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ECONOMIC – FINANCIAL SUMMARY

Ø  The Company’s operating result (EBIT) increased Ch$ 63,200 million, an increase of 9.3%, explained mostly by the positive impact of Resolution 32/2015 in the operating income in Argentina and the good performance of the generation business in Chile due to higher sales and sale prices.

Ø  The net financial result shows a decrease in the expense of Ch$ 118,592 million. This is explained by greater financial income, mainly in distributors in distribution companies in Brazil and lower financial expenses in Argentina in connection with the impact of exchange rate over lower debt.

Ø  Income before taxes was Ch$ 672,229 million, an increase of 31% compared to the first half of 2014.

Ø  Corporate taxes paid by the company were 24.2% higher than in the first half of 2014, reaching Ch$ 211,088 million, mostly in Chile and Brazil..

Ø  As a result, net earnings attributable to the shareholders of Enersis in the first half 2015 increased by 50,6% compared to the same period of the previous year, amounting to Ch$ 288,008 million.

FINANCIAL SUMMARY

Ø  Available liquidity has continued to show a solid position, as follows:

•     Cash and cash equivalents                                                    US$ 1,513 million

•     Cash and cash equiv. + 90 days cash investments             US$ 1,685 million

•     Committed lines of credit available                                       US$ 580 million

•     Uncommitted lines of credit available                                   US$ 718 million

Ø The average nominal interest rate in June 2015 decreased to 8.4% from 8.6% in the same period of the year before, mainly influenced by the higher rates in US$ and improved inflation conditions in Chile. This was partially offset by worsening rate conditions on debt in Brazilian reais.

Hedging and protection:

In order to mitigate financial risks associated with exchange and interest rate variations, Enersis has established policies and procedures for protecting its financial statements against volatility.

•      The Enersis exchange rate hedging policy states that there should be a balance between flows indexed to foreign currency of each company and the currency in which they borrow. We also have cross-currency swaps of US$ 1,169 million and forward contracts of US$ 478 million.

•      In order to reduce volatility in the financial statements due to changes in the interest rate, we maintain a balance between fixed and variable rate debt. We have contracted interest-rate swaps of US$ 141 million.

MARKETS IN WHICH THE COMPANY OPERATES

Enersis’ business activities are carried out though subsidiary companies that operate the different businesses in the five countries in which the Company operates. The most important businesses for Enersis are electricity generation and distribution.

 At the end of April 2014, our subsidiary Endesa Chile acquired an additional 50% of the partnership rights in Inversiones Gas Atacama Holding Limitada, thus attaining 100% ownership.

The following tables provide some key performance indicators as of June 30, 2015 and 2014 of the companies in the different countries in which they operate.

Generation Business 

Distribution Business

The following table shows the energy sales revenues breakdown by business line and by type of client, as of June 30, 2015 and 2014, in the different countries where we operate.

I.- FINANCIAL STATEMENTS ANALYSIS

1. -Analysis of the Income Statement 

Net income attributable to the controlling shareholders of Enersis as of June 30, 2015, was of Ch$ 288,008 million, representing a 50.6% increase with respect to the same period the previous year, which was Ch$ 191,273 million.

The following compares each item of the income statement:

Operating income:

Operating income increased by Ch$ 63,199 million as of June 30, 2015, or 9.3%, from Ch$ 680,282 million as of June 2014 to Ch$ 743,481 million in this period.

The breakdown of operating revenue and expenses by business line for the periods ended June 30, 2015 and 2014 is as follows:

The generation and transmission businesses of the Group produced increased operating income of Ch$ 7,427 million, equivalent to 1.8%, reaching Ch$ 430,949 million. Physical sales increased by 4.9% amounting to 34,911 GWh (33,266 GWh to June 2014).

Operating income for the generation and transmission businesses on a comparative basis and detailed by country is shown in the following table:

Chile

Operating income in Chile increased from Ch$ 21,101 million as of June 2014 to Ch$ 83,832 million in this period, mainly due to higher operating revenues of Ch$ 185.702 million, due to  an increase in physical sales (+1,650 GWh),coupled to better average sales energy prices, and operating revenue contributed by the GasAtacama subsidiary of Ch$ 70,708 million.

Operating costs increased by Ch$ 122,971 million, due to higher costs in energy purchases for Ch$ 12,589 million due to increased physical purchases on the spot market, higher fuel expenses  of Ch$ 52,308 million, mainly explained by the incorporation of GasAtacama, increase in other variable procurement and service expenses of Ch$ 36,034 million mainly due to the generation facility lease for Ch$ 25,968 million, and higher water transportation costs for the operation of the San Isidro plant for Ch$ 7,375 million, a higher charge for depreciation and impairment of Ch$ 13,076 million due to the incorporation of GasAtacama and capital improvements made in the second half of 2014 in San Isidro II, Bocamina II and Tal Tal, higher expenses by nature of Ch$ 5,139 million and higher personnel expenses of Ch$ 1,841 million.

On April 22, 2014, our subsidiary Endesa Chile acquired 50% of the shares in Inversiones Gas Atacama Holding Limitada to reach a 100% ownership. The acquired subsidiary, whose operating results are booked from May 2014, shows an improved operating income of Ch$ 10,722 million compared to the previous period.

Argentina 

In Argentina, operating income from our subsidiaries for the period reached Ch$ 13,269 million, lower by Ch$ 6,248 million in comparison with the same period last year, when operating income reached Ch$ 19,517 million.

The operating income of Costanera amounted to Ch$ 6,429 million, a decrease of Ch$ 2,654 million compared to the same period last year, as a consequence of higher operating costs of Ch$ 9,980 million, mainly due to increased personnel expenses of Ch$ 7,224 million due to increases in the workforce and salaries resulting from the group bargaining, and a higher charge for depreciation and impairment of Ch$ 2,970 million due to new assets. These were partially offset by higher revenue for Ch$ 7,326 million mainly due to higher energy sales of 1,037 GWh compared to the previous period.

El Chocón’s operating income reached Ch$ 6,844 million, Ch$ 663 million lower than in the same period of the previous year, mainly due to higher personnel expenses of Ch$ 464 million, compensated by reduced other fixed costs of Ch$ 89 million. Operating revenues declined by Ch$ 285 million, mainly due to reduced energy sales. Physical sales amounted to 1,591 GWh in this period, 113 GWh lower than the 1,704 GWh in the same period of 2014.

The operating income of our subsidiary Dock Sud reached Ch$ 663 million, lower by Ch$ 1,462 million compared to the same period of the previous year, mainly due to higher operating expenses of Ch$ 4,520 million mainly due to a higher fuel consumption.

Operating revenue rose by Ch$ 3,058 million as a result of non-recurring maintenance income. Physical sales amounted to 1,629 GWh in this period, lower by 879 GWh compared to the same period last year when they reached 2,508 GWh.

The effect of translating the financial statements from Argentine pesos to Chilean pesos in both periods led to a 0.23% decrease in Chilean peso terms in June 2015 as compared to June 2014.

Brazil

The operating income of our Brazilian subsidiaries amounted to Ch$ 72,632 million, a decrease of Ch$ 16,642 million compared to the result of the same period of the previous year, which amounted Ch$ 89,274 million.

The operating income of our subsidiary Cachoeira Dourada decreased by Ch$ 21,718 million, mainly due to lower operating revenues of Ch$ 52,238 million due to 596 GWh lower energy sales than in the previous period and also due to lower average sales prices. Operating costs decreased by Ch$ 30,520 million mainly due to lower energy purchases to cover demand of Ch$ 27,382 million and lower other variable procurements and services for Ch$ 2,012 million.

The operating income of Central Fortaleza (CGTF) amounted to Ch$ 10,175 million, Ch$ 1,138 more than in June 2014, mainly due to reduced energy purchases of Ch$ 14,210 million mainly the result of lower market sales prices, offset by reduced sales of energy of Ch$ 12,508 million due to lower sales prices. Physical sales amounted to 1,610 GWh in this period, 149 GWh more than the same period last year when they reached 1,461 GWh.

Our subsidiary Cien showed an increase in operating income of Ch$ 3,291 million, mainly due to higher operating revenues of Ch$ 2,185 million due to the increase in the annual allowed revenue (RAP) as a result of higher energy dispatch as indicated by the regulatory entity, a lower charge for depreciation and impairment of Ch$ 906 million and reduced personnel expenses of Ch$ 205 million.

The effect of translating the financial statements from Brazilian reais to Chilean pesos in both periods was a 12.9% decrease in Chilean peso terms in June 2015 compared to June 2014.

Colombia

The operating income in Colombia decreased by 14.7%, to a total of Ch$ 185,978 million as of June 2015 (Ch$ 217,932 in 2014). The reduced operating revenues of Ch$ 31,403 million were mainly due to the effect of translating the Colombian peso to the Chilean peso of Ch$ 40,769 million, partially offset by larger physical sales of 629 GWh compared to the same period of the previous year.

Increased operating costs of Ch$ 551 million are the result of increased other expenses of Ch$ 8,026 million mainly due to recognizing the wealth tax decreed by the Colombian government of Ch$ 8,883 million and higher fuel consumption of Ch$ 4,765 million, offset by reduced energy purchases of Ch$ 10,395 million due to higher energy generation and lower purchase prices, and a reduced charge for depreciation and impairment of Ch$ 1,700 million.

The effect of translating the financial statements from Colombian pesos to Chilean pesos in both periods resulted in an 11.4% decrease in Chilean peso terms at June 2015 when compared to June 2014.

Peru 

The operating income of our subsidiaries in Peru totaled Ch$ 75,238 million as of June 2015, reflecting a slight decrease of Ch$ 460 million compared to the same period last year, when the operating income amounted to Ch$ 75,698 million.

The operating income of Edegel was Ch$ 67,365 million, an increase of Ch$ 1,128 million over the same period of the previous year. Operating revenues were Ch$ 4,208 million higher mainly due to higher toll revenues of Ch$ 20,853 million offset by 285 GWh of lower energy sales and reduced average sales prices of Ch$ 11,900 million and lower other operating revenues of Ch$ 4,745 million, mainly the insurance claims in 2014 with respect to the turbine T-G7 of the Santa Rosa plant.

Operating expenses rose by Ch$ 3,080 million due to higher transportation expenses of Ch$ 3,604 million, a higher charge to depreciation and impairment of Ch$ 2,026 million, increased fuel expenses of Ch$ 427 million and larger energy purchases of Ch$ 291 million, offset by lower expenses in other variable procurements and services of Ch$ 3,204 million.

The subsidiary Empresa Eléctrica de Piura also reduced its operating revenues by Ch$ 1,553 million compared to the same period of the previous year.

The effect of translating the financial statements from Peruvian new soles to Chilean pesos in both periods resulted in a 1.5% increase in Chilean peso terms as of June 2015, compared to June 2014.

The Enersis Group distribution business showed an increase in operating income of Ch$ 68.580 million, equivalent to 25.4% compared to the same period in 2014, to reach Ch$ 338,511 million. Physical sales were 779 GWh higher, equivalent to an increase of 2.1% over the same period of the previous year, to reach 39,154 GWh. The number of clients increased by 422,000 to 15 million, 2.9 % more than in the same period of the previous.

The following shows details of the operating income of the distribution business by country and comparing the two periods:

Chile   

In Chile, our subsidiary Chilectra showed an operating income of Ch$ 70,104 million, representing an decrease of Ch$ 6,004 million compared to the same period of 2014, or 7.9%.

The variation is mainly due to higher operating revenues of Ch$ 83,569 million, (+18.6%), due to an increase in energy purchases of Ch$ 67,485 million reflecting increased physical purchases and higher prices compared to the 2014 period, increased other procurement and services expenses of Ch$ 7,447 million, greater transportation expenses of Ch$ 6,763 million and a higher charge depreciation and impairment of Ch$ 2,466 million.

The higher operating costs of Ch$ 77,566 million, (+14.8%), include increased energy sales of Ch$ 60,820 million, reflecting increased physical sales, a tariff increase for regulated customers and the product of greater recognition in the resettlement of average node price decrees not applied, and  increased other services provided of Ch$ 17,687 million, mainly increased income from transmission tolls with generators of Ch$ 8,948 million and rentals and maintenance of public lighting and network installations plus other services  of Ch$ 8,739 million.

Energy losses increased by 0.2 p.p. from 5.3% to 5.5% in 2015. Physical energy sales increased 1.2% to reach 7,844 GWh in this period and the number of clients rose by 47,000, totaling 1.76 million.

Argentina  

In Argentina, our subsidiary Edesur produced an increased operating result of Ch$ 79,818 million, passing from a loss of Ch$ 47,119 million in 2014, to net income of Ch$ 32,699 million in this period.

In our subsidiary Coelce, operating income increased by Ch$ 49,089 million, amounting to Ch$ 65,652 million. This is explained by higher operating revenue of Ch$ 57,929 million mainly as the result of higher energy sales revenues due to 174 GWh of higher physical sales which reached 5,564 GWh as of June 2015 and higher energy sales prices. Operating costs showed a slight increase of Ch$ 8,840 million due to larger energy purchases of Ch$ 24,848 million, affected by the higher prices caused by the drought and higher transport expenses of Ch$ 2,090 million, offset by reduced variable procurements and services expenses of Ch$ 13,733 million and lower other expenses of Ch$ 4,353 million. 

Energy losses increased by 0.6 p.p. to 12.9% and the number of clients rose at Coelce by 125,900, to a total of more than 3.68 million.

The effect of translating the financial statements from Brazilian reais to Chilean pesos in both periods led to a 12.9% decrease in Chilean peso terms as compared to June 2014.

Colombia 

In Colombia, Codensa‘s operating income was of Ch$ 117,778 million, showing a decrease of Ch$ 4,593 million compared to the same period of the previous year. This is explained by operating revenues falling by Ch$ 27,176 million, mainly due to the effect of the translation of the Colombian peso to the Chilean peso, offset by higher energy purchases of 102 GWh to 6,798 GWh to June 2015 and higher average sales prices of Ch$ 18,991 million. Operating costs also declined, by Ch$ 22,583 million, mainly due to smaller energy purchases of Ch$ 25,208 million and a reduced charge for depreciation and impairment of Ch$ 3,855 million, offset by higher other expenses of Ch$ 5,527 million, reflecting the recognition of the wealth tax decreed by the Colombian government.  

Energy losses decreased 0.1 p.p. to 7.2% and the number of clients rose by 88.3 thousand to reach a total of more than 2.82 million.

The effect of translating the financial statements from Colombian pesos to Chilean pesos in both periods was an 11.4% decrease in Chilean peso terms compared to June 2014.

Peru 

Our Peruvian subsidiary Edelnor reported operating income of Ch$ 49,973 million, an increase of Ch$ 5,787 million over the same period of the previous year, mainly explained by the increase in operating revenues of Ch$ 28,545 million due to higher physical sales in the period. This was partially offset by higher energy purchase costs of Ch$ 19,912 million to cover the higher client demand and increased variable procurement and services expenses of Ch$ 2,144 million.

Physical sales rose by 161 GWh, amounting to 3,829 GWh as of June 2015. Energy losses increased by 0.4 p.p. amounting to 8.4%. The number of clients rose by 41.7 thousand, to reach over 1.31 million.

The effect of translating the financial statements from Peruvian soles to Chilean pesos in both periods was a 1.5% increase in Chilean peso terms compared to June 2014.

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Lower expenses for exchange rate differences of Ch$ 36,542 million, mainly at DockSud for  Ch$ 20,945 million due to capitalization in 2014 of all its debt, reduced effects at Costanera of Ch$19,599 million due to higher debt denominated in US dollars, partially offset by higher exchange differences of Ch$ 4,002 million on foreign currency debt.

Result of asset sales and other investments

The reduced result of Ch$ 19,474 million relates mainly to reduced income on the re-measurement of the initial pre-existing participation of 50% of Gas Atacama for Ch$ 21,546 million, booked in June 2014, offset by income of Ch$ 4,207 million with respect to the result of the sale of Túnel el Melón.

Corporate Taxes   

Corporate income tax shows a higher expense of Ch$ 41,099 million explained by the increased expense in Coelce of Ch$ 26,337 million, reflecting the improved financial results compared to the previous period of the year before, increased expenses in Endesa Chile of Ch$ 19,429 million, mainly due to its better financial results and the gradual increase in the rate following the tax reform applicable from September 2014,and higher expenses in Cachoeira Dourada of Ch$ 10,811 million due to a change oin the tax regime, passing from a presumed income taxable base to an actual income base, partially offset by reduced expenses in Enersis of Ch$ 16,889 million, mainly due to the lower effect of the exchange rate in the foreign subsidiary investments for taxes purposes.

ANÁLYSIS OF THE STATEMENT OF FINANCIAL POSITION

The Company’s total assets as of June 2015 showed a decrease of Ch$ 712,500 million compared to December 2014, mainly due to:

       A decrease in Current Assets of Ch$ 698,587 million equivalent to 17.8%, as a result of:

·         Decrease in cash and cash equivalents of Ch$ 738,090 million mainly due to: decreases in Enersis of Ch$ 236,006 million due to payments of dividends, related company current accounts and transfers to deposits of more than 90 days net of dividends received, Emgesa of Ch$ 207,410 million following payments to suppliers, dividends, wealth tax and bond repayments, in Codensa of Ch$ 89,913 million due to payments to suppliers, dividends and wealth tax, in Edelnor of Ch$ 48,388 million on payments to suppliers and financial debt repayments, in Edegel of Ch$ 39,684 million on  payments of suppliers, dividends and financial debt repayments, in the Enel Brazil Group of Ch$ 78,547 million in payments to energy suppliers net of collections and contributions to the CDE fund, in Endesa Chile of Ch$ 16,721 million in payments to suppliers and bank loan repayments, in EE. Piura of Ch$ 11,952 million in repayment of financial debt and dividend payments, and in Gas Atacama of Ch$ 5,743 million in payments to suppliers net of collections.

·         Increase in current tax assets of Ch$ 46,354 million, mainly in Enersis and Chilectra of Ch$ 22,069 million with respect to monthly tax prepayments (PPM) and credits for dividends receivable, in Emgesa of Ch$ 13,292 million in income tax prepayments, in Ampla Energía of Ch$ 7,514 million in income tax prepayments and Gas Atacama of Ch$ 3,285 million in PPM.

·         Reduction in non-current assets or groups of assets for disposal classified as held for sale of Ch$ 7,979 million, corresponding to the assets of Túnel el Melón, a company sold in January 2015.

    Reduction in  non-current assets of Ch$13.912 million, equivalent to 0.1% mainly due to:

·         Decrease of intangible assets other than goodwill of Ch$ 47,531 million mainly relating to new investments in the period of Ch$ 98,319 million and other movements for Ch$ 3,202 million, partially offset by depreciation and impairment for the period of Ch$ 40,564 million and the effects of the translation from the various functional currencies of the companies of Ch$ 108,488 million.

·         Decrease of other non-current financial assets, of Ch$ 36,492 million, mainly related to the effects of translation of the Brazilian real to the Chilean peso in the Brazilian distributors Ampla and Coelce for accounts receivable, by IFRIC 12.

·         Increase in property, plant and equipment of Ch$ 179,264 million mainly corresponding to Ch$ 482,388 million of new investments in the period and other movements of Ch$ 33,503 million, mainly provisions for dismantling, partially offset by Ch$ 190,842 million of depreciation and impairment during the period and the effects of translating the various functional currencies of the companies to Chilean pesos of Ch$ 145,786 million. 

·         Reduction in goodwill of Ch$ 38,319 million, mainly explained by the effects of the translation of different currencies of investments abroad.

·         Decrease of trade and other non-current receivables, of Ch$ 23,690 million, mainly relating to the transfer to short term of the regulatory asset recoverable by our subsidiaries Ampla Energía and Coelce.

·         Decrease in deferred tax assets of Ch$ 47,934 million, mainly explained by the effects of translation from the various functional currencies of the companies.

The Company’s total liabilities and equity decreased by Ch$ 712,500 million compared to December 2014. This is mainly explained by the decrease in non-current liabilities of Ch$ 94,732 million, the decrease of current liabilities of Ch$ 588,111 million and the decrease in equity of Ch$ 29,657 million.

·         Current liabilities decreased by Ch$ 588,111 million, equivalent to a variation of 18.4%, mainly explained by:

·       Decrease of trade and other current payables, of Ch$ 533,644 million, due to decreases in Edesur of Ch$ 237,436 million due to compensation of energy debts with CAMMESA with credits receivable from the Costs Monitoring Mechanism (MMC, in its Spanish acronym), in Codensa of Ch$ 95,860 million, mainly the payment of dividends, energy suppliers, net of liabilities booked for the wealth tax, in Enersis of Ch$ 89,356 million mainly due dividend payments, in Emgesa of Ch$ 67,237 million, mainly dividend payments net of the liability booked for the wealth tax, and in Endesa Chile of Ch$ 57,153 million, mainly dividend payments.

·        Increase in other current financial liabilities of Ch$ 131,077 million, mainly due to the increase in Ampla Energía of Ch$ 46,422 million due to new bank loans, transfer from long term of bond debt net of payments, increase in Codensa of Ch$ 36,233 million due to the transfer from long term of bond debt, in Edegel of Ch$ 25,547 million due to the transfer from long term of bank loans, in Endesa Chile of Ch$ 9,078 million due to exchange difference effects on dollar debt and accrued interest, in Emgesa of Ch$ 7,211 million for bank loans net of bond repayments and in Edelnor of Ch$ 6,157 million in higher bank loans and transfer from long term of bond debt net of payments.

·         Decrease in current tax liabilities of Ch$ 91,743 million, mainly due to income tax settlements of the year 2014.

·         Decrease in current accounts payable to related companies of Ch$ 87,052 million, mainly the payment of dividends to parent companies.

·         Decrease of liabilities included in groups of assets held for sale of Ch$ 5,488 million, relating to the liabilities of the Túnel el Melón, which was sold in January 2015.

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Credit Risk

The Enersis Group thoroughly monitors credit risk

Trade Accounts Receivable:

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