 

 

Item 3. 

Key Information

 

14

 

 

 

 

Item 4. 

Information on the Company

 

28

 

 

 

 

Item 4A. 

Unresolved Staff Comments

 

107

0

 

 

 

Item 5. 

Operating and Financial Review and Prospects

 

107

 

 

 

 

Item 6. 

Directors, Senior Management and Employees

 

157

 

 

 

 

Item 7. 

Major Shareholders and Related Party Transactions

 

166

 

 

 

 

Item 8. 

Financial Information

 

168

 

 

 

 

Item 9. 

The Offer and Listing

 

171

 

 

 

 

Item 10. 

Additional Information

 

172

 

 

 

 

Item 11. 

Quantitative and Qualitative Disclosures About Market Risk

 

188

 

 

 

 

Item 12. 

Description of Securities Other Than Equity Securities

 

192

 

 

 

 

PART II  

 

 

 

 

 

 

 

Item 13. 

Defaults, Dividend Arrearages and Delinquencies

 

193

 

 

 

 

Item 14. 

Material Modifications to the Rights of Security Holders and Use of Proceeds

 

193

 

 

 

 

Item 15. 

Controls and Procedures

 

193

 

 

 

 

Item 16. 

Reserved

 

194

 

 

 

 

Item 16A. 

Audit Committee Financial Expert

 

194

 

 

 

 

Item 16B. 

Code of Ethics

 

194

 

 

 

 

Item 16C. 

Principal Accountant Fees and Services

 

195

 

 

 

 

Item 16D. 

Exemptions from the Listing Standards for Audit Committees

 

196

 

 

 

 

Item 16E. 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

196

 

 

 

 

Item 16F. 

Change in Registrant’s Certifying Accountant

 

198

 

 

 

 

Item 16G. 

Corporate Governance

 

198

 

 

 

 

Item 16H. 

Mine Safety Disclosure

 

198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

GLOSSARY

 

 

 

 

 

 

AFP

 

Administradora de Fondos de Pensiones

 

A legal entity that manages a Chilean pension fund.

 

 

 

 

 

ANEEL

 

Agência Nacional de Energia Elétrica

 

Brazilian governmental agency for electric energy.

 

 

 

 

 

Brazilian MME

 

Ministério de Minas e Energia

 

Brazilian Ministry of Mines and Energy.

 

 

 

 

 

BNDES

 

Banco Nacional de Desenvolvimento Econȏmico e Social

 

The National Bank for Economic and Social Development (“BNDES”) is the principal agent of development in Brazil with a focus on sustainable social and environmental development.

 

 

 

 

 

Cachoeira Dourada

 

Enel Green Power Cachoeira Dourada S.A.

 

Brazilian generation subsidiary owned by Enel Brasil. Formerly Centrais Elétricas Cachoeira Dourada S.A.

 

 

 

 

 

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.

 

 

 

 

 

CCEE

 

Câmara de Comercialização de Energia Elétrica

 

Electricity Trade Chamber or Clearing House

 

 

 

 

 

Chilean Stock Exchanges

 

Chilean Stock Exchanges

 

The two stock exchanges located in Chile: the Santiago Stock Exchange and the Electronic Stock Exchange.

 

 

 

 

 

Cien

 

Enel CIEN S.A.

 

Brazilian transmission subsidiary, wholly-owned by Enel Brasil. Formerly Companhia de Interconexão Energética S.A.

 

 

 

 

 

CND

 

Centro Nacional de Despacho

 

Colombian National Dispatch Center in charge of coordinating the efficient operation and dispatch of generation units to satisfy demand.

 

 

 

 

 

CNPE

 

Conselho Nacional de Politica Energética 

 

Brazilian national energy policy council in charge of advising the Brazilian President on energy policy.

 

 

 

 

 

4

CMF

 

Comisión para el Mercado Financiero

 

Chilean Financial Market Commission, the governmental authority that supervises the financial markets. Formerly the Chilean Superintendence of Securities and Insurance or SVS in its Spanish acronym.

 

 

 

 

 

CMSE

 

Comitê de Monitoramento do Setor Elétrico 

 

The Brazilian energy sector monitoring committee that evaluates the continuity and security of the energy supply across the country.

 

 

 

 

 

Codensa

 

Codensa S.A. E.S.P.

 

Colombian distribution subsidiary that operates mainly in Bogotá and whose voting power is controlled by us.

 

 

 

 

 

COES

 

Comité de Operación Económica del Sistema

 

Peruvian entity in charge of coordinating the efficient operation and dispatch of generation units to satisfy demand.

 

 

 

 

 

Colombian MME

 

Ministerio de Minas y Energía

 

Colombian Ministry of Mines and Energy.

 

 

 

 

 

CONPES

 

Consejo Nacional de Política Económica y Social

 

The Colombian council for economic and social policy, the highest national planning authority, and an advisory entity to the government in all aspects related to economic and social development.

 

 

 

 

 

Costanera

 

Enel Generación Costanera S.A.

 

A publicly held Argentine generation company controlled by us. Formerly Central Costanera S.A.

 

 

 

 

 

CREG

 

Comisión de Regulación de Energía y Gas

 

Colombian Commission for the Regulation of Energy and Gas.

 

 

 

 

 

CTM

 

Compañía de Transmisión del Mercosur S.A.

 

Argentine transmission company and subsidiary of Enel Brasil.

 

 

 

 

 

DCV

 

Depósito Central de Valores S.A.

 

Chilean Central Securities Depositary.

 

 

 

 

 

DECSA

 

Distribuidora Eléctrica de Cundinamarca S.A.

 

Colombian distribution company that merged into Codensa in 2016.

 

 

 

 

 

Dock Sud

 

Central Dock Sud S.A.

 

Argentine generation subsidiary.

 

 

 

 

 

Edesur

 

Empresa Distribuidora del Sur S.A.

 

Argentine distribution subsidiary, with a concession area in the southern part of the Buenos Aires greater metropolitan area.

 

 

 

 

 

EEC

 

Empresa de Energía de Cundinamarca S.A. E.S.P.

 

Colombian distribution subsidiary of DECSA, which merged with Codensa in 2016.

 

 

 

 

 

EGP Volta Grande

 

Enel Green Power Volta Grande S.A.

 

Brazilian generation subsidiary located in the State of Minas Gerais, in Brazil, owned by Enel Brasil.

5

 

 

 

 

 

El Chocón

 

Enel Generación El Chocón S.A.

 

Argentine generation company with two hydroelectric plants, El Chocón and Arroyito, both located in the Limay River, Argentina and our subsidiary. Formerly Hidroeléctrica El Chocón S.A.

 

 

 

 

 

Emgesa

 

Emgesa S.A. E.S.P.

 

Colombian generation subsidiary whose voting power is controlled by us.

 

 

 

 

 

Enel

 

Enel S.p.A.

 

An Italian energy company with multinational operations in the power and gas markets. A 61.5% beneficial owner of Enel Américas and our ultimate parent company.

 

 

 

 

 

Enel Américas

 

Enel Américas S.A.

 

Our company, a publicly held limited liability stock corporation incorporated under the laws of the Republic of Chile, headquartered in Chile, with subsidiaries engaged primarily in the generation and distribution of electricity in Argentina, Brazil, Colombia, and Peru, and controlled by Enel. Registrant of this Report. Formerly known as Enersis S.A.

 

 

 

 

 

Enel Brasil

 

Enel Brasil S.A.

 

Brazilian holding company subsidiary. Formerly known as Endesa Brasil S.A.

 

 

 

 

 

Enel Distribution Ceara

 

Companhia Energética Do Ceará S.A.

 

A publicly held Brazilian distribution subsidiary operating in the state of Ceará controlled by Enel Brasil. Also commercially known as Enel Distribuição Ceará.

 

 

 

 

 

Enel Distribution Goias

 

CELG Distribuição S.A.

 

Brazilian distribution subsidiary that operates a concession in the State of Goias, owned by Enel Brasil. Also commercially known as Enel Distribuição Goiás.

 

 

 

 

 

Enel Distribution Peru

 

Enel Distribución Perú S.A.A.

 

A publicly held Peruvian distribution subsidiary, with a concession area in the northern part of Lima. Formerly Empresa de Distribución Eléctrica de Lima Norte S.A. or Edelnor.

 

 

 

 

 

Enel Distribution Rio

 

Ampla Energia e Serviços S.A.

 

A publicly held Brazilian distribution subsidiary operating in Rio de Janeiro, owned by Enel Brasil. Also commercially known as Enel Distribuição Rio.

 

 

 

 

 

6

Enel Distribution Sao Paulo

 

Eletropaulo Metropolitana Eletricidade de São Paulo S.A.

 

A publicly held Brazilian distribution subsidiary operating in Sao Paulo, owned by Enel Investimentos Sudeste S.A., a wholly-owned investment vehicle of Enel Brasil. Also commercially known as Enel Distribuição São Paulo.

 

 

 

 

 

Enel Generation Peru

 

Enel Generación Perú S.A.A.

 

A publicly held Peruvian generation subsidiary. Formerly Edegel S.A.A.

 

 

 

 

 

Enel Generation Piura

 

Enel Generación Piura S.A.

 

A publicly held Peruvian generation subsidiary. Formerly Empresa Eléctrica de Piura S.A. or EEPSA.

 

 

 

 

 

Enel Sudeste

 

Enel Investimentos Sudeste S.A.

 

A Brazilian investment holding company, owned by Enel Brasil, and parent company of Enel Distribution Sao Paulo.

 

 

 

 

 

Enel Trading Argentina

 

Enel Trading Argentina S.R.L.

 

Energy trading subsidiary with operations in Argentina. Formerly Central Comercializadora de Energía S.A. or CEMSA.

 

 

 

 

 

Enel X Brasil

 

Enel X Brasil S.A.

 

A Brazilian subsidiary engaged in developing, implementing and selling products and services that are different from the sale of energy or concessioned energy distribution and associated services in Brazil, owned by Enel Brasil.

 

 

 

 

 

Enel X Colombia

 

Enel X Colombia S.A.S.

 

A Colombian subsidiary engaged in developing, implementing and selling products and services that are different from the sale of energy or concessioned energy distribution and associated services in Colombia, owned by Codensa.

 

 

 

 

 

ENRE

 

Ente Nacional Regulador de la Electricidad

 

Argentine national regulatory authority for the energy sector.

 

 

 

 

 

FONINVEMEM

 

Fondo para Inversiones Necesarias que permitan Incrementar la Oferta de Energía Eléctrica en el Mercado Eléctrico Mayorista

 

Argentine fund created to increase electricity supply in the MEM.

 

 

 

 

 

Fortaleza

 

Central Geradora Termeletrica Fortaleza S.A.

 

Brazilian generation subsidiary that operates in the state of Ceará and is wholly-owned by Enel Brasil. Also commercially known as Enel Geração Fortaleza.

 

 

 

 

 

7

GEB

 

Grupo Energía Bogotá S.A.

 

Colombian state-owned financial and energy holding company, with investments in the electricity generation, transmission, trading and distribution sectors and in the natural gas transmission, distribution and trading sectors. Formerly Empresa Energía de Bogotá S.A. or EEB.

 

 

 

 

 

IFRS

 

International Financial Reporting Standards

 

International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).

 

 

 

 

 

LNG

 

Liquefied Natural Gas.

 

Liquefied natural gas.

 

 

 

 

 

MADS

 

Ministerio de Ambiente y Desarrollo Sostenible

 

Colombian Ministry of Environment and Sustainable Development.

 

 

 

 

 

MEM

 

Mercado Eléctrico Mayorista

 

Wholesale Electricity Market. There are such markets in each of Argentina, Colombia, and Peru.

 

 

 

 

 

MINEM

 

Ministerio de Energia y Minas

 

Peruvian Ministry of Energy and Mines.

 

 

 

 

 

NCRE

 

Non-Conventional Renewable Energy

 

Energy sources which are continuously replenished by natural processes, such as wind, biomass, mini-hydro, geothermal, wave, solar or tidal energy.

 

 

 

 

 

NIS

 

Sistema Interconectado Nacional

 

National interconnected electric system. There are such systems in each of Argentina, Brazil, and Colombia.

 

 

 

 

 

OEF

 

Obligación de Energía Firme  ·

 

Colombian firm energy commitment of generators to guarantee energy in the long term.

 

 

 

 

 

ONS

 

Operador Nacional do Sistema Elétrico

 

National Electric System 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, the Peruvian regulatory electricity authority.

 

 

 

 

 

OSM

 

Ordinary Shareholders’ Meeting

 

 

Ordinary Shareholders’ Meeting

 

 

 

 

 

PLD

 

Preço de Liquidação das Diferenças

 

Settlement price for differences. It is the price assigned to sales and purchases of energy on the Brazilian spot market.

 

 

 

 

 

8

SEE

 

Secretaria de Energia Argentina

 

The Argentine Ministry of Energy and Mines manages the electricity industry through the Secretary of Electric Energy.

 

 

 

 

 

SEIN

 

Sistema Eléctrico Interconectado Nacional

 

Peruvian national interconnected electricity system. 

 

 

 

 

 

SENACE

 

Servicio Nacional de Certificación Ambiental para las Inversiones Sostenibles 

 

Peruvian autonomous national environmental certification service for sustainable investments that reports to the Peruvian Ministry of the Environment.

 

 

 

 

 

TESA

 

Transportadora de Energía S.A.

 

Transmission company with operations in Argentina and a subsidiary of Enel Brasil, our subsidiary.

 

 

 

 

 

UF

 

Unidad de Fomento

 

Chilean inflation-indexed, Chilean peso-denominated monetary unit equivalent to Ch$ 28,309.94  as of December 31, 2019.

 

 

 

 

 

UPME

 

Unidad de Planificación Minero Energética

 

Colombian energy and mining planning unit responsible for planning the expansion of the generation and transmission systems.

 

 

 

 

 

UTA

 

Unidad Tributaria Anual

 

Chilean annual tax unit. One UTA equals 12 Unidades Tributarias Mensuales (“UTM”), a Chilean inflation-indexed monthly tax unit used to define fines, among other purposes. As of December 31, 2019, one UTM was equivalent to Ch$ 49,623 and one UTA was equivalent to Ch$ 595,476.

 

 

 

 

 

VAD

 

Valor Agregado de Distribución

 

Value added from distribution of electricity.

 

 

 

 

 

XM

 

Expertos de Mercado S.A. E.S.P.

 

A subsidiary of Interconexión Eléctrica S.A. (“ISA”), a Colombian company that provides system management in real time services in electrical, financial and transportation sectors.

 

 

 

 

 

 

9

INTRODUCTION

 

As used in this Report on Form 20-F (“Report”), first-person personal pronouns such as “we”, “us” or “our” as well as “Enel Américas” and “the Company” refer to Enel Américas S.A. and our consolidated subsidiaries unless the context indicates otherwise. Unless otherwise noted, our interest in our principal subsidiaries and jointly controlled companies and associates is expressed in terms of our economic interest as of December 31, 2019.

 

We are a Chilean company engaged through our subsidiaries and jointly controlled companies in the electricity generation, transmission, and distribution businesses in Argentina, Brazil, Colombia, and Peru. We participate in the generation and transmission businesses mainly through our subsidiaries Costanera, Dock Sud, and El Chocón in Argentina; Cachoeira Dourada, Fortaleza, EGP Volta Grande, and Cien in Brazil; Emgesa in Colombia; and Enel Generation Peru and Enel Generation Piura in Peru. In the distribution business, our principal subsidiaries are Edesur in Argentina; Enel Distribution Ceara, Enel Distribution Rio, Enel Distribution Sao Paulo, and Enel Distribution Goias in Brazil; Codensa in Colombia; and Enel Distribution Peru in Peru. For additional information relating to our main subsidiaries and associates, please see “Item 4. Information on the Company — C. Organizational Structure — Principal Subsidiaries and Affiliates.”

 

We are a publicly held limited liability stock corporation headquartered in Chile and organized on June 19, 1981, under the laws of the Republic of Chile. During 2016, we completed a corporate reorganization to separate our Chilean businesses from our non-Chilean businesses. As part of this process, the former Enersis S.A. changed its name to Enel Américas S.A. on December 1, 2016. For additional information relating to the company and the corporate reorganization completed in 2016, please see “Item 4. Information on the Company — A. History and Development of the Company — History” and “— The 2016 Reorganization”.

 

As of the date of this Report, Enel S.p.A. (“Enel”), an Italian energy company with multinational operations in the power and gas markets, owns a beneficial interest of 61.5% of us and is our ultimate controlling shareholder. Enel has declared an intention to acquire additional shares of our common stock and ADSs through swap agreements involving our common stock and ADSs entered into with a financial institution to reach up to 65% beneficial ownership, the maximum level permitted by our bylaws, by the end of 2020. Upon the termination and settlement of two swap transactions entered into by Enel with respect to our ADSs, which are expected to occur on May 11 and May 27, 2020, Enel’s beneficial ownership interest in us is expected to increase to 62.3%. Enel may continue to acquire additional shares under the swap transactions during 2020 to increase its ownership interest in us up to 65% by the end of 2020.

 

 

10

PRESENTATION OF INFORMATION

 

Financial Information

 

In this Report, unless otherwise specified, references to “U.S. dollars” or “US$” are to dollars of the United States of America (“United States”); references to “Ar$” or “Argentine pesos” are to the legal currency of Argentina; references to “R$,” or “reais” are to Brazilian reais, the legal currency of Brazil; references to “pesos” or “Ch$” are to Chilean pesos, the legal currency of Chile; references to “CP$” or “Colombian pesos” are to the legal currency of Colombia; references to “soles” are to Peruvian Soles, the legal currency of Peru; and references to “UF” are to Unidades de Fomento. The UF is a Chilean inflation-indexed, peso-denominated, monetary unit that is adjusted daily to reflect changes in the official Consumer Price Index (“CPI”) of the Chilean National Institute of Statistics (Instituto Nacional de Estadísticas or “INE”). The UF is adjusted in monthly cycles. Each day in the period beginning on the tenth day of the current month through the ninth day of the succeeding month, the nominal peso value of the UF is indexed in order to reflect a proportionate amount of the change in the Chilean CPI during the prior calendar month. As of December 31, 2019, one UF was equivalent to Ch$ 28,309.94. The U.S. dollar equivalent of one UF was US$ 37.81 as of December 31, 2019, using the Observed Exchange Rate reported by the Central Bank of Chile (Banco Central de Chile) as of December 31, 2019, of Ch$ 748.74 per US$ 1.00. The U.S. dollar observed exchange rate (dólar observado) (the “Observed Exchange Rate”), which is reported by the Central Bank of Chile and published daily on its webpage, is the weighted average exchange rate of the previous business day’s transactions in the Formal Exchange Market. Unless the context specifies otherwise, all amounts translated from Chilean pesos to U.S. dollars or vice versa, or from UF to Chilean pesos, have been carried out at the rates applicable as of December 31, 2019.

 

Since 2017, our functional currency has been the U.S. dollar, and therefore our consolidated financial statements and other financial information concerning us included in this Report are presented in U.S. dollars. The change of our functional currency was recorded as of January 1, 2017, by translating all items of our consolidated financial statements to the new functional currency, using the exchange rate of Ch$ 669.47 as of January 1, 2017. We also changed the presentation currency of our consolidated financial statements from the Chilean peso to the U.S. dollar. The change in the presentation currency was applied retrospectively as if the U.S. dollar had always been the presentation currency of the consolidated financial statements. The consolidated financial statements for the years ended December 31, 2016 and 2015, were restated in U.S. dollars using the average exchange rate for each period. For further information about the change of our functional currency, please refer to Note 3 of the Notes to our consolidated financial statements.

 

We have prepared our consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). All our subsidiaries are integrated, and all their assets, liabilities, income, expenses, and cash flows are included in the consolidated financial statements after making the adjustments and eliminations related to intra-group transactions. Our participation in associated companies over which we exercise significant influence is included in our consolidated financial statements using the equity method. For detailed information regarding consolidated entities, jointly controlled entities and associated companies, see Notes 2.4 and 2.5 of the Notes to our consolidated financial statements.

 

This Report may contain translations of certain Chilean peso amounts into U.S. dollars at specified rates. Unless otherwise indicated, the Chilean peso equivalent for information in U.S. dollars is based on the Observed Exchange Rate for December 31, 2019, as defined in “Item 3. Key Information — A. Selected Financial Data — Exchange Rates”. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos. No representation is made that the Chilean peso or U.S. dollar amounts that are shown in this Report could have been or could be converted into U.S. dollars or Chilean pesos at such rate or at any other rate. See “Item 3. Key Information — A. Selected Financial Data — Exchange Rates”.

 

Technical Terms

 

References to “TW” are to terawatts (1012 watts or a trillion watts); references to “GW” and “GWh” are to gigawatts (109 watts or a billion watts) and gigawatt hours, respectively; references to “MW” and “MWh” are to megawatts (106 watts or a million watts) and megawatt hours, respectively; references to “kW” and “kWh” are to kilowatts (103 watts or a thousand watts) and kilowatt hours, respectively; references to “kV” are to kilovolts, and references to “MVA” are to megavolt amperes. References to “BTU” and “MBTU” are to British thermal unit and million British thermal units, respectively. A “BTU” is an energy unit equal to approximately 1,055 joules. References to “Hz” are to hertz, and references to “mtpa” are to metric tons per annum. Unless otherwise indicated, statistics provided in this

11

Report with respect to the installed capacity of electricity generation facilities are expressed in MW. One TW equals 1,000 GW, one GW equals 1,000 MW, and one MW equals 1,000 kW.  The installed capacity we are presenting in this Report corresponds to the gross installed capacity, without considering the MW that each power plant consumes for its own operation.

 

Statistics relating to aggregate annual electricity production are expressed in GWh and based on a year of 8,760 hours, except for leap years, which are based on 8,784 hours. Statistics relating to installed capacity and production of the electricity industry do not include electricity of self-generators.

 

Energy losses experienced by generation companies during transmission are calculated by subtracting the number of GWh of energy sold from the number of GWh of energy generated (excluding their own energy consumption and losses on the part of the power plant), within a given period. Losses are expressed as a percentage of total energy generated.

 

Energy losses during distribution are calculated as the difference between total energy purchased (GWh of electricity demand, including own generation) and the energy sold excluding tolls and energy consumption not billed (also measured in GWh), within a given period. Distribution losses are expressed as a percentage of total energy purchased. Losses in distribution arise from illegally tapped energy as well as technical losses.

 

Calculation of Economic Interest

 

References are made in this Report to the “economic interest” of Enel Américas in its related companies. We could have direct and indirect interest in such companies. In circumstances in which we do not directly own an interest in a related company, our economic interest in such ultimate related company is calculated by multiplying the percentage of economic interest in a directly held related company by the percentage of economic interest of any entity in the ownership chain of such related company. For example, if we directly own a 6% equity stake in an associated company and 40% is directly held by our 60%-owned subsidiary, our economic interest in such associate would be 60% times 40% plus 6%, equal to 30%.

 

Rounding

 

Figures included in this Report have been rounded for ease of presentation. It is possible, due to rounding, that the sums in tables do not exactly equal the sums of the entries.

12

FORWARD-LOOKING STATEMENTS

 

This Report contains statements that are or may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements appear throughout this 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 of operations;

 

our dividend policy;

 

the future impact of competition and regulation;

 

political and economic conditions in the countries in which we or our related companies 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 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:

 

demographic developments, political events, economic fluctuations, social unrest, public health crises and pandemics, and interventionist measures by authorities in the markets in South America in which we operate;

 

hydrology, droughts, flooding, and other weather conditions;

 

changes in the environmental regulations and the regulatory framework of the electricity 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; 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 registered public accounting firm has not examined or compiled the forward-looking statements and, accordingly, does 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 Report to reflect later events or circumstances or the occurrence of unanticipated events, except as required by law.

 

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.

 

 

 

13

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 selected consolidated financial data should be read in conjunction with our consolidated financial statements included in this Report. The selected consolidated financial data as of December 31, 2019, and 2018 and for each of the years in the three-year period ended December 31, 2019, are derived from our audited consolidated financial statements included in this Report. The selected consolidated financial data as of December 31, 2017, 2016, and 2015, and for the years ended December 31, 2016, and 2015 are derived from our consolidated financial statements not included in this Report. Our consolidated financial statements were prepared in accordance with IFRS, as issued by the IASB.

Our consolidated financial statements are presented in U.S. dollars, because of the change of our functional currency from Chilean pesos to U.S. dollars in 2017. The change of our functional currency was recorded as of January 1, 2017, by translating all items of our consolidated financial statements to the new functional currency, using the closing exchange rate at the date of exchange. We also changed our presentation currency of our consolidated financial statements from Chilean pesos to U.S. dollars. The change in the presentation currency was applied retrospectively as if the U.S. dollar had always been the presentation currency of the consolidated financial statements. The consolidated statement of financial position data as of December 31, 2016, and 2015 were translated into U.S. dollars using the closing U.S. dollar Observed Exchange Rate (dólar observado) of Ch$ 669.47 and Ch$710.16 per US$ 1.00, respectively. The consolidated statement of comprehensive income data for the years ended December 31, 2016, and 2015 were translated into U.S. dollars using the average exchange rates of Ch$ 676.19 and Ch$ 654.71 per US$ 1.00, respectively.  For further information about the change of our functional currency please refer to Note 3 of the Notes to our consolidated financial statements. The Observed Exchange Rate, which is reported and published daily on the Central Bank of Chile’s web page, corresponds to the weighted-average exchange rate of the previous business day’s transactions in the Formal Exchange Market. For more information concerning historical exchange rates, see “— Exchange Rates” below. Amounts in the tables are expressed in millions of U.S. dollars, except for ratios, operating data and data for shares and American Depositary Shares (“ADS”).

14

The following tables set forth our selected consolidated financial data for the years indicated and the operating data of our principal subsidiaries:

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the year ended December 31,

 

    

2019

    

2018

    

2017

    

2016

    

2015

 

 

(US$ millions)

 

 

Consolidated Statement of Comprehensive Income Data

 

 

 

 

 

 

 

 

 

 

Revenues and other operating income

 

14,314

 

12,990

 

10,438

 

7,643

 

8,097

Operating costs (1)

 

(11,545)

 

(10,555)

 

(8,219)

 

(5,843)

 

(6,181)

Operating income from continuing operations

 

2,769

 

2,435

 

2,219

 

1,800

 

1,917

Financial results (2)

 

(378)

 

(333)

 

(582)

 

(439)

 

43

Other gains

 

14

 

 1

 

 5

 

12

 

(10)

Share of profit (loss) of associates and joint venture accounted for using the equity method

 

 1

 

 2

 

 3

 

 3

 

 5

Income from continuing operations before income tax

 

2,406

 

2,105

 

1,646

 

1,376

 

1,955

Income tax expenses, continuing operations

 

(236)

 

(438)

 

(519)

 

(531)

 

(800)

Net Income from continuing operations

 

2,170

 

1,667

 

1,127

 

845

 

1,155

Profit after tax from discontinued operations

 

 —

 

 —

 

 —

 

170

 

593

Net income

 

2,170

 

1,667

 

1,127

 

1,015

 

1,748

Net income attributable to the parent Company

 

1,614

 

1,201

 

709

 

566

 

1,011

Net income attributable to non-controlling interests

 

556

 

466

 

417

 

448

 

738

Basic and diluted earnings from continuing operations per average number of shares (US$ per share)

 

0.025

 

0.021

 

0.012

 

0.009

 

0.013

Basic and diluted earnings from continuing operations per average number of ADS (US$ per ADS)

 

1.233

 

1.045

 

0.617

 

0.453

 

0.638

Basic and diluted earnings from discontinued operations per average number of shares (US$ per share)

 

 

 

 

0.002

 

0.008

Basic and diluted earnings from discontinued operations per average number of ADS (US$ per ADS)

 

 

 

 

0.116

 

0.392

Total basic and diluted earnings per average number of shares (US$ per share)

 

0.025

 

0.021

 

0.012

 

0.009

 

0.013

Total basic and diluted earnings per average number of ADSs (US$ per ADS)

 

1.233

 

1.045

 

0.617

 

0.453

 

0.638

Cash dividends per share (US$ per share)

 

0.008

 

0.006

 

0.005

 

0.007

 

0.010

Cash dividends per ADS (US$ per ADS)

 

0.419

 

0.309

 

0.249

 

0.332

 

0.509

Weighted average number of shares of common stock (millions)

 

65,481

 

57,453

 

57,453

 

49,769

 

49,093

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Financial Position Data

 

 

 

 

 

 

 

 

 

 

Total assets

 

29,776

 

27,396

 

20,169

 

16,851

 

21,754

Non-current liabilities

 

10,794

 

8,914

 

6,956

 

5,150

 

3,878

Equity attributable to the parent company

 

9,966

 

6,724

 

6,481

 

6,200

 

8,486

Equity attributable to non-controlling interests

 

2,280

 

2,108

 

1,798

 

1,680

 

3,047

Total equity

 

12,246

 

8,832

 

8,279

 

7,880

 

11,532

Capital stock (3)

 

9,784

 

6,763

 

6,763

 

6,904

 

8,173

 

 

 

 

 

 

 

 

 

 

 

Other Consolidated Financial Data

 

 

 

 

 

 

 

 

 

 

Capital expenditures (CAPEX) (4)

 

1,659

 

1,541

 

1,371

 

1,230

 

2,081

Depreciation, amortization and impairment losses (5)

 

1,225

 

923

 

728

 

630

 

550


(1)

Operating expenses represent raw materials and consumables used, other work performed by the entity and capitalized, employee benefit expenses, depreciation and amortization expenses, impairment loss recognized in the period’s profit or loss and other expenses.

(2)

Financial results represent (+) financial income, (-) financial expenses, (+/-) foreign currency exchange differences and net gains/losses from indexed assets and liabilities.

(3)

Capital stock represents issued capital.

(4)

CAPEX figures represent cash flows used for purchases of property, plant and equipment and intangible assets for each year.

(5)

For further detail please refer to Note 31 of the Notes to our consolidated financial statements.

15

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the year ended December 31,

 

    

2019

    

2018

    

2017

    

2016

    

2015

OPERATING DATA OF PRINCIPAL SUBSIDIARIES (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edesur (Argentina)

 

 

 

 

 

 

 

 

 

 

Electricity sold (GWh)

 

16,798

 

17,548

 

17,736

 

18,493

 

18,492

Number of customers (thousands)

 

2,490

 

2,530

 

2,529

 

2,505

 

2,479

Total energy losses (%) (2)

 

15.5

 

14.2

 

12.0

 

12.0

 

11.6

 

 

 

 

 

 

 

 

 

 

 

Enel Distribution Rio (Brazil)

 

 

 

 

 

 

 

 

 

 

Electricity sold (GWh)

 

11,089

 

11,019

 

11,091

 

11,181

 

11,096

Number of customers (thousands)

 

2,867

 

2,959

 

3,030

 

3,054

 

2,997

Total energy losses (%) (2)

 

22.5

 

21.0

 

20.4

 

19.4

 

19.4

 

 

 

 

 

 

 

 

 

 

 

Enel Distribution Ceara (Brazil)

 

 

 

 

 

 

 

 

 

 

Electricity sold (GWh)

 

12,186

 

11,843

 

11,522

 

11,628

 

11,229

Number of customers (thousands)

 

3,924

 

3,933

 

4,017

 

3,890

 

3,757

Total energy losses (%) (2)

 

14.0

 

13.9

 

13.6

 

12.5

 

12.5

 

 

 

 

 

 

 

 

 

 

 

Enel Distribution Goias (Brazil)

 

 

 

 

 

 

 

 

 

 

Electricity sold (GWh)

 

14,259

 

13,755

 

12,264

 

 

Number of customers (thousands)

 

3,114

 

3,027

 

2,928

 

 

Total energy losses (%) (2)

 

12.3

 

11.6

 

11.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Enel Distribution Sao Paulo (Brazil)

 

 

 

 

 

 

 

 

 

 

Electricity sold (GWh)

 

43,148

 

24,693

 

 —

 

 —

 

 —

Number of customers (thousands)

 

7,328

 

7,224

 

 —

 

 —

 

 —

Total energy losses (%) (2)

 

9.6

 

9.5

 

 —

 

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Codensa (Colombia)

 

 

 

 

 

 

 

 

 

 

Electricity sold (GWh)

 

14,307

 

14,024

 

13,790

 

13,632

 

13,946

Number of customers (thousands)

 

3,527

 

3,439

 

3,340

 

3,248

 

2,865

Total energy losses (%) (2)

 

7.7

 

7.7

 

7.8

 

7.1

 

7.1

 

 

 

 

 

 

 

 

 

 

 

Enel Distribution Peru (Peru)

 

 

 

 

 

 

 

 

 

 

Electricity sold (GWh)

 

8,211

 

8,045

 

7,934

 

7,782

 

7,624

Number of customers (thousands)

 

1,434

 

1,423

 

1,397

 

1,367

 

1,337

Total energy losses (%) (2)

 

8.2

 

8.1

 

8.2

 

7.8

 

8.1

 

 

 

 

 

 

 

 

 

 

 

Enel Américas

 

 

 

 

 

 

 

 

 

 

Installed capacity in Argentina (MW) (3)

 

4,419

 

4,419

 

4,419

 

4,537

 

4,537

Installed capacity in Brazil (MW) (3) (4)

 

1,354

 

1,354

 

1,354

 

1,372

 

992

Installed capacity in Colombia (MW) (3)

 

3,506

 

3,499

 

3,467

 

3,509

 

3,509

Installed capacity in Peru (MW) (3)

 

1,987

 

1,985

 

1,979

 

2,026

 

1,977

Generation in Argentina (GWh)

 

12,974

 

13,949

 

14,825

 

13,124

 

15,204

Generation in Brazil (GWh) (4)

 

5,292

 

3,755

 

4,034

 

4,034

 

4,398

Generation in Colombia (GWh)

 

15,250

 

14,052

 

14,765

 

14,952

 

13,705

Generation in Peru (GWh)

 

8,244

 

8,106

 

7,430

 

8,698

 

8,801


(1)

Some information may be different than reported in previous periods. For further details, please refer to “Item 4. Information on the Company — B. Business Overview. — Electricity Distribution Business.”

(2)

Energy losses in distribution arise from illegally tapped energy as well as technical losses. They are calculated as the difference between total energy generated, and purchased (GWh) and the energy sold excluding tolls and energy consumption not billed (GWh), within a given period. Losses are expressed as a percentage of total energy purchased.

(3)

Installed capacity figures may differ from previous years, since starting in 2018 we began reporting the net installed capacity instead of the gross installed capacity.

(4)

Since 2017, data includes the capacity and generation of the Volta Grande hydroelectric plant, as a result of its acquisition and consolidation since November 2017.

16

 

Exchange Rates

 

Fluctuations in the exchange rate between the Chilean peso and the U.S. dollar will affect the U.S. dollar equivalent of the price in Chilean pesos of our shares of common stock on the Santiago Stock Exchange (Bolsa de Comercio de Santiago) and the Chilean Electronic Stock Exchange (Bolsa Electrónica de Chile). These fluctuations in the exchange rate affect the price of our American Depositary Shares (“ADSs”) as well as the dividends we pay (see “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Dividends”).  In addition, to the extent that significant financial liabilities are denominated in foreign currencies, fluctuations in the exchange rate may have a considerable impact on our earnings.

 

For further details regarding fluctuation in the exchange rates between the U.S. dollar and the local currency in each of the countries in which we operate, please refer to “Item 5. Operating and Financial Review and Prospects — a. Operating Results. — 1. Discussion of Main Factors Affecting Operating Results and Financial Condition of the Company — d. Economic Conditions — Local Currency Exchange Rate.”

 

B.   Capitalization and Indebtedness.

Not applicable.

C.   Reasons for the Offer and Use of Proceeds.

Not applicable.

D.  Risk Factors.

Certain South American countries have been historically characterized by frequent and occasionally drastic economic interventionist measures by governmental authorities, including expropriations that may adversely affect our business and financial results.

Governmental authorities have altered monetary, credit, tariff, tax, and other policies to influence the course of South American countries, including Argentina, Brazil, Colombia, and Peru. Even though we do not have electricity operations in Chile, our company is established under the laws of the Republic of Chile and is subject to changes in Chilean tax, labor and monetary laws, among others. Other governmental actions in these South American countries have also involved wage, price, and tariff rate controls, as well as other interventionist measures, such as expropriation or nationalization.

 

In the distribution business, if we do not meet minimum service and technical standards, we may lose our concessions. In some concession areas, such as those in Buenos Aires, Goiás, and Rio de Janeiro, it may be especially difficult to satisfy certain minimum standards that, if not met, empower regulators to revoke our concessions and reassign them to our competitors. For example, a loss of a concession by one of our significant subsidiaries could lead to a default of a debt obligation by such subsidiary, which could trigger a cross default, bankruptcy, or insolvency proceedings. Such events could have a material adverse effect on our contractual obligations under debt covenants.

 

For 2020, we expect tax reforms and amendments to the current tax laws in Brazil, Chile, and Colombia. Changes in governmental and monetary policies regarding tariffs, exchange controls, regulations, and taxation could reduce our profitability. Inflation, devaluation, social instability, and other political, economic, diplomatic developments or crises, including the response by governments in the region to these circumstances, could also reduce our profitability.

Our businesses depend heavily on hydrology and are affected by droughts, flooding, storms, ocean currents, and other inclement weather conditions.

Approximately 55% of our consolidated installed generation capacity in 2019 was hydroelectric. Accordingly, arid hydrological conditions could negatively affect our business, results of operations, and financial condition. Regional hydrological conditions have often been subject to two weather phenomena dealing with ocean currents - El Niño and La Niña - that influence rainfall and may result in drought or flooding, depending on the region affected. Droughts may affect our ability to dispatch energy from our hydroelectric facilities.

17

 

In the past, El Niño has affected Colombian hydrologic conditions, where 88% of our installed capacity is hydroelectric, leading to rainfall deficits, high temperatures, and higher energy prices. In March 2017, “El Niño Costero” in Peru led to unusually heavy rains that flooded the Santa Eulalia River, caused innumerable landslides and avalanches in the coastal basins, and resulted in the stoppage of several of our hydroelectric power plants, mainly Callahuanca (81 MW) and Moyopampa (69 MW). Each ocean current event is different and, depending on its intensity and duration, the magnitude of the social and economic effects could be material.

 

Our distribution business is also affected by inclement weather, mainly in Argentina. With extreme temperatures, demand can increase significantly within a short period, which could affect service and result in service outages that may result in fines. Depending on weather conditions, results obtained by our distribution business can vary from year to year.

 

Our operating expenses increase during drought periods when thermal power plants, which have higher operating costs relative to hydroelectric power plants, are dispatched more frequently. Depending on our commercial obligations, we may need to buy electricity at higher spot prices in order to comply with our contractual supply obligations. The cost of these electricity purchases may exceed our contracted electricity sale prices, thus potentially producing losses from those contracts. For further information with respect to the effect of hydrology on our business and financial results, please refer to “Item 5. Operating and Financial Review and Prospects— A. Operating Results — 1. Discussion of Main Factors Affecting Operating Results and Financial Condition of the Company—a. Generation and Transmission Business.”

 

Droughts also indirectly affect the operation of our thermal power plants, including our facilities that use natural gas, fuel oil, or coal, in the following manner:

 

Our thermal power plants require water for cooling, and droughts may reduce the availability of water and increase the cost of transportation. As a result, we may have to purchase water from agricultural areas that are also experiencing water shortages. These water purchases may increase our operating costs and require us to negotiate further with the local communities.

 

Thermal power plants generate emissions such as nitrogen oxide (NO), carbon dioxide (CO2), carbon monoxide (CO), sulfur dioxide (SO2), and particulate matter into the atmosphere. Therefore, greater use of thermal power plants during droughts generally increases the risk of producing higher levels of greenhouse emissions.

 

A full recovery from the drought that has been affecting the regions where most of our hydroelectric power plants are located may last for an extended period, and new drought periods may recur in the future. Prolonged droughts may exacerbate the risks described above and have a further negative effect upon our business, results of operations, and financial condition.

 

We are subject to potential financial risks resulting from climate change legislation and regulation to limit greenhouse gas (GHG) emissions.

 

Future climate change legislation and regulation restricting or regulating GHG emissions could result in increased operating costs and have a material adverse effect on our business, results of operations, and financial condition. The adoption and implementation of any international treaty or any legislation or regulations imposing new or additional reporting obligations on, or limiting emissions of, GHGs from our operations could require us to incur additional costs to comply with such requirements and possibly require the reduction or limitation of GHG emissions associated with our operations. These higher compliance standards may involve additional costs to operate and maintain our equipment and facilities, install emission controls, or pay taxes and fees relating to GHG emissions, which could have a material adverse effect on our business, results of operations and financial condition.

 

A further deterioration of the economic situation in Argentina or further devaluation of the Argentine peso could have an adverse effect on our operations and profitability.

The Argentine peso was one of the worldwide currencies that experienced one of the steepest devaluations against the U.S. dollar in 2019, amounting to an annual depreciation of 37.1%. On August 12, 2019, the Argentine peso depreciated 18.6% against the U.S. dollar in a single day, after Alberto Fernández defeated President Mauricio Macri in

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a presidential primary election. On December 10, 2019, Mr. Fernández assumed the Presidency amidst a two-year economic recession. The country’s macroeconomic outlook for 2020 remains risky due to high interest rates, the threat of government default on foreign and local debt, rising poverty and unemployment, and a high inflationary environment. In response to these conditions, in December 2019, the Argentine Congress declared a public emergency through December 31, 2020, and passed emergency economic measures to stabilize the economy and resolve the social crisis. These measures included tax increases on certain exports and purchases of U.S. dollars, subsidies for pensioners, and granting more executive powers over finance, tax, administration, pensions, tariffs, energy, health, and social issues. The Argentine government also froze tariffs on electricity and natural gas for 180 days and announced a new distribution tariff scheme that should be in place by the second half of 2020.

 

Argentina’s annualized inflation rate has increased significantly in the last three years, from 24.8% in 2017, to 47.6% in 2018, and 53.8% in 2019, while the Argentine peso has depreciated nearly 73.5% against the U.S. dollar over the same period. Some economists are concerned that the government owes a substantial amount of short-term debt at very high interest rates in both U.S. dollars and Argentine pesos. In December 2019, the Argentine government postponed payments on US$ 9.1 billion in Argentine Treasury bills until August 31, 2020, which prompted rating agencies to reevaluate the Argentine government’s creditworthiness.

 

In January 2020, S&P Global upgraded their credit rating for Argentina to “CCC-” (speculative grade), with a negative outlook, from “CC.”  In August 2019, Moody’s lowered their rating to “Caa2” from “B2” and lowered their rating again in April 2020 to “Ca” (non-investment grade), with a negative outlook.

 

Since July 2018, Argentina has been considered a hyperinflationary economy according to IFRS accounting standards. A general price index was used to present the amounts related to our Argentine subsidiaries in our consolidated financial statements retrospectively to reflect the changes in the purchasing power of the Argentine peso under the provisions outlined in IAS 29, “Financial Reporting in Hyper-Inflationary Economies.” Non-monetary assets and liabilities were restated as of February 2003, the latest date in which an inflation adjustment for accounting purposes was applied in our Argentine subsidiaries. Our consolidated financial statements have not been restated to reflect the gain from the indexation of the non-monetary assets and liabilities of our Argentine subsidiaries before January 1, 2018. Such monetary gain up to that date was recognized as an adjustment to our retained earnings as of January 1, 2018 (please see Note 3 of the Notes to our consolidated financial statements).

 

Further deterioration of Argentina’s economy, a continued devaluation of the Argentine peso against the U.S. dollar driven by hyperinflation, or the initial freezing and subsequent lowering of electricity distribution tariffs could adversely affect our results of operations and financial condition.

 

Governmental regulations may unfavorably affect our businesses, cause delays, impede the development of new projects, or increase the costs of operations and capital expenditures.

Our businesses and the tariffs we charge to our customers are subject to extensive regulation that may negatively affect our profitability. For example, governmental authorities in any of the countries in which we operate may impose material rationing policies during droughts or prolonged failures of power facilities, which may adversely affect our business, results of operations and financial condition.

 

Electricity regulations issued by governmental authorities in the countries in which we operate may affect the ability of our generation companies to collect revenues sufficient to offset their operating costs, which could adversely affect our business, results of operations and financial condition. Governmental authorities may also delay the distribution tariff review process, or tariff adjustments determined by regulatory authorities may be insufficient to pass on our costs to customers.

 

Our operating subsidiaries are also subject to environmental regulations that, among other things, require us to perform environmental impact studies on future projects and obtain construction and operating permits from local and national regulators. Governmental authorities may withhold or delay the approval of these permits until the completion of environmental impact studies. Therefore, their processing time may be longer than expected. Environmental regulations for existing and future generation capacity have become stricter and require increased capital investments. Any delay in meeting the required emission standards may constitute a violation of the environmental regulations. Failure to certify the original implementation and ongoing emission standard requirements of monitoring systems may

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result in significant penalties, sanctions, or legal claims for damages. We expect that more restrictive emission limits will be established in the future.

 

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, which could adversely affect our business, results of operations and financial condition.

 

Regulatory authorities may impose fines on our subsidiaries due to operational failures or breaches of regulations.

Our electricity businesses may be subject to regulatory fines for any breach of current regulations, including failures to supply energy, in the four countries in which we operate. Our generation subsidiaries are supervised by local regulatory entities and may be subject to fines in cases where the regulator determines that the company is responsible for the operational failures that affect the regular energy supply to the system. Our subsidiaries may be required to pay fines or compensate customers if they are unable to deliver electricity, even if such failures are not within their control, or when they do not meet environmental or other standards. Fines may also be associated with a breach of regulations.

 

In 2019, ANEEL fined Enel Distribution Sao Paulo R$ 16.5 million due to failures in technical and commercial procedures related to the quality of electricity supply; Enel Distribution Rio R$ 7.4 million for partial violation of quality of service indicators; Enel Distribution Ceara R$ 6.4 million for technical problems with the call center data preservation process, deadlines, and complaints; and Enel Distribution Goias R$ 74.8 million due to flaws in technical procedures and commercial issues related to the quality of electricity supply. 

 

We depend on payments from our subsidiaries and associates to meet our payment obligations.

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. Such payments and distributions to us are subject to legal constraints such as dividend restrictions, fiduciary obligations, contractual limitations, and foreign exchange controls that may be imposed by local authorities.

 

Historically, we have not always been able to access the cash flows of some of our operating subsidiaries due to government regulations, strategic considerations, economic conditions, and credit restrictions. In the future, we may not always 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 subsidiaries are subject to legal reserve requirements and other restrictions on dividend payments. Other legal restrictions, such as foreign currency controls, may limit the ability of our subsidiaries and equity affiliates to pay dividends and make loan payments or other distributions to us. The ability of any of our subsidiaries that are not wholly owned to distribute cash to us may be limited by the directors’ fiduciary duties of such subsidiaries to their minority shareholders. Furthermore, local authorities may force some of our subsidiaries, under applicable regulation, to reduce or eliminate dividend payments. These restrictions could impede our subsidiaries from distributing cash to us under certain circumstances.

 

Contractual Constraints: Distribution restrictions included in the credit agreements of our subsidiaries, including Enel Generation Piura and most of our subsidiaries in Brazil, may prevent dividends and other distributions to shareholders if they do not comply with specified financial ratios. Our credit agreements typically prohibit distributions if there is an ongoing default.

 

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 of any of our subsidiaries exceed their available cash, cash will not be upstreamed to us.

 

The currency of any dividend paid by our subsidiaries is subject to depreciation in relation to our functional currency, which may adversely affect our ability to pay dividends to shareholders.

 

Any of the situations described above could adversely affect our business, results of operations, and financial condition.

 

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We are involved in litigation proceedings.

We are currently involved in various litigation proceedings that could result in unfavorable decisions or financial penalties against us. In Colombia, we exercise control over Emgesa and Codensa through shareholder agreements with Grupo Energía Bogotá S.A. (“GEB”). In December 2017, we were notified that GEB had submitted to arbitration some differences arising between the parties on the distribution of 2016 net income of Emgesa and Codensa under the terms of the shareholder agreements. GEB claimed that we violated the provisions of the shareholder agreements, which regulate distributions, requiring the parties to vote in favor of distribution of 100% of the profits that can be distributed each period. Instead, Emgesa and Codensa distributed 70% of the 2016 net income. The claims seek the distribution of 100% of the profits for 2016 for each company. The amounts in dispute are US$ 21 million for Codensa and US$ 27 million for Emgesa. An adverse ruling would set a precedent that will oblige us to vote always for a 100% distribution of the profits of each year that can be distributed, which may not be financially prudent for our subsidiaries or us.

 

Our financial condition or results of operations could be unfavorably affected if we are unsuccessful in defending litigations or other lawsuits and proceedings against us. For further information on litigation proceedings, please see Note 34.3 of the Notes to our consolidated financial statements.

 

Political events or financial or other crises in any region worldwide can have a significant impact on the countries in which we operate, and consequently, may unfavorably affect our operations and liquidity.

The countries in which we operate are vulnerable to external shocks that could cause significant economic difficulties and affect growth. If any of these countries experience lower than expected economic growth or a recession, it is likely that consumer demand for electricity will decrease and that some of our customers may have difficulties paying their electric bills, possibly increasing our uncollectible accounts. Any of these situations could adversely affect our results of operations and financial condition.

 

Financial and political events in these countries and other parts of the world could also negatively affect our business. For example, since 2018, the U.S. and China have been involved in a trade war involving protectionist measures that has increased volatility in financial markets worldwide due to the uncertainty of political decisions. In addition, instability in the Middle East or any other major oil-producing region could result in higher fuel prices worldwide, which would increase the operating costs for our thermal generation power plants and unfavorably affect our results of operations and financial condition. An international financial crisis and its disruptive effects on the financial industry could negatively affect our ability to obtain new bank financings under the same historical terms and conditions that we have benefited from to date.

 

Political events or financial or other crises could also diminish our ability to access capital markets in the countries in which we operate and international capital markets as sources of liquidity or increase interest rates available to us. Reduced liquidity could negatively affect our capital expenditures, long-term investments and acquisitions, growth prospects, and dividend payout policy.

 

The U.S. federal government has experienced shutdowns in recent years. The 2018-2019 U.S. government shutdown, the longest in U.S. history, lasted 35 days and affected many federal agencies, including the SEC. Even temporary or threatened U.S. government shutdowns could have a material adverse effect on the timing, execution, and increased expense associated with our international financing and M&A activities.

 

We are subject to the adverse effects of worldwide pandemics.

 

An international public health crisis, such as the one attributable to the COVID‑19 pandemic that has become an increasing worldwide source of distress since December 2019, could significantly affect all the countries in which we operate as well as our trading partners.

 

In March 2020, in response to the COVID‑19 pandemic, governments in all the countries in which we operate declared some form of a state of emergency recognized by their respective constitutions. These declarations grant each government various special powers, such as control over public spending, use of the military, license to close businesses and schools, and ability to restrict border crossings and domestic travel through quarantines and other measures. The private sector in these countries has voluntarily taken further measures, such as adopting telecommuting wherever possible and the closing of commercial offices. Many businesses, such as restaurants, retail stores, malls, and spaces for

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large gatherings, have temporarily closed, many by executive decree, and companies associated with travel, transportation, and tourism have been severely affected and many may go bankrupt.

 

The governments in the countries in which we operate are taking measures to preserve access to essential services, such as water and electricity. As of March 2020, in Argentina, companies providing essential services may not cut service due to non-payment for 180 days for low-income residential customers, small businesses, and companies providing other essential services, such as health facilities. The Brazilian government enacted a similar prohibition on the suspension of the supply of electricity due to non-payment for all residential customers and companies and facilities providing essential services. It also released two Provisory Acts (MP n. 950 and MP n. 949 /2020), setting the grounds and guidelines to financially assist distribution companies during the duration of the effects of COVID-19. In Colombia, the government is allowing low-income residential customers, 60% of the customer base, to defer payment of monthly electricity bills for 36 months, without penalty or risk of a cut in service. The Peruvian government is allowing vulnerable customers (4.8 million residential customers) to prorate bills issued during March 2020 or bills that include any consumption during the emergency period for up to 24 months, without interest, charges, or fees due to late payment. 

 

The cumulative effect of measures of this kind will likely lead to recessions, high unemployment levels, and perhaps a decline in electricity demand in the countries in which we operate. If the COVID-19 pandemic is not adequately contained in 2020, the ability of our businesses to generate income and maintain liquidity levels to allow for normal operations may diminish. We may also experience increased difficulties in receiving payments from our distribution customers, especially those residential customers accustomed to making their monthly electricity bill payments in our commercial offices, some of which have closed. These customers may not have easy access to payment online or may have greater difficulties in settling their electricity bills. We are not presently able to quantify the expected negative effects of the COVID‑19 pandemic on our 2020 results; however, we expect them to be adverse, especially in the distribution business.

 

South American economic fluctuations, political instability, and corruption scandals may affect our results of operations, financial condition, and the value of our securities.

All our operations are in South America. Accordingly, our consolidated revenues may be affected by the performance of South American economies. If local, regional, or worldwide economic trends adversely affect the economy of any of the countries in which we operate, our financial condition and results of operations could be adversely affected. We operate in Argentina, Brazil, Colombia, and Peru, more volatile countries that at times have experienced political instability due to, among other things, corruption scandals involving several high-ranking government officials. South American financial and securities markets are influenced by economic and market conditions in other countries, which could unfavorably affect the value of our securities.

 

In addition, the challenges arising from changes in economic conditions, regulatory policies, laws governing foreign trade, manufacturing, development and investment, and various crises and uncertainties in the countries in which we operate and other South American countries, either individually or in the aggregate, could severely impact the economies in these countries and our business, result of operations and financial condition. For example, in December 2019, the Argentine government declared a public emergency and enacted several emergency economic measures to stabilize the economy and resolve the social crisis. In Peru, there was a constitutional crisis in the last quarter of 2019 when President Vizcarra dissolved the Peruvian Congress. The Peruvian Congress initially refused to recognize the action and declared the vice president as the interim president, who resigned the next day. The highest judiciary authority, the Tribunal Constitucional, validated President Vizcarra’s decision and a new Congress was elected and is currently in place. In Colombia, large protests against the government took place in November and December 2019. Initially, the protests were organized by students, unions and indigenous groups opposed to proposed changes to the Colombian pension and labor laws and expanded rapidly to encompass economic inequality, corruption and possible austerity measures, as well as rising violence in the countryside.

 

In Chile, widespread protests began in October 2019, resulting in a declaration of a state of emergency for a brief period, the introduction of several social and economic reforms, and an agreement to hold a referendum in April 2020 on potentially replacing the Chilean constitution, which was subsequently postponed until October 2020 due to the COVID-19 pandemic. Although we do not have operations in Chile, our management and headquarters are in Chile and our common stock is traded on the Chilean Stock Exchanges. Demonstrations and civil unrest in these countries may

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continue or worsen, which could negatively impact the economies in these countries and adversely affect our business, results of operations, financial condition and value of our securities.

 

Insufficient cash flows from our subsidiaries located in these countries have resulted in their inability to meet debt obligations and the need to seek waivers to comply with some debt covenants. To a limited extent, these subsidiaries may require guarantees or other emergency measures from us as shareholders, especially in Brazil and Argentina. For further details regarding financial support provided to our Brazilian subsidiaries, please refer to “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions.”

 

Future adverse developments in these countries may impair our ability to execute our strategic plan, which could adversely affect our growth and our results of operations and financial condition.

 

Construction and operation of power plants may encounter significant delays, stoppages, cost overruns, and stakeholder opposition that may damage our reputation and potentially result in impairment of our goodwill with stakeholders.

Our power plant projects may be delayed in obtaining regulatory approvals or may face shortages and increases in the price of equipment, materials, or labor. They may be subject to construction delays, strikes, accidents, and human error. Any such event could negatively affect our business, results of operations and financial condition.

 

Market conditions may change significantly between the approval and completion of a project, which, in some cases, may decrease a project’s profitability or render it impracticable. Deviations in market conditions, such as estimates of timing and expenditures, may lead to cost overruns and delays in project completion that widely exceed our initial forecasts. In turn, this may have a material adverse effect on our business, results of operation, and financial condition.

 

We may develop new projects in locations that are sometimes challenging in terms of geographical topography, such as mountain slopes, jungles, or other areas with limited access. Additionally, given the location of some projects, there may be additional inherent risks to archeological heritage sites. These factors may also lead to significant delays and cost overruns.

 

The operation of our thermal power plants, especially those that are coal fired, may affect our goodwill with stakeholders due to greenhouse gas emissions that could unfavorably affect the environment and nearby residents. Furthermore, outside stakeholders may influence the interests and perceptions communities have of our company. If we fail to address all relevant stakeholders appropriately, we may face opposition, which could negatively affect our reputation, stall operations, or lead to litigation threats or actions. Our reputation is the foundation of our relationship with key stakeholders and other constituencies. If we do not effectively manage these sensitive issues, our business, results of operations, and financial condition could be adversely affected.

 

Damage to our reputation may exert considerable pressure on regulators, creditors, and other stakeholders, possibly leading to the abandonment of projects and operations. This could cause our share prices to drop and hinder our ability to attract and retain valuable employees. Any of these outcomes could result in an impairment of our goodwill with stakeholders.

 

We may be unable to enter into suitable acquisitions or successfully integrate businesses that we acquire.

On an ongoing basis, we review acquisition prospects that may increase our market coverage or provide synergies with our existing businesses, though there can be no assurance that we will be able to identify and acquire suitable companies in the future. The acquisition and integration of independent companies that we do not control is generally a complex, costly, and time-consuming process that requires significant efforts and expenditures. If we do make further acquisitions, such as Enel Distribution Sao Paulo in 2018, we could incur substantial debt, assume unknown liabilities, potentially lose critical employees, be forced to amortize expenses related to tangible assets, and divert management’s attention from other business concerns. For example, as a result of the acquisition of Enel Distribution Sao Paulo, our leverage at the onset increased considerably due to the new debt for the purchase itself and the consolidation of Enel Distribution Sao Paulo’s existing debt.

 

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Integrating acquired businesses may be difficult, expensive, time-consuming, and a strain on our resources and relationships with our employees and customers. Ultimately, these acquisitions may not be successful or achieve the expected benefits. Any delays or difficulties encountered in connection with acquisitions and the integration of their operations could have a material adverse effect on our business, results of operations, or financial condition.

 

Our business and profitability could be unfavorably affected if water rights are denied, if water concessions are granted with limited duration, or if the cost of water rights is increased.

We own water rights for the supply of water from rivers, lakes, and reservoirs near our production facilities, granted by each countries’ respective authority. In Colombia, water rights and water concessions are awarded for different periods for each of our power plants, in some cases for up to 50 years. However, these concessions may be revoked for specific reasons, including a progressive water decrease or depletion. Water for human consumption has priority over any other use. In Peru, the concessions are granted for indefinite periods but could be revoked due to scarcity or a decline in service quality.

 

Any limitations on our current water rights, additional water rights, or the current unlimited duration of water concessions could have a material adverse effect on our hydroelectric development projects and profitability.

 

Foreign exchange risk may unfavorably affect our results and the U.S. dollar value of dividends payable to ADS holders.

Even though our functional currency is the U.S. dollar, our subsidiaries generate revenues in Argentine pesos, Peruvian nuevos soles, Brazilian reais, and Colombian pesos. We generally have been and will continue to be materially exposed to currency fluctuations in our local currencies against the U.S. dollar because of time lags and other limitations to pegging our tariff rates to the U.S. dollar. This exposure can substantially decrease the value of cash generated by our subsidiaries and the value of our dividends when translated into in U.S. dollars if our local currencies experience a devaluation against the U.S. dollar. For example, the Chilean peso devaluated by 7.2% against the U.S. dollar in 2019 and continues to strongly devaluate as of the date of this Report. Future volatility in the exchange rate of the currencies in which we receive revenues or incur expenditures may adversely affect our business, results of operations, and financial condition, especially when measured in U.S. dollars, the currency that affects our ADS holders.

 

Our long-term energy sales contracts are subject to fluctuations in the market prices of certain commodities, energy, and other factors.

We have exposure to fluctuations in the market prices of certain commodities that affect our long-term energy sales contracts. These contracts commit our subsidiaries to material obligations as selling parties and contain prices that are indexed to different commodities, exchange rates, inflation, and the market price of electricity. Unfavorable changes to these indices would reduce the rates we charge under these contracts, which could adversely affect our business, results of operations, and financial condition. In our distribution business, we also have economic exposure to fluctuations in energy prices.

 

We are subject to incremental risks in distribution markets that are becoming more liberalized.

In some countries, our distribution customers who meet the minimum and maximum demand requirements may freely choose unregulated tariffs. This may adversely affect our operating income. In some cases, customers may choose an alternative energy provider, which could adversely affect our business, results of operations, and financial condition.

 

Our controlling shareholder may exert influence over us and may have a different strategic view for our development from that of our minority shareholders.

Enel, our controlling shareholder, owns a beneficial interest of 61.5% of our share capital as of the date of this Report. Enel has declared an intention to acquire additional shares of our common stock and ADSs through swap agreements involving our common stock and ADSs entered into with a financial institution to reach up to 65% beneficial ownership, the maximum level permitted by our bylaws, by the end of 2020. Upon the termination and settlement of two swap transactions entered into by Enel with respect to our ADSs, which are expected to occur on May 11 and May 27, 2020, Enel’s beneficial ownership interest in us is expected to increase to 62.3%. Enel may continue to acquire additional shares under the swap transactions during 2020 to increase its ownership interest in us up to 65% by the end

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of 2020. Under Chilean corporate law, Enel has the power to determine the outcome of all material matters that require a simple majority of shareholders’ votes, such as the election of the majority of the seats on our board, and, subject to contractual and legal restrictions, the adoption of our dividend policy. Enel also exercises significant influence over our business strategy and operations. However, in some cases, its interests may differ from those of our minority shareholders. For example, in South American countries other than Chile, Enel conducts its business operations in the renewable energy field through Enel Green Power S.p.A., a company in which we have no equity interest. Certain conflicts of interest affecting Enel in these matters may be resolved in a manner that is different from the interests of our company or our minority shareholders.

 

Our electricity business is subject to risks arising from natural disasters, catastrophic accidents, and acts of terrorism, which could unfavorably affect our operations, earnings and cash flow.

Our primary facilities include power plants, transmission and distribution assets that are exposed to damage, from catastrophic natural disasters, such as earthquakes and fires, human causes, as well as acts of vandalism, protests, riots, and terrorism. A catastrophic event could cause prolonged unavailability of our assets, disruptions in our business, significant decreases in revenues due to lower demand, or significant additional costs to us not covered by our business interruption insurance. There may be lags between a significant accident or catastrophic event and the final reimbursement from our insurance policies, which typically carry a deductible and are subject to per event policy maximum amounts.

 

In mid-October 2019, widespread street demonstrations and protests erupted in Santiago and quickly spread throughout the rest of Chile. These actions have since become commonplace, and, at times, have been accompanied by looting, arson, and severe vandalism. Violent confrontations between protesters and the police and armed forces have resulted in a significant loss of human lives and severe injuries. The accumulated damage to public and private property could amount to billions of dollars. Damage to the country’s economy, prospects for growth, perception of risk, and immediate repercussions in terms of unemployment and loss of productivity are also significant. Our corporate headquarters in Santiago suffered a severe arson attack on October 18, 2019, resulting in the dislocation of our management and headquarters employees for an extended period. It is not possible to estimate when such violence will come to an end or the final effects on our business, but there may be material long-term negative effects resulting from this social crisis. Violence has accompanied these spontaneous acts of civil unrest in many regions in 2019. In a globalized world interconnected through the Internet and mass media, all the countries in which we operate are subject to this risk.

 

Any natural or human catastrophic disruption to our electricity assets in the countries in which we operate could lead to significant adverse effects on our results of operations and financial condition.

 

We are subject to financing risks, such as those associated with funding our new projects and capital expenditures or refinancing existing obligations.

As of December 31, 2019, our consolidated debt totaled US$ 6,368 million, and our holding company debt in Chile totaled US$ 959 million. Our debt agreements are subject to several of the following provisions, including (1) financial covenants, (2) affirmative and negative covenants, (3) events of default, (4) mandatory prepayments for contractual breaches, (5) change of control clauses for material mergers and divestments, and (6) bankruptcy and insolvency proceeding covenants, among others.

 

As of December 31, 2019, we held US$ 591 million in SEC-registered bonds issued in the U.S. and had drawn bank debt under a Senior Unsecured Revolving Credit Agreement for US$ 352 million, all governed under the laws of the State of New York. 

 

A significant portion of our financial indebtedness is subject to cross default provisions, which have varying definitions, criteria, materiality thresholds, and applicability concerning subsidiaries that could result in cross default. Our debt may also become immediately due and payable in cases involving bankruptcy or insolvency proceedings of a significant or material subsidiary. Likewise, some of our debtholders may decide to accelerate our debt in events of cross default dealing with significant or material subsidiaries, among other potential covenant defaults.

 

We may be unable to refinance our debt or obtain such refinancing in terms acceptable to us. In the absence of such refinancing, we could be forced to liquidate assets at unfavorable prices in order to make payments due on our debt.

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Furthermore, we may be unable to sell our assets at opportune moments or sufficiently high prices to obtain proceeds that would enable us to make such payments.

 

We may also be unable to raise the necessary funds required to finish our projects under development or construction. Market conditions or unforeseen project costs prevailing when we need funds could compromise our ability to finance these projects and expenditures.

 

As of the date of this Report, Brazil is the country with our highest refinancing risk. As of December 31, 2019, the debt of our Brazilian subsidiaries amounted to US$ 3,218 million, while the debt of our Colombian subsidiaries amounted to US$ 1,585 million.

 

Our inability to finance new projects or capital expenditures, refinance our existing debt, or comply with our covenants could negatively affect our results of operation and financial condition.

 

If third party electricity transmission facilities, gas pipeline infrastructure, or fuel supply contracts fail to provide us with adequate service, we may be unable to deliver the electricity we sell to our final customers.

We depend on transmission facilities owned and operated by other companies to deliver the electricity we sell. This dependence exposes us to several risks. If the transmission is disrupted, or transmission capacity is inadequate, we may be unable to sell and deliver our electricity. If a region’s power transmission infrastructure is inadequate, our recovery of sales costs and profits may be insufficient. If restrictive transmission price regulations are imposed, transmission companies may not have sufficient incentives to invest in expanding their infrastructure, which could unfavorably affect our results of operations and financial condition or affect our ability to deploy our portfolio of projects under development. The construction of new transmission lines may take longer than in the past, mainly because of sustainability, social, and environmental requirements that create uncertainties as to the timing of project completion. As a result, in some of the countries in which we operate, renewable energy projects are being completed faster than new transmission projects, which is creating a backlog of electricity that can be transmitted through current transmission systems. In Argentina, for example, the lack of investment in transmission lines will reduce incentives for the development of renewable energy projects.

 

We also rely on pipelines to obtain natural gas, mainly in Peru, where more than 50% of our generation capacity is thermal. In recent years, the Peruvian system has occasionally faced gas and electricity shortages due to a lack of sufficient capacity in the pipeline and transmission lines, which led to higher spot prices. Depending on the type of facility, our thermal generation power plants purchase gas, coal, diesel, and other fuels to produce electricity. Any contract breach or supply shortage may prevent our facilities from producing electricity on time.

 

Fortaleza owns and operates a 319-MW natural gas combined-cycle power plant. We have a contract with Petrobras that guarantees a supply of natural gas at a fixed priced until 2023 to supply Fortaleza. The primary purpose of the program is to avoid a short-term energy crisis by providing security through thermal generation, because, as seen in 2018, hydroelectric power plants are vulnerable to adverse hydrological conditions. From 2001 until 2017, the Brazilian government supplied Fortaleza with all the fuel we needed to operate the power plant. However, in September 2017, Petrobras announced a unilateral termination of the gas supply contract on the grounds of alleged economic disequilibrium and excessive burdens. Petrobras has since sporadically supplied natural gas to Fortaleza under the terms of that contract, but the situation is highly unstable. In the event of interruptions in the supply of natural gas, Fortaleza has in the past and may in the future be required to purchase electricity at spot market prices, which could be higher than the contracted fixed sale price to customers, such as Enel Distribution Ceará, which has contracted to buy all of Fortaleza’s generation until 2023. This scenario could adversely affect our business, results of operations, and financial condition.

 

We may be unable to reach satisfactory collective bargaining agreements with our unionized employees or retain key employees in cases of labor conflict.

A large percentage of our employees are members of unions and have collective bargaining agreements that must be renewed regularly. Our business, results of operations, and financial condition could be unfavorably affected by a failure to reach a collective bargaining agreement with any labor union, or by an agreement with a labor union that contains terms we view as unfavorable. Laws in many of the countries in which we operate provide legal mechanisms for judicial

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authorities to impose a collective bargaining agreement if the parties are unable to come to an agreement, which may materially increase our costs.

 

We employ many highly specialized employees, and specific actions such as strikes, walkouts, or work stoppages by these employees could negatively impact our business, results of operations, financial conditions, and reputation.

 

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

Even though we do not have assets in Chile, our shares are traded on the Chilean Stock Exchanges because we are organized under the laws of the Republic of Chile and have our headquarters in Chile. Chilean securities markets are substantially smaller and have less liquidity than the major securities markets in the United States and other developed countries. The low liquidity of the Chilean market may impair the ability of shareholders to sell shares, or holders of ADSs to sell shares of our common stock withdrawn from the ADS program, on the Chilean Stock Exchanges in the amount and at the desired price and time.

 

Lawsuits against us brought outside of the South American countries in which we operate, or complaints against us based on foreign legal concepts may be unsuccessful.

All our operations are located outside of the United States. All our directors and officers reside outside of the United States, and substantially all their assets are located outside the United States. If any investor were to bring a lawsuit against our directors and officers 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 judgments obtained in U.S. courts based on civil liability provisions of U.S. federal securities laws against them in U.S. or Chilean courts. There is also doubt as to whether an action could be brought successfully in Chile for liability based solely on the civil liability provisions of U.S. federal securities laws.

 

Interruption in or failure of our information technology, control, and communications systems or cyberattacks to or cybersecurity breaches of these systems could have a material adverse effect on our business, results of operations, and financial condition.

We operate in an industry that requires the continued operation of sophisticated information technology, control, and communications systems (“IT Systems”) and network infrastructure. We use our IT Systems and infrastructure to create, collect, use, disclose, store, dispose of, and otherwise process sensitive information, including company and customer data, and personal information regarding customers, employees and their dependents, contractors, shareholders, and other individuals. In our generation business, IT Systems are critical to controlling and monitoring our power plants’ operations, maintaining generation and network performance, generating invoices to bill customers, achieving operating efficiencies, and meeting our service targets and standards. Our distribution business increasingly relies on IT Systems to monitor smart grids, billing processes for millions of customers and customer service platforms. The operation of our generations, transmission, and distribution systems is dependent not only on the physical interconnection of our facilities with the electricity network infrastructure but also on communications among the various parties connected to the network. The reliance on IT Systems to manage information and communication among and between those parties has increased significantly since the deployment of smart meters and intelligent grids, especially in Brazil and Colombia, where we have installed a significant number of smart meters.

 

Our generation, transmission, and distribution facilities, IT Systems, and other infrastructure, as well as the information processed in our IT Systems, could be affected by cybersecurity incidents, including those caused by human error. Our industry has begun to see an increased volume and sophistication of cybersecurity incidents from international activist organizations, nation states, and individuals, and are among the emerging risks identified in our planning process. Cybersecurity incidents could harm our businesses by limiting our generation, transmission, and distribution capabilities, delaying our development and construction of new facilities or capital improvement projects to existing facilities, disrupting our customer operations, or exposing us to liability. Our business systems are part of an interconnected system. Therefore, a disruption caused by the impact of a cybersecurity incident in the electric transmission grid, network infrastructure, fuel sources, or our third party service providers’ operations could also unfavorably affect our business.

 

27

Our business requires the collection and retention of personally identifiable information of our customers, employees, and shareholders, who expect that we will adequately protect the privacy of such information. Cybersecurity breaches may expose us to a risk of loss or misuse of confidential and proprietary information. Significant theft, loss, or fraudulent use of personally identifiable information may lead to potentially large costs to notify and protect the impacted persons and could cause us to become subject to significant litigation, losses, liability, fines, or penalties, any of which could materially and adversely affect our results of operations and reputation with customers, shareholders, and regulators, among others. We may also be required to incur significant costs associated with governmental actions in response to such intrusions or to strengthen our information and electronic control systems.

 

The cybersecurity threat is dynamic and evolving and is increasing in sophistication, magnitude, and frequency. There is no assurance that we can implement adequate preventive measures or accurately assess the likelihood of a cybersecurity incident. We are unable to quantify the potential impact of cybersecurity incidents on our business and reputation. These potential cybersecurity incidents and corresponding regulatory action could result in a material decrease in revenues and high additional costs, including penalties, third party claims, repair costs, increased insurance expense, litigation costs, notification and remediation costs, security costs, and compliance costs.

 

Item 4.    Information on the Company

A. History and Development of the Company.

 

History

 

We are a publicly held limited liability stock corporation headquartered in Chile and organized on June 19, 1981, under the laws of the Republic of Chile. Since January 1983, we have been registered in Santiago with the CMF under Registration No. 0175. We have also been registered with the SEC under the commission file number 001-12440 since October 19, 1993. Our full legal name is Enel Américas S.A. and we are also known commercially as “Enel Américas.” Our shares are listed and traded on the Chilean Stock Exchanges under the trading symbol “ENELAM” and our ADSs are listed and traded on the NYSE under the trading symbol “ENIA.”

 

Our contact information in Chile is:

 

 

Contact Person:

Nicolás Billikopf

Street Address:

Av. Santa Rosa 76, Piso 15

Comuna de Santiago

Santiago, Chile

Email:

nicolas.billikopf@enel.com

Telephone:

(56-9) 9343-5500

Web site:

www.enelamericas.com

 

The information contained on or linked from our website is not included as part of, or incorporated by reference into, this Report. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, such as our company, at www.sec.gov.

 

We are an electricity utility company engaged, through our subsidiaries and affiliates, in the generation, transmission and distribution of electricity businesses in Argentina, Brazil, Colombia, and Peru. As of December 31, 2019, we had 11,267 MW of net installed generation capacity and 24.7 million distribution customers. Our net installed generation capacity is comprised of 112 generation units in the four countries in which we operate, of which 55% are hydroelectric power plants. As of December 31, 2019, we had consolidated assets of US$ 29.8 billion and operating revenues of US$ 14.3 billion.

 

Since June 2009, our controlling shareholder has been the Italian company Enel, which as of the date of this Report beneficially owns 61.5% of our shares. Enel has declared an intention to acquire additional shares of our common stock and ADSs through swap agreements involving our common stock and ADSs entered into with a financial institution to reach up to 65% beneficial ownership, the maximum level permitted by our bylaws, by the end of 2020. Upon the termination and settlement of two swap transactions entered into by Enel with respect to our ADSs, which are expected to occur on May 11 and May 27, 2020, Enel’s beneficial ownership interest in us is expected to increase to 62.3%. Enel

28

may continue to acquire additional shares under the swap transactions during 2020 to increase its ownership interest in us up to 65% by the end of 2020. Enel is an energy company with multinational operations in the power and gas markets, focusing primarily on Europe and Latin America. Enel operates in 32 countries across five continents, produces energy through a managed installed capacity of more than 88 GW, which includes 46 GW of renewable sources, and distributes electricity and gas through a network covering 2.2 million kilometers. With almost 70 million users worldwide, Enel has the most extensive customer base among European competitors and figures among Europe’s leading power companies in terms of installed capacity. Enel shares trade on the Milan Stock Exchange.

 

We are one of the largest publicly listed companies in the electricity sector in South America. We have been known as Enel Américas since the 2016 Reorganization described further below. However, we trace our origins to Compañía Chilena de Electricidad Ltda. (“CCE” in its Spanish acronym), 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 (“CONAFE” in its Spanish acronym), with operations dating back to 1919. Following the nationalization of the CCE in the 1970s, the Chilean electric utility sector was reorganized in the 1980s under the Chilean Electricity Law, known as the Decree with Force of Law No. 1 of 1982 (“DFL 1”). The CCE’s operations were divided into a generation company, AES Gener S.A. (“Gener”), an unrelated company, and two distribution companies, one with a concession in the Valparaíso Region, Chilquinta S.A., an unrelated company, 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. In August 1988, Compañía Chilena Metropolitana de Distribución Eléctrica S.A. changed its name to Enersis S.A. (“Enersis”), and became the new parent company of Distribuidora Chilectra Metropolitana S.A., later renamed Chilectra S.A. (currently Enel Distribución Chile S.A.). In the 1990s, we diversified into electricity generation, transmission and distribution sectors in other South American countries. Subsequent to the 2016 Reorganization (described below), we no longer hold electricity assets in Chile, but instead hold electricity generation, transmission and distribution assets in Argentina, Brazil, Colombia, and Peru.

 

We began international operations in 1992 with our participation in Edesur, a distribution company, and Costanera, a generation company, both in Argentina. In 1994, we expanded into Peru through our distribution company Edelnor (now Enel Distribution Peru), and in 1995, acquired the electricity generation company Edegel (now Enel Generation Peru). Our presence in Brazil and Colombia began in 1996 through our Brazilian distributor, Ampla (now Enel Distribution Rio), and the Colombian generator, Codensa. In 1997, we acquired an interest in the Colombian generator Emgesa. We acquired the Brazilian distributor Coelce (now Enel Distribution Ceara) in 1998 and the Brazilian generator Fortaleza in the state of Ceará in 2002. In 2005, Enel Brasil was formed in order to manage all the generation, transmission and distribution assets held in Brazil, namely, Enel Distribution Rio, Enel Distribution Ceara, Fortaleza, and Cachoeira Dourada, and the transmission business held through Cien.

 

During the 2000s we increased our participation in some of our existing subsidiaries. In 2006, Empresa de Generación Termoeléctrica Ventanilla S.A., a Peruvian generation company that was owned by the Spanish electric utility, Endesa, S.A. (“Endesa Spain”) at the time, merged with and into Edegel, becoming a 457 MW thermoelectric generation company. In September 2007, we merged our generation subsidiaries in Colombia into our generation company Emgesa. As of December 31, 2019, we held a 48.5% economic and 56.4% voting interest in Emgesa and, pursuant to a shareholders’ agreement, we control and consolidate the company. For more information regarding the control and consolidation of Emgesa, see “Item 5. Operating and Financial Review and Prospects — A. Operating Results. — 1. Discussion of Main Factors Affecting Operating Results and Financial Condition of the Company.” In October 2009, Enel Generation Chile purchased an additional 29.4% of Enel Generation Peru, increasing our economic interest in that company from 19.8% to 37.5%., and we acquired an additional 24% of Enel Distribution Peru, increasing our economic interest in the company from 33.5% to 57.5%.

 

In March 2013, we completed a capital increase proposed by Endesa Spain, our parent company at the time, through in-kind contributions from all its equity interests in 25 companies in the five South American countries in which we operated. The other shareholders had the right to contribute their proportional participation in cash. The capital increase was first offered to existing shareholders through a preemptive rights offering registered with the CMF and the U.S. SEC and subsequently through a follow-on offering. The total Ch$ 2,846 billion (US$ 6 billion at that time) capital increase consisted of Ch$ 1,714 billion (US$ 3.6 billion) of in-kind contributions from Endesa Spain and Ch$ 1,132 billion (US$ 2.4 billion) in cash from minority shareholders (the “2013 capital increase”). Following the 2013 capital increase, we acquired additional interests in certain companies, directly or indirectly through our subsidiaries and undertook other reorganizations including the following transactions:

 

29

·

In May 2014, we finalized a voluntary public offer to purchase the shares of our subsidiary Enel Distribution Ceara that we did not own. The investment amounted to Ch$ 133 billion (at that time) and we reached a 64.9% economic interest in Enel Distribution Ceara. Following the 2016 Reorganization, and as of December 31, 2019, we held a 74.1% economic interest in Enel Distribution Ceara.

 

·

In September 2014, we acquired the indirectly held shares that Inkia Americas Holdings Limited had in Generandes Perú S.A. (39.0% of the company), the controlling company of Enel Generation Peru. The total investment amounted to Ch$ 243 billion (US$ 413 million at that time) and we increased our economic interest in Enel Generation Peru by 21%, to 58.6%.

 

·

In February 2017, we acquired 94.8% of the shares of Celg Distribuição S.A. (now Enel Distribution Goias) in a tender process organized by the Brazilian Government through BNDES. The offer amounted to R$ 2,187 million (US$ 640 million at that time). In May 2017, Enel Brasil acquired the remaining 5% of Enel Distribution Goias for R$ 82 million. As of December 31, 2019, we held a 99.9% economic interest in Enel Distribution Goias.

 

·

In September 2017, we were awarded the 30-year concession auctioned by the Brazilian regulator to operate Volta Grande, the 380 MW hydroelectric power plant located in the State of Minas Gerais. The power plant started commercial operations in 1974. It is comprised of four generation units with an installed capacity of 95 MW each. The tender amounted to R$ 1,419 million (US$ 445 million at that time) and the payment took place on November 30, 2017. To carry out this transaction, we fully subscribed and paid a cash capital increase in Enel Brasil amounting to R$ 568 million (US$ 178 million). This capital increase was partially financed with the remaining proceeds of the 2013 capital increase.

 

·

On October 4, 2017, our wholly owned subsidiary Enel Peru acquired a 7.5% stake of Enel Distribution Peru on the Lima Stock Exchange. This transaction amounted to 262 million Peruvian soles (US$ 80 million at that time). As a result, we increased our economic interest in Enel Distribution Peru to 83.2%.

 

·

On June 4, 2018, we completed a tender offer to acquire Enel Distribution Sao Paulo, the main distribution company in Sao Paulo, Brazil and among the largest distribution companies in South America. Enel Distribution Sao Paulo, with more than 7.2 million customers, operates in a concession area of 4,526 square kilometers. In the tender offer, we acquired 73.4% of the shares at R$ 45.22 per share. Until July 4, 2018, all remaining Enel Distribution Sao Paulo shareholders were allowed to sell their shares at the same tender offer price. During September 2018, we participated in a capital increase of Enel Distribution Sao Paulo. In November 2019, we made a tender offer of R$ 49.39 per share for the remaining 4.056% of common stock of Enel Distribution Sao Paulo. The purpose of the November 2019 tender offer was to terminate Enel Distribution Sao Paulo’s registration as a publicly held company with the CVM under category “A,” converting the company to category “B.” Our ownership of the company, as of the date of this Report, is 100%. The total investment to acquire the remaining 4.056% of Enel Distribution Sao Paulo was approximately US$ 2,270 million using the exchange rate at that time.

 

·

At an ESM held on April 30, 2019, our shareholders approved a capital increase for an amount of US$ 3 billion. The capital increase was made through two preemptive rights periods in Chile for local shares and in the United States for ADRs. As a result, 18,633,669,520 new shares of our common stock, including in the form of ADRs, were subscribed and paid for by our existing shareholders and ADR holders representing 99.5% of the total new shares approved at the ESM, totaling US$ 3,020,670,890, the largest cash‑only capital increase in Chilean corporate history.

 

The 2016 Reorganization

 

During 2016, we completed a corporate reorganization to separate our Chilean businesses from our non-Chilean businesses (the “2016 Reorganization”).

 

The 2016 Reorganization involved the separation of the respective Chilean and non-Chilean electricity generation, transmission and distribution businesses of Empresa Nacional de Electricidad S.A. (“Endesa Chile”), Chilectra and Enersis by means of a “demerger” under Chilean law and the subsequent distribution of the shares of the newly created entities to each company’s respective shareholders (collectively, the “Spin-Offs”). The “demerger”, or separation of the

30

businesses, occurred on March 1, 2016, and the Spin-Offs were effective in April 2016, with the creation and public listing of the shares of the newly incorporated entities: (i) Enersis Chile S.A. (“Enersis Chile”), which held the Chilean businesses of Enersis, (ii) Endesa Américas S.A. (“Endesa Américas”), which held the non-Chilean businesses of Endesa Chile, and (iii) Chilectra Américas S.A. (“Chilectra Américas”), which held the non-Chilean businesses of Chilectra.

 

The 2016 Reorganization also involved the merger of the companies holding the non-Chilean assets. The merger became effective on December 1, 2016, and merged Endesa Américas and Chilectra Américas with and into Enersis Américas, with the latter continuing as the surviving company. The merger combined the non-Chilean generation, transmission and distribution businesses under a single holding company, contributed to the simplification of the corporate structure of the group and provided benefits such as subsidiary cash leakage reduction, strategic interest alignment and increased decision-making and operational efficiencies. As a consequence of the merger, we issued 9,232,202,625 new shares, of which 872,333,871 shares were deemed reacquired and held as treasury stock and were cancelled as a result of the approval of the cancellation by the shareholders at the ESM held on April 27, 2017. As a result, our ultimate controlling shareholder, Enel, owned 51.8% of our outstanding shares. As of the date of this Report, Enel beneficially owns 61.5% of our shares, after fully subscribing its pro rata share of the 2019 capital increase and making additional purchases in 2019 and 2020. Enel has declared an intention to acquire additional shares of our common stock and ADSs through swap agreements involving our common stock and ADSs entered into with a financial institution to reach up to 65% beneficial ownership, the maximum level permitted by our bylaws, by the end of 2020. Upon the termination and settlement of two swap transactions entered into by Enel with respect to our ADSs, which are expected to occur on May 11 and May 27, 2020, Enel’s beneficial ownership interest in us is expected to increase to 62.3%. Enel may continue to acquire additional shares under the swap transactions during 2020 to increase its ownership interest in us up to 65% by the end of 2020.

 

As part of the 2016 Reorganization process, Enersis changed its name to Enersis Américas S.A. on March 1, 2016, and subsequently to Enel Américas S.A. on December 1, 2016. On October 18, 2016, (i) Endesa Chile changed its name to Enel Generación Chile S.A.; (ii) Chilectra changed its name to Enel Distribución Chile S.A.; and (iii) Enersis Chile S.A. changed its name to Enel Chile S.A.

Enel X

 

In 2018, we formed Enel X Colombia S.A.S. (“Enel X Colombia”), which is wholly owned by Codensa. The main purpose of Enel X Colombia is to focus on public lighting tenders, supplementing the activities of Codensa. We also changed the name of Enel Soluçoes S.A., a wholly owned subsidiary of Enel Brasil, to Enel X Brasil S.A. (“Enel X Brasil”). These companies will develop, implement and sell products and services that incorporate innovation and cutting-edge technology and are different from the sale of energy or concessioned energy distribution and associated services. These Enel X companies expect to offer turnkey projects for municipalities and other public and governmental entities, industrial or residential customer appliances such as photovoltaic systems, heating ventilation air conditioning, led lighting, projects related to energy efficiency, and the development of public and private electric mobility, and charging infrastructure, in all cases including customers outside of our concession areas.

Capital Investments, Capital Expenditures, and Divestitures

 

We coordinate our overall financial strategy, including the terms and conditions of loans and intercompany advances entered into by our subsidiaries, to optimize debt and liquidity management. Generally, our operating subsidiaries independently plan capital expenditures financed by internally generated funds or direct financings. One of our goals is to focus on investments that will provide long-term benefits, such as energy loss reduction projects. Although we have considered how these investments will be financed as part of our budget process, we have not committed to any particular financing structure, and investments will depend on the prevailing market conditions at the time the cash flows are needed.

 

Our investment plan is flexible enough to adapt to changing circumstances by giving different priorities to each project following expected profitability and strategic fit, which includes sustainability considerations. We are currently focused on making investments on behalf of the distribution business, related to network reliability, capacity improvement, and new technology developments such as smart meters.

 

For the 2020-2022 period, we expect capital expenditures in our subsidiaries to amount to US$ 5,347 million. Our focus will be investments currently in progress, maintenance of our distribution network and generation plants, in studies

31

required to develop other potential generation and distribution projects and in the development of new businesses. For further detail regarding these projects, please see “Item 4. Information on the Company — D. Property, Plant and Equipment — Projects Under Development.”

 

The table below sets forth the expected capital expenditures for the 2020-2022 period and the capital expenditures incurred in 2019, 2018, and 2017:

 

 

 

 

 

 

 

 

 

 

    

Estimated

2020-2022

    

2019

    

2018

    

2017

 

 

(in millions of US$)

Capital expenditures (1)

 

5,347

 

1,659

 

1,541

 

1,371


1)

Capital expenditures listed in this table represent payments for each year, net of contributions, except for future projections.

 

While our planned investments go beyond the three years highlighted in this table, we are reporting three years to be better aligned with Enel’s three-year industrial plan disclosed in November 2018. For further information, please refer to “Item 4. Information on the Company — D. Property, Plant and Equipment. — Project Investments” and “Item 5. Operating and Financial Review and Prospects — F. Tabular Disclosure of Contractual Obligations.”

 

Capital Expenditures in 2019, 2018, and 2017

 

A critical part of our capital expenditures is related to non-discretionary investments that include maintenance of existing installed capacity to increase the quality and operation standards of our facilities. On a consolidated basis, during 2019, our capital expenditures were primarily focused on Brazil and, in a higher proportion, the distribution segment.

 

In our distribution business, our capital expenditures since 2017 have been primarily related to the expansion of service in response to increasing demand for energy and new customers, the improvement of quality of service and safety, and the prevention of energy losses, especially in Brazil. During 2019, we invested US$ 760 million in our Brazilian distribution companies and US$ 256 million in Codensa, our Colombian distribution company. We plan to continue to expand our services, increasing the connections available to end customers, and reduce energy losses to improve efficiency and profitability.

 

During 2017 and 2018, the focus of our capital expenditures in the generation business was in Emgesa and Peru. In Emgesa, we started the improvements to our thermal power plant Termozipa to reduce its environmental impact and to extend its useful life. The environmental upgrade aims to achieve the best environmental standards for gas emissions among coal-fired power plants in Latin America. In Peru, we focused on the reconstruction of our hydroelectric power plants affected by the heavy rains at the beginning of 2017, which damaged the Callahuanca and Moyopampa power plants. We also invested in maintenance activities and modernization of civil works and hydraulic units in Peru.

 

Projects in progress will be financed with resources provided by external financing and internally generated funds.

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B.   Business Overview.

We are a publicly held limited liability stock corporation headquartered in Chile, but with consolidated operations in Argentina, Brazil, Colombia, and Peru. Our core businesses are electricity generation, transmission, and distribution.

The table below presents our revenues by reportable segments and by operating segments within such reportable segments.

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

    

2019

    

2018

    

2017

    

Change 2019 vs. 2018

 

 

(in millions of US$)

 

(in %)

Generation and Transmission Business in Argentina

 

436

 

328

 

300

 

33.0

Costanera

 

214

 

163

 

152

 

31.4

El Chocón

 

72

 

67

 

58

 

7.2

Dock Sud

 

147

 

95

 

88

 

55.1

Other

 

 3

 

 3

 

 1

 

 —

 

 

 

 

 

 

 

 

 

Generation and Transmission Business in Brazil

 

778

 

854

 

830

 

(9.0)

Cachoeira Dourada

 

494

 

540

 

503

 

(8.5)

Fortaleza

 

310

 

212

 

261

 

46.3

Cien

 

70

 

83

 

89

 

(15.3)

EGP Volta Grande

 

107

 

82

 

 9

 

30.6

Other

 

(203)

 

(63)

 

(32)

 

222.2

 

 

 

 

 

 

 

 

 

Generation and Transmission Business in Colombia

 

1,247

 

1,259

 

1,160

 

(1.0)

Emgesa

 

1,247

 

1,259

 

1,160

 

(1.0)

 

 

 

 

 

 

 

 

 

Generation and Transmission Business in Peru

 

596

 

596

 

730

 

 —

Enel Generation Peru

 

519

 

522

 

646

 

(0.6)

Enel Generation Piura

 

82

 

78

 

87

 

5.1

Other

 

(5)

 

(4)

 

(3)

 

25.0

 

 

 

 

 

 

 

 

 

Total Generation and Transmission Business reportable segment

 

3,057

 

3,037

 

3,020

 

0.6

 

 

 

 

 

 

 

 

 

Distribution Business in Argentina

 

1,347

 

1,190

 

1,223

 

13.2

Edesur

 

1,347

 

1,190

 

1,223

 

13.2