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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 20-F/A

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to 
Commission file number 1-13240


EMPRESA NACIONAL DE ELECTRICIDAD S.A.


(Exact name of Registrant as specified in its charter)


NATIONAL ELECTRICITYCOMPANY OF CHILE, INC
    
    CHILE(Translation of Registrants name into English)
    
    (Jurisdiction of incorporation or organization)


Santa Rosa 76, Santiago, Chile
Telephone No. (562) 630-9000
(Address of principal executive offices)Securities registered or to be registered pursuant to Section 12(b) of the Act:

Name of each exchangeTitle of Each Class
    
    on which registeredAmerican Depositary Shares
    
    New York Stock ExchangeShares
    
    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:

US$150,000,000
    
    7.200
    %
    
    Notes due 2006US$230,000,000
    
    7.875
    %
    
    Notes due 2027US$220,000,000
    
    7.325
    %
    
    Notes due 2037US$200,000,000
    
    8.125
    %
    
    Notes due 2097US$400,000,000
    
    7.750
    %
    
    Notes due 2008US$400,000,000
    
    8.502
    %
    
    Notes due 2009


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: 8,201,754,580.

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
    
    [X]
    
    NO


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

ITEM 17
    
    ITEM 18
    
    [X]




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TABLE OF CONTENTS



|                                         |                               |  |  |  |  |  |  | 
|---------------------------------------- | ----------------------------- |  |  |  |  |  |  | 
|                                         | Item 18. Financial Statements
|                                         | Item 19. Exhibits            
|SIGNATURES                              
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER
|CERTIFICATION OF CHIEF FINANCIAL OFFICER
|CERTIFICATION OF CEO AND CFO            



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EXPLANATORY NOTE

The purpose of this amendment to the Annual Report on Form 20-F for the
year ended December 31, 2002 filed by Empresa Nacional de Electricidad S.A.
(Endesa-Chile) on June 30, 2003 (the 2002 Form 20-F) is to include the
amended audit reports of Deloitte & Co. S.R.L., relating to the consolidated
financial statements of Endesa Argentina S.A. as of December 31, 2002, and for
the year then ended, and Deloitte Touche Tohmatsu relating to the financial
statements of Centrais Elétricas Cachoeira Dourada S.A. as of December 31, 2002
and 2001, and for the years then ended, and CIEN  Companhia de Interconexão
Energética as of December 31, 2002, and for the year then ended. These
financial statements were included in our 2002 Form 20-F as originally filed
and the related audit reports were previously filed by us in the 2002 Form
20-F. Except for the revisions of the above-described audit reports, no
changes have been made to the 2002 Form 20-F.

This 20-F/A consists of a cover page, this explanatory note, Items 18 and
19 (as amended) of the 2002 Form 20-F including our consolidated financial
statements for the three fiscal years ended December 31, 2002, the
above-described audit reports, the signature page and the required
certifications of the principal executive officer and the principal financial
officer of Endesa-Chile.

Other than expressly set forth above, thisForm 20-F/Adoes not, and does
not purport to, amend, update or restate the information in any Item of the
2002Form 20-For reflect any events that have occurred after the 2002 Form
20-F was filed.



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Item 18. Financial Statements

PageReport of Independent Auditors:Audit Report of Ernst & Young  Endesa-Chile 2002
    
    
    F-1Amended Audit Report of Deloitte & Touche  Endesa Argentina 2002
    
    
    F-3Audit Report of Deloitte & Touche  Endesa Colombia 2002
    
    
    F-4Amended Audit Report of Deloitte & Touche  Cachoeira Dourada 2002
    
    
    F-5Amended Audit Report of Deloitte & Touche  CIEN 2002
    
    
    F-6Audit Report of Deloitte & Touche  Endesa-Chile 2000 and 2001
    
    
    F-7Audit Report of Arthur Andersen  Endesa Argentina 2000 and 2001
    
    
    F-8Audit Report of Arthur Andersen  Endesa Colombia 2000 and 2001
    
    
    F-10Consolidated Financial Statements:Consolidated Balance Sheets as of December 31, 2001 and 2002
    
    
    F-11Consolidated Statements of Income for the years ended
December 31, 2000, 2001 and 2002
    
    
    F-13Consolidated Statements of Shareholders Equity for the years ended
December 31, 2000, 2001 and 2002
    
    
    F-14Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 2001 and 2002
    
    
    F-15Notes to the Consolidated Financial Statements
    
    
    F-17


Ch$ -
    
    Chilean pesosUS$ -
    
    United States dollarsUF -
    
    The UF is a Chilean inflation-indexed,
peso-denominated monetary unit that is set daily in
advance based on the previous months inflation rate
(see Note 2 (b))ThCh$ -
    
    Thousands of Chilean pesosThUS$ -
    
    Thousands of United States dollars


Application of Constant Chilean Pesos

The consolidated financial statements included herein have been restated for
general price-level changes and expressed in constant Chilean pesos of December
31, 2002 purchasing power.





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Report of Independent Auditors

To the Board of Directors and Shareholders of
Empresa Nacional de Electricidad S.A. (Endesa-Chile):

We have audited the accompanying consolidated balance sheet of Endesa-Chile and
subsidiaries (the Company) as of December 31, 2002, and the related
consolidated statements of income, changes in shareholders equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit. We did not audit the
financial statements as of December 31, 2002 and for the year then ended of
certain consolidated companies which statements reflect total revenues and
total assets representing of 31.93 percent and 40.06 percent respectively, of the
related consolidated totals. We also did not audit the financial statements as
of December 31, 2002 and for the year then ended of certain investments
accounted for under the equity method, which statements reflect investments and
equity participation in income of 0.87 percent and 61.23 percent, respectively,
of total assets and total net income, respectively. Those statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for those entities, is
based solely on the reports of the other auditors. The report of other auditors
over the consolidated financial statements of the subsidiary, Endesa Argentina
S.A. and subsidiaries, contains an emphasis paragraph regarding the instability
of the economic and political situation in Argentina.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit and the reports of
other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Endesa-Chile and subsidiaries
as of December 31, 2002, and the results of their operations and their cash
flows for the year then ended in conformity with accounting principles
generally accepted in Chile.

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Accounting principles generally accepted in Chile vary in certain significant
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected consolidated shareholders equity as of
December 31, 2002 and the consolidated results of operations for the year ended
December 31, 2002, to the extent summarized in Note 34 of the Notes to the
consolidated financial statements.

ERNST
& YOUNG LTDA.
    
    (ERNST AND YOUNG SIGNATURE)


Santiago, Chile
January 24, 2003
(except for Notes 32 and 34 for which the dates are June 12, 2003)

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Deloitte & Co. S.R.L.
Florida 234, Piso 5°
C1005AAF Buenos Aires
Argentina

Tel.: (54-11) 4320-2700 / 4326-4046
Fax: (54-11) 4325-8081 / 4326-7340
www.deloitte.com.ar

(DELOITTE and TOUCHE LOGO)

AUDITORS REPORT

To the President and the Board of Directors ofEndesa Argentina S.A.

We have audited the accompanying consolidated balance sheet of Endesa Argentina
S.A. and Subsidiaries (the Company) as of December 31, 2002, and the related
consolidated statements of income, changes in shareholders equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Companys Management. Our responsibility is to express an
opinion on these financial statements based on our audit. The consolidated
financial statements of the Company for the year ended at December 31, 2001,
were audited by other auditors who were member firm of a worldwide organization
that has ceased operations. Those auditors expressed an unqualified opinion on
those financial statements in their report dated March 8, 2002, which include
emphasis paragraphs expressing the uncertainty on the Companys capacity to
meet its obligations and continue operations, and to disclose the major effects
that the severe changes made by the Argentinean Government to the economic
model and to the International Exchange Law that had been in force since 1991 might
have on the Company.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, based on our audit, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Endesa Argentina S.A. and Subsidiaries as of December 31, 2002, and the
consolidated results of their operations and their consolidated cash flows for
the year then ended, in conformity with accounting principles generally
accepted in Chile.

(DELOITTE TOUCHE TOHMATSU LOGO)
    
    Deloitte & Co. S.R.L.  Registro de Soc. Com. CPCE  Cap. Fed. T° 1 F° 3




2.

As described in notes 37 and 38 to the financial statements referred to above,
on January 2002 the Argentine Government approved certain economic measures
with a negative impact on the Argentine economy and on the Company  ́s operations
including: the devaluation of the Argentine peso; the default on the public
external debt; the pesification of assets and liabilities denominated in
foreign currency held in the country; the restriction on transfers of funds
abroad, which require prior authorization from the Central Bank of the Republic
of Argentina; and the pesification of the utilities rates. Taking into account
that the official position of the Argentine Government related to the energy
prices has not been defined yet, and that the rates of utilities renegotiation
has not begun, as of the date of approval of these financial statements the
future evolution of the electrical sector cannot be assessed in the short and
medium term. Also, the Argentine Government continues to issue additional and
supplementary measures, as described in note 28.1 to the financial statements
referred to above, in respect of the Agreement related to the work order No.
4322. As a consequence of the economic crisis, and in particular of the
electrical sector, the Company is in negotiations to reschedule the maturity of
some loans. The above described situations generate uncertainties in respect of
the effects of the measures, to be taken by the Argentine Government related to
the economic policy and, in particular, related to the electrical sector, could
have on the Company  ́s consolidated financial position, the consolidated results
of its operations and its future consolidated cash flows.

Accounting principles generally accepted in Chile vary in certain significant
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected consolidated shareholders equity as of
December 31, 2002 and the consolidated results of operations for the year ended
December 31, 2002, to the extent summarized in Note 39 to the consolidated
financial statements.

Buenos Aires, January 17, 2003, except for the fifth paragraph for which the
date is April 30, 2003

DELOITTE & Co. S.R.L.(-s- Carlos A. Lloveras)CARLOS A. LLOVERAS(Partner)(DELOITTE AND TOUCHE LETTERHEAD)


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(DELOITTE AND TOUCHE LETTERHEAD)

Report of independent Accountants
(Translation of a report originally issued in Spanish)

To the Board of Directors and Shareholders of
Endesa de Colombia S.A.:

We have audited the accompanying consolidated balance sheets of Endesa de
Colombia S.A. and Subsidiaries (the Company) as of December 31, 2002, and the
related consolidated statements of income, changes in shareholders equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits. The consolidated
financial statements of the Company for the year ended at December 31, 2001,
were audited by other auditors who have ceased operations. Those auditors
expressed an unqualified opinion in those financial statements in their report
dated January 18, 2002.

We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, based on our audit, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Endesa de Colombia S.A. and Subsidiaries as of December 31, 2002, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in Chile.

Accounting principles generally accepted in Chile vary in certain significant
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected consolidated shareholders
equity as of December 31, 2002 and the consolidated results of operations for
the year ended December 31, 2002, to the extent summarized in Note 27 of the
Notes to the consolidated financial statements.

(-s- Carlos Eduardo Tovar)
    
    (DELOITTE COLOMBIA LTDA. SIGNATURE)Carlos Eduardo TovarJanuary 17, 2003, Bogatá, Columbia
    
    DELOITTE COLOMBIA LTDA.(DELOITTE AND TOUCHE LOGO)


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(DELOITTE and TOUCHE LOGO)

(Convenience Translation into English from the Original Report Previously
Issued in Spanish)

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
Centrais Elétricas Cachoeira Dourada S.A.
Cachoeira Dourada  GO, Brazil



|1. |  | We have audited the balance sheets of Centrais Elétricas Cachoeira
Dourada S.A. as of December 31, 2002 and 2001, and the related statements
of income and cash flows for the years then ended, as expressed in United
States dollars. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. |  | We conducted our audits in accordance with auditing standards generally
accepted in Brazil and in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Centrais
Elétricas Cachoeira Dourada S.A. as of December 31, 2002 and 2001, and the
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles and rules of
Superintendencia de Valores y Seguros of Chile, according to the
information included in the instructions and requirements of Endesa Chile
Group, for purposes of consolidation.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | As of December 31, 2002, the Company has recorded, as current and
non-current assets, accounts receivable in the amount of US$14,348
thousand and, as current liabilities, accounts payable in the amount of
US$14,921 thousand, related to energy sale and purchase transactions in
the Electric Energy Wholesale Market  MAE, based on calculations prepared
and released by the MAE and/or based on estimates prepared by the
Companys management. Such amounts may be subject to changes depending on
decisions on judicial lawsuits in progress, filed by sector companies,
relating to interpretations of market regulations in force.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Centrais Elétricas Cachoeira Dourada S.A.
    
    
    2




|5. |  | The balance sheet as of December 31, 2002 and the related statements of
income and cash flows for the year then ended are also presented in
Chilean Pesos (CLP$) translated at year-end exchange rates of R$3.5333 =
US$1.00 = CLP$718.61, solely for information purposes.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The accounting practices of the Company used in preparing the
accompanying financial statements conform with accounting practices
adopted in Chile, according to the information included in the
instructions and requirements of Endesa Chile Group for purposes of
consolidation, which vary in certain respects from accounting principles
generally accepted in the United States of America (US GAAP). The
application of the accounting principles generally accepted in the United
States of America would have affected the results of operations for the
years ended December 31, 2002 and 2001 and the shareholders equity of
Centrais Elétricas Cachoeira Dourada S.A. as of December 31, 2002 and
2001, to the extent summarized in Note 22 to the financial statements. As
described in Note 23 to the financial statements, the reported amounts of
shareholders equity as of December 31, 2002 and the results of operations
for the year then ended, under the accounting principles generally
accepted in the United States of America, have been restated.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(DELOITTE AND TOUCHE LOGO)

January 17, 2003 (except for Notes 22 and 23, for which the date is February
17, 2004)

F-5



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(DELOITTE and TOUCHE LOGO)

(Convenience Translation into English from the Original Report Previously
Issued in Spanish)

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
CIEN  Companhia de Interconexão Energética
Rio de Janeiro  RJ, Brazil



|1. |  | We have audited the balance sheet of CIEN  Companhia de Interconexão
Energética as of December 31, 2002, and the related statements of income
and cash flows for the year then ended, as expressed in United States
dollars. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. |  | We conducted our audit in accordance with auditing
standards generally accepted in Brazil and in the United
States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CIEN 
Companhia de Interconexão Energética as of December 31, 2002, and the
results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles and rules of
Superintendencia de Valores y Seguros of Chile, according to the
information included in the instructions and requirements of Endesa Chile
Group, for purposes of consolidation.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | As of December 31, 2002, the Company has recorded, as current assets,
accounts receivable in the amount of US$11,928 thousand and, as current
liabilities, accounts payable in the amount of US$15,185 thousand, related
to energy sale and purchase transactions in the Electric Energy Wholesale
Market  MAE, based on calculations prepared and released by the MAE
and/or based on estimates prepared by the Companys management. Such
amounts may be subject to changes depending on decisions on judicial
lawsuits in progress, filed by sector companies, relating to
interpretations of market regulations in force.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CIEN  Companhia de Interconexão Energética
    
    
    2




|5. |  | The balance sheet as of December 31, 2002 and the related statements of
income and cash flows for the year then ended are also presented in
Chilean Pesos (CLP$) translated at year-end exchange rates of R$3.5333 =
US$1.00 = CLP$718.61, solely for information purposes.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The accounting practices of the Company used in preparing the
accompanying financial statements conform with accounting practices
adopted in Chile, according to the information included in the
instructions and requirements of Endesa Chile Group for purposes of
consolidation, which vary in certain respects from accounting principles
generally accepted in the United States of America (US GAAP). The
application of the accounting principles generally accepted in the United
States of America would have affected the results of operations for the
year ended December 31, 2002 and the shareholders equity of CIEN 
Companhia de Interconexão Energética as of December 31, 2002, to the
extent summarized in Note 24 to the financial statements.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(DELOITTE AND TOUCHE LOGO)

January 17, 2003

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(DELOITTE AND TOUCHE LETTERHEAD)

INDEPENDENT AUDITORS REPORT

To the President and Directors of
Empresa Nacional de Electricidad S.A.

We have audited the consolidated balance sheets of Empresa Nacional de
Electricidad S.A. and Subsidiaries as of December 31, 2001 and 2000 and the
related consolidated statements of income and of cash flows for each of the two
years in the period ended December 31, 2001. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements for 2000 and 2001 of
certain consolidated companies, which statements reflect total assets
constituting 41.99% (41.18% in 2000) and total revenues constituting 41.92%
(48.56% in 2000 and 55.06% in 1999) as of December 31, 2001, of the related
consolidated totals. Those financial statements were audited by other auditors
for the purpose of the Companys Chilean annual financial statements and their
reports have been furnished to us. The report of these auditors on the 2001
financial statements of Endesa Argentina SA. include emphasis paragraphs
expressing the uncertainty on the Argentinean subsidiaries capacity to meet
their obligations and continue operations, and to disclose the major effects
that the severe changes made by the Argentinean Government to the economic
model and to the International Exchange Law that had been in force since 1991
might have on the companies. Our opinion, insofar as it relates to the amounts
included for those companies for 2000 and 2001, is based solely on the reports
of such other auditors. Their report referred to other auditors, one of whom
was a member firm of a worldwide organization that has ceased operations, and
another who has ceased to exist

We conducted our audits in accordance with auditing standards generally
accepted in Chile and in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit and the report of the other auditors provides a reasonable basis for our
opinion.

In our opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements referred to above present fairly. in all
material respects, the financial position of Empresa Nacional de Electricidad
S.A. and subsidiaries as of December 31, 2000 and 2001 and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in Chile.

Accounting principles generally accepted in Chile vary in certain significant
respects from accounting principles generally accepted in the United States of
America. The application of the latter would have affected the determination of
consolidated net income expressed in Chilean pesos for each of the two years in
the period ended at December 31, 2001 and the determination of shareholders
equity, also expressed in Chilean pesos, at December 31, 2000 and 2001 to the
extent summarized in Note 32 to the consolidated financial statements.

As indicated in Note 26, the Company holds direct investments in Argentinean
subsidiaries and indirect investments through the subsidiaries Compañia
Eléctrica Cono Sur S.A. and Inversiones Endesa Norte S.A., whose financial
statements show total assets and revenues amounting to 13.58% and 21.42%,
respectively, of the corresponding consolidated totals. Due to the current
economic situation in Argentina and considering the effects of the application
of the Public Emergency Law referred to in Note 31, these direct and indirect
subsidiaries are exposed to situations that might affect the values of their
assets and liabilities and uncertainties arise with respect to their capacity
to meet their obligations and continue operations. The present financial
statements do not include adjustment that might arise from the resolution of
these uncertainties.

(DELOITTE AND TOUCHE SIGNATURE)

Santiago, Chile
February 1, 2002

(DELOITTE AND TOUCHE LOGO)

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(ANDERSON LOGO)

Pistrelli, Diaz y AsociadosFirma Miembro de Andersen25 de Mayo 487REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
    
    1002 Buenos AiresArgentina(English translation of the report originally issued in Spanish)Tel 54 11 4318 1800 4311 6644Fax 54 11 4312 8847 4318 1777


To the Board of Directors of
ENDESA ARGENTINA S.A.:



|1. |  | We have audited the consolidated balance sheets of ENDESA ARGENTINA
S.A. (the Company) and its subsidiaries ENDESA BRASIL PARTICIPAÇOES
LTD., HIDROELECTRICA EL CHOCON S.A., HIDROINVEST S.A. and CENTRAL
COSTANERA S.A. as of December 31, 2001 and 2000, and the related
consolidated statements of income and cash flows for the years then
ended, not presented separately herein, all expressed in thousands of
constant Chilean pesos. Those financial statements are the
responsibility of the Companys Management. Our responsibility is to
express an opinion on those financial statements based on our audits.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. |  | We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by the Management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | As described in note 38 to the financial statements referred to above
(not presented separately herein), in the last few months, a deep
change has been implemented in the economic framework of Argentina as
well as in the Convertibility Law that was in place since March 1991.
The main consequences of the set of measures adopted by the Argentine
Federal Government, which are detailed in the above mentioned note,
have been (a) the devaluation of the Argentine peso with respect to
the US dollar and de-dollarization of certain assets and liabilities
in foreign currency held in the country, (b) de-dollarization of
utilities rates previously agreed-upon in U.S. dollars and subsequent
renegotiation in each particular case; (c) the implementation of
restrictions on the withdrawal of funds deposited with financial
institutions; (d) the restriction on transfers abroad on account of
financial loan principal service and dividend distributions without
prior authorization from the Central Bank; and (e) the increase in
domestic prices. The future development of the economic crisis may
require further measures from the Argentine Federal Government. The
above mentioned financial statements, should be read taking into
account the issues mentioned above.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | In our opinion, the consolidated financial statements referred to
above (not presented separately herein) present fairly, in all
material respects, the financial position of ENDESA BRASIL
PARTICIPAÇOES LTD., HIDROELECTRICA EL CHOCON S.A., HIDROINVEST S.A.
and CENTRAL COSTANERA S.A. as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles in
Chile.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8



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##### Table of Contents



(ANDERSON LOGO)



|5. |  | As described in note 15 to the financial
statements referred to above (not
presented separately herein), as of the
date of issuance thereof, HIDROELECTRICA
EL CHOCON S.A. has been unable to repay
yet past-due corporate bonds amounting to
about USD 140 million. (In addition, as
mentioned in Note 28.2 to the above
mentioned financial statements, as of
December 31, 2001, CENTRAL COSTANERA S.A.
does not meet a financial ratio required
by the syndicated bank loan agreement,
recorded under current liabilities in the
amount of about CLP 62,240 million.
Considering that this represents a breach
of contractual provisions for this loan
and for other loans with cross-default
clauses, the lenders are entitled to
demand accelerated repayment. As of
December 31, 2001 HIDROELECTRICA EL CHOCON
S.A., HIDROINVEST S.A. and CENTRAL
COSTANERA S.A. have negative working
capital, which creates substantial doubt,
among others, on the ability to pay their
obligations. In addition, due to the
negative exchange rate difference derived
from devaluation mentioned in note 38 to
the above mentioned financial statements,
ENDESA ARGENTINA S.A. and CENTRAL
COSTANERA S.A. could enter into the
mandatory dissolution for loss of capital
stock, as provided for by the Business
Associations Law No. 19,550, which creates
substantial doubt, among others, on the
continuity of the operations of these
Companies.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The continuity of the operations of ENDESA
ARGENTINA S.A., HIDROELECTRICA EL CHOCON
S.A., HIDROINVEST S.A., and CENTRAL
COSTANERA S.A. will depend on their
ability to pay their obligations and the
ability of ENDESA ARGENTINA S.A. and
CENTRAL COSTANERA S.A. to restore its
capital stock. The financial statements
referred to above have been prepared
assuming that ENDESA ARGENTINA S.A.,
HIDROELECTRICA EL CHOCON S.A., HIDROINVEST
S.A., and CENTRAL COSTANERA S.A. will
continue as going concerns; therefore, the
financial statements referred to above do
not include any adjustments that might
result from the outcome of these
uncertainties
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Buenos Aires
    
    PISTRELLI, DIAZ Y ASOCIADOSMarch 8, 2002
    
    (-s- Ezequiel A. Calciati)EZEQUIEL A. CALCIATIPartner


F-9



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##### Table of Contents



(ARTHUR ANDERSON LOGO)

Report of Independent Accountants
    
    Arthur Andersen y Cia. Ltda(Translation of a report originally issued in Spanish-
    
    Carrera 7 No. 74-09See Note 2 to the Financial Statements)
    
    Apartado Aéreo 075874Bogotá D.C.ColombiaTel 57 1 546 18 10-846 16 15Fax 57 1 217 80 88 314 55 56


To the Shareholders of
Endesa de Colombia S.A. and Subsidiaires:

We have audited the accompanying consolidated balance sheets of Endesa de
Colombia S.A. and Subsidiaires (the Company) as of December 31, 2000 and 2001
and the related consolidated statements of income and cash flows for each of
the two years in the period ended December 31, 2001, all expressed in thousands
of constant Chilean pesos. These financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Endesa de Colombia
S.A. and its subsidiaries as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles in Chile.

(-s- César Cheng)
    
    (ARTHUR ANDERSON SIGNATURE)César Cheng
    
    ARTHUR ANDERSEN & CIA LTDA.January 18, 2002, Bogotá, Colombia


F-10



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Audited Consolidated Balance Sheets
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, and thousands of US dollars)

As of December 31,Note
    
    2001
    
    2002
    
    2002ThCh$
    
    ThCh$
    
    ThUS$(Note 2 (b))AssetsCurrent assets:Cash
    
    
    
    
    5,024,238
    
    
    
    7,450,853
    
    
    
    10,368Time deposits
    
    4
    
    
    88,952,041
    
    
    
    90,071,189
    
    
    
    125,341Accounts
receivable,
net
    
    5
    
    
    91,879,870
    
    
    
    88,254,540
    
    
    
    122,813Notes
receivable,
net
    
    5
    
    
    162,773
    
    
    
    1,010,451
    
    
    
    1,406Other
accounts
receivable,
net
    
    5
    
    
    19,883,555
    
    
    
    17,922,487
    
    
    
    24,940Amounts due
from related
companies
    
    6a
    
    
    40,355,991
    
    
    
    219,504,354
    
    
    
    305,456Inventories,
net
    
    7
    
    
    21,552,807
    
    
    
    10,408,424
    
    
    
    14,484Income taxes
recoverable
    
    8a
    
    
    32,774,790
    
    
    
    23,941,054
    
    
    
    33,316Prepaid
expenses
    
    
    
    
    4,893,798
    
    
    
    3,639,906
    
    
    
    5,065Deferred
income taxes
    
    8d
    
    
    
    
    
    
    3,262,225
    
    
    
    4,540Other current
assets
    
    9
    
    
    9,776,158
    
    
    
    76,732,288
    
    
    
    106,779Total
current
assets
    
    
    
    
    315,256,021
    
    
    
    542,197,771
    
    
    
    754,508Property, plant and
equipment, net
    
    10
    
    
    5,564,893,072
    
    
    
    5,669,849,128
    
    
    
    7,890,023Other assets:Investments
in related
companies
    
    11
    
    
    164,793,262
    
    
    
    174,713,284
    
    
    
    243,127Investments
in other
companies
    
    12
    
    
    76,476,310
    
    
    
    81,636,042
    
    
    
    113,603Long-term
receivables
    
    5
    
    
    44,335,067
    
    
    
    19,157,436
    
    
    
    26,659Goodwill, net
    
    13a
    
    
    124,968,641
    
    
    
    27,931,802
    
    
    
    38,869Negative
goodwill, net
    
    13b
    
    
    (166,481,365
    )
    
    
    (91,725,141
    )
    
    
    (127,642
    )Amounts due
from related
companies
    
    6a
    
    
    170,667,792
    
    
    
    898,130
    
    
    
    1,250Other
intangibles
    
    14
    
    
    30,585,405
    
    
    
    32,010,352
    
    
    
    44,545Accumulated
amortization
    
    14
    
    
    (4,461,821
    )
    
    
    (5,349,240
    )
    
    
    (7,444
    )Other assets
    
    15
    
    
    40,538,985
    
    
    
    72,881,832
    
    
    
    101,421Total
other
assets
    
    
    
    
    481,422,276
    
    
    
    312,154,497
    
    
    
    434,388Total
assets
    
    
    
    
    6,361,571,369
    
    
    
    6,524,201,396
    
    
    
    9,078,919


The accompanying notes are an integral part of these consolidated financial statements.

F-11



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Audited Consolidated Balance Sheets
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, and thousands of US dollars)

As of December 31,Note
    
    2001
    
    2002
    
    2002ThCh$
    
    ThCh$
    
    ThUS$(Note 2 (b))Liabilities and
Shareholders
equityCurrent liabilities:Short-term
debt due to
banks and
financial
institutions
    
    16a
    
    
    58,718,598
    
    
    
    109,464,066
    
    
    
    152,328Current
portion of
long-term
debt due to
banks and
financial
institutions
    
    16b
    
    
    328,523,177
    
    
    
    266,190,846
    
    
    
    370,425Current
portion of
long-term
notes payable
    
    
    
    
    26,490,047
    
    
    
    41,628,914
    
    
    
    57,929Promissory
notes
    
    17
    
    
    
    
    
    
    7,567,174
    
    
    
    10,530Current
portion of
bonds payable
    
    18a
    
    
    51,987,275
    
    
    
    486,791,417
    
    
    
    677,407Dividends
payable
    
    
    
    
    75,871
    
    
    
    727,268
    
    
    
    1,012Accounts
payable
    
    19b
    
    
    77,273,825
    
    
    
    66,686,654
    
    
    
    92,800Miscellaneous
payables
    
    
    
    
    21,208,252
    
    
    
    38,823,431
    
    
    
    54,026Amounts
payable to
related
companies
    
    6b
    
    
    64,544,584
    
    
    
    52,235,790
    
    
    
    72,690Accrued
expenses
    
    19a
    
    
    30,908,070
    
    
    
    38,524,968
    
    
    
    53,610Withholdings
    
    
    
    
    3,004,285
    
    
    
    6,440,179
    
    
    
    8,962Income taxes
payable
    
    8a
    
    
    11,993,181
    
    
    
    4,468,220
    
    
    
    6,218Deferred
income taxes
    
    8d
    
    
    270,823
    
    
    
    
    
    
    
    Other current
liabilities
    
    
    
    
    4,345,628
    
    
    
    14,655,332
    
    
    
    20,394Total
current
liabilities
    
    
    
    
    679,343,616
    
    
    
    1,134,204,259
    
    
    
    1,578,331Long-term
liabilities:Due to banks
and financial
institutions
    
    16c
    
    
    835,661,938
    
    
    
    663,188,721
    
    
    
    922,877Bonds payable
    
    18b
    
    
    1,665,111,726
    
    
    
    1,451,867,591
    
    
    
    2,020,384Long-term
notes
payables
    
    
    
    
    165,303,116
    
    
    
    145,798,996
    
    
    
    202,890Miscellaneous
payables
    
    
    
    
    26,321,417
    
    
    
    19,993,843
    
    
    
    27,823Amounts
payable to
related
companies
    
    6b
    
    
    20,772,558
    
    
    
    48,663,658
    
    
    
    67,719Accrued
expenses
    
    19a
    
    
    31,444,250
    
    
    
    39,214,504
    
    
    
    54,570Deferred
income taxes
    
    8d
    
    
    29,099,863
    
    
    
    65,897,598
    
    
    
    91,701Other
long-term
liabilities
    
    
    
    
    29,383,481
    
    
    
    26,505,675
    
    
    
    36,885Total
long-term
liabilities
    
    
    
    
    2,803,098,349
    
    
    
    2,461,130,586
    
    
    
    3,424,849Commitments and
contingencies
    
    28Minority interest
    
    20a
    
    
    1,432,579,970
    
    
    
    1,498,231,231
    
    
    
    2,084,902Shareholders
equity:
    
    21Paid-in
capital, no
par value
    
    
    
    
    1,039,795,887
    
    
    
    1,039,795,887
    
    
    
    1,446,954Additional
paid-in
capital -
share premium
    
    
    
    
    203,968,868
    
    
    
    203,968,868
    
    
    
    283,838Other reserves
    
    
    
    
    69,984,148
    
    
    
    71,330,030
    
    
    
    99,261Retained
earnings
    
    
    
    
    60,640,513
    
    
    
    124,859,591
    
    
    
    173,752Net income
(loss) for
the year
    
    
    
    
    72,160,018
    
    
    
    (9,319,056
    )
    
    
    (12,968
    )Total
shareholders
equity
    
    
    
    
    1,446,549,434
    
    
    
    1,430,635,320
    
    
    
    1,990,837Total
liabilities
and
shareholders
equity
    
    
    
    
    6,361,571,369
    
    
    
    6,524,201,396
    
    
    
    9,078,919


The accompanying notes are an integral part of these consolidated financial statements.

F-12



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Audited Consolidated Statements of Income
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, and thousands of US dollars)

Years Ended December 31,Note
    
    2000
    
    2001
    
    2002
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThUS$(Note 2 (b))Operating income:Sales
    
    
    
    
    937,650,314
    
    
    
    1,045,279,320
    
    
    
    938,099,151
    
    
    
    1,305,436Cost of sales
    
    
    
    
    (637,295,881
    )
    
    
    (662,607,797
    )
    
    
    (555,585,893
    )
    
    
    (773,140
    )Gross profit
    
    
    
    
    300,354,433
    
    
    
    382,671,523
    
    
    
    382,513,258
    
    
    
    532,296Administrative and
selling expenses
    
    
    
    
    (33,425,425
    )
    
    
    (34,696,360
    )
    
    
    (36,288,767
    )
    
    
    (50,499
    )Operating
income
    
    
    
    
    266,929,008
    
    
    
    347,975,163
    
    
    
    346,224,491
    
    
    
    481,797Non-operating
income and expense:Interest income
    
    
    
    
    33,850,290
    
    
    
    19,150,720
    
    
    
    15,246,729
    
    
    
    21,217Equity
participation in
income of related
companies
    
    11
    
    
    4,836,483
    
    
    
    4,036,723
    
    
    
    15,021,694
    
    
    
    20,904Other non-operating
income
    
    22a
    
    
    272,787,595
    
    
    
    55,817,015
    
    
    
    102,484,444
    
    
    
    142,615Equity
participation in
losses of related
companies
    
    11
    
    
    (4,158,453
    )
    
    
    (13,984,347
    )
    
    
    (6,451,197
    )
    
    
    (8,977
    )Goodwill
amortization
    
    13a
    
    
    (7,244,775
    )
    
    
    (8,268,503
    )
    
    
    (108,561,701
    )
    
    
    (151,072
    )Interest expense
    
    
    
    
    (271,334,314
    )
    
    
    (235,882,840
    )
    
    
    (212,800,395
    )
    
    
    (296,128
    )Other non-operating
expenses
    
    22b
    
    
    (61,082,273
    )
    
    
    (58,500,656
    )
    
    
    (121,919,959
    )
    
    
    (169,661
    )Price-level
restatement, net
    
    23
    
    
    915,645
    
    
    
    4,338,232
    
    
    
    3,996,482
    
    
    
    5,561Foreign currency
translation, net
    
    24
    
    
    (4,646,149
    )
    
    
    (14,504,840
    )
    
    
    (441,015
    )
    
    
    (614
    )Non-operating
Expense, net
    
    
    
    
    (36,075,951
    )
    
    
    (247,798,496
    )
    
    
    (313,424,918
    )
    
    
    (436,155
    )Income before
income taxes and
extraordinary loss
    
    
    
    
    230,853,057
    
    
    
    100,176,667
    
    
    
    32,799,573
    
    
    
    45,642Income tax
    
    8e
    
    
    (88,483,851
    )
    
    
    (39,911,895
    )
    
    
    (70,628,398
    )
    
    
    (98,285
    )Extraordinary loss
    
    26
    
    
    
    
    
    
    
    
    
    
    (10,930,092
    )
    
    
    (15,210
    )Income before
minority interest
    
    
    
    
    142,369,206
    
    
    
    60,264,772
    
    
    
    (48,758,917
    )
    
    
    (67,853
    )Minority interest
    
    20b
    
    
    (68,580,912
    )
    
    
    (34,015,850
    )
    
    
    (46,478,294
    )
    
    
    (64,678
    )Income before
amortization
of negative
goodwill
    
    
    
    
    73,788,294
    
    
    
    26,248,922
    
    
    
    (95,237,211
    )
    
    
    (132,531
    )Amortization of
negative goodwill
    
    13b
    
    
    41,136,598
    
    
    
    45,911,096
    
    
    
    85,918,155
    
    
    
    119,562Net income
(loss) for
the year
    
    
    
    
    114,924,892
    
    
    
    72,160,018
    
    
    
    (9,319,056
    )
    
    
    (12,969
    )


The accompanying notes are an integral part of these consolidated financial statements.

F-13



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Audited Consolidated Statements of Shareholders Equity
Translation of financial statements originally issued in Spanish
(Expressed in thousands of historical Chilean pesos, except as stated)

Net incomeNumber of
    
    
    
    
    
    Additional
    
    
    
    
    
    Retained
    
    (loss) for theshares
    
    Paid-in capital
    
    paid-in capital
    
    Other reserves
    
    earnings
    
    year
    
    Total(In thousands)
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThUS$As of January 1, 2000
    
    
    8,201,755
    
    
    
    935,202,208
    
    
    
    183,451,520
    
    
    
    48,408,214
    
    
    
    144,079,252
    
    
    
    (176,733,788
    )
    
    
    1,134,407,406Transfer of prior year
loss to retained earnings
and other reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,016,367
    
    
    
    (191,056,643
    )
    
    
    185,040,276
    
    
    
    Price-level restatement of
capital
    
    
    
    
    
    
    43,954,504
    
    
    
    8,622,221
    
    
    
    2,275,186
    
    
    
    6,771,725
    
    
    
    (8,306,488
    )
    
    
    53,317,148Surplus deficit of
subsidiaries in the
development stage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,229,114
    
    
    
    (3,081,487
    )
    
    
    
    
    
    
    147,627Cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    504,021
    
    
    
    
    
    
    
    
    
    
    
    504,021Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,222,663
    
    
    
    108,222,663As of December 31, 2000
    
    
    8,201,755
    
    
    
    979,156,712
    
    
    
    192,073,741
    
    
    
    60,432,902
    
    
    
    (43,287,153
    )
    
    
    108,222,663
    
    
    
    1,296,598,865As of December 31, 2000 (1)
    
    
    8,201,755
    
    
    
    1,039,795,887
    
    
    
    203,968,868
    
    
    
    64,175,512
    
    
    
    (45,967,927
    )
    
    
    114,924,893
    
    
    
    1,376,897,233As of January 1, 2001
    
    
    8,201,755
    
    
    
    979,156,712
    
    
    
    192,073,741
    
    
    
    60,432,902
    
    
    
    (43,287,153
    )
    
    
    108,222,663
    
    
    
    1,296,598,865Transfer of prior year
loss to retained earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,574
    
    
    
    111,565,992
    
    
    
    (111,577,566
    )
    
    
    Price-level restatement of
capital
    
    
    
    
    
    
    30,353,858
    
    
    
    5,954,286
    
    
    
    1,873,420
    
    
    
    (1,530,871
    )
    
    
    3,354,903
    
    
    
    40,005,596Deficit of subsidiaries in
the development stage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (78,369
    )
    
    
    
    
    
    
    
    
    
    
    (78,369
    )Changes in equity of
affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,836,137
    )
    
    
    
    
    
    
    
    
    
    
    (5,836,137
    )Cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,542,385
    
    
    
    
    
    
    
    
    
    
    
    11,542,385Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,873,684
    )
    
    
    
    
    
    
    (7,873,684
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,058,270
    
    
    
    70,058,270As of December 31, 2001
    
    
    8,201,755
    
    
    
    1,009,510,570
    
    
    
    198,028,027
    
    
    
    67,945,775
    
    
    
    58,874,284
    
    
    
    70,058,270
    
    
    
    1,404,416,926As of December 31, 2001 (1)
    
    
    8,201,755
    
    
    
    1,039,795,887
    
    
    
    203,968,868
    
    
    
    69,984,148
    
    
    
    60,640,513
    
    
    
    72,160,018
    
    
    
    1,446,549,434As of January 1, 2002
    
    
    8,201,755
    
    
    
    1,009,510,570
    
    
    
    198,028,027
    
    
    
    67,945,775
    
    
    
    58,874,284
    
    
    
    70,058,270
    
    
    
    1,404,416,926Transfer of prior year
income to retained
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,058,270
    
    
    
    (70,058,270
    )
    
    
    Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,709,649
    )
    
    
    
    
    
    
    (7,709,649
    )Deficit of subsidiaries in
the development stage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,968,156
    )
    
    
    
    
    
    
    
    
    
    
    (7,968,156
    )Price-level restatement of
capital
    
    
    
    
    
    
    30,285,317
    
    
    
    5,940,841
    
    
    
    2,038,374
    
    
    
    3,636,686
    
    
    
    
    
    
    
    41,901,218Cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,314,037
    
    
    
    
    
    
    
    
    
    
    
    9,314,037Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,319,056
    )
    
    
    (9,319,056
    )As of December 31, 2002
    
    
    8,201,755
    
    
    
    1,039,795,887
    
    
    
    203,968,868
    
    
    
    71,330,030
    
    
    
    124,859,591
    
    
    
    (9,319,056
    )
    
    
    1,430,635,320




|(1) |  | Restated in thousands of constant Chilean pesos as of December 31, 2002.
|--- |  | ------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial statements.

F-14



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Audited Consolidated Statements of Cash Flows
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, and thousands of US dollars)

Years Ended December 31,2000
    
    2001
    
    2002
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThUS$(Note 2 (b))Cash flows from operating activities:Net income (loss) for the year
    
    
    114,924,893
    
    
    
    72,160,018
    
    
    
    (9,319,056
    )
    
    
    (12,968
    )Gain on sales of property, plant and equipment
    
    
    (62,060,142
    )
    
    
    (4,707,858
    )
    
    
    (707,833
    )
    
    
    (985
    )Gain on sales of investments
    
    
    (121,935,112
    )
    
    
    
    
    
    
    
    
    
    
    Charges (credits) to income which donot represent cash flows:Depreciation
    
    
    176,364,843
    
    
    
    185,420,388
    
    
    
    195,858,624
    
    
    
    272,552Amortization of intangibles
    
    
    27,080,106
    
    
    
    4,118,545
    
    
    
    3,206,872
    
    
    
    4,463Write-offs and accrued expenses
    
    
    
    
    
    
    
    
    
    
    384,280
    
    
    
    535Equity participation in income of related companies
    
    
    (4,836,483
    )
    
    
    (4,036,723
    )
    
    
    (15,021,694
    )
    
    
    (20,904
    )Equity participation in losses of related companies
    
    
    4,158,453
    
    
    
    13,984,347
    
    
    
    6,451,197
    
    
    
    8,977Amortization of goodwill
    
    
    7,244,775
    
    
    
    8,268,503
    
    
    
    108,561,701
    
    
    
    151,072Amortization of negative goodwill
    
    
    (41,136,598
    )
    
    
    (45,911,096
    )
    
    
    (85,918,155
    )
    
    
    (119,562
    )Price-level restatement, net
    
    
    (915,645
    )
    
    
    (4,338,232
    )
    
    
    (3,996,482
    )
    
    
    (5,561
    )Foreign currency translation, net
    
    
    4,646,149
    
    
    
    14,504,840
    
    
    
    441,015
    
    
    
    614Other credits to income which do not
represent cash flows
    
    
    
    
    
    
    
    
    
    
    (76,135,258
    )
    
    
    (105,948
    )Other charges to income which do not
represent cash flows
    
    
    49,762,760
    
    
    
    25,901,862
    
    
    
    87,634,005
    
    
    
    121,949Changes in assets which affect cash flows:Decrease (increase) in trade receivables
    
    
    (18,859,635
    )
    
    
    49,873,655
    
    
    
    (16,937,444
    )
    
    
    (23,570
    )Decrease in inventory
    
    
    (5,972,310
    )
    
    
    3,549,684
    
    
    
    4,680,686
    
    
    
    6,514Decrease (increase) in other assets
    
    
    (15,313,180
    )
    
    
    (4,277,731
    )
    
    
    13,864,959
    
    
    
    19,294Changes in liabilities which affect cash flows:Increase in accounts payable associated
with operating results
    
    
    (23,151,591
    )
    
    
    17,905,083
    
    
    
    6,850,029
    
    
    
    9,532Increase in interest payable
    
    
    81,200,268
    
    
    
    8,403,487
    
    
    
    3,822,075
    
    
    
    5,319Increase (decrease) in income tax payable
    
    
    36,276,494
    
    
    
    (28,412,759
    )
    
    
    2,286,791
    
    
    
    3,182Increase (decrease) in other
accounts payable associated with non-operating results
    
    
    (43,765,523
    )
    
    
    (97,933,317
    )
    
    
    72,709,867
    
    
    
    101,181Net increase in value added tax and other accounts payable
    
    
    53,655,211
    
    
    
    8,207,228
    
    
    
    7,014,172
    
    
    
    9,761Income attributable to minority interest
    
    
    68,580,912
    
    
    
    34,015,850
    
    
    
    46,478,294
    
    
    
    64,678Net cash flows provided by operating activities
    
    
    285,948,645
    
    
    
    256,695,774
    
    
    
    352,208,645
    
    
    
    490,125


The accompanying notes are an integral part of these consolidated financial statements.

F-15



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Audited Consolidated Statements of Cash Flows
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, and thousands of US dollars)

Years Ended December 31,2000
    
    2001
    
    2002
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThUS$(Note 2 (b))Cash flows from financing activities:Issuance of subisiary shares
    
    
    
    
    
    
    
    
    
    
    1,845,750
    
    
    
    2,569Proceeds from the issuance of debt
    
    
    672,302,120
    
    
    
    631,654,679
    
    
    
    250,386,931
    
    
    
    348,432Proceeds from bond issuances
    
    
    48,734,092
    
    
    
    132,483,050
    
    
    
    107,025,973
    
    
    
    148,935Proceeds from loans obtained from related companies
    
    
    347,579,356
    
    
    
    443,751,170
    
    
    
    104,785,882
    
    
    
    145,817Other loans received from related companies
    
    
    
    
    
    
    
    
    
    
    48,865,480
    
    
    
    68,000Other sources of financing
    
    
    151,099
    
    
    
    53,538,288
    
    
    
    23,683,650
    
    
    
    32,958Dividends paid
    
    
    (65,020,150
    )
    
    
    (55,986,379
    )
    
    
    (68,652,600
    )
    
    
    (95,535
    )Distributions of capital by foreign subsidiaries
    
    
    (30,066,329
    )
    
    
    
    
    
    
    (7,337,533
    )
    
    
    (10,211
    )Payment of debt
    
    
    (1,186,495,701
    )
    
    
    (857,713,257
    )
    
    
    (495,991,836
    )
    
    
    (690,210
    )Payment of bonds
    
    
    (97,139,863
    )
    
    
    (27,393,008
    )
    
    
    (5,828,964
    )
    
    
    (8,111
    )Payment of loans obtained from related companies
    
    
    (472,659,891
    )
    
    
    (380,997,703
    )
    
    
    (104,236,101
    )
    
    
    (145,052
    )Payment of other loans from related companies
    
    
    
    
    
    
    
    
    
    
    (46,709,650
    )
    
    
    (65,000
    )Payment of bond issuance costs
    
    
    
    
    
    
    
    
    
    
    (11,140,779
    )
    
    
    (15,503
    )Other disbursements for financing
    
    
    (49,355,867
    )
    
    
    (23,173,027
    )
    
    
    (15,668,115
    )
    
    
    (21,803
    )Net cash used in financing activities
    
    
    (831,971,135
    )
    
    
    (83,836,187
    )
    
    
    (218,971,912
    )
    
    
    (304,714
    )Cash flows from investing activities:Proceeds from sales of property, plant and equipment
    
    
    139,070,318
    
    
    
    16,587,562
    
    
    
    19,463,934
    
    
    
    27,086Sale of investment in related companies
    
    
    329,026,024
    
    
    
    
    
    
    
    
    
    
    
    Payments recieved on loans to related companies
    
    
    
    
    
    
    
    
    
    
    17,130,504
    
    
    
    23,838Payments recieved on other loans to related companies
    
    
    22,280,353
    
    
    
    87,868,896
    
    
    
    17,423,767
    
    
    
    24,246Other receipts from investments
    
    
    203,413,403
    
    
    
    262,515
    
    
    
    3,749,472
    
    
    
    5,218Additions to property, plant and equipment
    
    
    (89,662,770
    )
    
    
    (52,972,422
    )
    
    
    (134,857,961
    )
    
    
    (187,665
    )Repurchase of Yankee bonds
    
    
    
    
    
    
    (109,918,922
    )
    
    
    
    
    
    
    Long-term investments
    
    
    (5,429,577
    )
    
    
    (1,487,500
    )
    
    
    (5,098,729
    )
    
    
    (7,095
    )Investment in financial instruments
    
    
    
    
    
    
    
    
    
    
    (724,403
    )
    
    
    (1,008
    )Other loans granted to related companies
    
    
    (82,826,754
    )
    
    
    (45,024,516
    )
    
    
    (28,874,779
    )
    
    
    (40,181
    )Other investment disbursements
    
    
    (33,052,547
    )
    
    
    (7,821,579
    )
    
    
    (1,600,646
    )
    
    
    (2,227
    )Net cash used in investing activities
    
    
    482,818,451
    
    
    
    (112,505,966
    )
    
    
    (113,388,841
    )
    
    
    (157,788
    )Positive net cash flow for the year
    
    
    (63,204,039
    )
    
    
    60,353,621
    
    
    
    19,847,892
    
    
    
    27,620Effect of price-level restatement on cash
and cash equivalents
    
    
    7,881,099
    
    
    
    3,278,431
    
    
    
    9,040,813
    
    
    
    12,581Net increase in cash and cash equivalents
    
    
    (55,322,940
    )
    
    
    63,632,052
    
    
    
    28,888,705
    
    
    
    40,201Cash and cash equivalents beginning of year
    
    
    85,667,167
    
    
    
    30,344,227
    
    
    
    93,976,279
    
    
    
    130,775Cash and cash equivalents end of year
    
    
    30,344,227
    
    
    
    93,976,279
    
    
    
    122,864,984
    
    
    
    170,976


The accompanying notes are an integral part of these consolidated financial statements.

F-16



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

1. Description of Business:

Empresa Nacional de Electricidad S.A. (Endesa-Chile or the Company) is an
electric generation and transmisision company domiciled in Chile. It is a
publicly traded company, regulated by the Chilean Superintendency of Securities
and Insurance (Superintendencia de Valores y Seguros or SVS) as well as by
the United States Securities and Exchange Commission (SEC) since issuing
American Depositary Receipts (ADRs) in 1994.

The Companys subsidiaries that are regulated by the SVS include Empresa
Eléctrica Pehuenche S.A. (Pehuenche S.A.), Empresa Eléctrica Pangue S.A.
(Pangue S.A.), Sociedad Concesionaria Autopista del Sol S.A., Sociedad
Concesionaria Autopista Los Libertadores S.A., and Infraestructura 2000 S.A.
registered under the numbers 293, 419, 550, 619, and 693, respectively.

2. Summary of Significant Accounting Policies:

a. General:

The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in Chile and the
regulations established by the SVS (collectively Chilean GAAP). Certain
accounting practices applied by the Company that conform with generally
accepted accounting principles in Chile do not conform with generally accepted
accounting principles in the United States (U.S. GAAP). Certain amounts in
the prior years financial statements have been reclassified to conform to the
current years presentation.

The preparation of financial statements in conformity with Chilean GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosures of contingent assets and
liabilities as of the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

In certain cases generally accepted accounting principles require that assets
or liabilities be recorded or disclosed at their fair values. The fair value
is the amount at which an asset could be bought or sold or the amount at which
a liability could be incurred or settled in a current transaction between
willing parties, other than in a forced or liquidation sale. Where available,
quoted market prices in active markets have been used as the basis for the
measurement; however, where quoted market prices in active markets are not
available, the Company has estimated such values based on the best information
available, including using modeling and other valuation techniques.

The accompanying financial statements reflect the consolidated results of
operations of Endesa-Chile and its subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. Investments in companies
in the development stage are accounted for using the equity method, except that
income or losses are included directly in equity instead of being reflected in
the Companys consolidated statement of income. The Company consolidates the
financial statements of companies in which it controls over 50% of the voting
shares, provided there are no substantive minority participating rights that
prevent control, as detailed as follows:

F-17



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

2. Summary of Significant Accounting Policies, continued:

Percentage participation as of December 31,Company name
    
    2000
    
    2001
    
    
    
    
    
    2002Total
    
    Total
    
    Direct
    
    Indirect
    
    TotalEnigesa S.A.
    
    
    100.00
    
    
    
    100.00
    
    
    
    99.51
    
    
    
    0.49
    
    
    
    100.00Ingendesa S.A.
    
    
    97.64
    
    
    
    97.64
    
    
    
    96.39
    
    
    
    1.25
    
    
    
    97.64Pehuenche S.A.
    
    
    92.55
    
    
    
    93.66
    
    
    
    92.65
    
    
    
    
    
    
    
    92.65Endesa Argentina S.A. (6)
    
    
    99.99
    
    
    
    99.99
    
    
    
    99.99
    
    
    
    
    
    
    
    99.99Endesa-Chile Internacional (1)
    
    
    100.00
    
    
    
    100.00
    
    
    
    100.00
    
    
    
    
    
    
    
    100.00Pangue S.A.
    
    
    92.48
    
    
    
    92.48
    
    
    
    94.97
    
    
    
    0.02
    
    
    
    94.99Hidroinvest S.A. (6)
    
    
    69.93
    
    
    
    69.93
    
    
    
    
    
    
    
    69.93
    
    
    
    69.93Infraestructura 2000 S.A.
    
    
    60.00
    
    
    
    60.00
    
    
    
    60.00
    
    
    
    
    
    
    
    60.00Hidroeléctrica El Chocón S.A. (6)
    
    
    47.45
    
    
    
    65.19
    
    
    
    
    
    
    
    65.19
    
    
    
    65.19Central Costanera S.A. (3) (6)
    
    
    51.68
    
    
    
    51.93
    
    
    
    
    
    
    
    51.93
    
    
    
    51.93Endesa Brasil Participacoes Ltda.
    
    
    100.00
    
    
    
    100.00
    
    
    
    5.00
    
    
    
    95.00
    
    
    
    100.00Túnel El Melón S.A.
    
    
    99.95
    
    
    
    99.95
    
    
    
    99.95
    
    
    
    
    
    
    
    99.95Soc. Concesionaria Autopista del Sol S.A.
    
    
    60.04
    
    
    
    100.00
    
    
    
    0.10
    
    
    
    99.90
    
    
    
    100.00Inecsa 2000 S.A.
    
    
    58.39
    
    
    
    97.32
    
    
    
    
    
    
    
    97.32
    
    
    
    97.32Soc. Concesionaria Autopista Los Libertadores S.A. (5)
    
    
    58.36
    
    
    
    99.95
    
    
    
    
    
    
    
    99.95
    
    
    
    99.95Compañía Eléctrica Cono Sur S.A.
    
    
    100.00
    
    
    
    100.00
    
    
    
    100.00
    
    
    
    
    
    
    
    100.00Central Hidroeléctrica Betania S.A. (2)
    
    
    85.62
    
    
    
    85.62
    
    
    
    
    
    
    
    85.62
    
    
    
    85.62Endesa de Colombia S.A.
    
    
    100.00
    
    
    
    100.00
    
    
    
    5.10
    
    
    
    94.90
    
    
    
    100.00Lajas Inversora S.A. (1)
    
    
    92.88
    
    
    
    100.00
    
    
    
    
    
    
    
    100.00
    
    
    
    100.00Cachoeira Dourada S.A.
    
    
    91.80
    
    
    
    99.51
    
    
    
    
    
    
    
    99.59
    
    
    
    99.59Capital de Energía S.A.
    
    
    43.67
    
    
    
    50.90
    
    
    
    
    
    
    
    50.90
    
    
    
    50.90Emgesa S.A
    
    
    22.41
    
    
    
    51.32
    
    
    
    
    
    
    
    51.32
    
    
    
    51.32Edegel S.A.A
    
    
    37.90
    
    
    
    63.56
    
    
    
    
    
    
    
    63.56
    
    
    
    63.56Generandes Perú S.A. (4)
    
    
    54.26
    
    
    
    59.63
    
    
    
    
    
    
    
    59.63
    
    
    
    59.63Compañía Eléctrica San Isidro S.A.
    
    
    75.00
    
    
    
    75.00
    
    
    
    50.00
    
    
    
    25.00
    
    
    
    75.00Compañía Eléctrica Tarapacá S.A.
    
    
    100.00
    
    
    
    100.00
    
    
    
    99.90
    
    
    
    0.10
    
    
    
    100.00Inversiones Endesa Norte S.A.
    
    
    100.00
    
    
    
    100.00
    
    
    
    99.99
    
    
    
    0.01
    
    
    
    100.00




|(1) |  | In August 2001, the companies Lajas Holding Inc. and Endesa-Chile Overseas Co. changed their names to Lajas Inversora S.A. y
Endesa-Chile Internacional, respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | In August 2001, Central Betania Overseas Co. merged with Central Hydroelectric Betania.
|--- |  | ---------------------------------------------------------------------------------------



|(3) |  | On December 1, 2001, Central Termoeléctrica Buenos Aires S.A. (CBA) merged with Central Costanera S.A.
|--- |  | ------------------------------------------------------------------------------------------------------

F-18



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|2. |  | Summary of Significant Accounting Policies, continued:
|-- |  | ------------------------------------------------------



|(4) |  | At the General Shareholders Meeting held on March 30, 2001, it was agreed to reduce the share capital of Generandes Perú
by 110,456,374 Soles (equivalent to ThCh$22,147,865), with the intention that Generandes Perú purchase and retire
110,456,374 of its own shares. The shareholders agreed that, as compensation for the share repurchase, Generandes Perú
would transfer 139,935,442 of its shares in Edegel to Edegel. On July 2, 2001, this agreement was registered publicly and
in the accounting records.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) |  | On May 16, 2001, Autopista Los Libertadores S.A. changed its name to Sociedad Concesionaria Autopista Los Libertadores S.A.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------



|(6) |  | Situation in Argentina:
As a consequence of the serious economic crisis in Argentina that began towards the end of 2001, changes were implemented
in the countrys economic model and Ley de Convertibilidad (Convertibility Law) with new regulations proclaimed by the
national government, which resulted in the devaluation of the Argentine peso with respect to the United States dollar and
the redenomination to Argentine pesos from foreign currencies of certain assets and liabilities maintained in Argentina;
conversion to pesos of rates for public services such as electricity, introduction of restrictions on withdrawal of
deposits from financial institutions, and restrictions for certain transfers abroad for servicing principal and interest
of financial loans without prior authorization from the Republic of Argentina Central Bank.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Based on the unstable environment described above, the Company has evaluated the recoverability of its investments in the
Argentine companies Central Costanera S.A. and Hidroeléctrica el Chocón S.A. as described in Notes 2(j) and 13.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) |  | Constant currency restatement:
|-- |  | ------------------------------

The cumulative inflation rate in Chile as measured by the Chilean Consumer
Price Index (CPI) for the three-year period ended December 31, 2002 was
approximately 11.18%.

Chilean GAAP requires that the financial statements be restated to reflect the
full effects of loss in the purchasing power of the Chilean peso on the
financial position and results of operations of reporting entities. The method
described below is based on a model that enables calculation of net inflation
gains or losses caused by monetary assets and liabilities exposed to changes in
the purchasing power of local currency. The model prescribes that the
historical cost of all non-monetary accounts be restated for general
price-level changes between the date of origin of each item and the year-end.

The financial statements of the Company have been price-level restated in order
to reflect the effects of the changes in the purchasing power of the Chilean
currency during each year. All non-monetary assets and liabilities, all equity
accounts and income statement accounts have been restated to reflect the
changes in the CPI from the date they were acquired or incurred to year-end
(see also Note 23).

The purchasing power gain or loss included in net income reflects the effects
of Chilean inflation on the monetary assets and liabilities held by the
Company.

The restatements were calculated using the official consumer price index of the
National Institute of Statistics and based on the prior month rule, in which
the inflation adjustments are based on the CPI at the close of the month
preceding the close of the respective period or transaction. This index is
considered by the business community, the accounting profession and the Chilean
government to be the index that most closely complies with the technical
requirement to reflect the variation in the general level of prices in Chile,
and consequently it is widely used for financial reporting purposes.

F-19



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|2. |  | Summary of Significant Accounting Policies, continued:
|-- |  | ------------------------------------------------------

The values of the Chilean consumer price indices used to reflect the effects of
the changes in the purchasing power of the Chilean peso (price-level
restatement) are as follows:

Change over PreviousIndex
    
    November 30,November 30, 2000
    
    
    106.82
    
    
    
    4.7
    %November 30, 2001
    
    
    110.10
    
    
    
    3.1
    %November 30, 2002
    
    
    113.46
    
    
    
    3.0
    %


By way of comparison, the actual values of the Chilean consumer price indices
as of the balance sheet dates are as follows:

Change over PreviousIndex
    
    December 31,December 31, 2000
    
    
    106.94
    
    
    
    4.5
    %December 31, 2001
    
    
    109.76
    
    
    
    2.6
    %December 31, 2002
    
    
    112.86
    
    
    
    2.8
    %


The above-mentioned price-level restatements do not purport to represent
appraisal or replacement values and are only intended to restate all
non-monetary financial statement components in terms of local currency of a
single purchasing power and to include in net income or loss for each year the
gain or loss in purchasing power arising from the holding of monetary assets
and liabilities exposed to the effects of inflation.

Index-linked assets and liabilities

Assets and liabilities that are denominated in index-linked units of account
are stated at the year-end values of the respective units of account. The
principal index-linked unit used in Chile is the Unidad de Fomento(UF),
which is adjusted daily to reflect the changes in Chiles CPI. Certain of the
Companys investments are linked to the UF. As the Companys indexed
liabilities exceed its indexed assets, the increase in the index results in a
net loss on indexation. Values for the UF are as follows (historical Chilean
pesos per UF):

Ch$December 31, 2000
    
    
    15,769.92December 31, 2001
    
    
    16,262.66December 31, 2002
    
    
    16,744.12


Comparative financial statements

For comparative purposes, the historical December 31, 2000, 2001 and 2002
consolidated financial statements and their accompanying notes have been
presented in constant Chilean pesos as of December 31, 2002. Amounts
previously presented in constant Chilean pesos as of each balance sheet date
have been adjusted by the percentage changes in the CPI to December 31, 2002,
as follows:

F-20



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|2. |  | Summary of Significant Accounting Policies, continued:
|-- |  | ------------------------------------------------------

ChangePeriod
    
    in Index2000
    
    
    6.2%
    (1)2001
    
    
    3.0%
    (2)




|(1) |  | Equivalent to the amounts for 2000 multiplied by the change in the CPI for 2001, then by the change in the CPI for 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------



|(2) |  | Equivalent to the amounts for 2001 multiplied by the change in the CPI for 2002.
|--- |  | --------------------------------------------------------------------------------

This updating does not change the prior periods statements or information in
any way except to update the amounts to constant Chilean pesos of similar
purchasing power.

Convenience translation to U.S. dollars

The financial statements are stated in Chilean pesos. The translations of
Chilean pesos into US dollars are included solely for the convenience of the
reader, using the observed exchange rate reported by the Chilean Central Bank
as of December 31, 2002 of Ch$ 718.61 to US$ 1.00. The convenience
translations should not be construed as representations that the Chilean peso
amounts have been, could have been, or could in the future be, converted into
US dollars at this or any other rate of exchange.



|c) |  | Assets and liabilities denominated in foreign currencies:
|-- |  | ---------------------------------------------------------

Assets and liabilities denominated in foreign currencies are detailed in Note
30. These amounts have been stated at the observed exchange rates reported by
the Central Bank of Chile as of each year-end as follows:

Currency
    
    Symbol used
    
    2000
    
    2001
    
    2002Ch$
    
    Ch$
    
    Ch$United States dollar
(Observed)
    
    US$
    
    
    573.65
    
    
    
    654.79
    
    
    
    718.61British pound sterling
    
    
    £
    
    
    
    856.58
    
    
    
    948.01
    
    
    
    1,152.91Colombian peso
    
    $ Col
    
    
    0.26
    
    
    
    0.29
    
    
    
    0.25New Peruvian sol
    
    Soles
    
    
    162.69
    
    
    
    190.29
    
    
    
    204.73Brazilian real
    
    Rs
    
    
    294.33
    
    
    
    282.97
    
    
    
    203.57Japanese yen
    
    
    ¥
    
    
    
    5.01
    
    
    
    4.99
    
    
    
    6.07Euro
    
    
    
    
    
    
    538.84
    
    
    
    578.18
    
    
    
    752.55French Franc (1)
    
    FFr
    
    
    82.15
    
    
    
    88.36
    
    
    
    Pool Unit (IBRD) (2)
    
    UP
    
    
    7,230,629.88
    
    
    
    7,742,160.26
    
    
    
    9,089,158.76Unidad de Fomento (UF)
    
    UF
    
    
    15,769.92
    
    
    
    16,262.66
    
    
    
    16,744.12Unit of Account (IBD) (2)
    
    UC
    
    
    850.92
    
    
    
    929.26
    
    
    
    1,093.75Argentine peso (3)
    
    $ Arg
    
    
    573.65
    
    
    
    385.17
    
    
    
    219.09




|(1) |  | Beginning on January 1, 2002, this currency is expressed in the Euro.
|--- |  | ---------------------------------------------------------------------

F-21



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|2. |  | Summary of Significant Accounting Policies, continued:
|-- |  | ------------------------------------------------------



| | (2) |  | Units of measurement used by the
International Bank for Reconstruction
and Development (IBRD) and
Interamerican Development Bank (IDB)
to express the weighted-average of
multicurrency loan obligations
granted using fixed currency ratios
to the US dollar, at a determined
date.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) |  | In recent years prior to December 31,
2001, the Argentine peso has been
pegged to the US dollar at a rate of
1 Argentine peso to 1 US dollar. In
early December 2001, restrictions
were put in place that prohibited
cash withdrawals above a certain
amount and foreign money transfers,
with certain limited exceptions.
While the legal exchange rate
remained at 1 peso to 1 US dollar,
financial institutions were allowed
to conduct only limited activity due
to these controls, and currency
exchange activity was effectively
halted except for personal
transactions in small amounts. In
January 2002, the Argentine
government announced its intent to
create a dual currency system with a
official fixed exchange rate of 1.4
pesos to 1 US dollar for import, and
export transactions and a free
floating exchange rate for other
transactions. On January 11, 2002,
the exchange rate market holiday
ended and closing new free floating
exchange rates ranged from 1.6 to 1.7
pesos to 1 US dollar notwithstanding
the official foreign exchange rate as
of December 31, 2001, in accordance
with SVS Circular No. 81. The
conversion of Argentine subsidiary
financial statements reflect the
conversion of 1.7 pesos to 1 US
dollar.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d) |  | Time deposits and Marketable securities:
|-- |  | ----------------------------------------

Time deposits are presented at cost plus accrued interest and UF indexation
adjustments, as applicable.



|e) |  | Accounts receivable and Allowance for doubtful accounts:
|-- |  | --------------------------------------------------------

Accounts receivable are classified as current or long-term, depending on their
collection terms. Current and long-term trade accounts receivable, notes
receivable and other receivables are presented net of allowances for doubtful
accounts (see Note 5). The Company establishes its allowance for doubtful
accounts based on the aging of the accounts and prior experience with specific
accounts.



|f) |  | Inventories:
|-- |  | ------------

Inventories primarily include fuels for the generation of electricity and are
valued at the lower of price-level restated average cost or net realizable
value. Inventories are presented net of a provision for obsolescence (Note 7).



|g) |  | Property, plant and equipment:
|-- |  | ------------------------------

Until 1980, property, plant and equipment were previously valued at net
replacement cost as determined by the former Chilean Superintendency of
Electricity and Fuels (SIC) adjusted for price-level restatement in accordance
with Decree Law N° 4 of 1959.

Property, plant and equipment are currently shown at contributed amounts or
cost, as appropriate, plus price-level restatement. The interest cost on debt
directly obtained in the construction projects is capitalized during the period
of construction. Costs of maintenance and repairs are expensed as incurred
unless such costs increase the useful life or productivity of the related
assets, in which case the costs are capitalized when incurred.

In 1986, an increase based upon a technical appraisal of property, plant and
equipment was recorded in the manner authorized by the SVS in Circulars No.s
550 and 566 dated October 15 and December 16, 1985, respectively, and
Communication No. 4790, dated December 11, 1985.

F-22



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|2. |  | Summary of Significant Accounting Policies, continued:
|-- |  | ------------------------------------------------------

Property, plant and equipment received in leasing which qualify as capital
leases, are accounted as acquisitions, recording the total of the lease
obligation and interest on an accrual basis. Assets obtained under financial
contracts are not the legal property of the Company until it decides to
exercise the related purchase option. Therefore, the Company cannot freely
dispose of them.

In accordance with Chilean GAAP, the Company has evaluated the recoverability
of its foreign investments as required by Technical Bulletins No. 33 and No. 42
of the Chilean Association of Accountants. It is the Companys policy, when
evidence exists of an other than temporary impairment of fixed assets, such
that the Companys operations are not expected to produce sufficient net cash
flows, on a discounted basis, to recover all fixed asset costs, including
depreciation, that the book values of those assets must be reduced to their net
realizable values with a charge to non-operating expense. The Company has not
identified impairments in the net book values of its property, plant and
equipment; however, an impairment of goodwill and negative goodwill was
identified during 2002 (see Note 13).



|h) |  | Depreciation:
|-- |  | -------------

Depreciation expense is calculated on the revalued balances using the
straight-line method over the estimated useful lives of the assets.
Depreciation expense was ThCh $176,364,843, ThCh $185,420,388 and ThCh
$195,858,624 as of December 31, 2000, 2001 and 2002, respectively.
Depreciation expense of ThCh$175,067,450, ThCh$ 184,658,737 and
ThCh$195,029,534 were included in Cost of sales and ThCh$1,297,393, ThCh$
761,651 and ThCh$ 829,090 were included in Administrative and selling
expenses as of December 31,2000, 2001 and 2002, respectively.



|i) |  | Investments in related companies:
|-- |  | ---------------------------------

Investments in related companies are included in Other assets using the
equity method. This accounting method recognizes in income the Companys
proportionate share in the net income or loss of each investee on the accrual
basis (Note 11).

Investments in foreign affiliates are recorded in accordance with Technical
Bulletin No. 64 of the Chilean Association of Accountants (see Note 2(j)).

Invesments in other companies are presented at acquisition cost adjusted for
pricel-level restatement.



|j) |  | Foreign investments:
|-- |  | --------------------

Under Technical Bulletin No. 64 of the Chilean Association of Accountants,
investments in foreign subsidiaries are price-level restated, the effects of
which are reflected in income, while the effects of the foreign exchange gains
or losses between the Chilean Peso and the US Dollar on the foreign investment
measured in US dollars, are reflected in equity in the account Cumulative
Translation Adjustment.



|k) |  | Intangibles, other than goodwill:
|-- |  | ---------------------------------

Intangibles, other than goodwill, correspond mainly to easements and rights for
the use of waterways and are amortized over periods not exceeding 40 years in
accordance with Technical Bulletin No. 55 of the Chilean Association of
Accountants.

F-23



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|2. |  | Summary of Significant Accounting Policies, continued:
|-- |  | ------------------------------------------------------



|l) |  | Goodwill and negative goodwill:
|-- |  | -------------------------------

Goodwill and negative goodwill are determined according to Circular No. 368 of
the SVS based on differences between the purchase price and the recorded book
values of the company acquired at the effective acquisition date. Amortization
is determined using the straight-line method, considering the nature and
characteristic of each investment, foreseeable life of the business and
investment return, and does not exceed 20 years.

The Company has evaluated the recoverability of its recorded goodwill and
negative goodwill in accordance with Technical Bulletin No. 56 and Statement of
International Accounting Standard No. 36 (IAS No. 36) Impairment of Assets.



|m) |  | Revenue recognition:
|-- |  | --------------------

Revenues are recognized at the time energy is supplied to the customer and
collectibility is is reasonably measured. Energy supplied and unbilled at each
year-end is valued at the selling price using the current rates and has been
included in revenue from operations. The unbilled amount is presented in
current assets as trade receivables and the corresponding cost is included in
cost of operations. The Company recognizes revenue generated from engineering
and inspection services and highway tolls at the time the related services are
provided.



|n) |  | Income tax and deferred income taxes:
|-- |  | -------------------------------------

The Company records income taxes in accordance with Technical Bulletin No. 60
of the Chilean Association of Accountants, and with circulars No. 1466 and No.
1560 issued by the SVS, recognizing, using the liability method, the deferred
tax effects of temporary differences between the financial and tax values of
assets and liabilities. As a transitional provision, a contra asset or
liability has been recorded offsetting the effects of the deferred tax assets
and liabilities not recorded prior to January 1, 2000. Such
contra asset or liability must be amortized to income over the estimated
average reversal periods corresponding to the underlying temporary differences
to which the deferred tax asset or liability relates calculated using the tax
rates to be in effect at the time of reversal. For the years ended December 31,
2001 and 2002, the Company recorded current tax expense according to the tax
laws and regulations within each country of ThCh$ 28,084,915 and ThCh$
39,689,689, respectively. A provision for the Article 21 tax of the Income Law
(Impuesto Unico del Art. 21 de la Ley de la Renta) has also been made in the
amount of ThCh$39,788 and ThCh$107,773 in 2001 and 2002, respectively.



|o) |  | Accrued vacation expense:
|-- |  | -------------------------

In accordance with Technical Bulletin No.47 issued by the Chilean Association
of Accountants, employee vacation expenses are recorded on the accrual basis.



|p) |  | Severance indemnity:
|-- |  | --------------------

The severance indemnity that, under collective bargaining agreements, the
Company is obliged to pay to its employees who have completed 15 years of
service is stated at the present value of the benefit under the vested cost
method, discounted at 9.5%. The value of the obligation is calculated based on
an average employment span of 35 years for employees with 15 years or more and
includes 75% of the benefit related to employees with less than the required 15
years.

F-24



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|2. |  | Summary of Significant Accounting Policies, continued:
|-- |  | ------------------------------------------------------



|q) |  | Pension and post-retirement benefits:
|-- |  | -------------------------------------

Pension and post-retirement benefits are recorded in accordance with the
respective employee collective bargaining agreements based on the actuarially
determined projected benefit obligation using a discount rate of 9.5% less an
unrecognized transition obligation.



|r) |  | Bonds:
|-- |  | ------

Bonds payable are recorded at the face value of the bonds. The difference
between the face value and the placement value, equal to the premium or
discount, is deferred and amortized over the term of the bonds (see Note 18).
Discounts on the bond issuances of Endesa-Chile and its subsidiaries deferred
over the term of the respective bonds amounted to ThCh$12,394,302 and
ThCh$12,068,834 as of December 31, 2001 and 2002, respectively, presented in
Other current assets and Other assets.



|s) |  | Statements of cash flows:
|-- |  | -------------------------

The Consolidated Statements of Cash Flows have been prepared in accordance with
the indirect method.

Cash and cash equivalents presented in the consolidated statements of cash
flows include cash, time deposits, and other balances classified as current
assets with maturities less than 90 days. For classification
purposes, cash flows from operations include collections from clients and
payments to suppliers, payroll and taxes.



|t) |  | Financial derivative contracts:
|-- |  | -------------------------------

As of December 31, 2001 and 2002, the Company has forward contracts, currency
swaps, and interest swaps and collars with various financial institutions,
which are recorded according to Technical Bulletin No. 57 of the Chilean
Association of Accountants. Forward foreign exchange contracts gains and losses
are recorded at estimated fair value with certain gains and losses deferred
until settlement if the instrument qualifies as a hedge and included in
earnings as Other non-operating income and expense.



|u) |  | Research and development costs:
|-- |  | -------------------------------

Costs incurred in research and development by the Company which are general in
nature (water-level studies, hydroelectric research, seismic-activity surveys)
are expensed as incurred. Studies related to specific construction projects are
capitalized. During the years ended December 31, 2000, 2001 and 2002 no such
costs were incurred.



|v) |  | Computer software:
|-- |  | ------------------

The Company has deferred the costs of purchased computer software packages,
which are being amortized over a period of three years.



|3. |  | Change in Accounting Principles:
|-- |  | --------------------------------

There were no changes in accounting principles during the years ended December
31, 2001 and 2002 that would affect the comparability with previously issued
financial statements.

F-25



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|4. |  | Time deposits:
|-- |  | --------------

Time deposits as of December 31, 2001 and 2002 and the applicable annual
interest rates and scheduled maturities as of December 31, 2002 are as follows:

As of December 31,Annual
    
    ScheduledFinancial Institution
    
    Rate
    
    Maturity
    
    2001
    
    2002%
    
    
    
    ThCh$
    
    ThCh$Banco Nationale de Paris
    
    
    2.75
    
    
    Jan 01, 2003
    
    
    13,048,776
    
    
    
    693,825Banco Santander
    
    
    1.00
    
    
    Jan 01, 2003
    
    
    618,685
    
    
    
    1,739,071Banco Wiese Sudameris
    
    
    1.44
    
    
    Jan 02, 2003
    
    
    166,454
    
    
    
    431,166Bank of America
    
    
    0.86
    
    
    Jan 01, 2003
    
    
    17,553,537
    
    
    
    5,320,419HSBC  Bamerindus
    
    
    19.06
    
    
    Jan 01, 2003
    
    
    586,792
    
    
    
    4,376,961Citibank
    
    
    3.75
    
    
    Jan 02, 2003
    
    
    
    
    
    
    521,074Banco de Credito
    
    
    1.13
    
    
    Jan 02, 2003
    
    
    
    
    
    
    1,652,803Banco Bradesco
    
    
    1.44
    
    
    Jan 01, 2003
    
    
    
    
    
    
    2,677,168Banco Continental
    
    
    2.42
    
    
    Jan 02, 2003
    
    
    
    
    
    
    3,369,062Fiduvalle
    
    
    7.66
    
    
    Jan 01, 2003
    
    
    
    
    
    
    761,371Banco Votorantim
    
    
    1.46
    
    
    Jan 01, 2003
    
    
    
    
    
    
    2,236,423Banco Pactual
    
    
    1.46
    
    
    Jan 01, 2003
    
    
    
    
    
    
    2,923,141Banco Rio de la Plata
    
    
    3.50
    
    
    Jan 01, 2003
    
    
    
    
    
    
    1,947,063Credifondos
    
    
    3.04
    
    
    Jan 02, 2003
    
    
    
    
    
    
    2,279,242Banco Itaú
    
    
    3.00
    
    
    Jan 01, 2003
    
    
    
    
    
    
    213,069Banco-Frances
    
    
    2.00
    
    
    Jan 01, 2003
    
    
    
    
    
    
    439,841Banco-Holandes
    
    
    3.00
    
    
    Jan 01, 2003
    
    
    
    
    
    
    431,741Suvalor
    
    
    9.04
    
    
    Jan 02, 2003
    
    
    
    
    
    
    4,015,453Banco de La Paz
    
    
    1.10
    
    
    Nov 01, 2003
    
    
    
    
    
    
    1,346Banco BBM
    
    
    18.96
    
    
    Jan 01, 2003
    
    
    
    
    
    
    1,053,564Citrust
    
    
    6.55
    
    
    Jan 01, 2003
    
    
    
    
    
    
    475Banco Interbank
    
    
    4.05
    
    
    Jan 14, 2003
    
    
    391,658
    
    
    
    2,862,988Citibank New York
    
    
    1.01
    
    
    Jan 02, 2003
    
    
    54,433,352
    
    
    
    50,123,923Banco CCF Brasil
    
    
    
    
    
    
    
    
    
    
    812,623
    
    
    
    Megabanco
    
    
    
    
    
    
    
    
    
    
    42,296
    
    
    
    Banco Boston
    
    
    
    
    
    
    
    
    
    
    815,600
    
    
    
    Banco Liberal
    
    
    
    
    
    
    
    
    
    
    482,268
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    88,952,041
    
    
    
    90,071,189


F-26



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|5. |  | Accounts, notes and other receivables:
|-- |  | --------------------------------------

Current accounts, notes and other receivables and related allowances for
doubtful accounts as of each December 31, are as follows:

As of December 31,2001
    
    2002Account
    
    Under 90 days
    
    91 days to 1 year
    
    Allowance
    
    Total
    
    Under 90 days
    
    91 days to 1 year
    
    Allowance
    
    TotalThCh$
    
    
    
    ThCh$
    
    
    
    ThCh$
    
    
    
    ThCh$
    
    
    
    ThCh$
    
    
    
    ThCh$
    
    
    
    ThCh$
    
    
    
    ThCh$Accounts Receivable
    
    
    91,527,082
    
    
    
    537,687
    
    
    
    (184,899
    )
    
    
    91,879,870
    
    
    
    79,416,470
    
    
    
    13,258,854
    
    
    
    (4,420,784
    )
    
    
    88,254,540Notes receivable
    
    
    162,773
    
    
    
    
    
    
    
    
    
    
    
    162,773
    
    
    
    431,437
    
    
    
    579,014
    
    
    
    
    
    
    
    1,010,451Other Receivables
    
    
    10,304,719
    
    
    
    10,363,308
    
    
    
    (784,472
    )
    
    
    19,883,555
    
    
    
    8,839,721
    
    
    
    10,017,426
    
    
    
    (934,660
    )
    
    
    17,922,487Total
    
    
    101,994,574
    
    
    
    10,900,995
    
    
    
    (969,371
    )
    
    
    111,926,198
    
    
    
    88,687,628
    
    
    
    23,855,294
    
    
    
    (5,355,444
    )
    
    
    107,187,478


Long-term other receivables as of December 31, 2001 and 2002 are ThCh$
44,335,067 and ThCh$ 19,157,436, respectively.

Current and long-term accounts receivables per country as of December 31, 2001
and 2002 are as follows:

As of December 31,Country
    
    2001
    
    2002ThCh$
    
    %
    
    ThCh$
    
    %Chile
    
    
    69,351,099
    
    
    
    44.38
    
    
    
    56,441,291
    
    
    
    44.68Peru
    
    
    22,650,214
    
    
    
    14.50
    
    
    
    23,423,791
    
    
    
    18.54Argentina
    
    
    13,861,326
    
    
    
    8.87
    
    
    
    6,332,838
    
    
    
    5.01Colombia
    
    
    23,237,358
    
    
    
    14.87
    
    
    
    19,889,688
    
    
    
    15.74Brazil
    
    
    24,362,299
    
    
    
    15.59
    
    
    
    19,293,025
    
    
    
    15.27Panama
    
    
    2,798,969
    
    
    
    1.79
    
    
    
    964,281
    
    
    
    0.76Total
    
    
    156,261,265
    
    
    
    100.00
    
    
    
    126,344,914
    
    
    
    100.00


F-27



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|6. |  | Transactions with Related Companies:
|-- |  | ------------------------------------

Balances of accounts receivable and payable classified according to the nature
of the transaction are as follows as of December 31, 2001 and 2002:



|a. |  | Notes and accounts receivable due from related companies:
|-- |  | ---------------------------------------------------------

As of December 31,Short-term
    
    Long-termCompany Name
    
    2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Atacama Finance Co.
    
    
    4,297,348
    
    
    
    182,046,895
    
    
    
    169,196,652
    
    
    
    Cía de Energía del Mercosur
    
    
    3,369,682
    
    
    
    4,422,881
    
    
    
    
    
    
    
    Inversiones Eléctricas Quillota
    
    
    1,030
    
    
    
    1,000
    
    
    
    
    
    
    
    Chilectra S.A.
    
    
    10,067,291
    
    
    
    9,716,987
    
    
    
    
    
    
    
    Cía. Interconexión Energética S.A.
    
    
    2,989,613
    
    
    
    4,099,278
    
    
    
    
    
    
    
    Codensa S.A.
    
    
    16,199,176
    
    
    
    14,921,937
    
    
    
    
    
    
    
    Edelnor S.A.
    
    
    2,203,178
    
    
    
    2,585,563
    
    
    
    
    
    
    
    Empresa Eléctrica de Bogotá S.A.
    
    
    133,978
    
    
    
    171,747
    
    
    
    
    
    
    
    Empresa Eléctrica Piura S.A.
    
    
    49,707
    
    
    
    175,199
    
    
    
    
    
    
    
    Enersis S.A.
    
    
    451,146
    
    
    
    179,099
    
    
    
    
    
    
    
    Etevensa
    
    
    155,136
    
    
    
    127,431
    
    
    
    
    
    
    
    Gasoducto Tal Tal Ltda.
    
    
    313,819
    
    
    
    144,871
    
    
    
    
    
    
    
    Gas Atacama Generación Ltda.
    
    
    49,224
    
    
    
    570,445
    
    
    
    
    
    
    
    Transmisora Eléctrica de Quillota Ltda.
    
    
    11,242
    
    
    
    304,222
    
    
    
    1,471,140
    
    
    
    882,109Compañía Americana de Multiservicios
    
    
    
    
    
    
    17,847
    
    
    
    
    
    
    
    Synapsis Colombia
    
    
    
    
    
    
    15,091
    
    
    
    
    
    
    
    Central Generadora Termoeléctrica de Fortaleza
    
    
    
    
    
    
    3,861
    
    
    
    
    
    
    
    Endesa Internacional S.A.
    
    
    38,823
    
    
    
    
    
    
    
    
    
    
    
    Enersis Energía de Colombia
    
    
    6,969
    
    
    
    
    
    
    
    
    
    
    
    Smartcom S.A.
    
    
    18,623
    
    
    
    
    
    
    
    
    
    
    
    Synapsis Soluciones y Servicios IT Ltda.
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Ingendesa Do Brasil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,021Total
    
    
    40,355,991
    
    
    
    219,504,354
    
    
    
    170,667,792
    
    
    
    898,130


F-28



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|6. |  | Transactions with Related Companies, continued:
|-- |  | -----------------------------------------------



|b. |  | Notes and accounts payable due to related companies:
|-- |  | ----------------------------------------------------

As of December 31,Short-term
    
    Long-termCompany Name
    
    2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Compañía de Energía del Mercosur S.A.
    
    
    7,175,604
    
    
    
    760,170
    
    
    
    
    
    
    
    Compañía de Transmisión del Mercosur S.A.
    
    
    339,240
    
    
    
    107,045
    
    
    
    
    
    
    
    Chilectra S.A.
    
    
    21,057
    
    
    
    10,875
    
    
    
    
    
    
    
    Codensa S.A.
    
    
    1,196,753
    
    
    
    18,734,877
    
    
    
    20,772,558
    
    
    
    22,133,188Edelnor S.A.
    
    
    31,206
    
    
    
    6,490
    
    
    
    
    
    
    
    Empresa Eléctrica de Bogotá S.A.
    
    
    3,629,114
    
    
    
    1,226,667
    
    
    
    
    
    
    
    920,539Enersis S.A.
    
    
    49,575,600
    
    
    
    29,454,526
    
    
    
    
    
    
    
    23,454,100Enersis Internacional
    
    
    
    
    
    
    3,994
    
    
    
    
    
    
    
    2,155,831Etevensa S.A.
    
    
    1,116,904
    
    
    
    
    
    
    
    
    
    
    
    Synapsis Soluciones y Servicios IT Ltda.
    
    
    932,434
    
    
    
    1,264,224
    
    
    
    
    
    
    
    Transmisora Eléctrica de Quillota Ltda.
    
    
    42,539
    
    
    
    82,402
    
    
    
    
    
    
    
    Synapsis Perú S.A.
    
    
    
    
    
    
    110,674
    
    
    
    
    
    
    
    Synapsis colombia S.A.
    
    
    
    
    
    
    33,056
    
    
    
    
    
    
    
    Compañía A. Multiser. Perú S.A.
    
    
    
    
    
    
    7,152
    
    
    
    
    
    
    
    Compañía A. Multiser. Colombia
    
    
    
    
    
    
    26,589
    
    
    
    
    
    
    
    Compañía A. Multiser. Ltda.
    
    
    
    
    
    
    12,653
    
    
    
    
    
    
    
    Gasoducto Tal Tal Ltda.
    
    
    213,599
    
    
    
    160,559
    
    
    
    
    
    
    
    Electrogas S.A.
    
    
    270,534
    
    
    
    233,837
    
    
    
    
    
    
    
    Total
    
    
    64,544,584
    
    
    
    52,235,790
    
    
    
    20,772,558
    
    
    
    48,663,658


Short-term accounts receivable and payable with related companies are related
to the sales and purchases of electricity and various services, as well as
operating loans. Transactions for electricity and services have terms of 30
days for payment and are not readjustable. Operating loans are readjustable
and require payment of interest.

The long-term receivable with Sociedad Transmisora Eléctrica de Quillota
Limitada resulted from the sale of fixed assets at book value. The amount is
recorded in UF with accrued interest at an annual rate of 9% and is to be paid
in five equal annual installments beginning in December 2002.

The receivable with Atacama Finance Co. relates to loans given by Compañía
Eléctrica Cono Sur S.A. to finance the construction-in-progress of Gasoducto
Atacama Argentina Ltda., Gasoducto Atacama Chile
Ltda. and Gas Atacama Generación Ltda. The loans are expressed in U.S. Dollars,
accrue interest at an average annual rate of 3.33%, and will mature in
September 2003.

The long-term payable to Enersis S.A. in 2001 and 2002 relates to loans
expressed in Chilean pesos and U.S. Dollars, and accrues interest at market
rates.

F-29



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|6. |  | Transactions with Related Companies, continued:
|-- |  | -----------------------------------------------

The long-term payable to Codensa S.A. is expressed in U.S. Dollars and accrues
interest at an average annual rate of 8.35% and is due on November 10, 2004.



|c. |  | The most significant transactions and their effects in income (expense) for each year-ended
December 31 are as follows:
|-- |  | -----------------------------------------------------------------------------------------------------------------------

Income (expense)Nature ofCompany
    
    Transaction
    
    2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Atacama Finance Co.
    
    Interest
    
    
    11,022,442
    
    
    
    10,056,288
    
    
    
    6,659,856Monetary correction
    
    
    5,061,400
    
    
    
    4,575,343
    
    
    
    4,988,688Exchange difference
    
    
    3,790,297
    
    
    
    17,033,254
    
    
    
    11,107,652Cia. Americana Multiservicios Ltda.
    
    Services
    
    
    
    
    
    
    
    
    
    
    33,800Central Generadora Termoeléctrica de Fortaleza
    
    Services
    
    
    
    
    
    
    
    
    
    
    473,819Exchange difference
    
    
    
    
    
    
    
    
    
    
    (21,636
    )Com. de Energía del Mercosur S.A.
    
    Sale of energy
    
    
    
    
    
    
    22,810,613
    
    
    
    19,152,859Purchase of energy
    
    
    
    
    
    
    (15,347,195
    )
    
    
    (1,958,213
    )Interest
    
    
    
    
    
    
    
    
    
    
    (62,519
    )Codensa S.A.
    
    Purchase of energy
    
    
    
    
    
    
    (9,934,087
    )
    
    
    (13,349,184
    )Sale of energy
    
    
    59,389,039
    
    
    
    70,772,410
    
    
    
    73,383,377Services
    
    
    
    
    
    
    
    
    
    
    104,917Services
    
    
    
    
    
    
    
    
    
    
    (132,730
    )Interest
    
    
    
    
    
    
    (2,326,307
    )
    
    
    (4,264,231
    )Cía. Transmisión del Mercosur S.A.
    
    Purchase of energy
    
    
    
    
    
    
    (3,985,903
    )
    
    
    (1,397,696
    )Cía. Interconexión Energética S.A.
    
    Sale of energy
    
    
    39,696,963
    
    
    
    46,839,739
    
    
    
    26,990,992Services
    
    
    471,433
    
    
    
    903,382
    
    
    
    135,856Empresa Propietaria de la Red
    
    Services
    
    
    
    
    
    
    
    
    
    
    346,994Chilectra S.A.
    
    Sale of energy
    
    
    92,856,351
    
    
    
    102,600,017
    
    
    
    108,965,952Services
    
    
    715,110
    
    
    
    795,144
    
    
    
    1,892,845Services
    
    
    
    
    
    
    
    
    
    
    (42,173
    )Interest
    
    
    37,974
    
    
    
    
    
    
    
    Empresa Eléctrica Piura S.A.
    
    Sale of energy
    
    
    2,472,161
    
    
    
    938,354
    
    
    
    1,457,382Enersis S.A.
    
    Interest
    
    
    (11,393,283
    )
    
    
    (316,444
    )
    
    
    (3,450,691
    )Services
    
    
    
    
    
    
    447,622
    
    
    
    552,533Exchange difference
    
    
    (218,105
    )
    
    
    (3,346,391
    )
    
    
    224,996Monetary correction
    
    
    (291,245
    )
    
    
    (365,636
    )
    
    
    (575,875
    )Enersis agencia
    
    Interest
    
    
    (442,798
    )Enersis Energía de Colombia S.A.
    
    Sale of energy
    
    
    10,668,648
    
    
    
    2,934,525
    
    
    
    Enersis de Argentina S.A.
    
    Exchange difference
    
    
    
    
    
    
    
    
    
    
    1,848Etevensa
    
    Sale of energy
    
    
    1,794,940
    
    
    
    3,063,312
    
    
    
    5,757,877Electrogas S.A.
    
    Purchase of gas
    
    
    
    
    
    
    (2,449,634
    )
    
    
    (2,973,636
    )Services
    
    
    5,670
    
    
    
    
    
    
    
    5,066Purchase of energy
    
    
    (2,324,817
    )
    
    
    
    
    
    
    Edesur
    
    Sales of energy
    
    
    38,744,517
    
    
    
    
    
    
    
    Edelnor S.A.
    
    Sale of energy
    
    
    40,573,341
    
    
    
    32,312,537
    
    
    
    28,775,524Edenor S.A.
    
    Sale of energy
    
    
    38,725,328
    
    
    
    
    
    
    
    Smartcom S.A.
    
    Services
    
    
    245,084
    
    
    
    180,013
    
    
    
    2,060Endesa Internacional S.A.
    
    Services
    
    
    83,015
    
    
    
    15,973
    
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    (3,994
    )Cam Colombia
    
    Services
    
    
    
    
    
    
    
    
    
    
    (308,870
    )Synapsis Sol y Serv. IT Ltda.
    
    Services
    
    
    (1,138,409
    )
    
    
    (238,829
    )
    
    
    2,727Services
    
    
    
    
    
    
    
    
    
    
    (3,189,018
    )Synapsis Argentina
    
    Services
    
    
    
    
    
    
    
    
    
    
    (41,109
    )Synapsis Colombia
    
    Services
    
    
    
    
    
    
    
    
    
    
    (392,047
    )Transmisora Eléc. de Quillota Ltda.
    
    Interest
    
    
    128,481
    
    
    
    134,407
    
    
    
    144,050Services
    
    
    (461,597
    )
    
    
    
    
    
    
    5,066Monetary correction
    
    
    
    
    
    
    
    
    
    
    43,994Nopel Ltda
    
    Services
    
    
    (1,582,825
    )
    
    
    
    
    
    
    Gasoducto Tal Tal ltda
    
    Services
    
    
    611,474
    
    
    
    
    
    
    
    Gas Atacama Generación Ltda.
    
    Services
    
    
    (1,630,310
    )
    
    
    325,374
    
    
    
    Total
    
    
    
    
    321,426,870
    
    
    
    278,427,881
    
    
    
    259,047,108


These transactions were carried out at prices that approximate market value.

F-30



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|6. |  | Transactions with Related Companies, continued:
|-- |  | -----------------------------------------------

The transfer of short-term funds between related companies, which funds are not
for collection or payment of services, is on the basis of a current cash
account, at a variable interest rate based on market conditions. The resulting
accounts receivable and accounts payable are essentially on 30-day terms, with
automatic rollover for the same period and settlement in line with cash flows.



|7. |  | Inventories, net:
|-- |  | -----------------

Inventories include the following items and are presented net of a provision
for obsolescence amounting to ThCh$1,389,676 and ThCh$1,819,908 as of December
31, 2001 and 2002, respectively:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Materials
    
    
    4,911,244
    
    
    
    3,501,189Fuels for thermal
facilities
    
    
    11,847,595
    
    
    
    6,442,698Others
    
    
    4,793,968
    
    
    
    464,537Total
    
    
    21,552,807
    
    
    
    10,408,424




|8. |  | Deferred income taxes:
|-- |  | ----------------------



|a. |  | Income taxes (recoverable) payable as of each year-end are as follows:
|-- |  | ----------------------------------------------------------------------

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Income tax payable
    
    
    11,993,181
    
    
    
    4,468,220Income tax recoverable
    
    
    (32,774,790
    )
    
    
    (23,941,054
    )Net
    
    
    (20,781,609
    )
    
    
    (19,472,834
    )




|b. |  | Endesa-Chile (individual legal entity) had a tax loss of ThCh$15,952,209 and ThCh$32,807,363 for the years ended December 31, 2001 and 2002,
respectively. Under current Chilean tax law, such losses do not expire.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c. |  | As of December 31, 2001 and 2002, Endesa-Chile (individual legal entity) had accumulated tax losses of ThCh$71,805,335, and ThCh$48,164,686 and
related tax credits of ThCh$10,500,930 and ThCh$3,436,936.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-31



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|8. |  | Deferred income taxes, continued:
|-- |  | ---------------------------------



|d. |  | In accordance with BT No. 60 and 69 of the Chilean Association of Accountants, and Circular
No. 1,466 of the SVS, the Company and its subsidiaries have recorded consolidated deferred
income taxes as of December 31, 2001 and 2002 as follows:
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2001
    
    As of December 31, 2002Asset
    
    Liability
    
    Asset
    
    LiabilityShort-term
    
    Long-term
    
    Short-term
    
    Long-term
    
    Short-term
    
    Long-term
    
    Short-term
    
    Long-termThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Depreciation
    
    
    
    
    
    
    3,500,985
    
    
    
    63,085
    
    
    
    271,008,078
    
    
    
    
    
    
    
    3,730,312
    
    
    
    33,908
    
    
    
    301,866,168Severance indemnities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,589,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    331,549Prepaid income
    
    
    115,837
    
    
    
    1,409,812
    
    
    
    
    
    
    
    
    
    
    
    99,963
    
    
    
    1,369,956
    
    
    
    
    
    
    
    Finance costs
    
    
    
    
    
    
    194,771
    
    
    
    
    
    
    
    8,304,618
    
    
    
    
    
    
    
    117,034
    
    
    
    
    
    
    
    13,755,855Derivative contracts
    
    
    2,775
    
    
    
    1,000,985
    
    
    
    
    
    
    
    512,288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vacation accrual
    
    
    151,853
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    324,095
    
    
    
    
    
    
    
    
    
    
    
    Tax losses
    
    
    
    
    
    
    55,588,192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,016,219
    
    
    
    
    
    
    
    Contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,328,724
    
    
    
    1,364
    
    
    
    
    
    
    
    Forward contracts and
swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,818
    
    
    
    234,174
    
    
    
    
    
    
    
    Imputed interest on
construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,830,117
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,863,433Cost of studies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,675,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,972,554Spare parts used
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,349,399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,086,289Leasing receivables
    
    
    
    
    
    
    3,475,357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,301,708
    
    
    
    
    
    
    
    Bonds discount
    
    
    
    
    
    
    
    
    
    
    259,662
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234,642Allowance for doubtful
accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,117
    
    
    
    
    
    
    
    El Chocón investments
    
    
    
    
    
    
    
    
    
    
    24,954
    
    
    
    119,374
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    2,897,754Capitalized costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,199,407
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,357,961Salaries for
construction-in-progress
    
    
    
    
    
    
    5,843,294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,926,807
    
    
    
    
    
    
    
    Provision for employee
obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    911,198
    
    
    
    
    
    
    
    Other events
    
    
    1,659
    
    
    
    980,723
    
    
    
    220,153
    
    
    
    55,187
    
    
    
    192,533
    
    
    
    1,168,172
    
    
    
    
    
    
    
    5,569,889Complementary accounts,
net
    
    
    (47
    )
    
    
    (42,970,204
    )
    
    
    (24,954
    )
    
    
    (243,842,266
    )
    
    
    
    
    
    
    (38,843,752
    )
    
    
    (37
    )
    
    
    (240,327,854
    )Valuation allowance
    
    
    
    
    
    
    (3,322,326
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,271,667
    )
    
    
    
    
    
    
    Total
    
    
    272,077
    
    
    
    25,701,589
    
    
    
    542,900
    
    
    
    54,801,452
    
    
    
    3,296,133
    
    
    
    33,710,642
    
    
    
    33,908
    
    
    
    99,608,240


F-32



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|8. |  | Deferred income taxes, continued:
|-- |  | ---------------------------------



|e. |  | Income tax expense for the years ended December 31, 2000, 2001 and 2002 is as follows:
|-- |  | --------------------------------------------------------------------------------------

As of December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Current income tax expenseIncome tax provision
    
    
    (72,087,373
    )
    
    
    (32,528,542
    )
    
    
    (40,342,717
    )Deferred tax expense (benefit)Special tax Art.21
    
    
    
    
    
    
    39,788
    
    
    
    107,773Adjustment for tax expense prior year
    
    
    
    
    
    
    4,443,627
    
    
    
    (653,028
    )Deferred taxes
    
    
    (14,727,729
    )
    
    
    (18,062,859
    )
    
    
    (20,281,561
    )Benefits for tax losses
    
    
    
    
    
    
    2,973,825
    
    
    
    4,921,105Amortization of complementary accounts
    
    
    7,951,155
    
    
    
    4,908,846
    
    
    
    (15,186,201
    )Change in valuation allowance
    
    
    (1,192,554
    )
    
    
    (1,607,004
    )
    
    
    126,575Other charges or credits
    
    
    (8,427,350
    )
    
    
    
    
    
    
    157,704Total
    
    
    (88,483,851
    )
    
    
    (39,911,895
    )
    
    
    (70,628,398
    )




|9. |  | Other current assets:
|-- |  | ---------------------

Other current assets as of each year-end are as follows:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Accounts receivable from
the Chilean Ministry of
PublicWorks
    
    
    3,303,579
    
    
    
    8,399,481Ralco and Alto Jahuel
Proyects
    
    
    3,049,361
    
    
    
    173,730Deposits for commitments
and guarantees
    
    
    1,134,520
    
    
    
    986,752Forward contracts and swaps
    
    
    
    
    
    
    29,196,189Unrealized losses on
derivatives
    
    
    
    
    
    
    11,253,893Restricted time deposits
Infraestructura 2000 S.A.
    
    
    
    
    
    
    25,342,942Reserve funds
Infraestructura 2000 S.A.
    
    
    
    
    
    
    1,298,967Other
    
    
    2,288,698
    
    
    
    80,338Total
    
    
    9,776,158
    
    
    
    76,732,288


F-33



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|10. |  | Property, plant and equipment:
|--- |  | ------------------------------

The composition of property, plant and equipment as of each year-end is as follows:

As of December 31,Years of usefullives
    
    2001
    
    2002ThCh$
    
    ThCh$Land
    
    
    
    
    39,431,003
    
    
    
    40,258,673Buildings and infrastructure
    
    35 - 40
    
    
    6,058,875,881
    
    
    
    6,362,064,717Distribution and transmission lines and public lighting
    
    35 - 40
    
    
    26,041,078
    
    
    
    22,297,240Sub-total
    
    
    
    
    6,084,916,959
    
    
    
    6,384,361,957Machinery and equipment
    
    35 - 40
    
    
    1,132,162,021
    
    
    
    1,207,370,348Construction in progress
    
    
    
    
    51,517,814
    
    
    
    17,272,756Construction materials
    
    
    
    
    5,413,533
    
    
    
    6,590,253Furniture and fixtures, tools, software and informationTechnology equipment
    
    3 - 10
    
    
    14,238,126
    
    
    
    13,761,358Vehicles
    
    6 - 10
    
    
    792,760
    
    
    
    1,413,367Other assets
    
    3 - 8
    
    
    5,874,776
    
    
    
    3,758,575Sub-total
    
    
    
    
    77,837,009
    
    
    
    42,796,309Technical appraisal
    
    
    
    
    678,006,069
    
    
    
    721,315,634Total property, plant and equipment
    
    
    
    
    8,012,353,061
    
    
    
    8,396,102,921Less: accumulated depreciation
    
    
    
    
    (2,447,459,989
    )
    
    
    (2,726,253,793
    )Total property, plant and equipment, net
    
    
    
    
    5,564,893,072
    
    
    
    5,669,849,128


The Company and its foreign subsidiaries have individually purchased insurance
policies which cover all risk, earthquake and machinery breakdown, with
coverage limitations of ThUS$400,000, ThUS$15,000 and ThUS$100,000
respectively. This coverage includes business interruption damages. The
premiums associated with these policies are recorded proportionately in each
company under Prepaid expenses and charged to expenses over its term.

Analysis of recoverability of fixed assets:

The Company analyzes the book values of its investments in companies operating
in South American countries outside of Chile. This analysis is necessary due
to the poor economic situation in South America and by the fact that property,
plant and equipment held by the Companys investees in countries outside of
Chile are remeasured into United States dollars. The analysis consisted in
evaluating both the recoverability of the property, plant and equipment of
these companies, as well as the goodwill and negative goodwill recorded by the
Company in these companies, in accordance with Chilean GAAP. The result of this
analysis determined that no adjustments were required to the net book values of
the property, plant and equipment of the Company and its Subsidiaries. However,
impairments of goodwill and negative goodwill were identified (see Note 13).

F-34



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|11. |  | Investment in related companies:
|--- |  | --------------------------------



|a) |  | Investments as of each year-end are as follows:
|-- |  | -----------------------------------------------

As of December 31, 2002
    
    Carrying Value
    
    Equity in net earnings (losses)Number of
    
    PercentageRelated Companies
    
    Shares
    
    Owned
    
    Related Equity
    
    2001
    
    2002
    
    2000
    
    2001
    
    2002%
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Cía. de Interconexión Energética S.A. (2)
    
    
    128,270,106
    
    
    
    45.00
    
    
    
    118,325,971
    
    
    
    50,667,801
    
    
    
    53,246,687
    
    
    
    (1,563,221
    )
    
    
    (5,826,850
    )
    
    
    7,230,684Gas Atacama Generación Ltda.
    
    
    
    
    
    
    50.00
    
    
    
    67,770,629
    
    
    
    36,300,892
    
    
    
    33,885,315
    
    
    
    (2,595,232
    )
    
    
    (3,441,037
    )
    
    
    (4,793,334
    )Gasoducto Atacama Argentina Ltda.
    
    
    
    
    
    
    50.00
    
    
    
    64,226,451
    
    
    
    27,899,622
    
    
    
    32,113,226
    
    
    
    287,536
    
    
    
    (4,686,666
    )
    
    
    2,386,141Gasoducto Atacama Chile Ltda.
    
    
    
    
    
    
    50.00
    
    
    
    55,859,069
    
    
    
    23,197,393
    
    
    
    27,929,534
    
    
    
    2,953,252
    
    
    
    3,303,780
    
    
    
    3,212,680Inversiones Eléctricas Quillota S.A.
    
    
    608,676
    
    
    
    50.00
    
    
    
    17,127,364
    
    
    
    7,602,220
    
    
    
    8,563,682
    
    
    
    615,927
    
    
    
    (29,794
    )
    
    
    1,310,128Inversiones Electrogas S.A.
    
    
    425
    
    
    
    42.50
    
    
    
    15,712,743
    
    
    
    6,037,668
    
    
    
    6,677,916
    
    
    
    300,236
    
    
    
    34,091
    
    
    
    638,377Com. de Energía del Mercosur S.A. (3)
    
    
    6,305,400
    
    
    
    45.00
    
    
    
    7,614,035
    
    
    
    4,680,261
    
    
    
    3,426,316
    
    
    
    196,295
    
    
    
    48,872
    
    
    
    (1,524,596
    )Transmisora Eléctrica de Quillota Ltda.
    
    
    
    
    
    
    50.00
    
    
    
    5,032,660
    
    
    
    2,389,373
    
    
    
    2,516,330
    
    
    
    96,667
    
    
    
    87,840
    
    
    
    126,529Atacama Finance Co. (2)
    
    
    3,150,000
    
    
    
    50.00
    
    
    
    5,179,023
    
    
    
    2,555,396
    
    
    
    2,589,511
    
    
    
    90,809
    
    
    
    120,819
    
    
    
    (133,267
    )Electrogas S.A.
    
    
    85
    
    
    
    0.02
    
    
    
    11,190,123
    
    
    
    2,038
    
    
    
    2,378
    
    
    
    168
    
    
    
    37
    
    
    
    339Distrilec Inversora S.A.
    
    
    4,416,141
    
    
    
    0.89
    
    
    
    411,308,793
    
    
    
    3,387,376
    
    
    
    3,650,226
    
    
    
    292,038
    
    
    
    418,722
    
    
    
    40,973Consorcio ARA  Ingendesa
    
    
    
    
    
    
    50.00
    
    
    
    105,766
    
    
    
    
    
    
    
    52,883
    
    
    
    3,555
    
    
    
    
    
    
    
    56,927Consorcio Ingendesa  Minmetal Ltda (1)
    
    
    
    
    
    
    50.00
    
    
    
    3,676
    
    
    
    23,623
    
    
    
    1,838
    
    
    
    
    
    
    
    22,562
    
    
    
    18,916Ingendesa do Brasil Limitada (1) (4)
    
    
    
    
    
    
    100.00
    
    
    
    57,442
    
    
    
    49,599
    
    
    
    57,442
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,793,262
    
    
    
    174,713,284
    
    
    
    678,030
    
    
    
    (9,947,624
    )
    
    
    8,570,497




|(1) |  | These companies are related parties to the subsidiary Ingendesa S.A.
|--- |  | --------------------------------------------------------------------



|(2) |  | These companies are related parties to the subsidiary Compañía Electrica Conosur S.A.
|--- |  | -------------------------------------------------------------------------------------



|(3) |  | This company is a related party to the subsidiary Endesa Argentina S.A.
|--- |  | -----------------------------------------------------------------------



|(4) |  | This company is in the development stage.
|--- |  | -----------------------------------------

F-35



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|11. |  | Investment in related companies, continued:
|--- |  | -------------------------------------------



|b. |  | Purchase of shares made in equity method investments during 2001 and 2002:
|-- |  | --------------------------------------------------------------------------

On August 9, 2001, Lajas Inversora S.A. purchased 19,662,674 (0.672%) shares of
Central Eléctrica Cachoeira Dourada S.A. (Brazil) for ThCh$1,487,500
(ThUS$2,206) increasing its participation to 99.51%.

During 2002, Lajas Inversora S.A. purchased 753,627 (0.0803%) shares of Central
Eléctrica Cachoeira Dourada S.A. (Brazil) for
ThCh$58,931, increasing its participation to 99.59%.

On July 12, 2002, the Endesa-Chile purchased 7,275,433 (2.51%) shares of Pangue
S.A. (Chile) for ThCh$4,998,894, increasing its participation to 94.97%.

The costs of these incremental investments are as follows:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$PurchasesCentral Eléctrica
Cachoeira Dourada S.A.
    
    
    1,487,500
    
    
    
    58,931Pangue S.A
    
    
    
    
    
    
    4,998,894Other
    
    
    
    
    
    
    40,9041,487,500
    
    
    
    5,098,729




|c. |  | In accordance with Technical Bulletin No. 64 of the Chilean Association of Accountants for the years ended December 31, 2001
and 2002, the Company has recorded foreign exchange gains and losses on liabilities related to net investments in foreign
countries that are denominated in the same currency as the functional currency of those foreign investments. Such gains and
losses are included in the cumulative translation adjustment account in shareholders equity, and in this way, act as an
economic hedge of the exchange risk affecting the investments. As of December 31, 2002 the corresponding amounts are as
follows:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Country of
    
    
    
    
    
    ReportingCompany
    
    Origin
    
    Investment
    
    Currency
    
    LiabilityThCh$
    
    
    
    
    
    ThCh$Central Hidroeléctrica Betania
    
    Colombia
    
    
    600,762,975
    
    
    US$
    
    
    336,577,165Cachoeira Dourada
    
    Brazil
    
    
    430,106,204
    
    
    US$
    
    
    530,228,953Edegel S.A.A
    
    Peru
    
    
    220,917,766
    
    
    US$
    
    
    243,486,508Cía. Interconexión Energética S.A.
    
    Brazil
    
    
    53,246,687
    
    
    US$
    
    
    62,574,905Atacama Finance Co.
    
    Cayman Islands
    
    
    2,589,511
    
    
    US$
    
    
    1,854,668Hidroeléctrica El Chocón S.A.
    
    Argentina
    
    
    212,761,767
    
    
    US$
    
    
    121,855,669Comercializadora de Energia del Mercosur S.A.
    
    Argentina
    
    
    3,426,316
    
    
    US$
    
    
    3,952,377Central Costanera S.A.
    
    Argentina
    
    
    89,044,456
    
    
    US$
    
    
    65,498,672Distrilec Inversora S.A.
    
    Argentina
    
    
    3,650,226
    
    
    US$
    
    
    1,624,288Total
    
    
    
    
    
    
    1,616,505,908
    
    
    
    
    
    
    
    1,367,653,205


F-36



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|12. |  | Investments in other companies:
|--- |  | -------------------------------



| |  | Investments in other companies at December 31, 2001 and 2002 are as follows:
| |  | ----------------------------------------------------------------------------

As of December 31,Company
    
    Number of shares
    
    Percentage owned
    
    2001
    
    2002%
    
    ThCh$
    
    ThCh$Club de la Banca y Comercio
    
    
    2
    
    
    
    1.00
    
    
    
    2,572
    
    
    
    2,699Club Empresarial
    
    
    1
    
    
    
    1.00
    
    
    
    6,328
    
    
    
    6,150Edegas
    
    
    1
    
    
    
    1.00
    
    
    
    2,616
    
    
    
    3,422Empresa Eléctrica de Aisen S.A
    
    
    2,516,231
    
    
    
    
    
    
    
    1,978,031
    
    
    
    1,978,031Inmobiliaria España S.A.
    
    
    1
    
    
    
    
    
    
    
    98
    
    
    
    98Inverandes S.A.
    
    
    1,011,899
    
    
    
    
    
    
    
    3,420
    
    
    
    3,420Cooperativa Eléctrica de Chillán
    
    
    
    
    
    
    
    
    
    
    12,907
    
    
    
    12,907CDEC-SIC Ltda.
    
    
    
    
    
    
    30.77
    
    
    
    153,100
    
    
    
    223,114Empresa Eléctrica de Bogotá S.A.
    
    
    6,409,132
    
    
    
    5.50
    
    
    
    74,188,405
    
    
    
    79,047,819Financiera Eléctrica Nacional
    
    
    
    
    
    
    
    
    
    
    124,006
    
    
    
    353,555Autopista del Río Maipo S.A.
    
    
    25
    
    
    
    
    
    
    
    4,827
    
    
    
    4,827Total
    
    
    
    
    
    
    
    
    
    
    76,476,310
    
    
    
    81,636,042




|13. |  | Goodwill and Negative Goodwill:
|--- |  | -------------------------------



|a. |  | In accordance with current standards, recognition has been given to the excess of
purchase price of the proportional equity in the net assets acquired (goodwill) in the
purchase of shares as of December 31, 2000, 2001 and 2002, as follows:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31,Company
    
    Amortization
    
    Net Balance2000
    
    2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Central Costanera S.A. (1)
    
    
    1,477,224
    
    
    
    1,635,472
    
    
    
    24,019,065
    
    
    
    22,542,503
    
    
    
    C. Hidroeléctrica Cachoeira
Dourada S.A.(1)
    
    
    3,685,680
    
    
    
    4,080,506
    
    
    
    69,564,545
    
    
    
    65,288,089
    
    
    
    Lajas Inversora S.A. (1)
    
    
    34,232
    
    
    
    105,474
    
    
    
    1,798,130
    
    
    
    1,687,590
    
    
    
    Emgesa S.A.
    
    
    1,369,908
    
    
    
    1,516,659
    
    
    
    1,615,435
    
    
    
    24,013,765
    
    
    
    23,970,674Gasoducto Atacama Chile Ltda.
    
    
    4,772
    
    
    
    4,772
    
    
    
    4,772
    
    
    
    81,927
    
    
    
    77,154Hidroeléctrica El Chocón S.A. (1)
    
    
    507,513
    
    
    
    810,026
    
    
    
    10,069,320
    
    
    
    9,450,309
    
    
    
    Hidroinvest S.A. (1)
    
    
    70,177
    
    
    
    77,694
    
    
    
    1,379,722
    
    
    
    1,294,904
    
    
    
    Edegel S.A.A
    
    
    95,269
    
    
    
    37,900
    
    
    
    41,020
    
    
    
    609,554
    
    
    
    608,459Pangue S.A.
    
    
    
    
    
    
    
    
    
    
    69,692
    
    
    
    
    
    
    
    3,275,515Total
    
    
    7,244,775
    
    
    
    8,268,503
    
    
    
    108,561,701
    
    
    
    124,968,641
    
    
    
    27,931,802


F-37



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|13. |  | Goodwill and Negative Goodwill, continued:
|--- |  | ------------------------------------------



|b. |  | Following current standards, recognition has been given to the excess of the equity in the
net assets purchased over the purchase price (negative goodwill) in the purchase of shares
as of December 31, 2000, 2001 and 2002 as follows:
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31,Company
    
    Amortization
    
    Net Balance2000
    
    2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$C. Hidroeléctrica Cachoeira
Dourada S.A. (1)
    
    
    1,773,475
    
    
    
    1,996,761
    
    
    
    36,869,705
    
    
    
    34,362,010
    
    
    
    Edegel S.A.A
    
    
    8,564,986
    
    
    
    9,661,331
    
    
    
    10,294,161
    
    
    
    68,866,610
    
    
    
    63,083,303Central Hidroeléctrica Betania
S.A.
    
    
    30,582,139
    
    
    
    33,765,719
    
    
    
    34,886,018
    
    
    
    56,035,189
    
    
    
    24,819,551Empresa Eléctrica de Bogotá S.A.
    
    
    215,999
    
    
    
    239,138
    
    
    
    254,803
    
    
    
    3,826,225
    
    
    
    3,822,287Hidroeléctrica El Chocón S.A. (1)
    
    
    
    
    
    
    248,147
    
    
    
    3,613,468
    
    
    
    3,391,331
    
    
    
    Total
    
    
    41,136,599
    
    
    
    45,911,096
    
    
    
    85,918,155
    
    
    
    166,481,365
    
    
    
    91,725,141




|(1) |  | An analisis of the recoverability of goodwill and negative goodwill associated with
investments outside Chile was performed in accordance with IAS No. 36 Impairment of
Assets, following the guidance in Technical Bulletin No. 56 issued by the Chilean
Association of Accountants. The results of this analysis showed that the goodwill and
negative goodwill associated with investments made in Argentina and Brazil are 100%
impaired due to the finding that the future discounted cash flows expected to be produced
from the investees in those countries is not sufficient to offset the recovery of recorded
goodwill and negative goodwill. Endesa-Chile has recorded a charge to income a net amount
of ThCh$62,151,280, which is recorded in amortization of goodwill and amortization of
negative goodwill in the consolidated statement of income for the year ended December 31,
2002. The amount recorded by the Company on a consolidated basis, net of the effect of
minority interests, was a net charge to income of ThCh$56,110,189.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-38



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|14. |  | Intangibles:
|--- |  | ------------

The detail of intangibles as of each year-end is as follows:

As of December 31,
    
    As of December 31,2001
    
    2002Accumulated
    
    
    
    
    
    
    
    
    
    AccumulatedTotal
    
    Amortization
    
    Net Balance
    
    Total
    
    Amortization
    
    Net BalanceThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Easements
    
    
    1,378,665
    
    
    
    (310,330
    )
    
    
    1,068,336
    
    
    
    1,410,654
    
    
    
    (639,638
    )
    
    
    771,016Water rights
    
    
    18,195,406
    
    
    
    (1,340,332
    )
    
    
    16,855,075
    
    
    
    18,299,404
    
    
    
    (1,064,261
    )
    
    
    17,235,143Salex-
fourth line 
Comahue
    
    
    9,272,601
    
    
    
    (1,788,137
    )
    
    
    7,484,464
    
    
    
    9,376,423
    
    
    
    (1,927,376
    )
    
    
    7,449,047Software
    
    
    580,669
    
    
    
    
    
    
    
    580,669
    
    
    
    618,703
    
    
    
    (122,731
    )
    
    
    495,972Mine rights
    
    
    50,461
    
    
    
    
    
    
    
    50,460
    
    
    
    50,460
    
    
    
    
    
    
    
    50,460Tolls license
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,321
    
    
    
    
    
    
    
    31,321Other
    
    
    1,107,603
    
    
    
    (1,023,022
    )
    
    
    84,580
    
    
    
    2,223,387
    
    
    
    (1,595,234
    )
    
    
    628,153Total
    
    
    30,585,405
    
    
    
    (4,461,821
    )
    
    
    26,123,584
    
    
    
    32,010,352
    
    
    
    (5,349,240
    )
    
    
    26,661,112




|15. |  | Other assets:
|--- |  | -------------

Other assets as of each year-end are as follows:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Bond discount
    
    
    12,394,302
    
    
    
    12,068,834Reimburseable contributions
    
    
    4,660,557
    
    
    
    4,129,558Deferred commissions on loans and lines of credit
    
    
    15,321,724
    
    
    
    16,342,698Minimum tax on earnings of certain productive
assets (Argentina)
    
    
    4,401,120
    
    
    
    3,362,778Bond issuance costs
    
    
    
    
    
    
    11,513,319Unrealized loss on forward contracts and collars
    
    
    
    
    
    
    22,440,336Accounts receivable from the Chilean Ministry of Public Works
    
    
    
    
    
    
    2,121,600Forward contracts and swaps
    
    
    3,067,592
    
    
    
    802,544Others
    
    
    693,690
    
    
    
    100,165Total
    
    
    40,538,985
    
    
    
    72,881,832


F-39



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|16. |  | Due to banks and financial institutions:
|--- |  | ----------------------------------------



|a. |  | Short-term debt due to banks and financial institutions:
|-- |  | --------------------------------------------------------

Foreign Currency
    
    Local Currency
    
    TotalUS$
    
    Other foreign currencies
    
    Ch$Financial Institution
    
    2001
    
    2002
    
    2001
    
    2002
    
    2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThChBanco BBVA Bhif
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,694,731
    
    
    
    
    
    
    
    5,694,731Banco Barings
    
    
    6,767,943
    
    
    
    5,034,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,767,943
    
    
    
    5,034,740Banco Continental
    
    
    6,091,898
    
    
    
    
    
    
    
    
    
    
    
    3,688,212
    
    
    
    
    
    
    
    
    
    
    
    6,091,898
    
    
    
    3,688,212Banco
Crédito e 
Inversiones
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,774,034
    
    
    
    
    
    
    
    2,774,034Banco
Crédito e 
Inversiones  Perú
    
    
    
    
    
    
    
    
    
    
    9,865,663
    
    
    
    16,272,691
    
    
    
    
    
    
    
    
    
    
    
    9,865,663
    
    
    
    16,272,691Banco de Bogotá
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,813,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,813,663Banco Ganadero
    
    
    
    
    
    
    
    
    
    
    8,328,537
    
    
    
    884,609
    
    
    
    
    
    
    
    
    
    
    
    8,328,537
    
    
    
    884,609Banco Itau
    
    
    2,729,433
    
    
    
    2,771,686
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,729,433
    
    
    
    2,771,686Banco Lloyds
    
    
    3,389,704
    
    
    
    3,601,063
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,389,704
    
    
    
    3,601,063Banco
Santander 
Overseas
    
    
    10,119,892
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,119,892
    
    
    
    Banco Santander
    
    
    
    
    
    
    
    
    
    
    2,955,440
    
    
    
    2,049,900
    
    
    
    
    
    
    
    
    
    
    
    2,955,440
    
    
    
    2,049,900Banco Santiago
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,363,855
    
    
    
    17,444,835
    
    
    
    2,363,855
    
    
    
    17,444,835Banco Wiese
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bank Boston
    
    
    3,152,303
    
    
    
    2,213,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,152,303
    
    
    
    2,213,764BNP Paribas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Citibank
    
    
    
    
    
    
    
    
    
    
    2,953,756
    
    
    
    2,907,554
    
    
    
    
    
    
    
    
    
    
    
    2,953,756
    
    
    
    2,907,554Interbank
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    Banco San Paolo
    
    
    
    
    
    
    40,312,584
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,312,584Total
    
    
    32,251,173
    
    
    
    53,933,837
    
    
    
    24,103,570
    
    
    
    29,616,629
    
    
    
    2,363,855
    
    
    
    25,913,600
    
    
    
    58,718,598
    
    
    
    109,464,066Total principal
    
    
    31,423,822
    
    
    
    53,779,726
    
    
    
    23,108,569
    
    
    
    28,660,569
    
    
    
    2,363,855
    
    
    
    25,913,600
    
    
    
    56,896,246
    
    
    
    108,353,895Weighted average annual interest rate
    
    
    6.20
    %
    
    
    5.04
    %
    
    
    13.00
    %
    
    
    6.20
    %
    
    
    7.50
    %
    
    
    6.20
    %
    
    
    8.70
    %
    
    
    4.23
    %


As of December 31,2001
    
    2002%
    
    %Percentage of debt in foreign currency:
    
    
    95.97
    
    
    
    62.53Percentage of debt in local currency:
    
    
    4.03
    
    
    
    37.47Total
    
    
    100.00
    
    
    
    100.00


F-40



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|16. |  | Due to banks and financial institutions, continued:
|--- |  | ---------------------------------------------------



|b. |  | Current portion of long-term debt due to banks and financial institutions:
|-- |  | --------------------------------------------------------------------------

Foreign Currency
    
    Local Currency
    
    TotalUS$
    
    Other foreign currencies
    
    Ch$Financial Institution
    
    2001
    
    2002
    
    2001
    
    2002
    
    2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$ABN Amor Bank
    
    
    4,126,325
    
    
    
    2,175,557
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,126,325
    
    
    
    2,175,557Banco de Chile
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,742,450
    
    
    
    
    
    
    
    17,742,450
    
    
    
    Banco Estado
    
    
    1,654,097
    
    
    
    931,318
    
    
    
    
    
    
    
    
    
    
    
    18,990,283
    
    
    
    1,377,746
    
    
    
    20,644,380
    
    
    
    2,309,064Banco Hermes
    
    
    6,577,752
    
    
    
    5,391,528
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,577,752
    
    
    
    5,391,528Banco Medio Crédito
    
    
    4,214,536
    
    
    
    
    
    
    
    
    
    
    
    2,019,382
    
    
    
    
    
    
    
    
    
    
    
    4,214,536
    
    
    
    2,019,382Banco Santander
    
    
    2,255,191
    
    
    
    768,636
    
    
    
    
    
    
    
    
    
    
    
    17,742,451
    
    
    
    
    
    
    
    19,997,642
    
    
    
    768,636Banco Santander Central Hispano
    
    
    401,324
    
    
    
    110,922,308
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    401,324
    
    
    
    110,922,308Banco Santander  Opel I II
    
    
    
    
    
    
    
    
    
    
    2,178,745
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,178,745
    
    
    
    Banco San Paolo
    
    
    67,508,298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,508,298
    
    
    
    Banesto
    
    
    4,292,992
    
    
    
    4,601,056
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,292,992
    
    
    
    4,601,056Bank of América
    
    
    64,126,449
    
    
    
    68,285,312
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,126,449
    
    
    
    68,285,312Banco Nationale París
    
    
    4,626,119
    
    
    
    11,861,505
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,626,119
    
    
    
    11,861,505Bank of Tokio  Mitsubishi
    
    
    6,803,495
    
    
    
    7,103,635
    
    
    
    891,998
    
    
    
    1,049,498
    
    
    
    
    
    
    
    
    
    
    
    7,695,493
    
    
    
    8,153,133Chase Manhattan Bank
    
    
    57,741,816
    
    
    
    
    
    
    
    
    
    
    
    775,148
    
    
    
    
    
    
    
    
    
    
    
    57,741,816
    
    
    
    775,148Citibank
    
    
    21,449,018
    
    
    
    22,708,978
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,449,018
    
    
    
    22,708,978Citibank N.Y
    
    
    776,357
    
    
    
    383,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    776,357
    
    
    
    383,633Electrobras  Brasil
    
    
    
    
    
    
    
    
    
    
    2,969,352
    
    
    
    459,473
    
    
    
    
    
    
    
    
    
    
    
    2,969,352
    
    
    
    459,473Banco sudamericano
    
    
    559,807
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    559,807
    
    
    
    Export Develop. Corp.
    
    
    1,681,533
    
    
    
    2,506,978
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,681,533
    
    
    
    2,506,978Kreditanstal Fur Weideraubau
    
    
    403,235
    
    
    
    424,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403,235
    
    
    
    424,774Midland Bank
    
    
    5,085,611
    
    
    
    5,668,452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,085,611
    
    
    
    5,668,452Santander Inv. Bank
    
    
    5,063,018
    
    
    
    6,349,226
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,063,018
    
    
    
    6,349,226Skandinaviska Enskildabnken
    
    
    2,229,111
    
    
    
    2,375,122
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,229,111
    
    
    
    2,375,122Birf
    
    
    
    
    
    
    
    
    
    
    1,066,471
    
    
    
    1,195,763
    
    
    
    
    
    
    
    
    
    
    
    1,066,471
    
    
    
    1,195,763Societe Generale
    
    
    1,740,953
    
    
    
    1,845,522
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,740,953
    
    
    
    1,845,522J.P. Morgan Chase Bank
    
    
    
    
    
    
    408,710
    
    
    
    3,624,390
    
    
    
    4,545,759
    
    
    
    
    
    
    
    
    
    
    
    3,624,390
    
    
    
    4,954,469Corfinsura
    
    
    
    
    
    
    55,827
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,827Supervieille
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    263,317,037
    
    
    
    254,768,077
    
    
    
    10,730,956
    
    
    
    10,045,023
    
    
    
    54,475,184
    
    
    
    1,377,746
    
    
    
    328,523,177
    
    
    
    266,190,846Total principal
    
    
    258,924,146
    
    
    
    244,208,816
    
    
    
    10,391,410
    
    
    
    9,764,606
    
    
    
    52,346,090
    
    
    
    1,377,746
    
    
    
    321,661,646
    
    
    
    255,351,168Weighted average annual interest rate
    
    
    6.00
    %
    
    
    3.62
    %
    
    
    6.16
    %
    
    
    4.12
    %
    
    
    7.50
    %
    
    
    6.20
    %
    
    
    6.27
    %
    
    
    3.71
    %


As of December 31,2001
    
    2002%
    
    %Percentage of debt in foreign currency:
    
    
    83.42
    
    
    
    99.08Percentage of debt in local currency:
    
    
    16.58
    
    
    
    0.92Total
    
    
    100.00
    
    
    
    100.00


F-41



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|16. |  | Due to banks and financial institutions, continued:
|--- |  | ---------------------------------------------------



|c. |  | Long-term portion of debt due to banks and financial institutions:
|-- |  | ------------------------------------------------------------------

As of December 31, 2001
    
    As of December 31, 2002After 2
    
    After 3
    
    After 5After 1 year
    
    years but
    
    years but
    
    years but
    
    
    
    
    
    
    
    
    
    AnnualFinancial
    
    
    
    
    
    Long-term
    
    but within 2
    
    within 3
    
    within 5
    
    within 10
    
    After 10
    
    Total long
    
    interestInstitution
    
    Currency
    
    portion
    
    years
    
    years
    
    years
    
    years
    
    years
    
    term portion
    
    rateThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    %ABN Amro Bank
    
    US$
    
    
    1,963,737
    
    
    
    348,727
    
    
    
    348,727
    
    
    
    697,457
    
    
    
    697,457
    
    
    
    
    
    
    
    2,092,368
    
    
    
    2.71Banco Estado
    
    UF
    
    
    7,071,910
    
    
    
    1,381,390
    
    
    
    1,381,390
    
    
    
    2,936,985
    
    
    
    
    
    
    
    
    
    
    
    5,699,765
    
    
    
    9.00US$
    
    
    864,034
    
    
    
    4,604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,604
    
    
    
    6.50Banco
Medio 
Crédito
    
    US$
    
    
    35,267,772
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    
    
    
    
    1,843,524
    
    
    
    1,843,521
    
    
    
    1,843,524
    
    
    
    6,440,033
    
    
    
    
    
    
    
    11,970,602
    
    
    
    1.75Banco Santander
    
    US$
    
    
    708,728
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bndes -Opel I y II
    
    Rs
    
    
    524,017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,435,157
    
    
    
    
    
    
    
    7,435,157
    
    
    
    9.24Banco
Santander 
Central His.
    
    US$
    
    
    130,840,138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Banesto
    
    US$
    
    
    32,850,615
    
    
    
    3,545,818
    
    
    
    3,545,818
    
    
    
    7,091,636
    
    
    
    14,183,276
    
    
    
    
    
    
    
    28,366,548
    
    
    
    4.30Banco
Nationale 
París
    
    US$
    
    
    73,126,544
    
    
    
    12,551,761
    
    
    
    12,551,761
    
    
    
    25,103,522
    
    
    
    22,557,742
    
    
    
    2,575,466
    
    
    
    75,340,252
    
    
    
    4.35Bank
Of Tokio 
Mitsubishi ltda.
    
    US$
    
    
    19,413,538
    
    
    
    6,895,050
    
    
    
    6,895,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,790,100
    
    
    
    2.66Yen
    
    
    1,173,625
    
    
    
    462,018
    
    
    
    462,018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    924,036
    
    
    
    0.89Euros
    
    
    
    
    
    
    122,980
    
    
    
    122,980
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245,960
    
    
    
    4.13Other
    
    
    1,408,678
    
    
    
    438,973
    
    
    
    438,973
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    877,946
    
    
    
    4.81Corfinsura
    
    US$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,609,803
    
    
    
    
    
    
    
    
    
    
    
    32,609,803
    
    
    
    12.38BIRF
    
    UP
    
    
    2,056,583
    
    
    
    1,189,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,189,530
    
    
    
    5.32J.P.
Morgan Chase 
Bank
    
    US$
    
    
    59,424,278
    
    
    
    
    
    
    
    39,523,550
    
    
    
    17,965,250
    
    
    
    
    
    
    
    
    
    
    
    57,488,800
    
    
    
    8.53Euros
    
    
    3,589,264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Citibank N.A.
    
    US$
    
    
    362,170,897
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Citibank N.Y.
    
    US$
    
    
    
    
    
    
    359,304,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359,304,764
    
    
    
    2.56Citibank
    
    US$
    
    
    52,991,219
    
    
    
    22,584,885
    
    
    
    11,292,443
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,877,328
    
    
    
    3.88Export
Develop. 
Corp.
    
    US$
    
    
    14,031,089
    
    
    
    2,030,595
    
    
    
    2,030,595
    
    
    
    4,061,190
    
    
    
    7,544,269
    
    
    
    1,974,229
    
    
    
    17,640,878
    
    
    
    2.90Kreditanstal
Fur 
Weideraubau
    
    US$
    
    
    2,398,095
    
    
    
    393,104
    
    
    
    393,104
    
    
    
    786,208
    
    
    
    589,654
    
    
    
    
    
    
    
    2,162,070
    
    
    
    4.85Midland Bank
    
    US$
    
    
    12,525,197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Santander

Investment
    
    US$
    
    
    9,307,185
    
    
    
    3,664,911
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,664,911
    
    
    
    7.25Skandinaviska

Enskildabnken
    
    US$
    
    
    8,916,338
    
    
    
    2,375,122
    
    
    
    2,375,122
    
    
    
    2,375,007
    
    
    
    
    
    
    
    
    
    
    
    7,125,251
    
    
    
    0.65Banco

Sudamericano
    
    US$
    
    
    20,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Societe Generale
    
    US$
    
    
    3,017,777
    
    
    
    1,378,048
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,378,048
    
    
    
    1.62Total
    
    
    
    
    
    
    835,661,938
    
    
    
    420,515,804
    
    
    
    83,205,052
    
    
    
    95,470,582
    
    
    
    59,447,588
    
    
    
    4,549,695
    
    
    
    663,188,721


As of December 31,2001
    
    2002%
    
    %Percentage of debt in foreign currency:
    
    
    99.15
    
    
    
    99.31Percentage of debt in local currency:
    
    
    0.85
    
    
    
    0.69Total
    
    
    100.00
    
    
    
    100.00


F-42



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

17. Promissory notes:

As of December 31,Financial
    
    Maturity
    
    InterestInstrument
    
    Date
    
    Rate
    
    2001
    
    2002%
    
    ThCh$
    
    ThCh$Commercial paper 1st issuance
    
    June 10, 2003
    
    
    4.84
    
    
    
    
    
    
    
    3,465,944Commercial paper 2nd issuance
    
    September 5, 2003
    
    
    4.50
    
    
    
    
    
    
    
    4,101,230Total
    
    
    
    
    
    
    
    
    
    
    
    
    7,567,174


18. Bonds payable:



|a) |  | Details of the current portion of bonds payable is as follows at each year-end:
|-- |  | -------------------------------------------------------------------------------

Par ValueFace Value
    
    
    
    
    
    MaturityInstrument
    
    Series
    
    Currency
    
    Outstanding
    
    Interest Rate
    
    Date
    
    2001
    
    2002%
    
    
    
    
    
    ThCh$
    
    ThCh$Bonds Endesa
    
    1
    
    US$
    
    
    230,000,000
    
    
    
    7.88
    
    
    
    02-01-2027
    
    
    
    4,559,675
    
    
    
    4,858,340Bonds Endesa
    
    2
    
    US$
    
    
    220,000,000
    
    
    
    7.33
    
    
    
    02-01-2037
    
    
    
    4,528,542
    
    
    
    4,825,168Bonds Endesa
    
    3
    
    US$
    
    
    200,000,000
    
    
    
    8.13
    
    
    
    02-01-2097
    
    
    
    947,084
    
    
    
    1,009,124Bonds Endesa
    
    1
    
    US$
    
    
    400,000,000
    
    
    
    7.75
    
    
    
    07-15-2008
    
    
    
    9,582,578
    
    
    
    10,210,249Bonds Endesa
    
    1
    
    US$
    
    
    400,000,000
    
    
    
    8.50
    
    
    
    04-01-2009
    
    
    
    5,732,686
    
    
    
    6,108,185Bonds Endesa
    
    E-1, E-2
    
    UF
    
    
    6,000,000
    
    
    
    6.20
    
    
    
    08-01-2006
    
    
    
    2,557,305
    
    
    
    2,556,325Bonds Endesa
    
    C2; D1, D2
    
    UF
    
    
    1,315,960
    
    
    
    6.80
    
    
    
    11-01-2010
    
    
    
    2,332,264
    
    
    
    2,448,643Bonds Endesa
    
    F
    
    UF
    
    
    1.500,000
    
    
    
    6.20
    
    
    
    08-01-2022
    
    
    
    639,327
    
    
    
    639,081Bonds Pehuenche
    
    1
    
    US$
    
    
    170,000,000
    
    
    
    7.30
    
    
    
    05-01-2003
    
    
    
    1,394,954
    
    
    
    123,650,025Bonds Edegel
    
    1
    
    US$
    
    
    30,000,000
    
    
    
    8.75
    
    
    
    06-13-2007
    
    
    
    139,657
    
    
    
    148,805Bonds Edegel
    
    2
    
    US$
    
    
    30,000,000
    
    
    
    8.41
    
    
    
    02-14-2007
    
    
    
    648,384
    
    
    
    690,620Bonds Edegel
    
    3
    
    US$
    
    
    30,000,000
    
    
    
    8.75
    
    
    
    06-03-2006
    
    
    
    91,499
    
    
    
    97,493Bonds Edegel
    
    4
    
    US$
    
    
    20,000,000
    
    
    
    8.44
    
    
    
    11-21-2005
    
    
    
    123,910
    
    
    
    135,327Bonds Edegel
    
    5 A
    
    Soles
    
    
    10,000,000
    
    
    
    11.50
    
    
    
    02-22-2004
    
    
    
    280,254
    
    
    
    7,450,131Bonds Edegel
    
    5 B
    
    Soles
    
    
    30,000,000
    
    
    
    6.00
    
    
    
    02-22-2004
    
    
    
    
    
    
    
    130,879Bonds Emgesa
    
    A-1
    
    $ Col
    
    
    15,000,006
    
    
    
    13.95
    
    
    
    07-09-2006
    
    
    
    108,833
    
    
    
    1,295,959Bonds Emgesa
    
    B-3
    
    $ Col
    
    
    31,525,018
    
    
    
    14.79
    
    
    
    02-08-2003
    
    
    
    9,461,897
    
    
    
    10,162,475Bonds Emgesa
    
    B-5
    
    $ Col
    
    
    12,750,006
    
    
    
    14.95
    
    
    
    10-09-2004
    
    
    
    119,042
    
    
    
    74,909Bonds Emgesa
    
    B-7
    
    $ Col
    
    
    19,500,010
    
    
    
    15.27
    
    
    
    10-09-2006
    
    
    
    186,358
    
    
    
    118,162Bonds Emgesa
    
    B-10
    
    $ Col
    
    
    229,815,122
    
    
    
    15.60
    
    
    
    10-09-2009
    
    
    
    2,247,058
    
    
    
    1,435,070Bonds Emgesa
    
    C-10
    
    $ Col
    
    
    19,777,918
    
    
    
    10.25
    
    
    
    10-09-2009
    
    
    
    136,358
    
    
    
    43,693Bonds Emgesa
    
    C-10
    
    $ Col
    
    
    1,245,298
    
    
    
    9.88
    
    
    
    10-10-2010
    
    
    
    
    
    
    
    80,679Bonds Emgesa
    
    B-10 2nd issue
    
    $ Col
    
    
    273,130
    
    
    
    15.78
    
    
    
    11-11-2009
    
    
    
    336,523
    
    
    
    220,970Bonds Emgesa
    
    A-5
    
    $ Col
    
    
    172,858
    
    
    
    8.35
    
    
    
    07-12-2006
    
    
    
    228,550
    
    
    
    70,046Eurobonds Endesa-Chile Internacional
    
    1
    
    Euro
    
    
    400,000,000
    
    
    
    3.34
    
    
    
    07-24-2003
    
    
    
    2,061,700
    
    
    
    303,740,866Bonds Endesa-Chile Internacional
    
    1
    
    US$
    
    
    150,000,000
    
    
    
    7.20
    
    
    
    04-01-2006
    
    
    
    
    
    
    
    1,940,247Bonds Autopista del Sol S.A.
    
    A-1
    
    UF
    
    
    3,446,160
    
    
    
    5.80
    
    
    
    01-01-2018
    
    
    
    
    
    
    
    1,632,119Bonds Autopista del Sol S.A.
    
    A-2
    
    UF
    
    
    861,540
    
    
    
    5.80
    
    
    
    01-01-2018
    
    
    
    
    
    
    
    408,030Bonds Autopista del Sol S.A.
    
    B-1
    
    UF
    
    
    964,372
    
    
    
    5.80
    
    
    
    01-01-2018
    
    
    
    
    
    
    
    486,834Bonds Endesa-Chile Internacional
    
    C
    
    US$
    
    
    150,000,000
    
    
    
    7.20
    
    
    
    04-01-2006
    
    
    
    1,820,971
    
    
    
    Bonds Emgesa
    
    B-1
    
    $ Col
    
    
    85,000,000
    
    
    
    15.80
    
    
    
    07-01-2006
    
    
    
    1,721,866
    
    
    
    Bonds Autopista del Sol S.A.
    
    B-2
    
    UF
    
    
    243,578
    
    
    
    5.80
    
    
    
    01-01-2018
    
    
    
    
    
    
    
    122,963Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,987,275
    
    
    
    486,791,417


F-43



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

18. Bonds payable, continued:



|b) |  | Details of the long-term portion of bonds payable is as follows at each year-end:
|-- |  | ---------------------------------------------------------------------------------

Par ValueFace Value
    
    Interest
    
    MaturityInstrument
    
    Series
    
    Currency
    
    Outstanding
    
    Rate
    
    Date
    
    2001
    
    2002%
    
    
    
    
    
    ThCh$
    
    ThCh$Bonds Endesa
    
    1
    
    US$
    
    
    230,000,000
    
    
    
    7.88
    
    
    
    02-01-27
    
    
    
    138,853,085
    
    
    
    147,948,145Bonds Endesa
    
    2
    
    US$
    
    
    220,000,000
    
    
    
    7.33
    
    
    
    02-01-37
    
    
    
    148,375,414
    
    
    
    158,094,200Bonds Endesa
    
    3
    
    US$
    
    
    200,000,000
    
    
    
    8.13
    
    
    
    02-01-97
    
    
    
    27,257,913
    
    
    
    29,043,342Bonds Endesa
    
    1
    
    US$
    
    
    400,000,000
    
    
    
    7.75
    
    
    
    07-15-08
    
    
    
    269,773,480
    
    
    
    287,444,000Bonds Endesa
    
    1
    
    US$
    
    
    400,000,000
    
    
    
    8.50
    
    
    
    04-01-09
    
    
    
    269,773,480
    
    
    
    287,444,000Bonds Endesa
    
    E-1, E-2
    
    UF
    
    
    6,000,000
    
    
    
    6.20
    
    
    
    08-01-06
    
    
    
    100,503,239
    
    
    
    100,464,720Bonds Endesa
    
    C2; D1, D2
    
    UF
    
    
    1,439,153
    
    
    
    6.80
    
    
    
    01-11-10
    
    
    
    22,043,038
    
    
    
    19,831,566Bonds Endesa
    
    F
    
    UF
    
    
    1,500,000
    
    
    
    6.20
    
    
    
    08-01-22
    
    
    
    25,125,810
    
    
    
    25,116,180Bonds Pehuenche
    
    1
    
    US$
    
    
    170,000,000
    
    
    
    7.30
    
    
    
    05-01-03
    
    
    
    114,653,729
    
    
    
    Bonds Edegel
    
    1
    
    US$
    
    
    30,000,000
    
    
    
    8.75
    
    
    
    06-13-07
    
    
    
    20,233,011
    
    
    
    21,558,300Bonds Edegel
    
    2
    
    US$
    
    
    30,000,000
    
    
    
    8.41
    
    
    
    02-14-07
    
    
    
    20,233,011
    
    
    
    21,558,300Bonds Edegel
    
    3
    
    US$
    
    
    30,000,000
    
    
    
    8.75
    
    
    
    06-03-06
    
    
    
    20,233,011
    
    
    
    21,558,300Bonds Edegel
    
    4
    
    US$
    
    
    20,000,000
    
    
    
    8.44
    
    
    
    11-21-05
    
    
    
    13,488,674
    
    
    
    14,372,200Bonds Edegel
    
    5
    
    Soles
    
    
    10,000,000
    
    
    
    11.54
    
    
    
    08-22-03
    
    
    
    6,854,001
    
    
    
    Bonds Edegel
    
    5 B
    
    Soles
    
    
    30,000,000
    
    
    
    6.00
    
    
    
    02-22-04
    
    
    
    
    
    
    
    6,134,974Bonds Emgesa
    
    A-1
    
    $ Col
    
    
    15,000,006
    
    
    
    13.43
    
    
    
    07-09-06
    
    
    
    4,415,413
    
    
    
    3,762,632Bonds Emgesa
    
    B-1
    
    $ Col
    
    
    85,000,000
    
    
    
    15.75
    
    
    
    07-01-06
    
    
    
    25,020,672
    
    
    
    21,321,580Bonds Emgesa
    
    B-5
    
    $ Col
    
    
    12,750,006
    
    
    
    14.95
    
    
    
    10-09-04
    
    
    
    3,753,101
    
    
    
    3,198,237Bonds Emgesa
    
    B-7
    
    $ Col
    
    
    19,500,010
    
    
    
    15.27
    
    
    
    10-09-06
    
    
    
    5,740,037
    
    
    
    4,891,422Bonds Emgesa
    
    B-10
    
    $ Col
    
    
    229,825,122
    
    
    
    15.60
    
    
    
    10-09-09
    
    
    
    67,651,483
    
    
    
    57,649,691Bonds Emgesa
    
    C-10
    
    $ Col
    
    
    19,777,918
    
    
    
    10.25
    
    
    
    10-09-09
    
    
    
    5,821,842
    
    
    
    5,279,069Bonds Emgesa
    
    B-10 2nd issue
    
    $ Col
    
    
    60,000,031
    
    
    
    15.78
    
    
    
    11-08-09
    
    
    
    17,661,651
    
    
    
    15,050,527Bonds Autopista del Sol S.A.
    
    A-1
    
    UF
    
    
    3,446,160
    
    
    
    5.80
    
    
    
    01-15-18
    
    
    
    
    
    
    
    57,702,917Bonds Autopista del Sol S.A.
    
    A-2
    
    UF
    
    
    861,540
    
    
    
    5.80
    
    
    
    01-15-18
    
    
    
    
    
    
    
    14,425,729Bonds Autopista del Sol S.A.
    
    B-1
    
    UF
    
    
    964,372
    
    
    
    5.80
    
    
    
    01-15-18
    
    
    
    
    
    
    
    16,147,555Bonds Autopista del Sol S.A.
    
    B-2
    
    UF
    
    
    243,578
    
    
    
    5.80
    
    
    
    01-15-18
    
    
    
    
    
    
    
    4,078,505Eurobonds Endesa-Chile Internacional
    
    1
    
    Euro
    
    
    400,000,000
    
    
    
    3.34
    
    
    
    07-24-03
    
    
    
    236,481,576
    
    
    
    Bonds Endesa-Chile Internacional
    
    1
    
    US$
    
    
    150,000,000
    
    
    
    7.20
    
    
    
    04-01-06
    
    
    
    101,165,055
    
    
    
    107,791,500Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,665,111,726
    
    
    
    1,451,867,591


F-44



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

18. Bonds payable, continued:



|i) |  | Endesa-Chile (Individual legal entity):
|-- |  | ---------------------------------------



|I) |  | The Company made four public offerings of bonds in the local market on the following dates:
|-- |  | -------------------------------------------------------------------------------------------



| |  | On September 12, 1988, the Company registered in the Securities Register of the Chilean Superintendency
of Securities and Insurance, under No. 105, the first issuance of bonds in the amount of UF 5,000,000,
which was issued prior to the end of the year ending December 31, 1988; and it has been paid in full on
September 1, 2000.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On August 24, 1989, the second issuance of bonds was registered under No. 111, amounting to UF
6,000,000, and was fully placed as of December 31, 1990; it has been paid in full on October 1, 2001.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On December 7, 1990, the third bond issuance was registered under No. 131 in the amount of UF 4,000,000.
Of this issuance the amount of UF 2,030,000 has been placed as of December 31, 1997. The balance of UF
1,970,000 has been cancelled due to the expiration of the placement period.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On August 9, 2001, the fourth bond issuance was registered under No. 264 in the amount of UF 7,500,000,
and was fully placed as of December 31, 2001.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Risk ratings of the bonds issued are as follows as of the date of these financial statements:
| |  | ---------------------------------------------------------------------------------------------

Rating Entity
    
    CategoryComisión Clasificadora de Riesgo
    
    AAFitch IBCA Chile Clasificadora de Riesgo Ltda.
    
    AAClasificadora de Riesgo Humphreys Ltda
    
    AA


ISSUANCE TERMS

Third IssuanceIssuer
    
    Empresa Nacional de Electricidad S.ASecurities issued
    
    Bearer bonds in local currency, denominated in Unidades de FomentoIssuance Value
    
    Four million Unidades de Fomento (UF 4,000,000) divided into:- Series C-1: 120 bonds at UF 10,000 each- Series C-2: 800 bonds at UF 1,000 each- Series D-1: 120 bonds at UF 10,000 each- Series D-2: 800 bonds at UF 1,000 eachIndexation
    
    Based on variations in Unidad de Fomento indexAmortization period
    
    Series C-1 and C-2: 15 years (5-year grace period and 10 years to
amortize capital)Series D-1 and D-2: 20 years (5-year grace period and 15 years to
amortize capital)Capital amortization
    
    Series C-1 and C-2: 20 consecutive installments payable
semi-anually, starting April 1, 1996. Amortization installments
will increase with time.Series D-1 and D-2: 30 consecutive installments payable
semi-anually, starting May 1, 1996. Amortization installments
will increase with time.


F-45



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

18. Bonds payable, continued:

Early Redemption
    
    At the issuers option, starting May 1, 1996
and only on the interest payment and
amortization dates.Nominal interest rate
    
    6.8% annually, compounded and on
semi-annually outstanding capital,
readjusted by the value of the Unidad de
Fomento. The applicable interest rate will
be equal to 3.34409%Interest Payments
    
    Interest will be paid semi-anually each May
1 and November 1, starting May 1, 1991.
Accrued interest at the end of the period
amounts to ThCh$245,619 (ThCh$268,716 in
2001), and is shown under current
liabilities.Guarantee
    
    There is no specific guarantee, however
there is a general guarantee over the
issuers assetsPlacement period
    
    48 months from the registration date in the
Chilean Securities Register of the
Superintendency of Securities and Insurance.


Fourth IssuanceIssuer
    
    Empresa Nacional de Electricidad S.ASecurities issued
    
    Bearer bonds in local currency, denominated in Unidades de FomentoIssuance Value
    
    Seven and a half million (UF 7,500,000) divided into (1):Series E-1: 1,500 bonds at UF 1,000 each.Series E-2: 600 bonds at UF 10,000 each.Series F: 200 bonds at UF 10,000 each.Indexation
    
    Based on variations in Unidad de Fomento indexAmortization period
    
    Series E-1 and E-2: August 1, 2006.Series F: August 1, 2022.Early Redemption
    
    Only in the case of Series F, beginning February 1, 2012.Nominal interest rate
    
    6.2% annually, compounded on outstanding capital, readjusted by
the value of the Unidad de Fomento. The interest rate applied
semi-annually will be equal to 3.0534%Placement period
    
    36 months from the registration date in the Chilean Securities
Register of the Superintendency of Securities and Insurance.Guarantee
    
    There is no specific guarantee, however, there is a general
guarantee over the issuers assets.Interest payments
    
    Interest wil be paid semi-annually each August 1 and February 1,
starting August 1, 2001. Accrued interest at the end of the
period amounted to ThCh$3,195,406 (ThCh$3,196,631 in 2001) and is
presented under current liabilities.




|(1) |  | The Company holds a currency swap that swaps UF payments to US dollars, and which
has a fair value of ThCh$ 2,192,610 as of December 31, and is included in
long-term miscellaneous payables.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-46



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

18. Bonds payable, continued:



|II) |  | The Company has issued and placed three public offerings of bonds in the international market as follows:
|--- |  | ---------------------------------------------------------------------------------------------------------



| |  | Risk ratings of the bonds are as follows as of the date of these financial statements:
| |  | --------------------------------------------------------------------------------------

Rating Entity
    
    CategoryStandard & Poors
    
    BBBMoodys Investors Services
    
    Baa3Fitch
    
    BBB+


First IssuanceIssuer
    
    Empresa Nacional de Electricidad S.ASecurities issued
    
    Marketable securities denominated in US$(Yankee bonds) in the US market.Issuance Value
    
    Six hundred and fifty million US Dollars (US$650,000,000) divided into:Series 1: US$230,000,000Series 2: US$220,000,000Series 3: US$200,000,000Indexation
    
    Variation in the US DollarCapital Amortization
    
    Series 1 full expiration on February 1, 2027Series 2 full expiration on February 1, 2037 (Put Option on February 1,
period 2009, on which date the holders may redeem 100% of the
securities plus accrued interest)Series 3 full expiration on February 1, 2097.Nominal interest rate
    
    Series 1: 7.875% annuallySeries 2: 7.325% annuallySeries 3: 8.125% annuallyInterest Payments
    
    Interest will be paid semi-anually each February 1 and August 1
annually, starting January 27, 1997. Accrued interest as of the
year-end amounts to ThCh$15,114,018 (ThCh$14,184,888 in 2001), which is
shown under current liabilities.


Second IssuanceIssuer
    
    Empresa Nacional de Electricidad S.ASecurities issued
    
    Marketable securities denominated in US$ (Yankee bonds) in the US market.Issuance Value
    
    Four hundred million US Dollars (US$400,000,000)Indexation
    
    Variation in the US DollarCapital amortization
    
    Series 1 full expiration on July 15, 2008Nominal interest rate
    
    Series 1: 7.75% annuallyInterest Payments
    
    Interest will be paid semi-anually each January 15 and July 15 annually,
starting January 15, 1999. Accrued interest as of the year-end amounts
to ThCh$10,210,249 (ThCh$9,582,578 in 2001), which is shown under
current liabilities.


F-47



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

18. Bonds payable, continued:

Third IssuanceIssuer
    
    Empresa Nacional de Electricidad S.ASecurities issued
    
    Marketable securities denominated in US$(Yankee bonds) in the US market.Issuance Value
    
    Four hundred million US Dollars (US$400,000,000)Indexation
    
    Variation in the US DollarCapital amortization
    
    Series 1 full expiration on April 1, 2009Nominal interest rate
    
    Series 1: 8.502% annuallyInterest Payments
    
    Interest will be paid semi-anually each October 1 and April 1 annually,
starting October, 1 1999. Accrued interest as of the year-end amounts
to ThCh$6,108,185 (ThCh$6,732,686 in 2001), which is shown under
current liabilities.


Repurchase of Yankee Bonds

During November 2001, the company made a tender offer to repurchase all of a
portion of the First Issuance of the following series of Yankee Bonds:

 Series 1: US$230,000,000; 30 years term with maturity in 2027.

 Series 3: US$200,000,000; 100 years term with maturity in 2097.


The offer expired November 21, 2001, and the company repurchased a total of
US$24,119,000 and US$159,584,000 of Series 1 and 3 bonds, respectively, with
accrued interest, at prices of US$21,324,000 and US$134,828,000 for Series 1
and 3, respectively, generating a financial gain of US$27,551,000
(ThCh$18,581,792) which is included in Other non-operating income (see Note
22(a)).



|ii) |  | Subsidiaries of Endesa-Chile
|--- |  | ----------------------------



|I) |  | Endesa-Chile Internacional
|-- |  | --------------------------

a) Endesa-Chile Internacional issued Yankee Bonds on April 1, 1996.

The risk rating of these bonds is as follows as of the date of these
financial statements:

Rating Entity
    
    CategoryStandard & Poors
    
    BBBMoodys Investors Services
    
    Baa3


F-48



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

18. Bonds payable, continued:

ISSUANCE TERMS

First IssuanceIssuer
    
    Endesa-Chile InternacionalSecurities issued
    
    Marketable securities denominated in US$(150,000 bonds)Issuance Value
    
    One hundred and fifty million Dollars (US$150,000,000)Readjustment
    
    Variation in the US DollarCapital amortization
    
    Full expiration as of April 1, 2006Nominal interest rate
    
    7.2% annually until expirationInterest Payments
    
    Interest will be paid semi-annually, starting October
1, 1996. Accrued interest as of the period end amounts
to ThCh$1,940,247 (ThCh$1,820,971 in 2001) and is shown
under current liabilities.Guarantee
    
    Guarantee from Empresa Nacional de Electricidad S.A.


As of July 24, 2000, the first registration of Eurobonds (European Medium Term
Note Programme) was registered in England, for a total of 1,000 million Euros.

ISSUANCE TERMS

First RegistrationSecurities registered
    
    1,000 million EurosIssuance Value
    
    Euros 400,000,000 (1)Capital amortization
    
    Principal due July 24, 2003Nominal interest rate
    
    Euribor + 0.80%Interest Payments
    
    Interest is to be paid quarterly, beginning on
October 24, 2000. Accrued interest as of December
31, 2002 amounts to ThCh$2,310,497 (ThCh$2,061,701
in 2001) and is presented in current liabilities.Guarantee
    
    Guarantee from Empresa Nacional de Electricidad S.A.


(1) Through a cross-currency swap, the company has elected to change the debt from Euros to US dollars.



|II) |  | Empresa Eléctrica Pehuenche S.A. issued bonds on May 2, 1996.
|--- |  | -------------------------------------------------------------

First IssuanceIssuer
    
    Empresa Eléctrica Pehuenche S.A.Securities issued
    
    Marketable securities denominated in US$Issuance Value
    
    One hundred and seventy million US Dollars (US$170,000,000)Capital amortization
    
    Full expiration as of May 1, 2003Nominal interest rate
    
    7.3% annually upon expirationInterest Payments
    
    Interest will be paid semi-anually, starting November 1,
1996. Accrued interest as of the period end amounts to
ThCh$1,486,325(ThCh$1,394,954 in 2001) and is shown under
Other Current Liabilities.


F-49



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

18. Bonds payable, continued:



|III) |  | Edegel S.A. issued bonds on June 4, 1999, February 15, 2000, June 14, 2000 and November 27, 2000 and August 22, 2001 (of this last
issuance, series B was placed on February 2, 2002) as per the following:
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

First IssuanceIssuer
    
    Edegel S.A.Securities issued
    
    Marketable securities denominated in US$ (120,000 bonds)Issuance Value
    
    One hundred and twenty million US dollars (US$ 120,000,000)Capital amortization
    
    Full expiration as of June 3, 2007, February 14, 2007,
June 03, 2006, November 21, 2005 and February 22, 2004,
respectively.Nominal interest rate
    
    8.75%, 8.41%, 8.75%, 8.44%, 11.5% and 6.0% annually.Interest Payments
    
    Interest will be paid semi-anually. Accrued interest as
of the year-end amounts to ThCh$1,367,515 (ThCh$1,283,703
in 2001) and is shown under Other Current Liabilities.




|IV) |  | Emgesa S.A. issued bonds on October 8, 1999 and July 9, 2001 as per the following:
|--- |  | ----------------------------------------------------------------------------------

First IssuanceIssuer
    
    Emegesa S.A.Securities issued
    
    Marketable securities denominated in Colombian pesosIssuance Value
    
    $Col 530,000,000,000Capital amortization
    
    Full expiration as of 2002, 2007, 2009, 2010, 2006, 2006
and 2002 for $Col 1,525,000;
$Col 81,407,744; $Col 19,500,000; $Col 297,567,256; $Col
15,000,000; $Col 85,000,000 and
$Col 30,000,000 respectively.Nominal interest rate
    
    15.5% annual average rateInterest Payments
    
    Interest will be paid quarterly and annuallly. Accrued
interest as of the period end amounts to ThCh$5,385,981
(ThCh$5,715,660 in 2001) and is shown under current
liabilities.




|V) |  | Sociedad Concesionaria Autopista del Sol S.A. issued bonds on March 8, 2002 as per the following:
|-- |  | -------------------------------------------------------------------------------------------------

First IssuanceIssuer
    
    Sociedad Concesionaria Autopista del Sol S.A.Securities issued
    
    Bearer bonds in local currency, denominated in UFIssuance Value
    
    U.F. 5.540.000, divided into:Serie A-1     U.F 3,460,000Serie A-2     U.F. 865,000Serie B-1     U.F. 970,000Serie B-2     U.F. 245,000Readjustment
    
    Variation in the U.F.Amortization period
    
    16 yearsCapital amortization
    
    Every six months.Nominal interest rate
    
    5.8% annually, composed semi-annuallly and effective over
capital outstanding readjusted by the value of the U.F.
The interest rate to be applied semi-annually will be
2.8591%Interest Payments
    
    Accrued interest as of year-end amounts to ThCh$2,427,752
and is recorded in current liabilities.


F-50



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

19. Accrued expenses:



|a. |  | The accrued expenses included in short-term and long-term liabilities as of each year-end are as follows:
|-- |  | ---------------------------------------------------------------------------------------------------------

Short-term
    
    Long-termAs of December 31,
    
    As of December 31,2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Employee salaries
    
    
    5,945,699
    
    
    
    7,760,239
    
    
    
    
    
    
    
    Provision for contingences, lawsuits, and
others
    
    
    11,209,813
    
    
    
    8,325,782
    
    
    
    143,903
    
    
    
    1,135,016Chilean Ministry of Public Works annual cost
    
    
    6,866,508
    
    
    
    3,295,779
    
    
    
    
    
    
    
    Provisional tax payments and other
    
    
    
    
    
    
    
    
    
    
    10,659,030
    
    
    
    7,000,596Post retirement benefits
    
    
    1,238,728
    
    
    
    822,430
    
    
    
    1,498,731
    
    
    
    2,595,018Employee severance indemnities (1)
    
    
    286,423
    
    
    
    141,063
    
    
    
    2,158,154
    
    
    
    2,633,641Pensions and post-Retirement benefits of
foreign subsidiaries
    
    
    
    
    
    
    
    
    
    
    16,984,432
    
    
    
    23,830,502Highway construction costs
    
    
    
    
    
    
    1,188,569
    
    
    
    
    
    
    
    1,844,926Provision for purchases of energy and power
    
    
    2,140,720
    
    
    
    13,847,798
    
    
    
    
    
    
    
    Others
    
    
    3,220,179
    
    
    
    3,143,308
    
    
    
    
    
    
    
    174,805Total
    
    
    30,908,070
    
    
    
    38,524,968
    
    
    
    31,444,250
    
    
    
    39,214,504




|(1) |  | Long-term accruals include severance indemnities to personnel, calculated in accordance with the policy described in Note 2. Analalysis of the changes in the accrual
in each year is as follows:
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Opening balance as of January 1
    
    
    2,206,744
    
    
    
    2,133,826Increase in accrual
    
    
    359,317
    
    
    
    634,325Transfers to short-term accrual
    
    
    (276,711
    )
    
    
    82,969Payments during the year
    
    
    (131,196
    )
    
    
    (217,479
    )Total
    
    
    2,158,154
    
    
    
    2,633,641




|b. |  | Accounts payable:
|-- |  | -----------------

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Suppliers and services
    
    
    45,883,958
    
    
    
    40,226,082Materials purchases
    
    
    8,390,629
    
    
    
    8,343,170Energy purchases and other
    
    
    16,126,410
    
    
    
    16,947,030Fuel and transportation
    
    
    4,932,471
    
    
    
    969,405Others
    
    
    1,940,357
    
    
    
    200,967Total
    
    
    77,273,825
    
    
    
    66,686,654


F-51



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

20. Minority interest:



|a. |  | Minority shareholders participation in the shareholders equity of the Companys
subsidiaries as of each year-end is as follows:
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2001
    
    As of December 31, 2002Company
    
    Equity
    
    Participation
    
    Total
    
    Equity
    
    Participation
    
    TotalThCh$
    
    %
    
    ThCh$
    
    ThCh$
    
    %
    
    ThCh$Autopista Los Libertadores S.A.
    
    
    25,296,795
    
    
    
    0.05
    
    
    
    12,648
    
    
    
    25,213,021
    
    
    
    0.05
    
    
    
    12,607Capital de Energía S.A.
    
    
    534,797,609
    
    
    
    49.10
    
    
    
    262,585,626
    
    
    
    566,223,719
    
    
    
    49.10
    
    
    
    278,015,846Central Hidroeléctrica Betania
S.A.
    
    
    494,429,051
    
    
    
    14.38
    
    
    
    71,088,020
    
    
    
    519,458,738
    
    
    
    14.38
    
    
    
    74,686,738Central Cachoeira Dourada
    
    
    499,191,115
    
    
    
    0.49
    
    
    
    2,452,676
    
    
    
    486,715,435
    
    
    
    0.41
    
    
    
    1,982,200Central Costanera S.A.
    
    
    137,706,613
    
    
    
    48.07
    
    
    
    66,192,075
    
    
    
    171,461,783
    
    
    
    48.07
    
    
    
    82,417,327Cía. Eléctrica San Isidro S.A.
    
    
    30,362,233
    
    
    
    50.00
    
    
    
    15,181,116
    
    
    
    34,217,794
    
    
    
    50.00
    
    
    
    17,108,897Edegel S.A.A
    
    
    661,672,319
    
    
    
    36.44
    
    
    
    241,138,499
    
    
    
    680,564,639
    
    
    
    36.44
    
    
    
    248,023,616Emgesa S.A.
    
    
    919,463,877
    
    
    
    51.52
    
    
    
    473,679,287
    
    
    
    963,653,136
    
    
    
    51.52
    
    
    
    496,444,223Empresa Eléctrica Pangue S.A.
    
    
    59,573,673
    
    
    
    7.52
    
    
    
    4,479,940
    
    
    
    74,436,633
    
    
    
    5.01
    
    
    
    3,729,275Endesa Argentina S.A.
    
    
    30,646,605
    
    
    
    0.01
    
    
    
    3,064
    
    
    
    21,798,627
    
    
    
    0.01
    
    
    
    2,180Generandes Perú S.A.
    
    
    351,973,200
    
    
    
    40.37
    
    
    
    142,088,131
    
    
    
    369,454,446
    
    
    
    40.37
    
    
    
    149,145,139Hidroeléctrica El Chocón S.A.
    
    
    237,400,257
    
    
    
    34.81
    
    
    
    82,639,029
    
    
    
    227,177,787
    
    
    
    34.81
    
    
    
    79,080,588Hidroinvest S.A.
    
    
    111,674,081
    
    
    
    30.07
    
    
    
    33,580,396
    
    
    
    92,470,425
    
    
    
    30.07
    
    
    
    27,805,857Inecsa 2000 S.A.
    
    
    25,510,699
    
    
    
    2.68
    
    
    
    683,687
    
    
    
    25,412,375
    
    
    
    2.68
    
    
    
    681,052Infraestructura 2000 S.A.
    
    
    63,589,515
    
    
    
    40.00
    
    
    
    25,435,806
    
    
    
    64,002,478
    
    
    
    40.00
    
    
    
    25,600,991Ingendesa S.A.
    
    
    2,480,040
    
    
    
    2.36
    
    
    
    58,591
    
    
    
    2,266,772
    
    
    
    2.36
    
    
    
    53,552Pehuenche S.A.
    
    
    177,950,062
    
    
    
    6.34
    
    
    
    11,282,035
    
    
    
    182,901,476
    
    
    
    7.35
    
    
    
    13,443,258Túnel El Melón S.A.
    
    
    (1,313,139
    )
    
    
    0.05
    
    
    
    (656
    )
    
    
    (4,230,882
    )
    
    
    0.05
    
    
    
    (2,115
    )Total
    
    
    
    
    
    
    
    
    
    
    1,432,579,970
    
    
    
    
    
    
    
    
    
    
    
    1,498,231,231


F-52



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

20. Minority interest, continued:



|b. |  | Minority shareholders equity participation in the results from operations of the
Companys subsidiaries for each year-end is as follows:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------

Year-ended December 31, 2000
    
    Year-ended December 31, 2001
    
    Year-ended December 31, 2002Company
    
    Net Income
    
    Participation
    
    Total
    
    Net Income
    
    Participation
    
    Total
    
    Net Income
    
    Participation
    
    TotalThCh$
    
    %
    
    ThCh$
    
    ThCh$
    
    %
    
    ThCh$
    
    ThCh$
    
    %
    
    ThCh$Autopista Los Libertadores
    
    
    139,949
    
    
    
    0.05
    
    
    
    70
    
    
    
    45,093
    
    
    
    0.05
    
    
    
    23
    
    
    
    (83,773
    )
    
    
    0.05
    
    
    
    (42
    )Capital de Energía S.A.
    
    
    20,837,378
    
    
    
    49.00
    
    
    
    10,210,316
    
    
    
    8,602,334
    
    
    
    49.10
    
    
    
    4,223,747
    
    
    
    23,671,013
    
    
    
    49.1
    
    
    
    11,622,467Central Hidroeléctrica
Betania S.A.
    
    
    (6,921,376
    )
    
    
    14.38
    
    
    
    (995,142
    )
    
    
    (8,666,017
    )
    
    
    14.38
    
    
    
    (1,245,983
    )
    
    
    (7,354,973
    )
    
    
    14.38
    
    
    
    (1,057,483
    )Central Cachoeira Dourada
    
    
    24,007,006
    
    
    
    1.16
    
    
    
    279,281
    
    
    
    25,841,820
    
    
    
    0.49
    
    
    
    126,969
    
    
    
    (35,501,840
    )
    
    
    0.41
    
    
    
    (144,585
    )Central Costanera S.A.
    
    
    16,524,363
    
    
    
    48.32
    
    
    
    7,984,571
    
    
    
    (11,567,900
    )
    
    
    48.07
    
    
    
    (5,560,396
    )
    
    
    24,735,275
    
    
    
    48.07
    
    
    
    11,889,619Central Buenos Aires S.A
    
    
    978,864
    
    
    
    22.17
    
    
    
    217,014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cía. Eléctrica San Isidro S.A.
    
    
    2,476,112
    
    
    
    50.00
    
    
    
    1,238,057
    
    
    
    (101,281
    )
    
    
    50.00
    
    
    
    (50,641
    )
    
    
    5,250,225
    
    
    
    50
    
    
    
    2,625,113Edegel S.A.A
    
    
    33,815,692
    
    
    
    30.16
    
    
    
    10,197,629
    
    
    
    28,636,179
    
    
    
    36.44
    
    
    
    10,436,112
    
    
    
    4,554,496
    
    
    
    36.44
    
    
    
    1,659,831Emgesa S.A.
    
    
    37,682,800
    
    
    
    51.52
    
    
    
    19,412,352
    
    
    
    18,796,538
    
    
    
    51.52
    
    
    
    9,683,394
    
    
    
    56,168,714
    
    
    
    51.52
    
    
    
    28,936,380Empresa Eléctrica Pangue S.A.
    
    
    (2,073,199
    )
    
    
    7.52
    
    
    
    (155,905
    )
    
    
    6,568,538
    
    
    
    7.52
    
    
    
    493,954
    
    
    
    18,850,842
    
    
    
    5.01
    
    
    
    944,427Endesa Argentina S.A.
    
    
    3,695,025
    
    
    
    0.01
    
    
    
    370
    
    
    
    (10,823,293
    )
    
    
    0.01
    
    
    
    (1,083
    )
    
    
    (10,781,159
    )
    
    
    0.01
    
    
    
    (1,078
    )Generandes Perú S.A.
    
    
    35,191,253
    
    
    
    45.74
    
    
    
    16,095,423
    
    
    
    27,929,472
    
    
    
    40.37
    
    
    
    11,274,854
    
    
    
    13,105,328
    
    
    
    40.37
    
    
    
    5,290,492Hidroeléctrica El Chocón S.A.
    
    
    10,022,417
    
    
    
    34.81
    
    
    
    3,488,804
    
    
    
    8,929,943
    
    
    
    34.81
    
    
    
    3,108,513
    
    
    
    (25,772,502
    )
    
    
    34.81
    
    
    
    (8,971,408
    )Hidroinvest S.A.
    
    
    2,916,610
    
    
    
    30.07
    
    
    
    877,024
    
    
    
    2,636,004
    
    
    
    30.07
    
    
    
    792,647
    
    
    
    (26,502,276
    )
    
    
    30.07
    
    
    
    (7,969,235
    )Inecsa 2000 S.A.
    
    
    101,580
    
    
    
    2.68
    
    
    
    2,722
    
    
    
    32,301
    
    
    
    2.68
    
    
    
    865
    
    
    
    (98,323
    )
    
    
    2.68
    
    
    
    (2,635
    )Infraestructura 2000 S.A.
    
    
    450,056
    
    
    
    40.00
    
    
    
    180,022
    
    
    
    996,272
    
    
    
    40.00
    
    
    
    398,509
    
    
    
    412,963
    
    
    
    40
    
    
    
    165,185Ingendesa S.A.
    
    
    931,578
    
    
    
    2.36
    
    
    
    22,008
    
    
    
    873,679
    
    
    
    2.36
    
    
    
    20,640
    
    
    
    923,250
    
    
    
    2.36
    
    
    
    21,812Pehuenche S.A.
    
    
    (6,344,120
    )
    
    
    7.45
    
    
    
    (472,637
    )
    
    
    4,963,596
    
    
    
    6.34
    
    
    
    314,692
    
    
    
    20,012,133
    
    
    
    7.35
    
    
    
    1,470,892Túnel El Melón S.A.
    
    
    (2,135,999
    )
    
    
    0.05
    
    
    
    (1,067
    )
    
    
    (1,932,383
    )
    
    
    0.05
    
    
    
    (966
    )
    
    
    (2,917,743
    )
    
    
    0.05
    
    
    
    (1,459
    )Total
    
    
    
    
    
    
    
    
    
    
    68,580,912
    
    
    
    
    
    
    
    
    
    
    
    34,015,850
    
    
    
    
    
    
    
    
    
    
    
    46,478,294


F-53



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

21. Shareholders equity:



|a. |  | Dividends
|-- |  | ---------

In accordance with law 18.046, the Company must declare a minimun dividend of
30% of net income for the year. The Company paid dividends to shareholders
during 2001 and 2002 related to the results of operations during 2000 and 2001,
as follows:

Type of
    
    YearPayment date
    
    Historical value
    
    dividend
    
    Related toCh$ per shareApril 2001
    
    
    0.96000
    
    
    Final
    
    
    2000April 2002
    
    
    0.94000
    
    
    Final
    
    
    2001




|b. |  | Number of shares
|-- |  | ----------------

As of each years ended December 31, 2000, 2001, and 2002, the number of shares
authorized, subscribed, and paid for was 8,201,754,580, all having voting
rights.



|c. |  | Subscribed and paid capital
|-- |  | ---------------------------

Subscribed and paid capital as of the years ended December 31, 2001, and 2002
amounted to ThCh$1,039,795,887.



|d. |  | Net losses from operations and accumulated net earnings (losses) of development-stage
subsidiaries are as follows:
|-- |  | ------------------------------------------------------------------------------------------------------------------

As of December 31, 2002Net Earnings (Losses)Company
    
    During the period
    
    AccumulatedThCh$
    
    ThCh$Compañía Eléctrica Taltal
Ltda.
    
    
    
    
    
    
    244,030Infraestructura 2000 S.A.
    
    
    
    
    
    
    578,937Gas Atacama Generación
Ltda.
    
    
    
    
    
    
    1,352,344Ingendesa (Brazil)
    
    
    2,418
    
    
    
    (77,200
    )Enigesa S.A. (Brazil)
    
    
    31
    
    
    
    (1,071
    )Cía. Eléctrica Conosur
S.A. (Argentina)
    
    
    (7,970,605
    )
    
    
    (7,970,605
    )Total
    
    
    (7,968,156
    )
    
    
    (5,873,565
    )


F-54



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

21. Shareholders equity, continued:



|e. |  | Other reserves
|-- |  | --------------

Other reserves are composed of the following as of December 31, of each year:

As of December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Accumulated surplus (deficit) of
development-stage subsidiaries
    
    
    2,163,390
    
    
    
    2,094,591
    
    
    
    (5,873,565
    )Accumulated capital revaluation
    
    
    1,651,325
    
    
    
    1,651,325
    
    
    
    1,651,325Revaluation of fixed assets under
Decree Law No. 4 (see Note 2)
    
    
    1,132,153
    
    
    
    1,132,153
    
    
    
    1,132,153Other revaluations
    
    
    73,673
    
    
    
    73,673
    
    
    
    73,673Reserve for technical revaluation of
fixed assets (Circulars 550 and 566)
    
    
    28,321,747
    
    
    
    28,321,747
    
    
    
    28,321,747Reserve for technical revaluation of
investments in subsidiaries
subsequently sold (Circulars 550 and
566)
    
    
    23,816,458
    
    
    
    23,816,458
    
    
    
    23,816,458Equity adjustment of unconsolidated
subsidiaries
    
    
    (322,706
    )
    
    
    (322,706
    )
    
    
    (322,706
    )Accumulated foreign currency
translation adjustments (1)
    
    
    7,339,472
    
    
    
    19,228,129
    
    
    
    28,542,166Reduction of capital in foreign
subisiaries
    
    
    
    
    
    
    (6,011,221
    )
    
    
    (6,011,221
    )Total
    
    
    62,012,123
    
    
    
    69,984,148
    
    
    
    71,330,030




|(1) |  | The detail of the cumulative translation adjustment for foreign currency gains and losses on assets and liabilities and net investments
measured in currencies other than the Chilean peso as of the year ended December 31, 2000, 2001 and 2002 are as follows:
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Endesa-Chile equity
method investments
    
    
    3,201,867
    
    
    
    12,054,909
    
    
    
    17,779,585Endesa Argentina
    
    
    2,348,583
    
    
    
    5,635,752
    
    
    
    7,566,681Endesa-Chile Internacional
    
    
    916,502
    
    
    
    262,247
    
    
    
    1,628,226Distrilec Inversora S.A
    
    
    188,616
    
    
    
    403,501
    
    
    
    525,526Endesa Colombia S.A.
    
    
    683,904
    
    
    
    877,497
    
    
    
    1,052,188Ingendesa Do Brasil Ltda.
    
    
    
    
    
    
    (5,777
    )
    
    
    (10,040
    )Total
    
    
    7,339,472
    
    
    
    19,228,129
    
    
    
    28,542,166


F-55



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

22. Other income and expenses:



|a. |  | The detail of other non-operating income in each year is as follows:
|-- |  | --------------------------------------------------------------------

Year ended December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Effect of application of BT 64
    
    
    19,415,643
    
    
    
    4,896,793
    
    
    
    73,053,174Gain on sale of fixed assets
    
    
    63,443,149
    
    
    
    5,337,344
    
    
    
    2,588,799Energy and power contract settlement
    
    
    8,334,081
    
    
    
    6,487,154
    
    
    
    12,496,885Incorporation of fourth line Camahue
    
    
    13,032,224
    
    
    
    411,352
    
    
    
    337,450Dividends Empresa Eléctrica de Bogotá
    
    
    4,880,465
    
    
    
    2,696,273
    
    
    
    5,180,763Aranceles customs
    
    
    2,335,015
    
    
    
    
    
    
    
    Penalties charged to contractors and
suppliers
    
    
    2,302,686
    
    
    
    
    
    
    
    Gain on sale of Transelec
    
    
    142,189,112
    
    
    
    
    
    
    
    Sale of materiales
    
    
    193,722
    
    
    
    
    
    
    
    Indemnities and commissions
    
    
    5,149,479
    
    
    
    
    
    
    
    636,164Generator security foundation
    
    
    
    
    
    
    
    
    
    
    2,122,012Price adjustment on sale of Transelec
shares
    
    
    
    
    
    
    3,163,324
    
    
    
    Gain on repurchase of bonds
    
    
    
    
    
    
    18,581,792
    
    
    
    Adjustment for Colombian equity method
investments
    
    
    
    
    
    
    3,254,890
    
    
    
    Recoverable taxes
    
    
    
    
    
    
    6,638,156Other
    
    
    11,512,019
    
    
    
    4,349,937
    
    
    
    6,069,197Total
    
    
    272,787,595
    
    
    
    55,817,015
    
    
    
    102,484,444


F-56



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

22. Other income and expenses, continued:



|b. |  | Other non-operating expenses in each year are as follows:
|-- |  | ---------------------------------------------------------

Year ended December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Amortization of bond discount
    
    
    1,134,310
    
    
    
    906,582
    
    
    
    5,346,724Effect of application of BT 64
    
    
    
    
    
    
    24,012,082
    
    
    
    17,956,295Loss on sale of fixed assets
    
    
    1,383,007
    
    
    
    629,486
    
    
    
    1,880,966Loss on sale of marketable securities
    
    
    669,295
    
    
    
    
    
    
    
    Retirement benefits and severance
indemnities
    
    
    1,976,442
    
    
    
    785,247
    
    
    
    1,516,543Board of directors compensation
    
    
    167,655
    
    
    
    226,736
    
    
    
    217,321Amortization of syndicated loan costs
    
    
    24,611,617
    
    
    
    
    
    
    
    Contingencies and litigation
    
    
    2,186,196
    
    
    
    4,823,922
    
    
    
    12,086,032Provision stamp tax
    
    
    2,316,886
    
    
    
    
    
    
    
    Intangible amortization and other
deferred expenses
    
    
    1,629,220
    
    
    
    399,266
    
    
    
    1,432,398Energy and power settlement
    
    
    9,781,368
    
    
    
    9,114,857
    
    
    
    17,447,275Internal Revenue Service fines and
other
    
    
    
    
    
    
    5,236,744
    
    
    
    90,642Income recovery
    
    
    
    
    
    
    1,454,685
    
    
    
    1,399,562Additional costs Laguna Maule
    
    
    1,667,087
    
    
    
    
    
    
    
    Provision for recoverability
construction in progress
    
    
    
    
    
    
    
    
    
    
    46,311,933Other taxes
    
    
    
    
    
    
    
    
    
    
    8,614,556Charge Los Pelambres
    
    
    
    
    
    
    1,283,943
    
    
    
    Charge Central Los Robles y Fundo
Huinay
    
    
    3,686,792
    
    
    
    
    
    
    
    Tax adjustments
    
    
    1,810,354
    
    
    
    3,787,493
    
    
    
    Energy studies
    
    
    1,626,091
    
    
    
    
    
    
    
    Indemnity Unelco
    
    
    
    
    
    
    516,679
    
    
    
    Turbine relocation
    
    
    
    
    
    
    476,610
    
    
    
    Other
    
    
    6,435,953
    
    
    
    4,846,324
    
    
    
    7,619,712Total
    
    
    61,082,273
    
    
    
    58,500,656
    
    
    
    121,919,959


F-57



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

23. Price-Level Restatement:

The gain (loss) from price-level restatement as of each year-end is as follows:

Year ended December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$AssetsCurrent assets
    
    
    14,361,361
    
    
    
    6,446,911
    
    
    
    4,200,011Accounts receivable
from subsidiaries
    
    
    10,390,053
    
    
    
    4,652,428
    
    
    
    5,032,682Fixed assets
    
    
    85,883,506
    
    
    
    56,882,632
    
    
    
    58,835,586Investment in
subsidiaries
    
    
    7,879,339
    
    
    
    4,809,964
    
    
    
    2,675,060Amortization of
goodwill and
negative goodwill
    
    
    (6,141,676
    )
    
    
    (2,761,222
    )
    
    
    (1,091,345
    )Other assets
    
    
    10,528,587
    
    
    
    4,720,688
    
    
    
    4,035,446Net gain from
asset
accounts
    
    
    122,901,170
    
    
    
    74,751,401
    
    
    
    73,687,440Liabilities and
Shareholders
equityShareholders equity
    
    
    (56,619,079
    )
    
    
    (41,205,764
    )
    
    
    (41,901,218
    )Current and
long-term
liabilities
    
    
    (73,730,488
    )
    
    
    (33,471,288
    )
    
    
    (32,379,223
    )Minority interest
    
    
    14,372,573
    
    
    
    6,517,278
    
    
    
    6,650,828Accounts payable to
subsidiaries
    
    
    (8,038,897
    )
    
    
    (3,638,671
    )
    
    
    (575,875
    )Net loss from
liabilities
and
shareholders
equity
accounts
    
    
    (124,015,891
    )
    
    
    (71,798,445
    )
    
    
    (68,205,488
    )Net gain (loss)
from
price-level
restatement
of balance
    
    
    (1,114,721
    )
    
    
    2,952,956
    
    
    
    5,481,952Net gain (loss)
from
price-level
restatement
of income
statement
    
    
    2,030,366
    
    
    
    1,385,276
    
    
    
    (1,485,470
    )Net gain
from
price-level
restatement in
income
    
    
    915,645
    
    
    
    4,338,232
    
    
    
    3,996,482


F-58



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

24. Foreign currency translation:

The (charge) credit to income for foreign currency translation as of each
year-end is as follows:

Assets

As of December 31,Current assets
    
    Currency
    
    2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Cash
    
    US$
    
    
    14,098
    
    
    
    736,958
    
    
    
    2,737,474Other
    
    
    
    
    
    
    
    
    
    
    (13,690
    )Time deposits
    
    US$
    
    
    127,149
    
    
    
    76,107
    
    
    
    (61,483
    )Other
    
    
    
    
    
    
    
    
    
    
    (31,054
    )Marketable
securities
    
    US$
    
    
    3,663,403
    
    
    
    11,797,767
    
    
    
    6,855,639Accounts
receivable, net
    
    US$
    
    
    25,951
    
    
    
    
    
    
    
    255,411Other accounts
receivable, net
    
    US$
    
    
    484
    
    
    
    1,057,978
    
    
    
    787,849Other
    
    
    35,111
    
    
    
    85,106
    
    
    
    42,536Prepaid expenses
    
    US$
    
    
    
    
    
    
    168,986
    
    
    
    29,442Other current assets
    
    US$
    
    
    156,908
    
    
    
    11,179,479
    
    
    
    15,036,272Other
    
    
    
    
    
    
    34,822
    
    
    
    7,967Amounts due from
related companies
    
    US$
    
    
    
    
    
    
    
    
    
    
    11,084,341Non-current assetsLong-term
receivables
    
    US$
    
    
    
    
    
    
    940,686
    
    
    
    1,177,056UC
    
    
    1,569
    
    
    
    277,166
    
    
    
    202,009Amounts due from
related companies
    
    US$
    
    
    4,632,812
    
    
    
    17,033,254
    
    
    
    (42,757
    )Deferred expenses
    
    US$
    
    
    1,044,069
    
    
    
    246,859
    
    
    
    228,059Other Assets
    
    US$
    
    
    21,679,267
    
    
    
    33,042,531
    
    
    
    13,817,006Forward contracts
    
    US$
    
    
    28,122,985
    
    
    
    36,011,211
    
    
    
    16,037,562Total (loss)
gain
    
    
    
    
    
    
    59,503,801
    
    
    
    112,688,910
    
    
    
    68,149,639


Liabilities

As of December 31,Current liabilities
    
    Currency
    
    2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Short-term debt due
to banks and
financial
institutions
    
    US$
    
    
    
    
    
    
    (732,039
    )
    
    
    (2,120,850
    )Current portion of
long-term debt due
to banks and
financial
institutions
    
    US$
    
    
    (1,122,365
    )
    
    
    (2,816,039
    )
    
    
    (1,790,634
    )¥
    
    
    
    13,156
    
    
    
    26,250
    
    
    
    (71,707
    )Euro
    
    
    (259,151
    )
    
    
    
    
    
    
    (26,128
    )UP
    
    
    
    
    
    
    (63,570
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    (242,103
    )Current portion of
bonds payable
    
    US$
    
    
    (747,853
    )
    
    
    (2,707,032
    )
    
    
    (2,524,350
    )Current portion of
long-term notes
payable
    
    US$
    
    
    (479,233
    )
    
    
    (1,426,092
    )
    
    
    (856,727
    )Other
    
    
    
    
    
    
    19,127
    
    
    
    Amounts payable to
related companies
    
    US$
    
    
    (1,060,620
    )
    
    
    (3,346,391
    )
    
    
    267,753Dividends payable
    
    Other
    
    
    
    
    
    
    
    
    
    
    Accrued expenses
    
    US$
    
    
    (3,441
    )
    
    
    (20,350
    )
    
    
    2,731Accounts payable
    
    US$
    
    
    
    
    
    
    
    
    
    
    (15,467
    )Other
    
    
    
    
    
    
    
    
    
    
    14,704Miscellaneous
payables
    
    US$
    
    
    (225,838
    )
    
    
    (254,413
    )
    
    
    (380,194
    )Other current
liabilities
    
    US$
    
    
    
    
    
    
    
    
    
    
    2,597Long-term
liabilitiesDue to banks and
financial
institutions
    
    US$
    
    
    (12,887,599
    )
    
    
    (34,301,102
    )
    
    
    (20,487,665
    )¥
    
    
    
    30,364
    
    
    
    22,840
    
    
    
    (180,770
    )Euro
    
    
    
    
    
    
    
    
    
    
    (60,487
    )£
    
    
    
    
    
    
    
    
    
    
    
    UP
    
    
    
    
    
    
    (246,923
    )
    
    
    (368,719
    )Bonds payable
    
    US$
    
    
    (29,451,208
    )
    
    
    (51,863,271
    )
    
    
    (30,609,405
    )Long-term notes
payables
    
    US$
    
    
    (2,236,806
    )
    
    
    (6,734,909
    )
    
    
    (2,814,082
    )Accounts payable
    
    US$
    
    
    (223,869
    )
    
    
    (995,614
    )
    
    
    358,233Other long-term
liabilities
    
    US$
    
    
    (15,495,488
    )
    
    
    (21,754,222
    )
    
    
    (6,687,384
    )Amounts payable to
related companies
    
    US$
    
    
    
    
    
    
    
    
    
    
    Total (loss)
gain
    
    
    
    
    
    
    (64,149,950
    )
    
    
    (127,193,750
    )
    
    
    (68,590,654
    )Net charges
to income
    
    
    
    
    
    
    (4,646,149
    )
    
    
    (14,504,840
    )
    
    
    (441,015
    )


F-59



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

25. Bond issuance costs:

The costs related to the registration and issuance of bonds of Endesa-Chile
incurred during the years ended December 31, 2000, 2001 and 2002 are as
follows:

As of December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Stamp taxes
    
    
    
    
    
    
    1,502,997
    
    
    
    1,448,819Commissions
    
    
    
    
    
    
    213,711
    
    
    
    748,114Consulting fees
    
    
    
    
    
    
    
    
    
    
    1,708,333Insurance
    
    
    
    
    
    
    
    
    
    
    7,235,513Total
    
    
    
    
    
    
    1,716,708
    
    
    
    11,140,779


Bond issuance costs are included in Other Assets and are amortized over the
life of the bonds. The amortization period for the Series B-1 is 8 years,
Series B-2 and Series F is 21 years, and Series E-1 and E-2 is 6 years,
respectively.

26. Extraordinary loss:

The Company recognized a minimal capital tax of 1.2% over the equity of its
Colombian subsidiaries, Central Hidroeléctrica de Betania S.A., Capital de
Energía S.A. and Emgesa S.A., in accordance with Decree No. 1949 of August 29,
2002 of the Republic of Colombia. This tax is assessed to provide democratic
security in Colombia. As of December 31, 2002, the detail of this tax by
subsidiary is as follows:

Year endedDecember 31,2002Company
    
    ThCh$Central Hidroeléctrica de Betania S.A.
    
    
    2,025,115Capital de Energía S.A.
    
    
    67,124Emgesa S.A.
    
    
    8,837,853Total
    
    
    10,930,092


F-60



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

27. Financial derivatives:

As of December 31, 2002 the Company and its subsidiaries held the following
financial derivative contracts with financial institutions with the objective
of decreasing exposure to interest rate and foreign currency risk according to
the following detail:

As of December 31, 2002Nominal
    
    Period of
    
    
    
    
    
    Sales/
    
    Hedged
    
    Initial Hedged
    
    Closing HedgedType (1)
    
    Amount
    
    Maturity
    
    Item
    
    Purch.
    
    Item
    
    Amount
    
    AmountUS$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ThCh$
    
    ThCh$FR
    
    
    108,000,000
    
    
    IV Quarter 03
    
    Exchange rate
    
    
    P
    
    
    Bank Obligations
    
    
    78,783,930
    
    
    
    78,783,930FR
    
    
    154,600,000
    
    
    II Quarter 03
    
    Exchange rate
    
    
    P
    
    
    Bank Obligations/ Yankee Bonds/Others
    
    
    111,096,962
    
    
    
    111,096,962FR
    
    
    68,400,000
    
    
    II Quarter 03
    
    Exchange rate
    
    
    P
    
    
    Bank Obligations
    
    
    49,153,068
    
    
    
    49,153,068S
    
    
    6,668,000
    
    
    IV Quarter 03
    
    Interest rate and currency
    
    
    P
    
    
    Bank Obligations
    
    
    4,545,759
    
    
    
    4,545,759S
    
    
    144,470,000
    
    
    III Quarter 06
    
    Interest rate and currency
    
    
    P
    
    
    Bonds
    
    
    103,021,045
    
    
    
    103,021,045S
    
    
    50,000,000
    
    
    III Quarter 06
    
    Interest rate and currency
    
    
    S
    
    
    Bonds
    
    
    (35,529,359
    )
    
    
    (35,529,359
    )S
    
    
    100,000,000
    
    
    I Quarter 03
    
    Interest rate
    
    
    S/P
    
    
    Bonds
    
    
    71,861,000
    
    
    
    71,861,000EO
    
    
    50,000,000
    
    
    II Quarter 04
    
    Interest rate
    
    
    S/P
    
    
    Bank Obligations
    
    
    35,930,500
    
    
    
    35,930,500S
    
    
    381,200,000
    
    
    III Quarter 03
    
    Exchange rate
    
    
    S/P
    
    
    Bonds
    
    
    273,934,132
    
    
    
    273,934,132EO
    
    
    125,000,000
    
    
    III Quarter 04
    
    Interest rate
    
    
    S/P
    
    
    Bank Obligations
    
    
    89,826,250
    
    
    
    89,826,250EO
    
    
    100,000,000
    
    
    I Quarter 06
    
    Interest rate
    
    
    S/P
    
    
    Bank Obligations
    
    
    71,861,000
    
    
    
    71,861,000EO
    
    
    250,000,000
    
    
    II Quarter 06
    
    Interest rate
    
    
    S/P
    
    
    Bank Obligations
    
    
    179,652,500
    
    
    
    179,652,500FR
    
    
    8,000,000
    
    
    I Quarter 03
    
    Exchange rate
    
    
    P
    
    
    U.S. Dollar Loan
    
    
    5,748,880
    
    
    
    5,748,880S
    
    
    19,600,000
    
    
    II Quarter 05
    
    Interest rate
    
    
    P
    
    
    U.S. Dollar Loan
    
    
    14,084,756
    
    
    
    14,084,756FR
    
    
    7,000,000
    
    
    I Quarter 03
    
    Exchange rate
    
    
    P
    
    
    U.S. Dollar Account Payable
    
    
    5,030,270
    
    
    
    5,030,270FR
    
    
    15,000,000
    
    
    II Quarter 03
    
    Exchange rate
    
    
    P
    
    
    U.S. Dollar Account Payable
    
    
    10,779,150
    
    
    
    10,779,150S
    
    
    95,000,000
    
    
    II Quarter 03
    
    Exchange rate
    
    
    P
    
    
    Yen Loan
    
    
    61,703,496
    
    
    
    68,267,950




|(1) |  | Fr = Forward, EO = European Option, S = Swap
|--- |  | --------------------------------------------

F-61



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies:

The detail of guaranties granted by the Company and its subsidiaries as of
December 31, 2002 is the following:

Direct guarantees held by third parties:

As of December 31, 2002Guarantee ReleasedUnder 1
    
    
    
    
    
    Over 3Guarantee
    
    Subsidiary
    
    year
    
    1 to 3 years
    
    years
    
    TotalThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Chilean Ministry of
Public Works
    
    Autopista del Sol
    
    
    
    
    
    
    
    
    
    
    654,208
    
    
    
    654,208Banco del Estado de
Chile
    
    Pehuenche S.A
    
    
    
    
    
    
    935,922
    
    
    
    
    
    
    
    935,922Chilean Customs
Director
    
    Pehuenche S.A
    
    
    
    
    
    
    
    
    
    
    49,584
    
    
    
    49,584Chilean Customs
Director
    
    Pangue S.A
    
    
    
    
    
    
    64,675
    
    
    
    
    
    
    
    64,675Various creditors
    
    Pangue S.A
    
    
    3,811,708
    
    
    
    7,623,416
    
    
    
    8,796,370
    
    
    
    20,231,494Mitsubishi Corp.
    
    San Isidro S.A
    
    
    
    
    
    
    
    
    
    
    71,509,333
    
    
    
    71,509,333Chilean Ministry of
    
    Autop. LosPublic Works
    
    Libertadores
    
    
    2,632,804
    
    
    
    
    
    
    
    
    
    
    
    2,632,804Total
    
    
    
    
    
    
    6,444,512
    
    
    
    8,624,013
    
    
    
    81,009,495
    
    
    
    96,078,020


F-62



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:

Indirect guarantees held by third parties:

As of December 31, 2002Guarantee ReleasedGuarantee
    
    Subsidiary
    
    Under 1 year
    
    1 to 3 years
    
    Over 3 years
    
    TotalThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Citibank N.A
    
    Endesa-Chile International
    
    
    
    
    
    
    359,688,633
    
    
    
    
    
    
    
    359,688,633Midland Bank (BSCH)
    
    Endesa-Chile
International
    
    
    5,668,452
    
    
    
    
    
    
    
    
    
    
    
    5,668,452Banco Santander Central Hispano
    
    Endesa-Chile International
    
    
    110,922,308
    
    
    
    
    
    
    
    
    
    
    
    110,922,308J.P. Morgan & Co. and C.S.F.B
    
    Endesa-Chile International
    
    
    
    
    
    
    
    
    
    
    109,731,747
    
    
    
    109,731,747BNP
    
    Endesa-Chile
International
    
    
    151,870,433
    
    
    
    
    
    
    
    
    
    
    
    151,870,433BBVA
    
    Endesa-Chile
International
    
    
    151,870,433
    
    
    
    
    
    
    
    
    
    
    
    151,870,433Mitsubishi Co.
    
    Cía. Eléctrica San Isidro S.A.
    
    
    
    
    
    
    
    
    
    
    49,098,687
    
    
    
    49,098,687Banco Santander
    
    Cía. Eléctrica Tarapacá S.A.
    
    
    768,635
    
    
    
    
    
    
    
    
    
    
    
    768,635Banco Español de Crédito
    
    Cía. Eléctrica Tarapacá S.A.
    
    
    
    
    
    
    
    
    
    
    32,967,603
    
    
    
    32,967,603ABN Bank
    
    Cía. Eléctrica Tarapacá S.A.
    
    
    
    
    
    
    4,267,923
    
    
    
    
    
    
    
    4,267,923Chase Manhattan Bank
    
    Endesa de Colombia S.A.
    
    
    205,521,266
    
    
    
    
    
    
    
    
    
    
    
    205,521,266Banco Santander  Chile
    
    Cia. Eléctrica Conosur S.A.
    
    
    
    
    
    
    
    
    
    
    137,655,836
    
    
    
    137,655,836Total
    
    
    
    
    626,621,527
    
    
    
    363,956,556
    
    
    
    329,453,873
    
    
    
    1,320,031,956


F-63



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:

Litigation and other legal actions:

The Company is party to various lawsuits arising in the ordinary course of its
business. Management considers it unlikely that any losses associated with the
pending lawsuits described below will significantly affect the Company or it
subsidiaries results of operations, financial position and cash flows,
although no assurance can be given to such effect. Accordingly, the Company
has established a provision for these lawsuits, which Management considers to
be adequate.

Endesa-Chile (Individual Legal Entity)

There are pending lawsuits that have been filed against Endesa-Chile for which
the corresponding defenses have been filed, which altogether amount to
approximately ThCh$2,242,254 and ThCh$1,895,083 as of December 31, 2001 and
2002, respectively.



|i. |  | Court : Supreme Court of Argentina
Process number : 2753-4000/97
Cause : Dirección Provincial de Rentas, Provincia de Neuquén versus TGN
(Transportadora de Gas del Norte S.A.). Resolution regarding Stamp Tax
sum that eventually should be paid jointly by TGN and Endesa-Chile.
Process status : TGN requested a precursory measure before the Supreme
Court of Argentina to suspend the proceeding filed by the Province of
Neuquen, which was accepted. Therefore the administrative complaint
proceeding remains pending.
Amounts involved: $Arg 13,943,572 (Includes tax, interest and fines).
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. |  | Court : Arbitration Court
Process number : N/A
Cause : On December 27, 2001, Empresa Nacional de Electricidad S.A.
was notified of an arbitration to resolve controversies related to
insurance policy No. 96.676, issued by Compañía de Seguros Generales
Consorcio Allianz, currently AGF/Allianz Chile Compañía de Seguros
Generales S.A., to cover Endesa-Chile related to all risks, civil
liability and anticipated loss of benefits for the construction of the
Ralco Hydroelectric Plant. The suit is directly related to the Ralco
Project Cofferdam loss, which occurred on May 27, 2001, and is based
on the existence of certain risks that were realized and the lack of
information provided by regarding the nature and extension of the
risks being covered.
Process status: Endesa replied to the complaint sustaining that the
plaintiff is distorting the facts, omitting information that was
provided by Endesa-Chile, altering the risks covered by the contract
and is unaware of the stipulations in the policy; that the flood that
affected the Cofferdam was an insurable risk, included in the policy,
and therefore it should be rejected since it has no foundation in fact
or in law.
Amounts involved: US$32 million.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-64



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:



|iii. |  | Court: Third Civil Court of Santiago
Process number: 3140-2000
Cause: Lawsuit filed by Endesa-Chile versus
the Chilean Government to define the
criteria for applying the General Electric
Services Law with respect to compensation
payments for interruptions in the supply
during periods of electric rationing. Under
Supreme Decree No. 287 of 1999, with which
the Chilean Ministry of Economy,
Development and Reconstruction ordered
electric rationing from June 12, to August
31, 1999 in the Central Interconnected
System, and the modification of Article 99
of the D.F.L. No. 1/82 Mining Law
(Electrical Services General Law introduced
by Law 19.613 dated June 8, 1999), when a
electricity generating companies produced
generation at deficits and were not able to
satisfy the normal consumption of their
distributor or final customers subject to
price regulation (whether due to prolonged
failures of thermal power plants or due to
droughts), they were obligated to pay
compensation or damages to these customers
in accordance with the regulations and
procedures established in the rationing
decree. This situation affected
Endesa-Chile and its subsidiaries Pehuenche
and Pangue.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Endesa-Chile has requested that the Court
declare the Company is obligated only to
pay compensation and damages to its
distributor customers for those days and
hours in which, during the term of
rationing Decree No. 287, there were
interruptions in the supply of electricity
that affected these customers. The
Government has maintained the position that
the compensation must be paid for the
entire rationing period.
Process status: Pending resolution.
Amounts involved: None.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pehuenche S.A.



|i. |  | Court: 20th Civil Courthouse of Santiago
Process number: 5.863-2001
Cause: Lawsuit by Empresa Eléctrica Pehuenche S.A. versus Empresa
Eléctrica Colbún S.A. for services rendered by Pehuenche S.A. to
Colbún S.A. during the last drought period.
Process status: Case is at the discovery stage.
Amounts involved: Undeterminable.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. |  | Court: Talca Court of Appeals
Process number: 39.945
Cause: Asociación del Canal Maule versus DGA Resolution 1768 dated
November 1984 related to the approval of reservoir works and building
of the Colbún power plant. Pehuenche also filed a complaint to
reinforce the claim of the irrigation subscribers that it is the
obligation of Colbún S.A. to operate the reservoir.
Process status: Resolution was passed rejecting the complaint.
Amounts involved: Undeterminable.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|iii. |  | Actions were filed related to the payment of compensation as per
Supreme Decree No. 287, dated 1999 issued by the Chilean Ministry of
Economy, Development and Reconstruction and modification of Art. 99
bis of DFL No. 1/82 of Mining Law.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-65



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:



|iv. |  | Court: 24th Civil Court of Santiago
Process number: 3908-99
Cause: A precautionary prejudicial measure was filed and was denied by the Tribunal. In
the same proceeding Pehuenche filed an ordinary public law motion to vacate against
Sociedad Austral de Electricidad S.A.
Process status: Sentence was passed on December 10, 2002; pending notification of verdict.
Amounts involved: Undeterminable.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|v. |  | Court: 17th Civil Court of Santiago
Process number: 3940-99
Cause: A precautionary prejudicial measure was presented and denied by the Tribunal. In
the same case, Pehuenche filed an ordinary public law motion to vacate against Chilectra
S.A.
Process status: Pending judgment of the Court.
Amounts involved: Undeterminable
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|vi. |  | Court: 20th Civil Court of Santiago
Process number: 4005-99
Cause: A precautionary prejudicial measure was presented and denied by the Tribunal. In
the same case Pehuenche presented an ordinary public law motion to vacate against Empresa
Eléctrica Atacama S.A.
Process status: Pending judgment of the Court.
Amounts involved: Undeterminable.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|vii. |  | Court: 3rd Local Police Court of Santiago
Process number: 50.419-AGO
Cause: SERNAC versus Pehuenche, claim for lack of electrical supply.
Process status: Pending sentence.
Amounts involved: Undeterminable.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|viii. |  | Court: 5th Labor Court of Santiago
Process number: 2.923-2001
Cause : Labor lawsuit for work accident. Manuel Rolando Muñoz Zamorano versus the
Chilean Association of Security, S.S.S. and Pehuenche. Second petition verdict
confirming first petition verdict.
Process status: Pending confirmation of appeal for dismissal.
Amounts involved: Undeterminable.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Endesa-Chile is seeking recourse related to the following fines imposed by the
Superintendency of
Electricity and Fuels:



|ix. |  | Court: Santiago Court of Appeals.
Process number: 6515-99
Cause: Failure of CDEC-SIC to provide timely information to the CNE.
Resolution 1,557 dated October 1, 1999. The State Defense Council
made itself a party to the case.
Process status: Pending hearing.
Amounts involved: Five fines for a total of 1,610 Units of Tax
Measurement (UTM) or ThCh$47,316.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-66



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:



|x. |  | Court : 5th Civil Court of Santiago
Process number : 2272-99
Cause : Resolution 631 dated April 27, 1999, for not establishing Dispatch
Center before January 1, 1999.
Process status : Judgment passed, pending notification to parties.
Amounts involved : Fine of 500 UTM (ThCh$14,695).
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|xi. |  | Court : 16th Civil Court of Santiago
Process number : 4164-97
Cause : Resolution 856 dated October 16, 1997, due to blackout
on May 11, 1997.

Process status : Rejected recourse, pending appeal.
Amounts involved : Fine of 450 UTM (ThCh$13,225).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|xii. |  | Court : 16th Civil Court of Santiago
Process number : 1928-98
Cause : Resolution 331 dated May 8, 1998, due to blackout on
October 13, 1997.
Process status : Rejected recourse, pending appeal.
Amounts involved : Fine of 300 UTM (ThCh$8,817).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|xiii. |  | Administrative tribunal : Superintendency of Energy and Fuels
Process number : N/A
Cause : Resolution 805 dated May 2, 2000 due to blackout on July 14, 1999.
Process status : Pending resolution.
Amounts involved : Fine of 400 UTA (ThCh$141,067).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pangue S.A.

Endesa-Chile is seeking recourse related to the following fines imposed by the
Superintendency of
Electricity and Fuel:



|i. |  | Court : Santiago Court of Appeals
Process number : 1294-99
Cause : Resolution 415 dated March 12, 1999 for not complying with
Article 9 of Decree 640 related to rationing by informing the
Superintendency of normal consumption of Pangues customers. Pangue
made itself a party before the Court of Appeals. A motion to vacate
was filed before the Supreme Court.
Process status : Pending hearing
Amounts involved : Fine of 10 UTM (ThCh$294).
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. |  | Court : 1st Civil Court of Santiago
Process number : 2273-99
Cause : Resolution No. 631 dated April 27, 1999 for infraction of
Article 183 of the Regulations by not establishing the independent
Dispatch and Control Center.
Process status : On June 16, 2002, a judgment was passed ordering a
fine to be paid. Pending official notification of judgment.
Amounts involved : Fine 500 UTM (ThCh$14,695)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-67



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:



|iii. |  | Court : 23rd Civil Court of Santiago
Process number : 4293-97
Cause : Resolution No. 856 dated October 16, 1997 for blackout on May 1, 1997.
Process status : On May 31, 1999, judgment was passed ordering fine to be paid. Appeal made on
November 29, 1999 and is pending hearing.
Amounts involved : Fine of 450 UTM (ThCh$13,225)
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|iv. |  | Court : 23rd Civil Court of Santiago
Process number : 1910-98
Cause : Resolution No. 331 dated May 8, 1998 for blackout on October 13, 1997.
Process status : On July 30, 1999, judgment was passed ordering fine to be paid. Appeal has
been filed and is pending hearing.
Amounts involved : Fine of 500 UTM (ThCh$14,695)
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|v. |  | Administrative tribunal: Superintendency of Energy and Fuels
Process number : N/A
Cause : Motion to set aside filed before the SEC against SEC Resolution No. 740 dated April
26, 2000 which fined Pangue for blackout on July 14, 1999.
Process status : Pending resolution
Amounts involved : Fine of 300 UTA (ThCh$105,800).
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other lawsuits involving Pangue:



|vi. |  | Court : 18th Civil Court of Santiago
Process number : 3886-99
Cause : Pangue against Chilectra. Lawsuit to annul obligation to pay compensation to
regulated price users derived from electricity rationing decree No. 287 issued by the
Chilean Ministry of Economy.
Process status : Pending judgment of the Court.
Amounts involved : Undeterminable.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|vii. |  | There are 37 administrative objections presented by Pangue S.A. before the Gobernación
Provincial de Malleco to the corresponding requests of various individual to
regularize rights to water use in the Commune of Lonquimay.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

San Isidro S.A.



|i. |  | Court : 7th Civil Court of Santiago
Process number : 2195-99
Cause : Resolution No. 628 dated April 27, 1999 for infraction of
Article 183 of Supreme Decree 327, issued by the Chilean Ministry of
Economy, by not establishing the independent Dispatch and Control
Center before January 1, 1999.
Process status : Pending judgment of the Court
Amounts involved : Fine 500 UTM (ThCh$14,695).
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-68



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:



|ii. |  | Administrative tribunal : Superintendency of Energy and Fuels
Process number : N/A
Cause : Resolution No. 719 dated April 24, 2000 due to blackout on July 14, 1999.
Process status : Pending administrative resolution
Amounts involved : Fine 150 UTA (ThCh$52,900).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Compañía Eléctrica de Tarapacá S.A. (Celta)



|i. |  | Administrative tribunal : Superintendency of Energy and Fuels
Process number : N/A
Cause : Charges against the company per Official Letter 4966 of
August 3, 2000 for SING blackout on September 23, 1999.
Process status : Pending resolution
Amounts involved : Undeterminable.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. |  | Court : 20th Civil Court of Santiago
Process number : 2760-2000
Cause : Verification of Credit in Inmobiliaria La Cascada Agreement.
Process status : Report No. 1 was received from the Liquidating
Commission. A first distribution of funds from the sale of goods
took place, Celta received ThCh$60,557.
Amounts involved : ThCh$203,718
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|iii. |  | Court : 30th Civil Court of Santiago
Process number : 4061-2002
Cause : Lawsuit for annulment and other actions filed by Sociedad
Punta de Lobos S.A. against Endesa-Chile, Celta and the Chilean
Government. The complaint requests that any attempted assignment,
transfer, or any legal action presented by Endesa-Chile to Celta be
rejected with respect to the marine concession granted to
Endesa-Chile in the Punta Patache sector. It also requests that the
concession be taken away from Endesa-Chile due to alleged violations
of the laws that regulate marine concessions, and that all assets
constructed on the concession lands be converted to property of the
Government. Endesa-Chile contends that the plaintiff lacks a legal
interest in its claim due to the fact that it is not a party to the
concession contract.
Process status : On August 28, 2002 the Tribunal declared as a
precautionary measure the prohibition to take action or execute
contracts in respect to the marine concession granted to Endesa-Chile
and in respect to the real estate which by nature composes or forms
part of that concession.
Amounts involved : If a forfeiture of the marine concession is
declared, the dock installation would be affected, which has a value
of US$15,000,000 and would become the property of the government,
seriously affecting the operation of Celtas thermal power plant.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-69



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:



|iv. |  | Court : 12th Civil Court of Santiago
Process number : 5237-2002
Cause : Lawsuit against Empresas
Eléctricas del Norte Grande S.A. (EDELNOR
et al, including Celta) for reimbursement
of compensation paid by the electrical
distributors Empresa Eléctrica de Arica
S.A., Empresa Eléctrica de Iquique S.A. and
Empresa Eléctrica de Antofagasta S.A., to
their customers due to the blackout on July
25, 1999 of the Sistema Interconectado del
Norte Grande (SING). The complaint is
directed against EDELNOR, Electroandina,
Norgener, AES Gener and Celta to jointly
reimburse the electrical distributors.
Process status : Court resolution pending
regarding pleas filed by the defendants
that the case is without merit. Outcome of
the lawsuit if taken to trial is not
determinable.
Amounts involved : ThCh$64,269
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Infraestructura Dos Mil S.A.



|i. |  | Court : 18th Civil Court of Santiago
Process number : 6504-2002
Cause : There is a public law motion to nullify public right filed on
December 23, 2002 by Infraestructura Dos Mil S.A. against the Chilean
government,
Process status : Pending resolution by the State Defense Council.
Amounts involved : N/A
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sociedad Concesionaria Autopista Los Libertadores S.A.



|i. |  | There are pending lawsuits against the company, for which the
corresponding defense has been filed, in the aggregate amount of
ThCh$2,200,830.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

Sociedad Concesionaria Autopista del Sol S.A.



|i. |  | There are pending lawsuits against the company, for which the
corresponding defense has been filed, in the aggregate amount of
ThCh$447,800.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------

Inecsa Dos Mil S.A.



|i. |  | On July 17, 2000, the Chilean Ministry of Public Works filed suit to
annul the public right to bidding for the Northeast Santiago Access
project. As of December 31, 2002 the courts have suspended this
lawsuit and any contingent payouts are undeterminable.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-70



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:

Hidroelectrica El Chocon S.A.



|i. |  | On December 28, 2000 the Federal Public Revenues Administration -
General Tax Services (FPRA-GTS) notified Hidroelectrica El Chocon
S.A. that it owed ThCh$374,218 of taxes related to failure to
withhold income tax on certain payments made abroad for a bank loan
obtained in 1994. It was also determined that Hidroelectrica El
Chocon S.A. must pay ThCh$850,224 for related accrued interest
calculated as of December 20, 2000. Hidroelectrica El Chocon S.A.
did not make these payments as it considered them relating to foreign
source income and therefore not subject to taxes. Hidroelectrica El
Chocon S.A. entered a plea in which it objected to payment of the
taxes. FPRA-GTS has also fined Hidroelectrica El Chocon S.A.
ThCh$261,953 which Hidroelectrica El Chocon S.A appealed by on
February 20, 2001.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. |  | On December 28, 2000 Hidroelectrica El Chocon S.A. was notified that
it owed accrued interest related to value-added-tax for the period
from December 1993 to July 1995 amounting to ThCh$169,331 as of
December 11, 2000, as well as an imposed fine of ThCh$213,771. On
February 20, 2001 Hidroelectrica El Chocon S.A. filed an appeal with
the courts under the premise that Chilean law does not require
payment of fines, including accrued interests, for obligations or
infractions committed before July 31, 1995.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|iii. |  | On June 26, 2000, Hidroelectrica El Chocon S.A. was notified of a
lawsuit for interest to be paid related to royalties, initially
amounting to ThCh$335,636. Additionally, on September 27, 2000, the
Company was notified of a new complaint from the province of Neuquén
against the State and hydroelectric generators of Comahue to obtain
royalties earned on accumulated funds in the Salex Account. The
complaint does not state the precise amount or date as of which the
sums claimed are considered as owed, but seeks charges from each
generator equal to 12% of the funds contributed to the account.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|iv. |  | On December 28, 2001 Hidroelectrica El Chocon S.A. received
notification from the Provincial Revenue Services of Buenos Aires
that it owed ThCh$229,520 for tax on gross income for the fiscal
periods from February 1995 to December 1998 and that the fine was 10%
of the allegedly unpaid amount. On January 15, 2002, Hidroelectrica
El Chocon S.A. filed an appeal citing erroneous computation of the
amount owed and other reasons as to why the taxes were not
applicable.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Hidroinvest S.A.



|i. |  | On December 27, 2000 Hidroinvest S.A. was notified that it owed tax of
ThCh$831,397 for gains realized in 1993 on the difference between the
acquisition cost and transfer price of bonds, accrued interest of
ThCh$1,788,336 and related fines of ThCh$581,978. On February 19,
2001, Hidroinvest S.A. filed an appeal to the notice.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Central Costanera S.A.



|i. |  | Central Costanera S.A. has a debt obligation corresponding to an
agreement related to Work Order No. 4322 (the Agreement). Central
Costanera S.A. has fixed the obligation at one peso equal to one US
dollar in accordance with applicable laws. However, certain laws have
exempted certain obligations from this fixed exchange rate, and should
the Secretary of Energy rule that the obligations of Central Costanera
S.A be exempted, an appeal would be filed. Central Costanera S.A.
would to have to pay an additional ThCh$26,228,000 in the event of an
unfavorable ruling.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-71



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|28. |  | Commitments and contingencies, continued:
|--- |  | -----------------------------------------

Edegel S.A.



|i. |  | Court : Chilean Federal Court
Process number : N/A
Cause : From November 2000 to October 2001, the Chilean tax authority, the
National Superintendency of Tax Administration (SUNAT) audited the income
taxes and general sales taxes of Edegel S.A. from 1995 to 1999. As a result
of the audits, in December 2001, SUNAT imposed back taxes and
related fines.

Process status : In November 2002, the Government Court issued its verdict
indicating that: SUNAT would have to once again audit Edegel S.A. related
to rejected expenses for amortization of negative goodwill.

Amounts involved : As of December 31, 2002, provisions for these
contingencies have been made amounting to ThCh$11,354,000 (US$15.8 million).
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. |  | Lawsuits have been filed by ESSALUD for payment of contributions amounting to
ThCh$3,025,000 (US$4.21 million). In the opinion of Management and their
external legal counsel, it is probable that these proceedings will be
resolved in favor of the Edegel S.A.; thus no liabilities have been recorded
as of December 31, 2002 and 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Claims have been filed against Talleres Mayopampa S.A. amounting to
ThCh$417,512 (US$581,000). The subsidiary has filed the corresponding
countersuits and appeals, which have not yet been settled. In the opinion
of Management and external legal counsel, these actions neither
independently nor jointly will have a significant adverse effect on the
financial position, results of operations or liquidity of Edegel S.A.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|iii. |  | A lawsuit has been filed by Edegel S.A.s workers union, which seeks an
increase in revenue sharing from the current 5%, as required by law, to 10%,
which would mean doubling the payments already made in 1994, 1995 and 1996,
meaning additional aggregate payments of ThCh$3,353,753 (US$4,667,000). On
August 24, 2000, the lawsuit was ruled unfounded, but on December 12, 2000 a
second ruling reversed that ruling. In the opinion of Management and
external legal counsel, the final resolution will be favorable to Edegel
S.A., and therefore no liabilities have been recorded related to this
lawsuit as of December 31, 2002 and 2001.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Central Hidroeléctrica de Betania S.A. (Betania)

Tax contingencies:



|i. |  | Presumptive income tax contingency  In 1997, 1998 and 1999 Betania
was exempted from paying taxes under the presumptive income tax system
  a system which calculates taxes payable on concepts other than net
income  due to a regulation passed by the Administration of National
Taxes (DIAN) in 1995. Since Betania had tax losses for those years, no
taxes were paid. That regulation was modified in 1999, which resulted
in Betania qualifying for the presumptive income tax system, which
means that according the DIAN it should have paid taxes in 1997 and
1998 amounting to ThCh$25,118,828 (including interest in the amount of
ThCh$10,524,298 and sanctions of ThCh$8,987,422). Betania believes
that the conclusions of DIAN were unfounded and, therefore on
September 13, 2002 filed a complaint before the Administrative Court
of Huila. Since then, DIAN has ruled against the petition to
reconsider the income tax payable for 1997, while for the 1998 period,
DIAN has yet to respond. As of December 31, 2002 Betania recorded a
provision amounting to ThCh$6,521,895 to cover this contingency.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-72



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|28. |  | Commitments and contingencies, continued:
|--- |  | -----------------------------------------



|ii. |  | DIAN reviewed Betanias calculation of its
ordinary income tax payable for 1997 and
1998 and declared that Betania owes
ThCh$12,174 and ThCh$47,836 for 1997 and
1998, respectively, including tax,
sanctions and estimated overdue interest.
In 1997 and 1998 the Company has been
audited both in the calculation of its
ordinary income as well as presumptive
income, therefore it should be noted that
only the greater of the two becomes taxable
net income on which the corresponding
taxes, sanctions and interest must be paid.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|iii. |  | DIAN notified Betania that it owes
ThCh$19,399 related to the incorrect
calculation of income for 1999. Betania has
requested that DIAN reconsider the validity
of its calculation.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other contingencies:



|iv. |  | As of December 31, 2002, amounts demanded in lawsuits relating to
administrative, civil and labor litigations amounted to
ThCh$5,590,769, and there exist other lawsuits for undetermined
amounts. Based on the evaluation of the probability of success in the
defense of these suits, ThCh$1,005,512 has been provisioned as of
December 31, 2002, to cover probable losses due to these
contingencies.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Restrictions:

Endesa-Chile Consolidated

The Company is in compliance with all financial ratios and covenants as of
December 31, 2002.

Endesa-Chile (Individual Legal Entity)

On a consolidated basis, the Company must comply with financial covenants and
requirements
derived from loan agreements with financial institutions. Some of the more
restrictive covenants are summarized
as follows:



| |  | Gross cash flows (defined as operating income plus depreciation,
amortization, financial income, and dividends received from
consolidated subsidiaries) equal to or greater than 13% of the average
consolidated financial debt for terms longer than one year, plus
short-term bank debt if the term is extendable to more than one year,
obtained from the debt in the consolidated financial statements at the
closing date of the last four quarters.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Gross Cash Flow equal to or greater than 1.9 times the consolidated
financial expenses, obtained according to the expenses reflected in
the consolidated financial statements at the closing date of the last
four quarters.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The financial debt for terms longer than one year, plus short-term
bank debt if its term is extendable to more than one year, cannot
exceed 58% of the sum of shareholders equity, plus minority
interests, plus financial debt with terms longer than one year and
short-term bank debt.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-73



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:

Infraestructura Dos Mil S.A.

Due to the placement of bonds by the subsidiary Concesionaria Autopista Del Sol
S.A., Infraestructura Dos Mil S.A. concurred as Sponsor to the contracts of
that transaction, committing itself to comply with restrictions in the transfer
of its property to the bond issuer. Additionally, Infraestructura Dos Mil
S.A., cannot make fundamental changes in its assets without written consent
from the insurance company guaranteeing the bond issuance (FSA Inc). Likewise,
the shares of the Concesionaria Autopista de Sol S.A. owned by Infraestructura
Dos Mil S.A. were pledged in favor of FSA Inc.

Pehuenche S.A.

The Santander Investment Bank Ltd. and the Chase Manhattan Bank N.A., in
relation to loans granted to Pehuenche, impose obligations and restrictions on
Pehuenche S.A., some of which are of a financial nature, such as: long-term
financial liabilities not exceeding 1.5 times the shareholders equity, and a
minimum company equity of UF 9,500,000.

Sociedad Concesionaria Autopista del Sol S.A.

In virtue of the bond issuance contract, Sociedad Concesionaria Autopista del
Sol S.A. must meet certain financial ratios based on the generation of
operating cash flows. Additionally, the Company must request authorization
from the insurer to obtain additional financing.

Pangue S.A

The following is a summary of the main obligations, which Empresa Eléctrica
Pangue S.A. must comply with as per agreements with financial institutions:



| |  | Maintain creditors duly informed regarding its financial situation.
|- |  | -------------------------------------------------------------------



| |  | Different conditions with the objective of guaranteeing a healthy
financial situation. Thus, the institutions have defined certain
indexes such as restrictions for the payment of dividends and
indebtedness, and acceleration clauses. In regard to the long-term
debt limit for loans in cash, for these events, the limit is 2.0 times
shareholders equity.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Insure and maintain insured all assets.
|- |  | ---------------------------------------

F-74



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:

Central Costanera S.A.

In virtue of the arrangement in Annex VI-A of the Concurso Público
Internacional para la Venta de las Acciones de Central Costanera Sociedad
Anónima (International Public Tender for the Sale of Shares of Central
Costanera Sociedad Anonymous), the domain of Central Costanera S.A.s land was
transferred subject to the condition that it used as the location for an
electric power plant for a term of twenty five years as of the date of
possession.

If under any circumstance whatsoever the land ceases to be used for that
purpose during the indicated period, its domain shall be considered revoked due
to this cause, returning such title effective immediately, and as a matter of
law, to SEGBA S.A. or, as applicable, to the National State.

In order to guarantee compliance with the obligations contained in the Mandate
Covenants transferred by Hidroeléctrica Norpatagónica S.A. (Hidronor S.A.),
Hidroinvest S.A. has pledged all of its Class Ashares of Hidroeléctrica El
Chocón S.A. in favor of the Chilean goverment until the term of the Mandate
Covenant has expired.

Edegel S.A.A.

Financial indicators originated by credit contracts:



| |  |  | Maintain financial debt to equity ratio not exceeding 0.55 during the term of the contract
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Maintain a ratio of EBITDA to net financial expenses of no less than 4.5 during each
quarter of 2002 and 2003. For 2004 the ratio of EBITDA to financial expenses, for four
consecutive quarters should be no less than 5.0 for each quarter.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintain a ratio of financial debt less cash to EBITDA (for four consecutive quarters) no
greater than 3.0 for each quarter, effective beginning in 2002.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The financial debt of Edegel must not exceed ThCh$287,444 (ThUS$400,000)
| | - |  | ------------------------------------------------------------------------

Financial indicators originated by Bonds Program and Short-term instruments:



| |  |  | Maintain indebtedness no greater than ThCh$395,236,000 (ThUS$550,000)
as of the close of each quarter ending on March 31, June 30, September
30 and December 31 of each year during the term of the bonds.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintain net shareholders equity of no less than ThCh$490,658,285
(ThUS$682,788) as of the close of each quarter ending on March 31,
June 30, September 30 and December 31 of each year during the term of
the bonds.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Edegel may not transfer or assign all or part of the debt it assumes
as a consequence of the issuance in the framework of the Bond Program,
unless there is a favorable agreement adopted by the General Assembly
of bond holders.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-75



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

28. Commitments and contingencies, continued:

Cross-Default Provisions:

As is customary for certain credit and capital market debt facilities, a
substantial portion of Enesa-Chiles financial indebtedness is subject to
cross-default provisions. Certain events including payment defaults and
bankruptcy by Endesa-Chile or any of its subsidiaries, left uncured over time
(in those specific provisions which allow for a cure period), could result in a
cross-default at the Endesa-Chile level, and if a cross-default were to occur,
approximately 60% of Endesa-Chiles consolidated liabilities would eventually
become due and payable.

Investment Grade Debt Rating

Certain of the Companys loan agreements have special provisions in the event
that the Companys US$-denominated debt rating falls bellow Investment grade
by the applicable rating agency, principally Standards & Poors (S&P). In the
event that senior unsecured long-term foreign currency denominated debt were to
be rated non-investment grade, or less than BBB- by S&P nomenclature, then
within certain applicable grace periods (normally 60 days), a mandatory
prepayment would be triggered and all the outstanding principal under these
loans would become due. As of December 31, 2002, US$718 million of
Endesa-Chiles loan agreements have mandatory prepayment provisions of this
type. As of December 31, 2002, S&P long-term foreign currency debt ratings
classify the Companys applicable liabilities as investment grade.

F-76



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

29. Sureties obtained from third parties:

Endesa-Chile (Individual Legal Entity)

The company has received guaranteed performance bonds from contractors and
third parties to guarantee performance and construction (mainly the Ralco
Project) in the amount of ThCh$24,799,372 as of December 31, 2002.

The Company has taken guaranteed performance bonds in favor of third parties to
guarantee performance and construction in the amount of ThCh$1,122,409.

Autopista Los Libertadores S.A.

Deposits and guaranteed performance bonds amount to UF 25,495 as of December
31, 2002.

Sociedad Concesionaria Autopista del Sol S.A.

Deposits and guaranteed performance bonds amount to UF 27,395 as of December
31, 2002.

Compañía Eléctrica de Tarapaca S.A.

The Company has received documents in guarantee amounting to ThCh$287,026 as of
December 31, 2002.

Compañía Eléctrica San Isidro S.A.

The Company has received documents in guarantee amounting to ThCh$4,676,984 as
of December 31, 2002.

Empresa Eléctrica de Pangue

Empresa Eléctrica Pangue S.A. has received from contractors guaranteed
performance bonds from banks in the amount of ThCh$8,879 as of December 31,
2002, which guarantee advances granted and compliance with contracts.

F-77



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies:

As of December 31, 2001 and 2002, foreign currency denominated assets and
liabilities are as follows:

a. Current assets

As of December 31,Account
    
    Currency
    
    2001
    
    2002ThCh$
    
    ThCh$Cash
    
    Ch$
    
    
    1,662,317
    
    
    
    865,762US$
    
    
    1,828,199
    
    
    
    1,067,602$ Col
    
    
    1,061,862
    
    
    
    3,345,416Soles
    
    
    402,400
    
    
    
    40,432$ Arg
    
    
    69,460
    
    
    
    1,934,895Rs
    
    
    
    
    
    
    196,7465,024,238
    
    
    
    7,450,853Time deposits
    
    US$
    
    
    80,765,617
    
    
    
    61,476,209$ Col
    
    
    3,782,106
    
    
    
    4,799,629Soles
    
    
    558,112
    
    
    
    4,652,356$ Arg
    
    
    530,238
    
    
    
    5,420,189Rs
    
    
    3,315,968
    
    
    
    13,722,80688,952,041
    
    
    
    90,071,189Accounts receivable, net
    
    Ch$
    
    
    36,209,795
    
    
    
    41,514,316US$
    
    
    8,148,302
    
    
    
    4,455,077$ Col
    
    
    21,014,604
    
    
    
    18,458,217Soles
    
    
    1,678,629
    
    
    
    3,379,887$ Arg
    
    
    12,632,810
    
    
    
    11,217,475Rs
    
    
    12,195,730
    
    
    
    9,229,56891,879,870
    
    
    
    88,254,540Notes receivable, net
    
    Ch$
    
    
    162,773
    
    
    
    47,989US$
    
    
    
    
    
    
    962,462162,773
    
    
    
    1,010,451Other accounts
receivables, net
    
    UF
    
    
    431,262
    
    
    
    57,647Ch$
    
    
    3,549,536
    
    
    
    5,826,556US$
    
    
    5,233,689
    
    
    
    1,665,807$ Col
    
    
    2,222,754
    
    
    
    378,219Soles
    
    
    6,462,442
    
    
    
    8,112,621$ Arg
    
    
    51,537
    
    
    
    29,363Rs
    
    
    896,003
    
    
    
    692,686UC
    
    
    1,036,332
    
    
    
    1,159,58819,883,555
    
    
    
    17,922,487


F-78



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies, continued:



|a. |  | Current assets, continued:
|-- |  | --------------------------

As of December 31,Account
    
    Currency
    
    2001
    
    2002ThCh$
    
    ThCh$Amounts due from related
companies
    
    Ch$
    
    
    10,863,159
    
    
    
    10,630,249US$
    
    
    4,385,395
    
    
    
    190,569,054$ Col
    
    
    16,340,122
    
    
    
    15,236,206Soles
    
    
    2,408,021
    
    
    
    2,585,563$ Arg
    
    
    6,359,294
    
    
    
    483,28240,355,991
    
    
    
    219,504,354Inventories, net
    
    Ch$
    
    
    7,148,924
    
    
    
    3,274,341US$
    
    
    4,894,194
    
    
    
    1,952,463$ Col
    
    
    4,793,968
    
    
    
    1,389,791Soles
    
    
    4,715,721
    
    
    
    3,791,82921,552,807
    
    
    
    10,408,424Income taxes recoverable
    
    Ch$
    
    
    19,507,337
    
    
    
    13,299,957$ Col
    
    
    
    
    
    
    130$ Arg
    
    
    13,267,453
    
    
    
    10,640,96732,774,790
    
    
    
    23,941,054Prepaid expenses
    
    UF
    
    
    810
    
    
    
    Ch$
    
    
    374,706
    
    
    
    383,855US$
    
    
    3,372,247
    
    
    
    2,570,012$ Col
    
    
    65,405
    
    
    
    47,428Soles
    
    
    259,038
    
    
    
    195,072$ Arg
    
    
    808,364
    
    
    
    437,348Rs
    
    
    13,228
    
    
    
    6,1914,893,798
    
    
    
    3,639,906Deferred income taxes
    
    Ch$
    
    
    
    
    
    
    3,262,225
    
    
    
    3,262,225Other current assets
    
    UF
    
    
    127,694
    
    
    
    Ch$
    
    
    9,180,414
    
    
    
    37,575,867$ Col
    
    
    
    
    
    
    888,202US$
    
    
    
    
    
    
    38,135,631$ Arg
    
    
    468,050
    
    
    
    132,5889,776,158
    
    
    
    76,732,288Total current assets
    
    
    
    
    
    
    315,256,021
    
    
    
    542,197,771


F-79



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies, continued:



|b. |  | Property, plant, and equipment:
|-- |  | -------------------------------

As of December 31,Account
    
    Currency
    
    2001
    
    2002ThCh$
    
    ThCh$Land
    
    Ch$
    
    
    19,691,134
    
    
    
    19,032,837$ Col
    
    
    12,580,123
    
    
    
    13,603,288Soles
    
    
    282,441
    
    
    
    300,942$ Arg
    
    
    6,454,622
    
    
    
    6,877,098Rs
    
    
    422,683
    
    
    
    444,50839,431,003
    
    
    
    40,258,673Buildings and Infrastructure and
electrical lines
    
    Ch$
    
    
    3,090,800,874
    
    
    
    3,184,777,542$ Col
    
    
    1,805,545,577
    
    
    
    1,944,293,493Soles
    
    
    326,065,474
    
    
    
    336,390,506$ Arg
    
    
    317,816,335
    
    
    
    338,633,725Rs
    
    
    544,688,699
    
    
    
    580,266,6916,084,916,959
    
    
    
    6,384,361,957Machinery and Equipment
    
    Ch$
    
    
    11,704,710
    
    
    
    11,535,446$ Col
    
    
    15,301,526
    
    
    
    6,696,008Soles
    
    
    398,623,345
    
    
    
    435,018,120$ Arg
    
    
    706,532,440
    
    
    
    754,120,7741,132,162,021
    
    
    
    1,207,370,348Other fixed assets
    
    Ch$
    
    
    7,867,922
    
    
    
    15,522,735$ Col
    
    
    7,642,350
    
    
    
    3,427,770Soles
    
    
    6,633,428
    
    
    
    10,137,319$ Arg
    
    
    8,993,450
    
    
    
    9,573,581Rs
    
    
    46,699,859
    
    
    
    4,134,90477,837,009
    
    
    
    42,796,309Technical appraisal
    
    Ch$
    
    
    7,024,788
    
    
    
    6,588,181$ Col
    
    
    64,759,545
    
    
    
    73,406,012Soles
    
    
    475,304,698
    
    
    
    505,989,949Rs
    
    
    130,917,038
    
    
    
    135,331,492678,006,069
    
    
    
    721,315,634Accumulated Depreciation
    
    Ch$
    
    
    (1,160,119,446
    )
    
    
    (1,220,857,838
    )$ Col
    
    
    (324,716,680
    )
    
    
    (394,951,649
    )Soles
    
    
    (403,273,807
    )
    
    
    (448,056,887
    )$ Arg
    
    
    (352,685,773
    )
    
    
    (423,230,376
    )Rs
    
    
    (206,664,283
    )
    
    
    (239,157,043
    )(2,447,459,989
    )
    
    
    (2,726,253,793
    )Total property, plant and
equipment, net
    
    
    
    
    
    
    5,564,893,072
    
    
    
    5,669,849,128


F-80



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies, continued:



|c. |  | Other assets:
|-- |  | -------------

As of December 31,Account
    
    Currency
    
    2001
    
    2002ThCh$
    
    ThCh$Investments in related Companies
    
    Ch$
    
    
    103,429,207
    
    
    
    111,747,643US$
    
    
    61,364,055
    
    
    
    62,965,641164,793,262
    
    
    
    174,713,284Investments in other Companies
    
    Ch$
    
    
    2,152,383
    
    
    
    2,222,396$ Col
    
    
    74,312,411
    
    
    
    79,401,375Soles
    
    
    11,516
    
    
    
    12,27176,476,310
    
    
    
    81,636,042Negative goodwill, net
    
    US$
    
    
    (37,753,342
    )
    
    
    $ Col
    
    
    (59,861,413
    )
    
    
    (28,641,838
    )Soles
    
    
    (68,866,610
    )
    
    
    (63,083,303
    )(166,481,365
    )
    
    
    (91,725,141
    )Goodwill, net
    
    Ch$
    
    
    81,927
    
    
    
    3,352,669US$
    
    
    69,288,973
    
    
    
    608,459$ Col
    
    
    24,013,765
    
    
    
    23,970,674Soles
    
    
    1,687,590
    
    
    
    $ Arg
    
    
    29,896,386
    
    
    
    124,968,641
    
    
    
    27,931,802Long-term receivables
    
    UF
    
    
    2,332,376
    
    
    
    273,500Ch$
    
    
    1,491,579
    
    
    
    1,264,056US$
    
    
    25,698,682
    
    
    
    6,084,497$ Col
    
    
    
    
    
    
    1,053,252Soles
    
    
    1,595,306
    
    
    
    Rs
    
    
    11,270,567
    
    
    
    9,370,770UC
    
    
    1,946,557
    
    
    
    1,111,36144,335,067
    
    
    
    19,157,436Amounts due from related
companies
    
    Ch$
    
    
    1,471,140
    
    
    
    898,130US$
    
    
    169,196,652
    
    
    
    170,667,792
    
    
    
    898,130Intangibles, net and Other assets
    
    UF
    
    
    6,676,601
    
    
    
    2,961,502Ch$
    
    
    9,373,151
    
    
    
    44,099,140US$
    
    
    26,237,475
    
    
    
    24,981,795$ Col
    
    
    23,012,333
    
    
    
    23,106,905Soles
    
    
    440,355
    
    
    
    535,946$ Arg
    
    
    341,984
    
    
    
    3,362,778Rs
    
    
    580,670
    
    
    
    494,87866,662,569
    
    
    
    99,542,944Total other assets
    
    
    
    
    
    
    481,422,276
    
    
    
    312,154,497


F-81



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies, continued:



|d. |  | Total assets
|-- |  | ------------

As of December 31,Account
    
    Currency
    
    2001
    
    2002ThCh$
    
    ThCh$Total assets by currency
    
    UF
    
    
    9,568,743
    
    
    
    3,292,649Ch$
    
    
    2,183,628,330
    
    
    
    2,296,864,054US$
    
    
    422,660,138
    
    
    
    397,494,709$ Col
    
    
    1,691,870,358
    
    
    
    1,789,908,528Soles
    
    
    754,988,099
    
    
    
    800,002,623$ Arg
    
    
    751,536,650
    
    
    
    719,633,687Rs
    
    
    544,336,162
    
    
    
    514,734,197UC
    
    
    2,982,889
    
    
    
    2,270,949Total assets
    
    
    
    
    
    
    6,361,571,369
    
    
    
    6,524,201,396


F-82



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies, continued:



|e. |  | Current liabilities
|-- |  | -------------------

Within 90 days
    
    91 days to 1 yearAs of December 31,
    
    As of December 31,
    
    As of December 31,
    
    As of December 31,2001
    
    2002
    
    2001
    
    2002Avg
    
    
    
    
    
    Avg
    
    
    
    
    
    Avg
    
    
    
    
    
    AvgAccount
    
    Currency
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    RateThCh$
    
    %
    
    ThCh$
    
    %
    
    ThCh$
    
    %
    
    ThCh$
    
    %Short-term due to banks and
financial institutions
    
    Ch$
    
    
    2,363,855
    
    
    
    
    
    
    
    23,567,397
    
    
    
    1.08
    
    
    
    
    
    
    
    
    
    
    
    2,346,203
    
    
    
    1.08US$
    
    
    16,039,393
    
    
    
    6.20
    
    
    
    13,621,253
    
    
    
    5.04
    
    
    
    16,211,780
    
    
    
    6.20
    
    
    
    40,312,584
    
    
    
    5.04$ Col
    
    
    
    
    
    
    
    
    
    
    7,602,894
    
    
    
    6.20
    
    
    
    11,282,293
    
    
    
    13.00
    
    
    
    
    
    
    
    Soles
    
    
    2,955,615
    
    
    
    13.00
    
    
    
    22,013,735
    
    
    
    6.20
    
    
    
    9,865,662
    
    
    
    13.00
    
    
    
    
    
    
    
    21,358,863
    
    
    
    
    
    
    
    66,805,279
    
    
    
    
    
    
    
    37,359,735
    
    
    
    
    
    
    
    42,658,787Current portion of long-term debt
due to banks and financial
institutions
    
    UF
    
    
    53,227,352
    
    
    
    7.50
    
    
    
    
    
    
    
    
    
    
    
    1,247,832
    
    
    
    7.50
    
    
    
    1,377,746
    
    
    
    US$
    
    
    18,419,928
    
    
    
    6.00
    
    
    
    199,738,046
    
    
    
    3.62
    
    
    
    244,897,109
    
    
    
    6.00
    
    
    
    55,030,031
    
    
    
    3.62Euro
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,624,390
    
    
    
    4.26
    
    
    
    4,673,051
    
    
    
    3.79Yen
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395,184
    
    
    
    0.90
    
    
    
    465,522
    
    
    
    0.89$ Arg
    
    
    
    
    
    
    
    
    
    
    1,363,453
    
    
    
    1.75
    
    
    
    
    
    
    
    
    
    
    
    655,929
    
    
    
    1.75Rs
    
    
    5,148,097
    
    
    
    9.24
    
    
    
    
    
    
    
    
    
    
    
    102,691
    
    
    
    4.44
    
    
    
    1,234,621
    
    
    
    4.75UP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,066,471
    
    
    
    5.32
    
    
    
    1,195,763
    
    
    
    5.32£
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394,123
    
    
    
    5.38
    
    
    
    456,684
    
    
    
    4.8176,795,377
    
    
    
    
    
    
    
    201,101,499
    
    
    
    
    
    
    
    251,727,800
    
    
    
    
    
    
    
    65,089,347Promissory notes
    
    Soles
    
    
    
    
    
    
    
    
    
    
    102,955
    
    
    
    4.50
    
    
    
    
    
    
    
    
    
    
    
    7,464,219
    
    
    
    4.50
    
    
    
    
    
    
    
    102,955
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,464,219Current portion of bonds payable
    
    UF
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,528,896
    
    
    
    6.30
    
    
    
    8,293,995
    
    
    
    6.29US$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,569,940
    
    
    
    7.90
    
    
    
    153,673,583
    
    
    
    8.04Euro
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,061,700
    
    
    
    3.34
    
    
    
    303,740,866
    
    
    
    3.34$ Col
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,546,485
    
    
    
    13.70
    
    
    
    13,501,963
    
    
    
    12.54Soles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280,254
    
    
    
    
    
    
    
    7,581,010
    
    
    
    8.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,987,275
    
    
    
    
    
    
    
    486,791,417Current portion of long-term notes
payable
    
    US$
    
    
    23,610,522
    
    
    
    7.40
    
    
    
    29,756,019
    
    
    
    9.00
    
    
    
    2,879,525
    
    
    
    7.20
    
    
    
    11,872,895
    
    
    
    9.0023,610,522
    
    
    
    
    
    
    
    29,756,019
    
    
    
    
    
    
    
    2,879,525
    
    
    
    
    
    
    
    11,872,895Dividends payable
    
    Ch$
    
    
    2,407
    
    
    
    
    
    
    
    651,529
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    51,489
    
    
    
    
    
    
    
    2,637
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    20,531
    
    
    
    
    
    
    
    72,325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    1,444
    
    
    
    
    
    
    
    777
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,871
    
    
    
    
    
    
    
    727,268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accounts payable
    
    Ch$
    
    
    30,257,724
    
    
    
    
    
    
    
    34,259,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,798
    
    
    
    US$
    
    
    7,985,937
    
    
    
    
    
    
    
    8,345,399
    
    
    
    
    
    
    
    343,503
    
    
    
    
    
    
    
    73,731
    
    
    
    $ Col
    
    
    353,691
    
    
    
    
    
    
    
    4,489,580
    
    
    
    
    
    
    
    8,982,460
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    2,167,854
    
    
    
    
    
    
    
    5,435,070
    
    
    
    
    
    
    
    2,026,856
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    7,873,571
    
    
    
    
    
    
    
    3,100,775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    17,143,664
    
    
    
    
    
    
    
    10,963,983
    
    
    
    
    
    
    
    138,565
    
    
    
    
    
    
    
    
    
    
    
    65,782,441
    
    
    
    
    
    
    
    66,594,125
    
    
    
    
    
    
    
    11,491,384
    
    
    
    
    
    
    
    92,529Miscellaneous payables
    
    Ch$
    
    
    13,266,616
    
    
    
    
    
    
    
    6,819,796
    
    
    
    
    
    
    
    5,718,123
    
    
    
    
    
    
    
    91,062
    
    
    
    US$
    
    
    1,701,652
    
    
    
    
    
    
    
    2,052,214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,571,255
    
    
    
    $ Col
    
    
    18,675
    
    
    
    
    
    
    
    7,138,671
    
    
    
    
    
    
    
    71,686
    
    
    
    
    
    
    
    11,338,473
    
    
    
    Soles
    
    
    
    
    
    
    
    
    
    
    2,436,207
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    105,397
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    326,103
    
    
    
    
    
    
    
    375,753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,418,443
    
    
    
    
    
    
    
    18,822,641
    
    
    
    
    
    
    
    5,789,809
    
    
    
    
    
    
    
    20,000,790Amounts payable to related companies
    
    Ch$-
    
    
    
    
    
    
    
    
    
    
    1,760,957
    
    
    
    
    
    
    
    51,055,763
    
    
    
    
    
    
    
    29,454,526
    
    
    
    US$-
    
    
    
    
    
    
    
    
    
    
    3,994
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Col
    
    
    1,196,753
    
    
    
    
    
    
    
    20,135,456
    
    
    
    
    
    
    
    3,629,420
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    1,116,904
    
    
    
    
    
    
    
    7,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    7,545,744
    
    
    
    
    
    
    
    873,705
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,859,401
    
    
    
    
    
    
    
    22,781,264
    
    
    
    
    
    
    
    54,685,183
    
    
    
    
    
    
    
    29,454,526


F-83



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies, continued:



|e. |  | Current liabilities, continued
|-- |  | ------------------------------

Within 90 days
    
    91 days to 1 yearAs of December 31, 2001
    
    As of December 31, 2002
    
    As of December 31, 2001
    
    As of December 31, 2002Avg
    
    
    
    
    
    Avg
    
    
    
    
    
    Avg
    
    
    
    
    
    AvgAccount
    
    Currency
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    RateThCh$
    
    %
    
    ThCh$
    
    %
    
    ThCh$
    
    %
    
    ThCh$
    
    %Accrued expenses
    
    Ch$
    
    
    10,581,004
    
    
    
    
    
    
    
    5,610,078
    
    
    
    
    
    
    
    13,239,522
    
    
    
    
    
    
    
    18,940,012
    
    
    
    US$
    
    
    
    
    
    
    
    
    
    
    87,559
    
    
    
    
    
    
    
    97,790
    
    
    
    
    
    
    
    
    
    
    
    $ Col
    
    
    1,276,170
    
    
    
    
    
    
    
    10,971,738
    
    
    
    
    
    
    
    3,219,760
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    
    
    
    
    
    
    
    
    213,889
    
    
    
    
    
    
    
    1,708,400
    
    
    
    
    
    
    
    2,228,091
    
    
    
    $ Arg
    
    
    639,245
    
    
    
    
    
    
    
    392,614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    146,179
    
    
    
    
    
    
    
    80,987
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,642,598
    
    
    
    
    
    
    
    17,356,865
    
    
    
    
    
    
    
    18,265,472
    
    
    
    
    
    
    
    21,168,103Withholdings
    
    Ch$
    
    
    633,905
    
    
    
    
    
    
    
    2,321,418
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Col
    
    
    
    
    
    
    
    
    
    
    475,002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    272,016
    
    
    
    
    
    
    
    1,659,002
    
    
    
    
    
    
    
    62,601
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    2,035,763
    
    
    
    
    
    
    
    1,982,201
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    
    
    
    
    
    
    
    
    2,556
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,941,684
    
    
    
    
    
    
    
    6,440,179
    
    
    
    
    
    
    
    62,601
    
    
    
    
    
    
    
    Income taxes payable
    
    Ch$
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,543,871
    
    
    
    
    
    
    
    
    
    
    
    $ Col
    
    
    
    
    
    
    
    
    
    
    1,256,376
    
    
    
    
    
    
    
    2,948,539
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    
    
    
    
    
    
    
    
    683
    
    
    
    
    
    
    
    5,765,990
    
    
    
    
    
    
    
    2,638,436
    
    
    
    $ Arg
    
    
    
    
    
    
    
    
    
    
    572,725
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    1,734,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,734,781
    
    
    
    
    
    
    
    1,829,784
    
    
    
    
    
    
    
    10,258,400
    
    
    
    
    
    
    
    2,638,436Deferred income taxes
    
    Ch$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,578
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    15,771
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170,474
    
    
    
    
    
    
    
    
    
    
    
    15,771
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255,052
    
    
    
    
    
    
    
    Other current liabilities
    
    Ch$
    
    
    120,958
    
    
    
    
    
    
    
    838,219
    
    
    
    
    
    
    
    2,424,551
    
    
    
    
    
    
    
    3,003,182
    
    
    
    US$
    
    
    
    
    
    
    
    
    
    
    10,504,400
    
    
    
    2.70
    
    
    
    
    
    
    
    
    
    
    
    287,973
    
    
    
    $ Col
    
    
    382,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,029,544
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    353,167
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    26,184
    
    
    
    
    
    
    
    21,558
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    9,202
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    538,366
    
    
    
    
    
    
    
    11,364,177
    
    
    
    
    
    
    
    3,807,262
    
    
    
    
    
    
    
    3,291,155Total current liabilities
    
    
    
    
    
    
    230,774,118
    
    
    
    
    
    
    
    443,682,055
    
    
    
    
    
    
    
    448,569,498
    
    
    
    
    
    
    
    690,522,204Current liabilities by currency
    
    UF
    
    
    53,227,352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,776,728
    
    
    
    
    
    
    
    9,671,741
    
    
    
    Ch$
    
    
    57,226,704
    
    
    
    
    
    
    
    75,828,712
    
    
    
    
    
    
    
    74,066,408
    
    
    
    
    
    
    
    53,853,783
    
    
    
    US$
    
    
    67,757,432
    
    
    
    
    
    
    
    264,108,884
    
    
    
    
    
    
    
    293,999,647
    
    
    
    
    
    
    
    269,822,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,686,090
    
    
    
    
    
    
    
    308,413,917
    
    
    
    Yen
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395,184
    
    
    
    
    
    
    
    465,522
    
    
    
    $ Col
    
    
    3,227,311
    
    
    
    
    
    
    
    52,069,717
    
    
    
    
    
    
    
    45,710,187
    
    
    
    
    
    
    
    24,840,436
    
    
    
    Soles
    
    
    6,532,920
    
    
    
    
    
    
    
    31,941,018
    
    
    
    
    
    
    
    20,062,930
    
    
    
    
    
    
    
    19,911,756
    
    
    
    $ Arg
    
    
    18,243,119
    
    
    
    
    
    
    
    8,307,808
    
    
    
    
    
    
    
    170,474
    
    
    
    
    
    
    
    655,929
    
    
    
    Rs
    
    
    24,559,280
    
    
    
    
    
    
    
    11,425,916
    
    
    
    
    
    
    
    241,256
    
    
    
    
    
    
    
    1,234,621
    
    
    
    UP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,066,471
    
    
    
    
    
    
    
    1,195,763
    
    
    
    £
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394,123
    
    
    
    
    
    
    
    456,684
    
    
    
    Total current liabilities
    
    
    
    
    
    
    230,774,118
    
    
    
    
    
    
    
    443,682,055
    
    
    
    
    
    
    
    448,569,498
    
    
    
    
    
    
    
    690,522,204


F-84



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies, continued:



|f. |  | Long-term liabilities, December 31, 2001
|-- |  | ----------------------------------------

1 to 3 years
    
    3 to 5 years
    
    5 to 10 years
    
    More than 10 yearsAvg
    
    
    
    
    
    Avg
    
    
    
    
    
    Avg
    
    
    
    
    
    AvgAccount
    
    Currency
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    RateThCh$
    
    %
    
    ThCh$
    
    %
    
    ThCh$
    
    %
    
    ThCh$
    
    %Due to banks and
    
    UF
    
    
    3,640,948
    
    
    
    9.00
    
    
    
    3,430,962
    
    
    
    9.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    financial institutions
    
    US$
    
    
    570,132,971
    
    
    
    4.20
    
    
    
    139,608,402
    
    
    
    4.20
    
    
    
    91,425,182
    
    
    
    5.80
    
    
    
    18,671,306
    
    
    
    1.75Yen
    
    
    782,417
    
    
    
    0.90
    
    
    
    391,208
    
    
    
    0.90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,589,264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    524,017
    
    
    
    19.20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UP
    
    
    2,056,583
    
    
    
    5.32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    £
    
    
    
    743,571
    
    
    
    5.38
    
    
    
    371,786
    
    
    
    5.38
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    195,547
    
    
    
    4.44
    
    
    
    97,774
    
    
    
    4.44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    581,665,318
    
    
    
    
    
    
    
    143,900,132
    
    
    
    
    
    
    
    91,425,182
    
    
    
    
    
    
    
    18,671,306Bonds payable
    
    UF
    
    
    100,503,239
    
    
    
    6.80
    
    
    
    22,043,038
    
    
    
    6.80
    
    
    
    
    
    
    
    
    
    
    
    25,125,810
    
    
    
    6.80US$
    
    
    128,142,403
    
    
    
    7.30
    
    
    
    161,864,088
    
    
    
    7.30
    
    
    
    539,546,960
    
    
    
    7.30
    
    
    
    314,486,412
    
    
    
    7.30
    
    
    
    236,481,576
    
    
    
    3.34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Col
    
    
    33,189,186
    
    
    
    13.00
    
    
    
    5,740,037
    
    
    
    13.00
    
    
    
    91,134,976
    
    
    
    13.00
    
    
    
    
    
    
    
    Soles
    
    
    6,854,001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    505,170,405
    
    
    
    
    
    
    
    189,647,163
    
    
    
    
    
    
    
    630,681,936
    
    
    
    
    
    
    
    339,612,222Notes payable
    
    US$
    
    
    51,442,361
    
    
    
    7.13
    
    
    
    38,416,837
    
    
    
    7.13
    
    
    
    60,737,304
    
    
    
    7.13
    
    
    
    14,706,614
    
    
    
    7.1351,442,361
    
    
    
    
    
    
    
    38,416,837
    
    
    
    
    
    
    
    60,737,304
    
    
    
    
    
    
    
    14,706,614Miscellaneous Payables
    
    UF
    
    
    77,590
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,599
    
    
    
    Ch$
    
    
    2,122,547
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US$
    
    
    23,496,466
    
    
    
    5.70
    
    
    
    
    
    
    
    5.70
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.70$ Col
    
    
    443,215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,139,818
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,599Amounts payable to related parties
    
    US$
    
    
    20,772,558
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,772,558
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accrued expenses
    
    UF
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ch$
    
    
    524,107
    
    
    
    
    
    
    
    491,714
    
    
    
    
    
    
    
    1,139,405
    
    
    
    
    
    
    
    1,501,660
    
    
    
    $ Col
    
    
    
    
    
    
    
    
    
    
    16,984,432
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    1,334,496
    
    
    
    
    
    
    
    1,785,890
    
    
    
    
    
    
    
    1,785,890
    
    
    
    
    
    
    
    5,896,656
    
    
    
    1,858,603
    
    
    
    
    
    
    
    19,262,036
    
    
    
    
    
    
    
    2,925,295
    
    
    
    
    
    
    
    7,398,316Deferred income taxes
    
    Ch$
    
    
    1,496,498
    
    
    
    
    
    
    
    3,146,275
    
    
    
    
    
    
    
    6,322,021
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    2,832,127
    
    
    
    
    
    
    
    13,467,817
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    249,330
    
    
    
    
    
    
    
    126,171
    
    
    
    
    
    
    
    1,459,624
    
    
    
    
    
    
    
    
    
    
    
    4,577,955
    
    
    
    
    
    
    
    16,740,263
    
    
    
    
    
    
    
    7,781,645
    
    
    
    
    
    
    
    Other liabilities
    
    Ch$
    
    
    8,620,627
    
    
    
    5.68
    
    
    
    150,305
    
    
    
    5.68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,612,549
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,233,176
    
    
    
    
    
    
    
    150,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total long-term liabilities
    
    
    
    
    
    
    1,220,860,194
    
    
    
    
    
    
    
    408,116,736
    
    
    
    
    
    
    
    793,551,362
    
    
    
    
    
    
    
    380,570,057Long-term liabilities by currency
    
    UF
    
    
    104,221,777
    
    
    
    
    
    
    
    25,474,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,307,409
    
    
    
    Ch$
    
    
    12,763,779
    
    
    
    
    
    
    
    3,788,294
    
    
    
    
    
    
    
    7,461,426
    
    
    
    
    
    
    
    1,501,660
    
    
    
    US$
    
    
    793,986,759
    
    
    
    
    
    
    
    339,889,327
    
    
    
    
    
    
    
    691,709,446
    
    
    
    
    
    
    
    347,864,332
    
    
    
    
    
    
    
    260,683,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Yen
    
    
    782,417
    
    
    
    
    
    
    
    391,208
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Col
    
    
    33,632,401
    
    
    
    
    
    
    
    22,724,469
    
    
    
    
    
    
    
    91,134,976
    
    
    
    
    
    
    
    
    
    
    
    Soles
    
    
    9,686,128
    
    
    
    
    
    
    
    13,467,817
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $Arg
    
    
    249,330
    
    
    
    
    
    
    
    126,171
    
    
    
    
    
    
    
    1,459,624
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    1,858,513
    
    
    
    
    
    
    
    1,785,890
    
    
    
    
    
    
    
    1,785,890
    
    
    
    
    
    
    
    5,896,656
    
    
    
    UP
    
    
    2,056,583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    £
    
    
    
    743,571
    
    
    
    
    
    
    
    371,786
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    195,547
    
    
    
    
    
    
    
    97,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total long-term liabilities
    
    
    
    
    
    
    1,220,860,194
    
    
    
    
    
    
    
    408,116,736
    
    
    
    
    
    
    
    793,551,362
    
    
    
    
    
    
    
    380,570,057


F-85



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

30. Foreign currencies, continued:



|g. |  | Long-term liabilities, December 31, 2002
|-- |  | ----------------------------------------

1 to 3 years
    
    3 to 5 years
    
    5 to 10 years
    
    More than 10 yearsAvg
    
    
    
    
    
    Avg
    
    
    
    
    
    Avg
    
    
    
    
    
    AvgAccount
    
    Currency
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    RateThCh$
    
    %
    
    ThCh$
    
    %
    
    ThCh$
    
    %
    
    ThCh$
    
    %Due to banks and Financial
institutions
    
    UF
    
    
    2,762,780
    
    
    
    9.00
    
    
    
    2,936,985
    
    
    
    9.00
    
    
    
    
    
    
    
    1.00
    
    
    
    
    
    
    
    US$
    
    
    494,033,559
    
    
    
    3.50
    
    
    
    90,690,073
    
    
    
    3.50
    
    
    
    45,572,398
    
    
    
    3.50
    
    
    
    4,549,695
    
    
    
    3.50
    
    
    
    245,960
    
    
    
    4.13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Yen
    
    
    924,036
    
    
    
    0.89
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    3,687,042
    
    
    
    1.75
    
    
    
    1,843,527
    
    
    
    1.75
    
    
    
    6,440,033
    
    
    
    1.75
    
    
    
    
    
    
    
    Rs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,435,157
    
    
    
    9.24
    
    
    
    
    
    
    
    UP
    
    
    1,189,530
    
    
    
    5.32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    £
    
    
    
    877,946
    
    
    
    4.81
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    503,720,853
    
    
    
    
    
    
    
    95,470,585
    
    
    
    
    
    
    
    59,447,588
    
    
    
    
    
    
    
    4,549,695Bonds payable
    
    UF
    
    
    
    
    
    
    
    
    
    
    100,464,720
    
    
    
    6.20
    
    
    
    19,831,566
    
    
    
    6.29
    
    
    
    117,470,886
    
    
    
    5.80US$
    
    
    143,722,000
    
    
    
    8.44
    
    
    
    330,560,600
    
    
    
    8.50
    
    
    
    287,444,000
    
    
    
    8.50
    
    
    
    335,085,687
    
    
    
    7.96$ Col
    
    
    33,173,871
    
    
    
    14.35
    
    
    
    
    
    
    
    
    
    
    
    77,979,287
    
    
    
    14.00
    
    
    
    
    
    
    
    Soles
    
    
    6,134,974
    
    
    
    6.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183,030,845
    
    
    
    
    
    
    
    431,025,320
    
    
    
    
    
    
    
    385,254,853
    
    
    
    
    
    
    
    452,556,573Notes payable
    
    US$
    
    
    44,459,671
    
    
    
    7.30
    
    
    
    41,870,347
    
    
    
    7.30
    
    
    
    59,468,978
    
    
    
    7.30
    
    
    
    
    
    
    
    44,459,671
    
    
    
    
    
    
    
    41,870,347
    
    
    
    
    
    
    
    59,468,978
    
    
    
    
    
    
    
    Miscellaneous payables
    
    UF
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,781
    
    
    
    Ch$
    
    
    2,124,216
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,580
    
    
    
    US$
    
    
    7,139,703
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,535,563
    
    
    
    
    
    
    
    
    
    
    
    9,263,919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,535,563
    
    
    
    
    
    
    
    194,361Amounts payable to related
companies
    
    US$
    
    
    48,663,658
    
    
    
    8.35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,663,658
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accrued expenses
    
    UF
    
    
    
    
    
    
    
    
    
    
    57,281
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ch$
    
    
    1,468,137
    
    
    
    
    
    
    
    1,226,607
    
    
    
    
    
    
    
    2,940,846
    
    
    
    
    
    
    
    2,496,205
    
    
    
    US$
    
    
    3,732,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Col
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,288,516
    
    
    
    Rs
    
    
    1,263,657
    
    
    
    
    
    
    
    839,764
    
    
    
    
    
    
    
    2,099,410
    
    
    
    
    
    
    
    2,801,776
    
    
    
    6,464,099
    
    
    
    
    
    
    
    2,123,652
    
    
    
    
    
    
    
    5,040,256
    
    
    
    
    
    
    
    25,586,497Deferred income taxes
    
    Ch$
    
    
    3,523,153
    
    
    
    
    
    
    
    1,999,002
    
    
    
    
    
    
    
    7,818,026
    
    
    
    
    
    
    
    16,210,034
    
    
    
    Soles
    
    
    
    
    
    
    
    
    
    
    35,427,215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $Arg
    
    
    197,179
    
    
    
    
    
    
    
    131,452
    
    
    
    
    
    
    
    591,537
    
    
    
    
    
    
    
    
    
    
    
    3,720,332
    
    
    
    
    
    
    
    37,557,669
    
    
    
    
    
    
    
    8,409,563
    
    
    
    
    
    
    
    16,210,034Other liabilities
    
    Ch$
    
    
    700,164
    
    
    
    
    
    
    
    12,764,792
    
    
    
    
    
    
    
    1,842,137
    
    
    
    
    
    
    
    11,198,582
    
    
    
    700,164
    
    
    
    
    
    
    
    12,764,792
    
    
    
    
    
    
    
    1,842,137
    
    
    
    
    
    
    
    11,198,582Total long-term liabilities
    
    
    
    
    
    
    800,023,541
    
    
    
    
    
    
    
    620,812,365
    
    
    
    
    
    
    
    529,998,938
    
    
    
    
    
    
    
    510,295,742Long-term
    
    UF
    
    
    2,762,780
    
    
    
    
    
    
    
    103,458,986
    
    
    
    
    
    
    
    19,831,566
    
    
    
    
    
    
    
    117,632,667
    
    
    
    liabilities by currency
    
    Ch$
    
    
    7,815,670
    
    
    
    
    
    
    
    15,990,401
    
    
    
    
    
    
    
    12,601,009
    
    
    
    
    
    
    
    29,937,401
    
    
    
    US$
    
    
    741,750,896
    
    
    
    
    
    
    
    463,121,020
    
    
    
    
    
    
    
    403,020,939
    
    
    
    
    
    
    
    339,635,382
    
    
    
    
    
    
    
    245,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Yen
    
    
    924,036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Col
    
    
    33,173,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,979,287
    
    
    
    
    
    
    
    20,288,516
    
    
    
    Soles
    
    
    6,134,974
    
    
    
    
    
    
    
    35,427,215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $ Arg
    
    
    3,884,221
    
    
    
    
    
    
    
    1,974,979
    
    
    
    
    
    
    
    7,031,570
    
    
    
    
    
    
    
    
    
    
    
    Rs
    
    
    1,263,657
    
    
    
    
    
    
    
    839,764
    
    
    
    
    
    
    
    9,534,567
    
    
    
    
    
    
    
    2,801,776
    
    
    
    UP
    
    
    1,189,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    £
    
    
    
    877,946
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total long-term liabilities
    
    
    
    
    
    
    800,023,541
    
    
    
    
    
    
    
    620,812,365
    
    
    
    
    
    
    
    529,998,938
    
    
    
    
    
    
    
    510,295,742


F-86



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

31. Sanctions:

The Company and its directors have not been the subject of sanctions by the SVS
nor by any other administrative authorities.

On February 22, 2002, through Resolución Exenta No. 44, the SVS applied a
sanction to censure Héctor López Vilaseco, the Companys general manager
infringing on the arrangement in Section III of Circular No. 1.481 of May 25,
2000, for having sent to the SVS, after the imposed deadline, the Companys
list of shareholders as of December 31, 2001.

32. Subsequent events:

On January 15, 2003, the Companys Board of Directors agreed in an
extraordinary session that it was duly informed of accounting adjustments to be
made by the Company for extraordinary charges to its balance sheet related to
its investments in Brazil and Argentina in the amount of US$137.4 millon,
recorded in the equivalent amount in Chilean pesos during 2002. The amount is
composed of US$100 millon from Brazil and US$37.4 millon from Argentina. The
impairment adjustments will not have an affect the Companys cash flows or
liquidity.

On February 2, 2003, Costanera refinanced a syndicated yen-denominated loan for
the equivalent of US$95 million (ThCh$68,285,312) which was originally
scheduled to mature on June 30, 2003. The facility has been restructured as a
US$86.8 million (ThCh$62,164,424) loan maturing in December 2004, with a
growing amortization schedule commencing June 2003. At the same time, a
bilateral bank contract for US$8.6 million (ThCh$6,159,148) was signed under
the same conditions as the syndicated loan. As a result of the exchange
controls imposed in Argentina, Costanera was not in compliance with a provision
of the loan facility, which provided that the imposition of exchange controls
constituted an event of default. In addition, Costanera was not able to meet a
debt coverage ratio under the facility because the Argentine pesos devaluation
increased the amount of Costaneras liabilities. Before this debt
restructuring, Costanera had not been in compliance with its financial
covenants, although the bank has waived the need for Costanera to comply with
them. The new facilities replaced the prior covenants and, in their place,
included a maximum debt covenant with which Costanera is in full compliance.

On February 21, 2003 Standard & Poors lowered its corporate credit ratings on
Endesa-Chile from BBB to BBB-. On May 14, 2003, Fitch lowered its local
and international foreign currency ratings of Endesa-Chile from BBB+ to
BBB-. Both rating agencies gave stable outlooks to the Company and its debt.

On April 8, 2003 the Company sold 285 kilometers of 220 kV transmission lines
to Transelec for US$ 32 million (ThCh$ 22,995,520). The carrying value of net
assets under Chilean GAAP sold amounted to ThCh$ 21,562,962 as of December 31,
2002. Additionally, GasAtacama Generación Limitada, of which Endesa Chile has
a 50% participation, sold 673 kilometers of 220 kV line transmission lines for
US$ 78 million (ThCh$ 56,051,580). The carrying value of net assets under
Chilean GAAP sold amounted to ThCh$ 53,458,465 as of December 31, 2002. In
both cases, the transaction included the transfer of the respective
substations.

On April 30, 2003 the Company sold the Canutillar Plant to Cenelca S.A. for US$
174 million (ThCh$125,038,140). The carrying value of net assets sold under
Chilean GAAP amounted to ThCh$ 124,872,617 as of December 31, 2002 and its
installed capacity was 172 MW.

F-87



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

32. Subsequent events, continued:

On May 13, 2003, the Company refinanced its loans of US$ 743 million (ThCh$
533,927,230) with a consortium of 30 banks lead by BBVA, Dresdner Kleinwort
Wasserstein, Salomon Smith Barney and Inc. and Santander Central Hispano
Investment Securities. According to the new agreements the payment period was
extended to 2008 and semi-annual principal payments will begin in 2005. As a
part of refinancing the debt covenants were modified, eliminating the interest
rate spread indexed to the Companys variable credit-rating and the investment
grade debt rating covenant, which specified that in the event senior unsecured
long-term foreign currency denominated debt were to be rated non-investment
grade or less than BBB- a mandatory repayment would be triggered and all
outstanding principals under these loans would become due.

During January 2003, Companhia Paranaense de Energía-Copel, suspended payment
and announced its intention to cancel or renegotiate its long-term energy
contracts with the Endesa-Chiles equity method investment, CIEN. CIEN has
20-year long-term energy purchase commitments in Argentina to satisfy the
supply contracts with Copel. Additionally, the estimated indemnity for
terminating both long-term energy
contracts, would give rise to a payment obligation by COPEL of US$
600 million
as of December 31, 2002. Any changes or cancellation of the contracts would
likely have a material impact in the Companys consolidated net income and
shareholders equity.

During March 2003, the Brazilian company, Celg, has suspended the payment of
its obligations with Endesa-Chiles subsidiary Cachoeira Dourada, and has
entered in a legal process against Cachoeira Dourada and the Brasilian
regulator, ANEEL. Celg was the State-owned company that sold Cachoeira Dourada
to Endesa-Chile in a bidding process in 1997, with a 30-year concession and a
15-year contract to purchase energy (with an annual reduction of 10% since
September 2002), in accordance with Brazilian regulation and law. The monthly
payments reach approximately R$ 17 million (approximately US$ 4.8 million).

33. Environment:

During the year ended December 31, 2002, the Company and its domestic and
foreign subsidiaries made expenditures in the amount of ThCh$3,786,874
corresponding primarily to the following:

Operating expenses during the year included costs of studies, monitoring,
follow-up, and laboratory analysis which amounted to ThCh$323,387 and costs
related to Environment Law No. 99 in Colombia and ISO 14.001
certification at Central Costanera and El Chocón which amounted to ThCh$ 686,449 (US$955,245).

Investments related with the following projects were capitalized and amounted
to ThCh$2,777,038:



| |  |  | Central Ralco environment program
| | - |  | ---------------------------------



| |  |  | Implementation of the environmental management system and its ISO
14.001 certification at the San Isidro, Pangue, Tal Tal, Pehuenche,
Loma Alta and Curillinque power plants.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-88



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted Accounting Principles:

Chilean GAAP varies in certain important respects from U.S. GAAP. Such
differences involve certain methods for measuring the amounts shown in the
financial statements.

Differences in Measurement Methods

The principal differences between Chilean GAAP and U.S. GAAP are described
below together with an explanation, where appropriate, of the method used in
the determination of the adjustments that affect net income and total
shareholders equity. References below to SFAS are to Statements of
Financial Accounting Standards issued by the Financial Accounting Standards
Board in the United States.



|a) |  | Inflation accounting
|-- |  | --------------------

The cumulative inflation rate in Chile as measured by the Consumer Price Index
for the three-years ended December 31, 2002 was approximately 11.18%. Pursuant
to Chilean GAAP, the Companys financial statements recognize certain effects
of inflation. The inclusion of price-level adjustments in the accompanying
consolidated financial statements is considered appropriate under the prolonged
inflationary conditions affecting the Chilean economy even though the
cumulative inflation rate for the last three years does not exceed 100%. As
allowed pursuant to Form 20-F the reconciliation included herein of
consolidated net income, comprehensive income and shareholders equity, as
determined in accordance with U.S. GAAP, does not include adjustments to
eliminate the effect of inflation accounting under Chilean GAAP.



|b) |  | Reversal of revaluation of property, plant and equipment
|-- |  | --------------------------------------------------------

In accordance with standards issued by the SVS, certain property, plant and
equipment are recorded in the financial statements at amounts determined in
accordance with a technical appraisal. The difference between the carrying
value and the revalued amount is included in shareholders equity, beginning in
1989, in Other reserves, and is subject to adjustments for price-level
restatement and depreciation. Revaluation of property, plant and equipment is
an accounting principle not generally accepted under U.S. GAAP, therefore, the
effects of the reversal of this revaluation, as well as of the related
accumulated depreciation and depreciation expense are included in paragraph (u)
below.



|c) |  | Deferred income taxes
|-- |  | ---------------------

Under Chilean GAAP, until December 31, 1999, deferred income taxes were
recorded based on non-recurring timing differences between the recognition of
income and expense items for financial statement and tax purposes.
Accordingly, there was an orientation toward the income statement focusing on
differences in the timing of recognition of revenues and expenses in pre-tax
accounting income and taxable income. At the time, Chilean GAAP also permitted
not providing for deferred income taxes where a deferred tax asset or liability
was either offsetting or not expected to be realized.

Starting January 1, 2000, the Company recorded income taxes in accordance with
Technical Bulletin No. 60 of the Chilean Association of Accountants,
recognizing, using the liability method, the deferred tax effects of temporary
differences between the financial and tax values of assets and liabilities. As
a transitional provision, a contra (referred to as complementary) asset or
liability has been recorded offsetting the effects of the deferred tax assets
and liabilities not recorded prior to January 1, 2000. Such complementary
asset or liability are being amortized to income over the estimated average
reversal periods corresponding to the underlying temporary differences to which
the deferred tax asset or liability relates.

F-89



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

Under U.S. GAAP, companies must account for deferred taxes in accordance with
SFAS No. 109, which requires an asset and liability approach for financial
accounting and reporting of income taxes, under the following basic principles:



|(i) |  | A deferred tax liability or asset is recognized for the estimated
future tax effects attributable to temporary differences and tax
loss carryforwards.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) |  | The measurement of deferred tax liabilities and assets is based on
the provisions of the enacted tax law. The effects of future
changes in tax laws or rates are not anticipated.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) |  | The measurement of deferred tax assets are reduced by a valuation
allowance, if based on the weight of available evidence, it is more
likely than not that some portion of the deferred tax assets will
not be realized.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Temporary differences are defined as any difference between the financial
reporting basis and the tax basis of an asset and liability that at some future
date will reverse, thereby resulting in taxable income or expense. Temporary
differences ordinarily become taxable or deductible when the related asset is
recovered or the related liability is settled. A deferred tax liability or
asset represents the amount of taxes payable or refundable in future years as a
result of temporary differences at the end of the current year.

As of January 1, 2000, the principal effect on the Company due to the
difference in the accounting for deferred income taxes between Chilean and U.S.
GAAP relates to the treatment of temporary differences arising from provisions,
net operating loss-carryforwards and accelerated depreciation methods. In
subsequent years the principal difference relates to the reversal of the
complementary assets and liabilities recorded as a transitional provision for
unrecorded deferred taxes as of January 1, 2000 and their corresponding
amortization into income. The effect of these differences on the net income
and shareholders equity of the Company is included in paragraph (u) below.



|d) |  | Staff severance indemnities
|-- |  | ---------------------------

As described in Note 2 p), under the Companys employment contracts, it has
committed to provide a lump sum payment to each employee at the end of their
employment, whether due to death, termination, resignation or retirement. Those
obligations are calculated based on the present value of the liability
determined at each year-end based on the current salary and average service
life of each employee. The Company, and certain of its subsidiaries, used a
real discount rate of 9.5% for the years ended December 31, 2000, 2001 and
2002, and assumed an average service life which varies based upon years of
service with the Company. The value of the obligation is calculated based on an
average employment span of 35 years for employees with 15 years or more and
includes 75% of the benefit related to employees with less than the required 15
years. The real annual discount rate does not include a projection of
inflation and, accordingly, future salary increases are also excluded from the
calculation of the obligation, because all such future increases are expected
to approximate the increase in inflation over a long-term period.

Under U.S. GAAP severance indemntities described above may be recorded based on
the vested benefits to which the employees are entitled if their employment
terminated immediately (settlement basis). The effects of accounting for staff
severance indemntities under U.S. GAAP have been presented in paragraph (u).

F-90



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted Accounting Principles, continued:



|e) |  | Pension and post-retirement benefits
|-- |  | ------------------------------------

The Company has obligations related to complementary pension plan benefits and
other post-retirement benefits as stipulated in collective bargaining
agreements. Under U.S. GAAP, post-retirement employee benefits have been
accounted for in accordance with SFAS No. 87 Employers Accounting for
Pensions and SFAS No. 106 Employers Accounting for Postretirement Benefits
Other Than Pensions. The effects of accounting for post-retirement benefits
under U.S. GAAP have been presented in paragraph (u).



|f) |  | Investments in related companies
|-- |  | --------------------------------

The Companys equity share of the effect of the adjustments from Chilean GAAP
to U.S. GAAP of equity accounted investees is included in paragraph (u) below.
The principal U.S. GAAP adjustments affecting the Companys equity investees
are as follows:



| | a) |  | The elimination of capitalized interest costs relating to foreign translation exchange differences.
| | -- |  | ---------------------------------------------------------------------------------------------------



| | b) |  | The recording of deferred taxes in accordance with SFAS No. 109.
| | -- |  | ----------------------------------------------------------------



| | c) |  | For the years beginning January 1, 2001, the recording of derivative instruments in accordance
with SFAS No. 133.
| | -- |  | -----------------------------------------------------------------------------------------------------------------



| | d) |  | The deferred income tax effects of adjustments (a) and (c).
| | -- |  | -----------------------------------------------------------



|g) |  | Goodwill
|-- |  | --------



| | (i) |  | Under Chilean GAAP, assets acquired and liabilities assumed are recorded at their carrying value,
and the excess of the purchased price over the carrying value are recorded as goodwill. Circular
No. 1358, dated December 3, 1997 issued by the SVS, extended the maximum amortization period of
goodwill to 20 years from the previous 10 years.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Under U.S. GAAP, assets acquired and liabilities assumed are recorded at their estimated fair
values, and the excess of the purchased price over the estimated fair value of the net
identifiable assets and liabilities acquired are recorded as goodwill. Prior to July 1, 2001 under
U.S. GAAP, the Company amortized goodwill on a straight-line basis over the estimated useful lives
of the assets, ranging from 20 to 40 years.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) |  | Under Chilean GAAP, the Company has evaluated the carrying amount of goodwill for impairment. The
measurement of the impairment loss was based on the fair value of the investment which the Company
determined using a discounted cash flow approach and recent comparable transactions in the market.
In order to estimate fair value, the Company made assumptions about future events that are highly
uncertain at the time of estimation. The results of this analysis showed that the goodwill and
negative goodwill associated with investments in Argentina and Brazil were impaired because
estimated future discounted cash flows were not sufficient to recover goodwill and negative
goodwill. During 2002, the Company recorded a net charge related to its investments in Central
Costanera S.A., Hidroeléctrica El Chocón S.A., Hidroinvest S.A., Lajas Inversora S.A. and C.
Hidroeléctrica Caehoeira Dourada S.A. in the amount of ThCh$106,830,782 to write-off all amounts
of goodwill.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-91



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted Accounting Principles, continued:



| |  |  | In accordance with U.S. GAAP, the Company adopted SFAS No.
142 Goodwill and Other Intangible Assets, (SFAS No. 142) as
of January 1, 2002. SFAS 142 applies to all goodwill and
identified intangible assets acquired in a business
combination. Under the new standard, all goodwill, including
that acquired before initial application of the standard, and
indefinite-lived intangible assets are not amortized, but
must be tested for impairment at least annually. Previously,
the Company evaluated the carrying
amount of goodwill, in relation to the operating performance
and future undiscounted cash flows of the underlying
business. The transitional impairment test required by the
standard, which was performed during the first half of 2002
indicated that none of the Companys goodwill was impaired.
However, based on subsequent testing of the Companys
investments in Argentina and Brazil performed as of December
31, 2002, it was determined that these investments were
impaired. The following effects are included in the net
income and shareholders equity reconciliation to U.S. GAAP
under paragraph (u) below:
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | differences in the amount of the impairment under
US GAAP related to basis differences in the
original determination and subsequent amortization
methodology between Chilean GAAP and U.S. GAAP
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | the reversal of goodwill amortization recorded
under Chilean GAAP related to reporting units that
were not found to be impaired under U.S. GAAP for
the year ended December 31, 2002
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) |  | The following details what the Companys net income under US
GAAP would have been for the years ended December 31, 2000
and 2001, excluding goodwill amortization expense:
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Years ended December 31,2000
    
    2001ThCh$
    
    ThCh$Net income under U.S. GAAP
    
    
    97,288,739
    
    
    
    30,938,881Add back: Goodwill amortization
    
    
    11,750,111
    
    
    
    11,123,298Adjusted net income
    
    
    109,038,850
    
    
    
    42,062,179




|(iv) |  | In accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of during 2000 and 2001, which was superceded by
SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets beginning in 2002, the Company evaluates
the carrying amount of property, plant and equipment and
other long-lived assets, in relation to the operating
performance and future undiscounted cash flows of the
underlying business. These standards require that an
impairment loss be recognized in the event that facts and
circumstances indicate that the carrying amount of an asset
may not be fully recoverable, when compared to the estimated
future undiscounted cash flows. Impairment is recorded based
on an estimate of future discounted cash flows, as compared
to current carrying amounts. For the years ended December
31, 2000, 2001, and 2002 no additional amounts were recorded
for impairment under U.S. GAAP.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-92



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:



|h) |  | Negative goodwill
|-- |  | -----------------

Under Chilean GAAP, the excess of the carrying value of the assets assumed in a
business combination over the purchase price is recorded as negative goodwill.
Circular No. 1358, dated December 3, 1997 issued by the SVS, extended the
maximum amortization period of negative goodwill to 20 years from the previous
5 years. Under U.S. GAAP, the fair values of the assets acquired less the fair
values of the liabilities assumed in excess of over the purchase price is
allocated proportionately to reduce the values assigned to non-current assets.
If the allocation reduces the non-current monetary assets to zero, the
remainder of the excess is recorded as a deferred credit account called
negative goodwill. The effects of reducing depreciation expense, due to the
proportionate allocation of the excess purchase price to property, plant and
equipment, as compared to the amortization of negative goodwill under Chilean
GAAP, and the reversal of negative goodwill write-offs described in paragraph
(g), which did not meet the U.S. GAAP impairment criteria for long-lived assets
under SFAS No. 144 described above, and conforming depreciation methods are
included in paragraph (u) below.



|i) |  | Capitalized interest and exchange differences
|-- |  | ---------------------------------------------

In accordance with Chilean GAAP, the Company has capitalized both interest on
debt directly related to property, plant and equipment under construction and
finance costs corresponding to exchange differences generated by the loans
associated with such assets. The capitalization of interest costs associated
with projects under construction is optional when incurred on debt that is not
directly related to such projects.

Under U.S. GAAP, the capitalization of interest on qualifying assets under
construction is required, regardless of whether interest is associated with
debt directly related to a project. In addition, under U.S. GAAP, foreign
translation exchange differences may not be capitalized. The accounting
differences between Chilean and U.S. GAAP for financing costs and the related
depreciation expense are included in the reconciliation to U.S. GAAP under
paragraph (u) below.



|j) |  | Accumulated deficit during the development stage
|-- |  | ------------------------------------------------

Under Chilean GAAP, the losses incurred during the development stage of
subsidiary companies is recorded directly in the parent companys equity.
Under U.S. GAAP, such costs must be charged to income as incurred. The effects
are included in paragraph (u) below.



|k) |  | Minimum dividend
|-- |  | ----------------

As required by the Chilean Companies Act, unless otherwise decided by the
unanimous vote of the holders of issued and subscribed shares, the Company must
distribute a cash dividend in an amount equal to at least 30% of its net income
for each year as determined in accordance with Chilean GAAP, unless and except
to the extent the Company has unabsorbed prior year losses. Since the payment
of the 30% dividend out of each years income is required by Chilean law, an
accrual has been made in the reconciliation in paragraph (u) below to reflect
the unrecorded dividend liability, whenever and to the extent the recorded
interim dividends do not reach the 30% minimum dividend.

F-93



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:



|l) |  | Capitalized general and administrative expenses
|-- |  | -----------------------------------------------

Until 1993 under Chilean GAAP, Endesa-Chile capitalized a portion of its
administrative and selling expenses as part of the cost of
construction-in-progress because a substantial portion of the efforts of
management were involved in the administration of major projects. Under U.S.
GAAP, general and administrative expenses are charged to expense unless they
can be directly identified with the supervision of the constructions of
specific projects. The effects of eliminating capitalized general and
administrative expenses and the related depreciation for U.S. GAAP purposes are
shown below under paragraph (u).



|m) |  | Involuntary employee termination benefits
|-- |  | -----------------------------------------

Under Chilean GAAP, the Argentine subsidiaries, Central Costanera and
Hidroelectricidad, recorded an accrual of certain involuntary employees
termination benefits related to the restructuring plan announced in 1997.
Since that date employees have continued to be made redundant pursuant to this
plan. In accordance with U.S. GAAP at that time, in order to recognize a
liability at the balance sheet date for the cost to terminate employees
involuntarily, there must have been a plan that specifically includes
notification of such employees prior to the balance sheet date. As of December
31, 2002, this requirement had not been met. The effect of eliminating the
accrued liability recognized is presented in paragraph (u) below.



|n) |  | Adjustment in selling price of investment
|-- |  | -----------------------------------------

Under Chilean GAAP, pursuant to the share transaction contract entered into in
1995 between Endesa-Chile and Endesa Overseas Co. with Enersis International
Limited, Chilectra S.A. and Chilectra International Limited, Endesa Argentina
recognized income related to an adjustment of the share purchase price. Under
U.S. GAAP, the contingent price adjustment would be considered a part of the
purchase
price, and would therefore be offset against the amount of goodwill that was
originally determined. As described in paragraph (g), the Company determined
goodwill amounts recorded in investments in Argentina was impaired as of
January 1, 2002, thus the adjustment in selling price of investment is a basis
difference between Chilean and U.S. GAAP that will be eliminated after the
impairment charge is recorded. The effects of the adjustments to conform to
U.S. GAAP are included under paragraph (u) below.



|o) |  | Translation of Financial Statements of Investments Outside of Chile
|-- |  | -------------------------------------------------------------------

Under Chilean GAAP, in accordance with Technical Bulletin 64 (BT 64) the
financial statements of foreign subsidiaries that operate in countries exposed
to significant risks (unstable countries), and that are not considered to be
an extension of the parent companys operations, are remeasured into US
dollars. The Companys foreign subsidiaries in Argentina, Peru, Brazil, and
Colombia all meet the criteria of foreign subsidiaries that operate in
countries exposed to significant risks under BT 64, and are remeasured into US
dollars. The Company has remeasured its foreign subsidiaries into US dollars
under this requirement as follows:



| |  | Monetary assets and liabilities are translated at year-end rates of
exchange between the US dollar and the local currency.
|- |  | --------------------------------------------------------------------------------------------------------------------------



| |  | All non-monetary assets and liabilities and shareholders equity are
translated at historical rates of exchange between the US dollar and
the local currency.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Income and expense accounts are translated at average rates of
exchange between the US dollar and local currency.
|- |  | -----------------------------------------------------------------------------------------------------------------



| |  | The effects of any exchange rate fluctuations between the local
currency and the US dollar are included in the results of operations
for the period.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

F-94



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

Under BT 64, the investment in the foreign subsidiary is price-level restated,
the effects of which are reflected in income, while the effects of the foreign
exchange gains or losses between the Chilean Peso and the US Dollar on the
foreign investment measured in US dollars, are reflected in equity in the
account Cumulative Translation Adjustment.

The amount of net foreign exchange gains and losses included in income that is
attributable to operations in unstable countries because these amounts have
been remeasured into US dollars was ThCh$535,235, ThCh$11,888,657, and
ThCh$9,314,037 for the years ended December 31, 2000, 2001 and 2002,
respectively.

In the opinion of the Company, the foreign currency translation procedures
described above are part of the comprehensive basis of preparation of
price-level adjusted financial statements required by Chilean GAAP. Inclusion
of inflation and translation effects in the financial statements is considered
appropriate
under the inflationary conditions that have historically affected the Chilean
economy, and accordingly, are not eliminated in the reconciliation to U.S. GAAP
as permitted by Form 20-F.



|p) |  | Derivative instruments
|-- |  | ----------------------

Under Chilean GAAP, forward foreign exchange contracts and currency swaps are
used to hedge existing balance sheet risks or fair value hedges, while
interest swaps and collars are used to hedge against future transaction risks
or cash flow hedges. Fair value hedges are recorded at fair values with
losses recorded at the time of their estimation and gains deferred until the
transaction date or to the extent losses have been previously recorded, while
gains and losses from cash flow hedges are deferred until the transaction date.
The hedging criteria and documentation requirements under Chilean GAAP are
less onerous than U.S. GAAP. Realized gains and losses are recorded in Other
non-operating income and expense.

Prior to January 1, 2001. under U.S. GAAP, contracts that were designated and
effective as hedges of existing assets and liabilities were recorded at the
closing spot exchange rate and included in earnings with the initial discount
or premium is amortized over the life of the contract as interest expense.
However, contracts not designated or effective as hedges were recorded at fair
value with the unrealized gains and losses recognized in income. For contracts
with fair values different from the values of the contracts at the closing spot
exchange rate, a difference between U.S. and Chilean GAAP resulted. The
effects of the difference were not considered material to the consolidated
financial statements and accordingly were not previously included in paragraph
(u) below.

Currently under U.S. GAAP, the accounting for derivative instruments is
described in SFAS No. 133 Accounting for Certain Derivative Instruments and
Certain Hedging Activities (SFAS No. 133) and other complementary rules and
amendments. SFAS No. 133, as amended, establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative instruments fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative instruments gains
and losses to offset related results on the hedged item in the income
statement, to the extent effective, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.

F-95



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

The Company adopted SFAS No. 133, as amended, on January 1, 2001. SFAS No. 133
required that as of the date of initial adoption, the difference between the
market value of derivative instruments recorded on the balance sheet and the
previous carrying amount of those derivatives be reported in net income or
other comprehensive income, as appropriate, as the cumulative effect of a
change in acounting principle in accordance with Accounting Principles. Board
Opinion No. 20, Accounting Changes. Statement 133 cannot be applied
retroactively. SFAS No. 133 must be applied to (a) derivative instruments and
(b) certain embedded derivative instruments. As permitted under this standard,
the Company has applied SFAS No.
133 to only those embedded instruments that were issued, acquired, or
substantively modified after January 1, 1999.

SFAS No. 133, in part, allows special hedge accounting for fair value and
cash flow hedges. SFAS No. 133 provides that the gain or loss on a derivative
instrument designated and qualifying as a fair value hedging instrument as
well as the offsetting loss or gain on the hedged item attributable to the
hedged risk be recognized currently in earnings in the same accounting period.
The accounting standard provides that the effective portion of the gain or loss
on a derivative instrument designated and qualifying as a cash flow hedging
instrument be reported as a component of other comprehensive income and be
reclassified into earnings in the same period or periods during which the
hedged forecasted transaction affects earnings. The remaining gain or loss on
the derivative instrument, if any, must be recognized currently in earnings.
While the Company enters into derivatives for the purpose of mitigating its
global financial and commodity risks, these operations do not meet the
documentation requirements to qualify for hedge accounting under U.S. GAAP.
Therefore changes in the respective fair values of all derivatives are reported
in earnings when they occur.

Current Chilean accounting rules do not consider the existence of derivative
instruments embedded in other contracts and therefore they are not reflected in
the financial statements. For U.S. GAAP purposes, certain implicit or explicit
terms included in host contracts that affect some or all of the cash flows or
the value of other exchanges required by the contract in a manner similar to a
derivative instrument, must be separated from the host contract and accounted
for at fair value. The Company separately measures embedded derivatives as
freestanding derivatives instruments at their estimated fair values recognizing
changes in earnings when they occur.

Estimates of fair values of financial instruments for which no quoted prices or
secondary market exists have been made using valuation techniques such as
forward pricing models, present value of estimated future cash flows, and other
modeling techniques. These estimates of fair value include assumptions made by
the Company about market variables that may change in the future. Changes in
assumptions could have a significant impact on the estimate of fair values
disclosed. As a result such fair value amounts are subject to significant
volatility and are highly dependent on the quality of the assumptions used.

The Company is also exposed to foreign currency risk arising from long-term
debt denominated in foreign currencies, the majority of which is the US dollar.
This risk is mitigated, as a substantial portion of the Companys revenues are
either directly or indirectly linked to the US dollar. Additionally, the
Company records the foreign exchange gains and losses on liabilities related to
net investments in foreign countries which are denominated in the same currency
as the functional currency of those foreign investments. Such unrealized gains
and losses are included in the cumulative translation adjustment account in
shareholders equity, and in this way act as a net investment hedge of the
exchange risk affecting the investments (see Note 11 (c) and Note 21 (e) for
further detail). The Company also uses short duration forward foreign currency
contracts and swaps, and cross-currency swaps, where possible, to manage its
risk related to foreign currency fluctuations.

F-96



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

The effect of adopting SFAS No. 133 as of January 1, 2001, resulted in a
cumulative effect on net income of ThCh$32,331,394, which is presented net of
deferred taxes of ThCh$41,390,632 and minority interest under the caption
Cumulative effect of changes in accounting principles. The effects of the
adjustment with respect to financial derivatives, commodity derivatives, and
embedded derivatives for the year ended December 31, 2002 is included in the
net income and shareholders equity reconciliation to U.S. GAAP under paragraph
(u) below.



|q) |  | Sale of subsidiary
|-- |  | ------------------

Corresponds to the reversal of the December 31, 1999 accumulated adjustments to
U.S. GAAP which under U.S. GAAP would have been included in the determination
of any gain or loss on sale made in connection with the subsidiary Compañía
Nacional de Transmisión Eléctrica S.A. (Transelec) as this subsidiary was sold
during 2000.



|r) |  | Reorganization of subsidiaries
|-- |  | ------------------------------

This adjustment corresponds to the reorganization of the Companys subsidiaries
Central Costanera and Central Buenos Aires (CBA) during 2001, in which Central
Costanera acquired the minority interest in CBA from third parties and
exchanged shares with Endesa Argentina. Under Chilean GAAP, the Company
recorded the transactions under the pooling method, using the book values of
the net assets acquired under merger accounting.

Under U.S. GAAP the exchange of shares between entities under common control is
recorded at book values. To the extent that shares in CBA were acquired from
third parties, the identifiable assets acquired and liabilities assumed are
recorded at fair value using purchase accounting together with the shares
issued by the subsidiary Central Costanera. The difference in fixed asset
basis between Chile and U.S. GAAP results in a greater depreciation expense to
be recorded under U.S. GAAP over the remaining estimated useful life of 20
years. The effect of this adjustment is included in the net income and
shareholders equity reconciliation to U.S. GAAP under paragraph (u) below.



|s) |  | Assets held for sale
|-- |  | --------------------

Under Chilean GAAP the Company records divestitures of investments or assets in
the year in which they occur. Under U.S. GAAP, in accordance with SFAS No.
144, long-lived assets for which there is a plan to sell the assets within the
following year, shall be disclosed separately from the Companys other assets,
provided all the criteria are met. Additionally, long-lived assets classified
as held for sale must be measured at the lower of their carrying amount or fair
value less cost to sell. Long-lived assets shall not be depreciated while they
are classified as held for sale, while interest and other expenses attributable
to the liabilities of a disposal group classified as held for sale shall
continue to be accrued.

The Companys Board of Directors approved a plan to sell a number of the
Companys assets during October 2002. The following assets to be sold meet the
definition of segments, reporting units or long-lived assets held for sale:



| |  | Central Canutillar power plant
|- |  | ------------------------------



| |  | Gas Atacama transmission lines
|- |  | ------------------------------



| |  | CELTA transmission lines
|- |  | ------------------------



| |  | Infrastructura 2000 S.A.
|- |  | ------------------------

F-97



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

The Company evaluated the carrying values of all assets held for sale,
recording a loss to the extent that one of the assets fair value less cost to
sell was lower than the carrying value of those assets. Additionally, the
Company ceased recording depreciation expense once the assets met the
qualification criteria of held for sale which varied from October to December
2002. The effect of these adjustments is included in the net income and
shareholders equity reconciliation to U.S. GAAP under paragraph (u) below.



|t) |  | Elimination of discontinued operations
|-- |  | --------------------------------------

Under Chilean GAAP, no restatement to the financial statement information
presented in previous years is required after a divestiture has occurred.
Under US GAAP, in accordance with SFAS No. 144, the discontinued operations of
a component must be retroactively separated from the continuing operations of
an entity, when the operations and cash flows of a component which will be
eliminated from the ongoing operations of an entity as a result of a disposal
transaction and will not have any significant continuing involvement in the
operations of a component after the disposal transaction.

The Company evaluated whether any of the assets held for sale met either
criteria, noting that the transmission lines and power plant are not
components, as they are included as a part of larger cash flow generating
groups, and the operations of these assets cannot be separated from their
respective groups. Additionally, Endesa-Chile plans to continue generating
revenues from Canutillar through a purchase power agreement, management
agreement, and a transmission leasing arrangement with the future buyer.
Infrastructura 2000 meets the conditions for discontinued operations because it
has distinct and separable financial results from operations and cash flows.
As a result of the disposal the results of operations of the reporting unit
have been eliminated from the ongoing operations of Endesa-Chile, as
Endesa-Chile will not have any continuing involvement in the operations of
Infrastructura 2000 after it is sold. The effect of restating discontinued
operations is included in the net income reconciliation to U.S. GAAP under
paragraph (u) below.

F-98



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:



|u) |  | Effects of conforming to U.S. GAAP:
|-- |  | -----------------------------------

The reconciliation of reported net income required to conform with U.S. GAAP is
as follows:

Years Ended December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Net income (loss)
in accordance with
Chilean GAAP
    
    
    114,924,893
    
    
    
    72,160,018
    
    
    
    (9,319,056
    )Reversal of
amortization of
revaluation of
property, plant and
equipment
(paragraph b)
    
    
    1,236,718
    
    
    
    981,019
    
    
    
    2,488,537Amortization of
intangibles
    
    
    287,410
    
    
    
    60,309
    
    
    
    Deferred income
taxes (paragraph c)
    
    
    (19,821,931
    )
    
    
    (16,517,586
    )
    
    
    2,358,419Staff severance
indemnities
(paragraph d)
    
    
    586,525
    
    
    
    (32,288
    )
    
    
    (120,975
    )Pension and
post-retirement
benefits (paragraph
e)
    
    
    
    
    
    
    
    
    
    
    836,617Investments in
related companies
(paragraph f)
    
    
    
    
    
    
    (5,661,056
    )
    
    
    20,860,935Amortization of
goodwill (paragraph
g)
    
    
    (4,505,336
    )
    
    
    (2,854,795
    )
    
    
    (31,002,875
    )Amortization of
negative goodwill
(paragraph h)
    
    
    (30,318,777
    )
    
    
    (29,532,731
    )
    
    
    (76,496,129
    )Capitalized
interest and
exchange
differences
(paragraph i)
    
    
    (2,889,526
    )
    
    
    (13,613,880
    )
    
    
    (9,671,255
    )Accumulated deficit
during the
development stage
(paragraph j)
    
    
    156,770
    
    
    
    (80,720
    )
    
    
    (7,968,156
    )Capitalized general
and administrative
expenses (paragraph
l)
    
    
    (1,614,200
    )
    
    
    (126,967
    )
    
    
    1,946,070Involuntary
employee
termination
benefits (paragraph
m)
    
    
    (2,693,049
    )
    
    
    (8,797
    )
    
    
    (347,089
    )Adjustment in
selling price of
investment
(paragraph n)
    
    
    133,954
    
    
    
    (76,430
    )
    
    
    4,491,313Derivative
instruments
(paragraph p)
    
    
    
    
    
    
    11,326,993
    
    
    
    25,675,345Sale of
subsidiaries
(paragraph q)
    
    
    23,022,109
    
    
    
    
    
    
    
    Reorganization of
subsidiaries
(paragraph r)
    
    
    
    
    
    
    
    
    
    
    (319,781
    )Assets held for
sale (paragraph s)
    
    
    
    
    
    
    
    
    
    
    (887,241
    )Elimination of
discontinued
operations
(paragraph t)
    
    
    (270,034
    )
    
    
    (597,763
    )
    
    
    (247,778
    )Effects of minority
interest on the
U.S. GAAP
adjustments
    
    
    18,619,735
    
    
    
    (17,292,014
    )
    
    
    2,576,692Income (loss) from
continuing
operations in
accordance with
U.S. GAAP before
cumulative effect
of changes in
accounting
principles and
discontinued
operations
    
    
    96,855,261
    
    
    
    (1,866,688
    )
    
    
    (75,146,407
    )Cumulative effect
of changes in
accounting
principles, net of
taxes and minority
interest
    
    
    
    
    
    
    32,331,394
    
    
    
    Income (loss) from
continuing
operations in
accordance with
U.S. GAAP before
discontinued
operations
    
    
    96,855,261
    
    
    
    30,464,706
    
    
    
    (75,146,407
    )Income from
discontinued
operations, net of
taxes and minority
interest (paragraph
t)
    
    
    433,477
    
    
    
    474,175
    
    
    
    275,290Net income (loss)
in accordance with
U.S. GAAP
    
    
    97,288,738
    
    
    
    30,938,881
    
    
    
    (74,871,117
    )Other comprehensive
income (loss):Cumulative
translation
adjustment
determined under
Chilean GAAP
    
    
    535,235
    
    
    
    3,035,615
    
    
    
    9,082,747Cumulative
translation
adjustment related
to U.S. GAAP
adjustments
    
    
    (8,945,782
    )
    
    
    (12,451,366
    )
    
    
    (6,540,230
    )Comprehensive
income (loss) in
accordance with
U.S. GAAP
    
    
    88,878,191
    
    
    
    21,523,130
    
    
    
    (72,328,600
    )


F-99



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

The reconciliation to conform shareholders equity amounts to U.S. GAAP is as
follows:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Shareholders
equity in
accordance with
Chilean GAAP
    
    
    1,446,549,434
    
    
    
    1,430,635,320Reversal of
revaluation of
property, plant and
equipment
(paragraph b)
    
    
    (8,843,086
    )
    
    
    (6,588,182
    )Deferred income
taxes (paragraph c)
    
    
    (242,601,300
    )
    
    
    (250,858,749
    )Staff severance
indemnities
(paragraph d)
    
    
    (2,321,770
    )
    
    
    (2,442,745
    )Pension and
post-retirement
benefits (paragraph
e)
    
    
    
    
    
    
    836,617Investments in
related companies
(paragraph f)
    
    
    (17,385,749
    )
    
    
    4,286,240Goodwill (paragraph
g)
    
    
    54,574,554
    
    
    
    27,050,745Negative goodwill
(paragraph h)
    
    
    (159,918,346
    )
    
    
    (246,889,338
    )Capitalized
interest and
exchange
differences
(paragraph i)
    
    
    (34,615,162
    )
    
    
    (44,786,431
    )Minimum dividend
(paragraph k)
    
    
    (7,940,938
    )
    
    
    Capitalized general
and administrative
expenses (paragraph
l)
    
    
    (26,801,224
    )
    
    
    (25,675,535
    )Reversal of accrual
of certain
involuntary
employee
termination
benefits (paragraph
m)
    
    
    412,753
    
    
    
    92,700Adjustment in
selling price of
investment
(paragraph n)
    
    
    (4,215,211
    )
    
    
    Derivative
instruments
(paragraph p)
    
    
    152,177,388
    
    
    
    189,311,518Reorganization of
subsidiaries
(paragraph r)
    
    
    5,997,065
    
    
    
    6,070,100Assets held for
sale (paragraph s)
    
    
    
    
    
    
    (887,241
    )Discontinued
operations
(paragraph t)
    
    
    
    
    
    
    724,763Effects of minority
interest on the
U.S. GAAP
adjustments
    
    
    (28,774,965
    )
    
    
    (26,683,650
    )Shareholders
equity in
accordance with
U.S. GAAP
    
    
    1,126,293,443
    
    
    
    1,054,196,132


F-100



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

The changes in shareholders equity in U.S. GAAP as of each year-end are as
follows:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Shareholders
equity in
accordance with
U.S. GAAP  January
1,
    
    
    1,106,676,190
    
    
    
    1,126,293,443Dividends paid
during the year
    
    
    (8,109,895
    )
    
    
    (7,709,649
    )Reversal of
dividends payable
as of previous
balance sheet date
    
    
    8,147,891
    
    
    
    7,940,938Minimum dividend
(paragraph k)
    
    
    (7,940,938
    )
    
    
    Cumulative
translation
adjustment
    
    
    (9,415,751
    )
    
    
    2,542,517Reorganization of
subsidiaries
(paragraph r)
    
    
    5,997,065
    
    
    
    Net income (loss)
in accordance with
U.S. GAAP for the
year
    
    
    30,938,881
    
    
    
    (74,871,117
    )Shareholders
equity in
accordance with
U.S. GAAP -
December 31,
    
    
    1,126,293,443
    
    
    
    1,054,196,132


F-101



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

II.  Additional Disclosure Requirements:



|a) |  | Goodwill and negative goodwill:
|-- |  | -------------------------------

The following is an analysis of goodwill and negative goodwill, determined on a
Chilean GAAP basis, as of December 31, 2001 and 2002, respectively:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Goodwill
    
    
    172,533,924
    
    
    
    187,172,109Less: accumulated
amortization
    
    
    (47,565,283
    )
    
    
    (159,240,307
    )Goodwill, net
    
    
    124,968,641
    
    
    
    27,931,802Negative goodwill
    
    
    376,765,873
    
    
    
    402,026,565Less: accumulated
amortization
    
    
    (210,284,508
    )
    
    
    (310,301,424
    )Negative goodwill, net
    
    
    166,481,365
    
    
    
    91,725,141




|b) |  | Basic and diluted earnings per share:
|-- |  | -------------------------------------

Year ended December 31,2000
    
    2001
    
    2002Ch$
    
    Ch$
    
    Ch$Chilean GAAP (loss)
earnings per share (1)
    
    
    14.01
    
    
    
    8.80
    
    
    
    (1.14
    )U.S. GAAP (loss) earnings
per share (1):U.S. GAAP (loss) earnings
per share from continuing
operations before
cumulative effect
of
changes in accounting
principles and discontinued operations
    
    
    11.81
    
    
    
    (0.23
    )
    
    
    (9.16
    )Cumulative effect of
changes in accounting
principles
    
    
    
    
    
    
    3.94
    
    
    
    U.S. GAAP (loss) earnings
per share before
cumulative effect of
change in accounting
principle and
discontinued operations
    
    
    11.81
    
    
    
    3.71
    
    
    
    (9.16
    )U.S. GAAP (loss) earnings
per share from
discontinued operations
    
    
    0.05
    
    
    
    0.06
    
    
    
    0.03U.S. GAAP (loss) earnings
per share
    
    
    11.86
    
    
    
    3.77
    
    
    
    (9.13
    )Weighted average number
of common shares
outstanding (000s)
    
    
    8,201,755
    
    
    
    8,201,755
    
    
    
    8,201,755




---

|(1) |  | There are no requirements to provide earnings per share disclosures under Chilean GAAP. The earnings per share
figures disclosed above for both U.S. GAAP and Chilean GAAP purposes have been calculated by dividing the
respective earnings (loss) amounts in accordance with U.S. GAAP and Chilean GAAP, respectively, by the weighted
average number of common shares outstanding during the year. The Company has not issued convertible debt or
equity securities. Consequently, there are no potentially dilutive effects on the earnings per share of the
Company.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-102



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

c) Income taxes:

The provision (benefit) for income taxes charged to the results of operations
determined in accordance with U.S. GAAP is as follows:

2000Chile
    
    Argentina
    
    Brazil
    
    Peru
    
    Colombia
    
    TotalThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Current income
taxes as determined
under Chilean GAAP
    
    
    (43,485,393
    )
    
    
    (8,808,724
    )
    
    
    (6,947,045
    )
    
    
    (1,287,503
    )
    
    
    (14,990,140
    )
    
    
    (75,518,805
    )Deferred income
taxes as determined
under US GAAP
    
    
    (15,149,708
    )
    
    
    (4,008,152
    )
    
    
    3,752,894
    
    
    
    (20,127,061
    )
    
    
    499,728
    
    
    
    (35,032,299
    )Total income tax
provision under US
GAAP
    
    
    (58,635,101
    )
    
    
    (12,816,876
    )
    
    
    (3,194,151
    )
    
    
    (21,414,564
    )
    
    
    (14,490,412
    )
    
    
    (110,551,104
    )


2001Chile
    
    Argentina
    
    Brazil
    
    Peru
    
    Colombia
    
    TotalThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Current income
taxes as determined
under Chilean GAAP
    
    
    1,047,609
    
    
    
    (3,726,100
    )
    
    
    (3,369,575
    )
    
    
    (8,211,372
    )
    
    
    (17,553,103
    )
    
    
    (31,812,542
    )Deferred income
taxes as determined
under US GAAP
    
    
    (12,534,853
    )
    
    
    (52,793,111
    )
    
    
    1,192,283
    
    
    
    (11,913,227
    )
    
    
    (6,141,020
    )
    
    
    (82,189,928
    )Total income tax
provision under US
GAAP
    
    
    (11,487,244
    )
    
    
    (56,519,211
    )
    
    
    (2,177,292
    )
    
    
    (20,124,599
    )
    
    
    (23,694,123
    )
    
    
    (114,002,470
    )


F-103



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

2002Chile
    
    Argentina
    
    Brazil
    
    Peru
    
    Colombia
    
    TotalThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Income tax provision
under Chilean GAAP:Current income tax
as determined under
Chilean GAAP
    
    
    452,306
    
    
    
    (256,422
    )
    
    
    (2,580,681
    )
    
    
    (12,657,619
    )
    
    
    (24,887,381
    )
    
    
    (39,929,797
    )Deferred income
taxes as determined
under Chilean GAAP
    
    
    (13,758,605
    )
    
    
    
    
    
    
    
    
    
    
    (18,119,716
    )
    
    
    1,179,720
    
    
    
    (30,698,601
    )Total income tax
provision under
Chilean GAAP
    
    
    (13,306,299
    )
    
    
    (256,422
    )
    
    
    (2,580,681
    )
    
    
    (30,777,335
    )
    
    
    (23,707,661
    )
    
    
    (70,628,398
    )U.S. GAAP adjustments:Deferred tax effect of
applying SFAS No. 109
    
    
    (2,620,091
    )
    
    
    3,077,828
    
    
    
    (1,473,869
    )
    
    
    (18,249,243
    )
    
    
    (3,448,104
    )
    
    
    (22,753,479
    )Deferred tax effect of
adjustment to U.S. GAAP
    
    
    9,923,986
    
    
    
    (7,863,623
    )
    
    
    196
    
    
    
    21,345,787
    
    
    
    1,705,552
    
    
    
    25,111,898Total U.S. GAAP
adjustments
    
    
    7,303,895
    
    
    
    (4,785,795
    )
    
    
    (1,473,673
    )
    
    
    3,056,544
    
    
    
    (1,742,552
    )
    
    
    2,358,419Total income tax
provision under
U.S. GAAP
    
    
    (6,002,404
    )
    
    
    (5,042,217
    )
    
    
    (4,054,354
    )
    
    
    (27,720,791
    )
    
    
    (25,450,213
    )
    
    
    (68,269,979
    )


F-104



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34.  Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

Deferred tax assets (liabilities) in accordance with U.S. GAAP as of each
balance sheet date is as follows:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Deferred income tax assetsProperty, plant and
equipment
    
    
    
    
    
    
    12,939,170Severance indemnities
    
    
    2,326,166
    
    
    
    415,266Prepaid income
    
    
    
    
    
    
    1,469,920Finance costs
    
    
    
    
    
    
    117,034Derivative contracts
    
    
    4,550,156
    
    
    
    Vacation accrual
    
    
    1,009,517
    
    
    
    324,095Tax losses (1)
    
    
    50,198,846
    
    
    
    61,016,219Contingencies
    
    
    
    
    
    
    2,330,088Forward contracts and
swaps
    
    
    
    
    
    
    584,992Leasing receivables
    
    
    
    
    
    
    2,301,708Allowance for doubtful
accounts
    
    
    
    
    
    
    49,117Salaries for
constrution-in-progress
    
    
    
    
    
    
    9,510,247Provision for employee
obligations
    
    
    
    
    
    
    911,197Negative goodwill
    
    
    
    
    
    
    14,403,748Other events
    
    
    11,093,495
    
    
    
    1,360,704Valuation allowance
    
    
    
    
    
    
    (2,271,667
    )Total deferred income tax
assets
    
    
    69,178,180
    
    
    
    105,461,838Deferred income tax
liabilitiesProperty, plant and
equipment
    
    
    259,405,295
    
    
    
    301,872,455Severance indemnities
    
    
    
    
    
    
    331,549Finance costs
    
    
    
    
    
    
    13,755,855Derivative contracts
    
    
    61,181,448
    
    
    
    69,238,975Imputed interest on
construction
    
    
    
    
    
    
    4,863,433Cost of studies
    
    
    
    
    
    
    7,972,554Spare parts used
    
    
    
    
    
    
    1,086,289Bonds discount
    
    
    
    
    
    
    234,642El Chocón investments
    
    
    
    
    
    
    2,897,791Capitalized costs
    
    
    
    
    
    
    1,357,961Fair value adjustments
    
    
    
    
    
    
    2,124,211Other events
    
    
    21,060,046
    
    
    
    5,569,889Total deferred income tax
liabilities
    
    
    341,646,789
    
    
    
    411,305,604Net deferred tax assets
(liabilities)
    
    
    (272,468,609
    )
    
    
    (305,843,766
    )




---

|(1) |  | Tax loss carryforwards relate primarily to Chilean entities. In accordance with the
current enacted tax law in Chile such tax losses may be carried-forward
indefinitely.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-105



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------

A reconciliation of the Chilean Statutory income tax rate to the Companys
effective tax rate on net income is as follows:

2000Chile
    
    Argentina
    
    Peru
    
    Brazil
    
    Colombia
    
    TotalThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Statutory Chilean GAAP (15%)
    
    
    (18,236,855
    )
    
    
    (4,155,928
    )
    
    
    (8,141,485
    )
    
    
    (4,542,596
    )
    
    
    (5,708,339
    )
    
    
    (40,785,203
    )Effect of difference in foreign tax rates
    
    
    
    
    
    
    (5,541,238
    )
    
    
    (8,141,486
    )
    
    
    (5,753,955
    )
    
    
    (7,611,119
    )
    
    
    (27,047,798
    )Increase (decrease) in retes resulting from:Price-level restatement not accepted for tax purposes
    
    
    (11,326,630
    )
    
    
    17,057
    
    
    
    
    
    
    
    
    
    
    
    (2,115,577
    )
    
    
    (13,425,150
    )Non deducible items
    
    
    (2,789,819
    )
    
    
    (3,667,241
    )
    
    
    
    
    
    
    (215,648
    )
    
    
    887,189
    
    
    
    (5,785,518
    )Non taxable items
    
    
    
    
    
    
    (57,263
    )
    
    
    (5,131,594
    )
    
    
    7,922,945
    
    
    
    (442,294
    )
    
    
    2,291,794Sale of subsidiary
    
    
    (26,281,797
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,281,797
    )Others
    
    
    
    
    
    
    587,738
    
    
    
    
    
    
    
    (604,898
    )
    
    
    499,729
    
    
    
    482,568Tax expense at effective tax rate
    
    
    (58,635,101
    )
    
    
    (12,816,875
    )
    
    
    (21,414,565
    )
    
    
    (3,194,152
    )
    
    
    (14,490,411
    )
    
    
    (110,551,104
    )


2001Chile
    
    Argentina
    
    Peru
    
    Brazil
    
    Colombia
    
    TotalThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Statutory Chilean GAAP (15%)
    
    
    (12,046,320
    )
    
    
    (22,968,937
    )
    
    
    (7,756,738
    )
    
    
    (2,304,735
    )
    
    
    (3,439,929
    )
    
    
    (48,516,659
    )Effect of difference in foreign tax rates
    
    
    
    
    
    
    (30,625,250
    )
    
    
    (7,756,738
    )
    
    
    (3,072,980
    )
    
    
    (4,586,572
    )
    
    
    (46,041,540
    )Increase (decrease) in retes resulting from:Price-level restatement not accepted for tax purposes
    
    
    (8,148,982
    )
    
    
    471,398
    
    
    
    472,813
    
    
    
    1,154,998
    
    
    
    (14,976,551
    )
    
    
    (21,026,324
    )Non deducible items
    
    
    18,260,989
    
    
    
    (253,562
    )
    
    
    
    
    
    
    316,500
    
    
    
    (691,070
    )
    
    
    17,632,857Non taxable items
    
    
    
    
    
    
    
    
    
    
    (5,083,936
    )
    
    
    1,728,925
    
    
    
    
    
    
    
    (3,355,011
    )Others
    
    
    
    
    
    
    (3,142,861
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,142,861
    )Effects of Chilean tax rate increase
    
    
    (9,552,932
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,552,932
    )Tax expense at effective tax rate
    
    
    (11,487,245
    )
    
    
    (56,519,212
    )
    
    
    (20,124,599
    )
    
    
    (2,177,292
    )
    
    
    (23,694,122
    )
    
    
    (114,002,470
    )


F-106



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------

2002Chile
    
    Argentina
    
    Peru
    
    Brazil
    
    Colombia
    
    TotalThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Statutory Chilean GAAP (16%)
    
    
    (5,652,822
    )
    
    
    (4,131,451
    )
    
    
    (7,926,874
    )
    
    
    21,223,745
    
    
    
    (18,081,113
    )
    
    
    (14,568,515
    )Effect of difference in foreign tax rates
    
    
    
    
    
    
    (4,906,098
    )
    
    
    (8,670,019
    )
    
    
    (1,626,154
    )
    
    
    (6,535,805
    )
    
    
    (21,738,076
    )Increase (decrease) in rates resulting from:Price-level restatement not accepted for tax purposes
    
    
    (6,232,611
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (665,672
    )
    
    
    (6,898,283
    )Deductible items
    
    
    1,268,782
    
    
    
    (10,461,230
    )
    
    
    (5,243,596
    )
    
    
    (23,651,945
    )
    
    
    198
    
    
    
    (38,087,791
    )Non-deducible items
    
    
    2,948,479
    
    
    
    14,151,602
    
    
    
    (7,400,496
    )
    
    
    
    
    
    
    1,265,661
    
    
    
    10,965,246Prior years income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    509,651
    
    
    
    509,651Other
    
    
    1,665,768
    
    
    
    304,960
    
    
    
    1,520,194
    
    
    
    
    
    
    
    (1,943,133
    )
    
    
    1,547,789Tax benefit (expense) at effective tax rate
    
    
    (6,002,404
    )
    
    
    (5,042,217
    )
    
    
    (27,720,791
    )
    
    
    (4,054,354
    )
    
    
    (25,450,213
    )
    
    
    (68,269,979
    )


F-107



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------



|d) |  | Segment disclosure
|-- |  | ------------------

The Company is primarily engaged in the generation of electricity in Chile,
Argentina, Brazil, Colombia and Peru. The Company provides these and other
services through two business segments:



| |  | Electricity
|- |  | -----------



| |  | Public works and concessions
|- |  | ----------------------------

As the Companys public works and concessions segment does not meet any of the
quantitative thresholds for separate disclosure, the Company has not included
quantitative disclosures by operating segment.

The methods of revenue recognition by segment are as follows:



| |  | Electricity
|- |  | -----------

Revenue is recognized when energy and power output is delivered and capacity is
provided at rates specified under contract terms or prevailing market rates.



| |  | Public works and concessions
|- |  | ----------------------------

Revenue is recognized as services are provided.

A summary of activities by geographic area is as follows:

Revenues
    
    Long-lived assetsYear ended December 31,
    
    As of December 31,2000
    
    2001
    
    2002
    
    2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Chile
    
    
    339,648,526
    
    
    
    421,007,417
    
    
    
    444,750,034
    
    
    
    2,222,901,468
    
    
    
    2,270,418,176
    
    
    
    2,194,926,386Argentina
    
    
    282,882,205
    
    
    
    227,980,443
    
    
    
    98,155,143
    
    
    
    698,259,697
    
    
    
    729,943,984
    
    
    
    696,850,165Brazil
    
    
    57,435,565
    
    
    
    67,266,817
    
    
    
    51,404,259
    
    
    
    473,739,126
    
    
    
    527,915,234
    
    
    
    481,515,429Colombia
    
    
    173,174,898
    
    
    
    220,309,469
    
    
    
    226,219,968
    
    
    
    1,419,852,299
    
    
    
    1,561,972,850
    
    
    
    1,738,529,384Peru
    
    
    84,509,122
    
    
    
    108,715,174
    
    
    
    117,569,147
    
    
    
    678,727,207
    
    
    
    744,446,251
    
    
    
    777,244,863Total
    
    
    937,650,316
    
    
    
    1,045,279,320
    
    
    
    938,099,151
    
    
    
    5,493,479,797
    
    
    
    5,834,696,495
    
    
    
    5,889,066,227




|e) |  | Concentration of risk:
|-- |  | ----------------------

The Company does not believe that it is exposed to any unusual credit risk from
any single financial institution. The Companys debtors are dependent on the
economy in Latin America, which could make them vulnerable to downturns in the
economic activity in the countries in which the Company operates.

No single customer accounted for more than 10% of revenues for the years ending
December 31, 2000, 2001 and 2002.

F-108



---



##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------



|f) |  | Schedule of debt maturity:
|-- |  | --------------------------

Following is a schedule of debt maturity in each of the next five years and
thereafter, including the effect of the refinancing of debt as discussed in
Note 32:

As of December 31, 2002ThCh$2003
    
    
    745,646,7092004
    
    
    154,579,1492005
    
    
    223,704,1052006
    
    
    506,391,7132007
    
    
    297,362,572Thereafter
    
    
    1,303,630,057Total
    
    
    3,231,314,305




|g) |  | Disclosure regarding interest capitalization:
|-- |  | ---------------------------------------------

Year ended December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Interest cost incurred
    
    
    248,640,551
    
    
    
    259,345,341
    
    
    
    212,800,395Interest capitalized under Chilean GAAP
    
    
    6,578,656
    
    
    
    10,704,790
    
    
    
    25,502,786Interest capitalized under U.S. GAAP
    
    
    6,578,656
    
    
    
    10,704,790
    
    
    
    9,671,255


F-109



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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------



|h) |  | Cash flow information:
|-- |  | ----------------------

The statement of cash flows under Chile GAAP differs in certain respects from
the presentation of a statement of cash flow under U.S. GAAP as follows:

Year ended December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Cash provided by operating activities under Chilean GAAP
    
    
    201,641,436
    
    
    
    256,695,774
    
    
    
    352,208,645Development stage companies
    
    
    
    
    
    
    58,615
    
    
    
    43,874Cash provided by operating activities under U.S. GAAP
    
    
    201,641,436
    
    
    
    256,754,389
    
    
    
    352,252,519Cash provided by (used in) by financing activities under Chilean GAAP
    
    
    (750,770,867
    )
    
    
    (83,836,187
    )
    
    
    (218,971,912
    )Repurchase of Yankee Bonds
    
    
    
    
    
    
    (109,918,922
    )
    
    
    Development stage companies
    
    
    
    
    
    
    
    
    
    
    Cash provided by (used in) financing activities under U.S. GAAP
    
    
    (750,770,867
    )
    
    
    (193,755,109
    )
    
    
    (218,971,912
    )Cash provided by (used in) investing activities under Chilean GAAP
    
    
    485,925,393
    
    
    
    (112,505,966
    )
    
    
    (113,388,841
    )Repurchase of Yankee Bonds
    
    
    
    
    
    
    109,918,922
    
    
    
    Development stage companies
    
    
    
    
    
    
    (27,654
    )
    
    
    Cash provided by (used in) investing activities under U.S. GAAP
    
    
    485,925,393
    
    
    
    (2,614,698
    )
    
    
    (113,388,841
    )




|(i) |  | Cash and cash equivalents includes all highly liquid debt instruments purchased with a maturity of three months or less:
|--- |  | ------------------------------------------------------------------------------------------------------------------------

As of December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Cash
    
    
    4,745,511
    
    
    
    5,024,238
    
    
    
    7,450,853Time deposits
    
    
    25,598,717
    
    
    
    88,952,041
    
    
    
    90,071,189Restricted time deposits
    
    
    
    
    
    
    
    
    
    
    25,342,942Total cash and cash equivalents
    
    
    30,344,228
    
    
    
    93,976,279
    
    
    
    122,864,984




|(ii) |  | Additional disclosures required under U.S. GAAP are as follows:
|---- |  | ---------------------------------------------------------------

Year ended December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Interest paid during the year
    
    
    248,640,550
    
    
    
    212,679,454
    
    
    
    220,102,284Income taxes paid during the year
    
    
    70,315,658
    
    
    
    68,521,084
    
    
    
    107,871,719


F-110



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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------



|i) |  | Disclosures about fair value of financial instruments
|-- |  | -----------------------------------------------------

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments as of December 31, 2001 and 2002 for which
it is practicable to estimate that value:



| |  | Cash
|- |  | ----

The fair value of the Companys cash is equal to its carrying value.



| |  | Time deposits
|- |  | -------------

The fair value of time deposits approximates carrying value due to the
relatively short-term nature.



| |  | Long-term accounts receivable
|- |  | -----------------------------

The fair value of long-term accounts receivable was estimated using the
interest rates that are currently offered for loans with similar terms and
remaining maturities.



| |  | Long-term debt
|- |  | --------------

The fair value of long-term debt was based on rates currently available to the
Company for debt with similar terms and remaining maturities.



| |  | Derivative instruments
|- |  | ----------------------

Estimates of fair values of derivative instruments for which no quoted prices
or secondary market exists have been made using valuation techniques such as
forward pricing models, present value of estimated future cash flows, and other
modeling techniques. These estimates of fair value include assumptions made by
the Company about market variables that may change in the future. Changes in
assumptions could have a significant impact on the estimate of fair values
disclosed. As a result such fair value amounts are subject to significant
volatility and are highly dependent on the quality of the assumptions used.

F-111



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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------

The estimated fair values of the Companys financial instruments compared to
U.S. GAAP carrying amounts are as follows:

As of December 31,2001
    
    2002Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Cash
    
    
    5,024,238
    
    
    
    5,024,238
    
    
    
    7,450,853
    
    
    
    7,450,853Time deposits
    
    
    88,952,041
    
    
    
    88,952,041
    
    
    
    90,071,189
    
    
    
    90,071,189Current receivables, net
    
    
    91,879,870
    
    
    
    91,879,870
    
    
    
    88,254,540
    
    
    
    88,254,540Notes receivables, net
    
    
    162,773
    
    
    
    162,773
    
    
    
    1,010,451
    
    
    
    1,010,451Other receivables, net
    
    
    19,883,555
    
    
    
    19,883,555
    
    
    
    17,922,487
    
    
    
    17,922,487Amounts due from related companies
    
    
    40,355,991
    
    
    
    40,355,991
    
    
    
    219,504,354
    
    
    
    219,504,354Long term receivables
    
    
    44,335,067
    
    
    
    44,335,067
    
    
    
    19,157,436
    
    
    
    19,157,436Long term amounts due from related companies
    
    
    170,667,792
    
    
    
    170,667,792
    
    
    
    898,130
    
    
    
    898,130Accounts payable
    
    
    (77,273,825
    )
    
    
    (77,273,825
    )
    
    
    (66,686,654
    )
    
    
    (66,686,654
    )Dividends payable
    
    
    (75,871
    )
    
    
    (75,871
    )
    
    
    (727,268
    )
    
    
    (727,268
    )Short term amounts payables to related companies
    
    
    (64,544,584
    )
    
    
    (64,544,584
    )
    
    
    (52,235,790
    )
    
    
    (52,235,790
    )Long-term debt and bonds payable
    
    
    (2,650,041,495
    )
    
    
    (2,876,643,596
    )
    
    
    (3,231,314,305
    )
    
    
    (3,216,757,427
    )Long term accounts payable to related companies
    
    
    (445,507,841
    )
    
    
    (445,507,841
    )
    
    
    (48,663,658
    )
    
    
    (48,663,658
    )Derivative contracts
    
    
    3,067,592
    
    
    
    3,067,592
    
    
    
    214,240,710
    
    
    
    214,240,710


F-112



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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------



|k) |  | Derivative instruments
|-- |  | ----------------------

The Company is exposed to the impact of market fluctuations in the price of
electricity, primary materials such as natural gas, petroleum, coal, and other
energy-related products, interest rates, and foreign exchange rates. The
Company employs policies and procedures to manage its risks associated with
these market fluctuations on a global basis through strategic contract
selection, fixed-rate and variable-rate portfolio targets, net investment
hedges, and financial derivatives. All derivatives not qualifying for the
normal purchase and sales exemption under SFAS No. 133 are recorded at their
fair value. On the date that swaps, futures, forwards or option contracts are
entered into, the Company designates the derivative as either a normal purchase
or sale contract or leaves the derivative undesignated and marks it to market,
with the exception of net investment hedges. The Company does not have the
appropriate documentation in place to designate contracts as hedges of a
forecasted transaction or future cash flows (cash flow hedge) or as a hedge of
a recognized asset, liability or firm commitment (fair value hedge).

The Company has classified their derivatives into the following general
categories: commodity derivatives, embedded derivatives, and financial
derivatives. Certain energy and other contracts for the Companys operations in
Chile are denominated in the US dollar. According to SFAS No. 133, an embedded
foreign currency derivative should be separated from the host contract because
none of the applicable exclusions are met. For purposes of evaluating the
functional currency of the Companys subsidiaries in Argentina, Peru, Brazil,
and Colombia, the Company applied BT 64, consistent with the methodology
described in paragraph (o), thus the functional currency of these subsidiaries
was the US dollar as these subsidiaries were remeasured into US dollars because
foreign subsidiaries operate in countries exposed to significant risks as
determined under BT 64.

The following is a summary of the Companys adjustment to fair values for all
identified derivative contracts, at the date of implementation of SFAS No. 133
on January 1, 2001 and as of December 31, 2001 and 2002.

As of January 1,
    
    As of December 31,2001
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Commodity derivatives
    
    
    125,456,995
    
    
    
    175,080,544
    
    
    
    218,474,062Embedded derivatives
    
    
    (3,700,443
    )
    
    
    (3,876,592
    )
    
    
    (16,952,690
    )Financial derivatives
    
    
    (8,631,797
    )
    
    
    (19,026,564
    )
    
    
    (12,209,854
    )113,124,755
    
    
    
    152,177,388
    
    
    
    189,311,518Effects of minority interest
    
    
    (39,402,729
    )
    
    
    (57,135,642
    )
    
    
    (70,816,419
    )Deferred tax effects
    
    
    (41,390,632
    )
    
    
    (57,578,011
    )
    
    
    (71,659,822
    )Net effect of adjustment
    
    
    32,331,394
    
    
    
    37,463,735
    
    
    
    46,835,277


F-113



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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------

Commodity derivatives

Certain of the Companys generation and distribution commodity contracts meet
the definition of a derivative under SFAS No. 133 and are required to be
accounted for at fair value. These are contracts that (i) have an underlying,
which is the market price of power at the delivery location and a notional
amount specified in the contract; (ii) have no initial payment on entering into
the contract; and (iii) do not have a net settlement provision but has the
characteristic of net settlement because power is readily convertible to cash,
as it is both fungible and actively traded in the country of generation or
country of distribution.

The Companys commodity contracts that are requirements contracts were
concluded to not have notional amounts, if they only had maximum amounts or no
specified amounts, and did not include an implicit minimum amount in a
settlement or a default clause. A requirements contract allows the purchaser
to use as many units of power as required in order to satisfy its actual needs
for power during the period of the contract, and the party is not permitted to
buy more than its actual needs.

The Company concluded that all of its power is readily convertible to cash as
energy is actively traded, or the Company has access, to markets where energy
is actively traded. However, only certain participants have access to the
energy markets, thus determination as to whether energy could be considered
readily convertible to cash was analyzed on a case-by-case basis. The Company
has concluded that multiple-delivery long-term power contracts meet the net
settlement characteristic. Multiple-delivery long-term power contracts are
readily convertible to cash because the Company operates in countries with
active spot markets, that although they contain varying levels of liquidity,
can rapidly absorb the contracts quantities at each delivery date without
significantly affecting the price, and thus meet the definition of net
settlement.

Derivative contracts were evaluated for qualification under the normal purchase
and sale exception, if it was probable the contracts would result in physical
delivery, and if the contract did not contain a price that was tied to an
unrelated underlying, such as, the U.S. Price for Finished Products (PPI)
index, or if the price of the contract is denominated in a currency other than
the functional currency of one of the parties to the contract and the commodity
is not internationally denominated in that currency. The Company does not
consider the local country or U.S. Consumer or Purchase Price Indexes to be
clearly and closely related to the energy purchased or sold because these
indices measure the level of price changes of certain items in the economy and
are not a direct factor in the production of energy.

The Companys Argentine generation entities have access to the Brazilian energy
market through an interconnection system between the two markets. In order to
calculate the fair values of the purchase and sale contracts related to the
energy to be sold in the Brazilian market, the Argentine market prices were
used. The Company believes this is the best measure for fair value, because in
the event that the Brazilian market prices are below the cost to produce the
energy in Argentina, the Company will sell the energy in Argentina and purchase
the energy from the spot market in Brazil. Additionally, the interconnection
line was established to sell energy generated in Argentina in the Brazilian
market, as the Brazilian energy market heavily relies on hydro-electric
generation and has historically had significant problems with meeting its
energy needs economically due to lack of rainfall.

F-114



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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------

Because both the purchases and sales interconnection contracts are for periods
up to 20 years in complex markets, where no similar term forward market
information is available, the Company has estimated such values based on the
best information available, including using modeling and other valuation
techniques. The Company has recorded the best estimate of fair value, however
with different assumptions such as interest rates, inflation rates, exchange
rates, electricity rates, and increases in cost trends, materially different
fair values could result. As a result such estimates are highly volatile and
dependent upon the assumptions used.

The assumption to measure the fair value of these interconnection related
contracts using the Argentine market prices has a significant effect on the
Companys net income and shareholders equity. If Brazilian market prices had
been used instead of Argentine prices estimated fair values of the related
energy contracts a significantly different fair value would result. The
Company considers the Argentine prices to be the correct benchmark to value the
fair value of the interconnection contracts because the Company does not have
concessions to sell the Argentine generated energy in the Brazilian market to
any parties other than those currently contracted. Therefore the Company views
the interconnection as an extension of the Argentine market and as a more
appropriate measure of the fair value of energy. Such values are included in
the reconciliation to U.S. GAAP in paragraph (u).

Embedded Derivative Contracts

The Company enters into certain contracts that have embedded features that are
not clearly and closely related to the host contract. As specified in SFAS No.
133, bifurcation analysis focuses on whether the economic characteristics and
risks of the embedded derivative are clearly and closely related to the
economic characteristics and risks of the host contract. In certain identified
contracts, the host service contract and the embedded feature are not indexed
to the same underlying and changes in the price or value of service will not
always correspond to changes in the price of the commodity to which the
contract is indexed. U.S. GAAP requires embedded features to be measured at
fair value as freestanding instruments. Unless the embedded contracts are
remeasured at fair value under otherwise applicable GAAP, the embedded feature
must be valued at fair value with changes in fair value reported in earnings as
they occur.

Embedded foreign currency derivative instruments are not separated from the
host contract and considered a derivative instrument if the host contract is
not a financial instrument and it requires payments denominated in either: (1)
the functional currency of any substantial party to the contract, (2) the local
currency of any substantial party to the contract, (3) the currency used
because the primary economic environment is highly inflationary, or (4) the
currency in which the good or service is routinely denominated in international
commerce.

Financial Derivatives

Changes in interest rates expose the Company to risk as a result of its
portfolio of fixed-rate and variable-rate debt. The Company manages interest
rate risk exposure on a global basis by limiting its variable-rate and
fixed-rate exposures to certain variable/fixed mixes set by policy. The
Company manages interest rate risk through the use of interest rate swaps and
collars and cross-currency swaps. The Company does not enter into financial
instruments for trading or speculative purposes.

F-115



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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------

Net Investment Hedges

The Company is also exposed to foreign currency risk arising from long-term
debt denominated in foreign currencies, the majority of which is the US dollar.
This risk is mitigated, as a substantial portion of the Companys revenues are
either directly or indirectly linked to the US dollar. Additionally, the
Company records the foreign exchange gains and losses on liabilities related to
net investments in foreign countries which are denominated in the same currency
as the functional currency of those foreign investments. Such unrealized gains
and losses are included in the cumulative translation adjustment account in
shareholders equity, and in this way act as a net investment hedge of the
exchange risk affecting the investments (see Note 11 (c) and Note 21 (e)(1) for
further detail). The Company also uses short duration forward foreign currency
contracts and swaps, and cross-currency swaps, where possible, to manage its
risk related to foreign currency fluctuations.

F-116



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##### Table of Contents



Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)



|34. |  | Differences between Chilean and United States Generally Accepted Accounting Principles, continued:
|--- |  | --------------------------------------------------------------------------------------------------



|k) |  | Reclassifications under U.S. GAAP
|-- |  | ---------------------------------

Certain reclassifications would be made to the Chilean GAAP income statement in
order to present Chilean GAAP amounts in accordance with presentation
requirements under U.S. GAAP. Amortization of negative goodwill, amortization
of goodwill, and certain other non-operating income and expense, would be
included in operating income. Recoverable taxes included in other
non-operating revenues would be recorded as part of income taxes under U.S.
GAAP. Equity participation in income or losses of related companies included
in non-operating income would be presented after income taxes and minority
interest in accordance with U.S. GAAP. Income from discontinued operations
would be presented after income from continuing operations under U.S. GAAP.
Additionally, the extraordinary loss recognized under Chilean GAAP in 2002
would be reclassified to income taxes as the Colombian democracy tax does not
meet the definition of extraordinary in accordance with U.S. GAAP. These
reclassifications exclude consolidation of development stage companies, the
effect of which is immaterial. The following
reclassifications included in the column labeled Reclassifications disclose
amounts using a U.S. GAAP presentation, although the amounts displayed have
been determined in accordance with Chilean GAAP:

Years ended December 31, 2000U.S. GAAPChilean GAAP
    
    Reclassification
    
    PresentationThCh$
    
    ThCh$
    
    ThCh$Operating income
    
    
    266,929,008
    
    
    
    241,360,710
    
    
    
    508,289,718Non-operating expense, net
    
    
    (36,075,951
    )
    
    
    (201,472,114
    )
    
    
    (237,548,065
    )Income taxes
    
    
    (88,483,851
    )
    
    
    116,662
    
    
    
    (88,367,189
    )Minority interest
    
    
    (68,580,912
    )
    
    
    183,276
    
    
    
    (68,397,636
    )Equity participation in income of related companies, net
    
    
    
    
    
    
    678,030
    
    
    
    678,030Amortization of negative goodwill
    
    
    41,136,598
    
    
    
    (41,136,598
    )
    
    
    Income from continuing operations
    
    
    114,924,892
    
    
    
    (270,034
    )
    
    
    114,654,858Income from discontinued operations
    
    
    
    
    
    
    270,034
    
    
    
    270,034Net income
    
    
    114,924,892
    
    
    
    
    
    
    
    114,924,892


F-117



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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

Years ended December 31, 2001U.S. GAAPChilean GAAP
    
    Reclassification
    
    PresentationThCh$
    
    ThCh$
    
    ThCh$Operating income
    
    
    347,975,163
    
    
    
    19,745,852
    
    
    
    367,721,015Non-operating expense, net
    
    
    (247,798,496
    )
    
    
    28,077,502
    
    
    
    (219,720,994
    )Income taxes
    
    
    (39,911,895
    )
    
    
    7,037,413
    
    
    
    (32,874,482
    )Minority interest
    
    
    (34,015,850
    )
    
    
    400,190
    
    
    
    (33,615,660
    )Equity participation in
income of related
companies, net
    
    
    
    
    
    
    (9,947,624
    )
    
    
    (9,947,624
    )Amortization of negative
goodwill
    
    
    45,911,096
    
    
    
    (45,911,096
    )
    
    
    Income from continuing
operations
    
    
    72,160,018
    
    
    
    (597,763
    )
    
    
    71,562,255Income from discontinued
operations
    
    
    
    
    
    
    597,763
    
    
    
    597,763Net income
    
    
    72,160,018
    
    
    
    
    
    
    
    72,160,018


Years ended December 31, 2002U.S. GAAPChilean GAAP
    
    Reclassification
    
    PresentationThCh$
    
    ThCh$
    
    ThCh$Operating income
    
    
    346,224,491
    
    
    
    (93,560,578
    )
    
    
    252,663,913Non-operating expense, net
    
    
    (313,424,918
    )
    
    
    170,203,364
    
    
    
    (143,221,554
    )Income taxes
    
    
    (70,628,398
    )
    
    
    (10,636,547
    )
    
    
    (81,264,945
    )Extraordinary loss
    
    
    (10,930,092
    )
    
    
    10,930,092
    
    
    
    Minority interest
    
    
    (46,478,294
    )
    
    
    163,549
    
    
    
    (46,314,745
    )Equity participation in
income of related
companies, net
    
    
    
    
    
    
    8,570,497
    
    
    
    8,570,497Amortization of negative
goodwill
    
    
    85,918,155
    
    
    
    (85,918,155
    )
    
    
    Income from continuing
operations
    
    
    (9,319,056
    )
    
    
    (247,778
    )
    
    
    (9,566,834
    )Income from discontinued
operations
    
    
    
    
    
    
    247,778
    
    
    
    247,778Net income
    
    
    (9,319,056
    )
    
    
    
    
    
    
    (9,319,056
    )


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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

Certain reclassifications would be made to the Chilean GAAP balance sheet in
order to present Chilean GAAP amounts in accordance with presentation
requirements under U.S. GAAP. Deferred taxes from depreciation differences
that are recorded as short-term under Chilean GAAP would be recorded as
long-term under U.S. GAAP. Debt discounts are included in other assets in
Chilean GAAP while the discount would be offset against the debt under U.S.
GAAP. The amounts receivable and payable related to financial derivatives have
been recorded in the balance sheet at their gross amounts, whereas, these
amounts would have been recorded at their net amounts by financial institution
under U.S. GAAP, provided the contracts have net settlement provisions.
Negative goodwill would be presented as a deduction to property, plant, and
equipment instead of a separate line-item in other assets. As of December 31,
2002, the non current assets and long-term liabilities of the assets held for
sale would be reclassified to current assets and current liabilities,
respectively. The assets held for sale are Infrastructura 2000, Central
Canutillar, and the CELTA transmission lines, all of which met asset held for
sale criteria as of December 31, 2002. As a result of the refinancing after
the date of the balance sheet but prior to the issuance of the financial
statements to be included in Form 20-F discussed in Note 32, a reclassification
of ThCh$ 206,068,769 from current to long-term debt due to banks and financial
institutions reflect the renegotiated maturity dates as of December 31, 2002.
These reclassifications exclude consolidation of development stage companies,
the effect of which is immaterial.

The effect of the following reclassifications included in the column labeled
Reclassifications discloses amounts using a U.S. GAAP presentation although
the amounts displayed have been determined in accordance with Chilean GAAP:

As of December 31, 2001U.S. GAAPChilean GAAP
    
    Reclassification
    
    PresentationThCh$
    
    ThCh$
    
    ThCh$Current assets
    
    
    315,256,021
    
    
    
    (7,877,490
    )
    
    
    307,378,531Property, plant,
and equipment, net
    
    
    5,564,893,072
    
    
    
    (166,481,365
    )
    
    
    5,398,411,707Other assets
    
    
    481,422,276
    
    
    
    144,269,867
    
    
    
    625,692,143Total assets
    
    
    6,361,571,369
    
    
    
    (30,088,988
    )
    
    
    6,331,482,381Current liabilities
    
    
    679,343,616
    
    
    
    (7,940,575
    )
    
    
    671,403,041Long-term
liabilities
    
    
    2,803,098,349
    
    
    
    (22,148,413
    )
    
    
    2,780,949,936Minority interest
    
    
    1,432,579,970
    
    
    
    
    
    
    
    1,432,579,970Shareholders equity
    
    
    1,446,549,434
    
    
    
    
    
    
    
    1,446,549,434Total liabilities
and shareholders
equity
    
    
    6,361,571,369
    
    
    
    (30,088,988
    )
    
    
    6,331,482,381


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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted Accounting Principles,
continued:

As of December 31, 2002U.S. GAAPChilean GAAP
    
    Reclassification
    
    PresentationThCh$
    
    ThCh$
    
    ThCh$Current assets
    
    
    542,197,771
    
    
    
    313,526,898
    
    
    
    855,724,669Property, plant, and equipment,
net
    
    
    5,669,849,128
    
    
    
    (406,657,050
    )
    
    
    5,263,192,078Other assets
    
    
    312,154,497
    
    
    
    62,448,950
    
    
    
    374,603,447Total assets
    
    
    6,524,201,396
    
    
    
    (30,681,202
    )
    
    
    6,493,520,194Current liabilities
    
    
    1,134,204,259
    
    
    
    (127,606,482
    )
    
    
    1,006,597,777Long-term liabilities
    
    
    2,461,130,586
    
    
    
    96,925,280
    
    
    
    2,558,055,866Minority interest
    
    
    1,498,231,231
    
    
    
    
    
    
    
    1,498,231,231Shareholders equity
    
    
    1,430,635,320
    
    
    
    
    
    
    
    1,430,635,320Total liabilities and
shareholders equity
    
    
    6,524,201,396
    
    
    
    (30,681,202
    )
    
    
    6,493,520,194


l) Employee Benefit Plans

Endesa-Chile and its subsidiaries sponsor various benefit plans for its current
and retired employees. A description of such benefits follows:

Severance indemnities

The provision for severance indemnities, included in the account Accrued
expenses short and long-term is calculated in accordance with the policy set
forth in Note 2 (n), using the current salary levels of all employees covered
under the severance indemnities agreement, an assumed discount rate of 9.5% for
the years ended December 31, 2000 and 2001 and an assumed discount rate of 6.5%
for the year ended December 31, 2002, and an estimated average service period
based on the years of services for the Company.

Benefits for Retired Personnel

Other benefits provided to certain retired personnel of Endesa-Chile include
electrical service rate subsidies, additional medical insurance and additional
post-retirement benefits. Descriptions of these benefits for retired personnel
are as follows:

i) Electrical rate service

This benefit is extended only to certain retired personnel of Endesa-Chile.
These electric rate subsidies result in the eligible retired employees paying a
percentage of their total monthly electricity costs, with Endesa-Chile paying
the difference.

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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally
Accepted Accounting Principles, continued:

ii) Medical benefits

This benefit provides supplementary health insurance, which covers a portion of
health benefits not covered under the institutional health benefits maintained
by employees of Endesa-Chile. This benefit expires at the time of death of the
pensioner.

iii) Supplementary pension benefits

Eligible employees are able to receive a monthly amount designed to cover a
portion of the difference between their salary at the point of retirement and
the theoretical pension that would have been received had the employee reached
the legal retirement age of the Institución de Previsión Social(Institute of
Social Welfare). This benefit expires upon the death of the pensioner for the
Endesa-Chile employee, however, continues to cover the surviving-spouse in the
case of employees of the subsidiary Endesa-Chile.

iv) Workers compensation benefits

Employees that were entitled to Workers compensation insurance in prior years
for work related accidents receive benefits from the Company as such insurance
has expired. This benefit continues at the time of death of the pensioner, to
cover the surviving-spouse.

The Company has recognized liabilities related to complementary pension plan
benefits and other post-retirement benefits as stipulated in collective
bargaining agreements. Under U.S. GAAP, post-retirement employee benefits have
been accounted for in accordance with SFAS No. 87 and SFAS No. 106, with
inclusion of prior-period amounts in current years income as the amounts are
not considered significant to the overall financial statement presentation.
The effects of accounting for post-retirement benefits under U.S. GAAP have
been presented in paragraph (u), above. The following data are presented under
U.S. GAAP for Companys post-retirement benefit plans.

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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted Accounting Principles, continued:

Pension Benefits
    
    Other Benefits2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Changes in benefit
(obligations)Benefit (obligations) at
January 1
    
    
    (13,410,712
    )
    
    
    (16,132,799
    )
    
    
    (2,999,954
    )
    
    
    (2,697,762
    )Foreign exchange effect
    
    
    (1,482,652
    )
    
    
    1,972,665
    
    
    
    
    
    
    
    Net periodic expense
    
    
    (2,479,224
    )
    
    
    (3,134,800
    )
    
    
    (568,618
    )
    
    
    (5,292,879
    )Benefits paid
    
    
    1,239,789
    
    
    
    1,559,657
    
    
    
    870,810
    
    
    
    835,090Company contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefit (obligations) at
December 31
    
    
    (16,132,799
    )
    
    
    (15,735,277
    )
    
    
    (2,697,762
    )
    
    
    (7,155,551
    )Funded Status of the PlansProjected Benefit
Obligation
    
    
    (17,427,604
    )
    
    
    (16,576,827
    )
    
    
    (4,141,087
    )
    
    
    (8,220,596
    )Fair value of plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Funded status
    
    
    (17,427,604
    )
    
    
    (16,576,827
    )
    
    
    (4,141,087
    )
    
    
    (8,220,596
    )Unrecognized prior
service obligation
    
    
    
    
    
    
    
    
    
    
    1,443,325
    
    
    
    961,848Unrecognized net loss
(gain)
    
    
    1,294,805
    
    
    
    841,550
    
    
    
    
    
    
    
    103,197Net liability recorded
under U.S. GAAP
    
    
    (16,132,799
    )
    
    
    (15,735,277
    )
    
    
    (2,697,762
    )
    
    
    (7,155,551
    )


Pension Benefits
    
    Other Benefits2001
    
    2002
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Assumptions as of
December 31Weighted-average discount
rate
    
    
    27.4
    %
    
    
    15.5
    %
    
    
    9.5
    %
    
    
    10.0
    %Weighted-average salary
increase
    
    
    21.4
    %
    
    
    10.2
    %
    
    
    N/A
    
    
    
    N/AWeighted-average return
on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Components of net
periodic benefits
expensesService cost
    
    
    (605,735
    )
    
    
    (161,342
    )
    
    
    316,460
    
    
    
    (4,612,213
    )Interest cost
    
    
    (4,300,553
    )
    
    
    (2,199,459
    )
    
    
    (462,277
    )
    
    
    (241,228
    )Expected return on assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization gain (loss)
    
    
    2,427,064
    
    
    
    (773,999
    )
    
    
    
    
    
    
    Amortization of prior
service obligation
    
    
    
    
    
    
    
    
    
    
    (422,801
    )
    
    
    (439,438
    )Net periodic expenses
    
    
    (2,479,224
    )
    
    
    (3,134,800
    )
    
    
    (568,618
    )
    
    
    (5,292,879
    )


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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States
Generally Accepted Accounting Principles,
continued:

m) Comprehensive income (loss)

In accordance with U.S. GAAP, the Company reports a measure of all changes in
shareholders equity that result from transactions and other economic events of
the period other than transactions with owners (comprehensive income).
Comprehensive income is the total of net income and other non-owner equity
transactions that result in changes in net shareholders equity.

The following represents accumulated other comprehensive income balances as of
December 31, 2000, 2001 and 2002 (in thousands of constant Chilean pesos as of
December 31, 2002).

2000Effect of U.S.GAAPChilean GAAP
    
    adjustments on
    
    Accumulatedcumulative
    
    cumulative
    
    Othertranslation
    
    translation
    
    Comprehensiveadjustment
    
    adjustment
    
    Income (Loss)Beginning balance
    
    
    3,602,367
    
    
    
    (2,365,448
    )
    
    
    1,236,919Credit (charge) for
the period
    
    
    535,235
    
    
    
    (8,945,783
    )
    
    
    (8,410,548
    )Ending balance
    
    
    4,137,602
    
    
    
    (11,311,231
    )
    
    
    (7,173,629
    )


2001Effect of U.S.GAAPChilean GAAP
    
    adjustments on
    
    Accumulatedcumulative
    
    cumulative
    
    Othertranslation
    
    translation
    
    Comprehensiveadjustment
    
    adjustment
    
    Income (Loss)Beginning balance
    
    
    4,137,602
    
    
    
    (11,311,231
    )
    
    
    (7,173,629
    )Credit (charge) for
the period
    
    
    3,035,615
    
    
    
    (12,451,366
    )
    
    
    (9,415,751
    )Ending balance
    
    
    7,173,217
    
    
    
    (23,762,597
    )
    
    
    (16,589,380
    )


2002Effect of U.S.GAAPChilean GAAP
    
    adjustments on
    
    Accumulatedcumulative
    
    cumulative
    
    Othertranslation
    
    translation
    
    Comprehensiveadjustment
    
    adjustment
    
    Income (Loss)Beginning balance
    
    
    7,173,217
    
    
    
    (23,762,597
    )
    
    
    (16,589,380
    )Credit (charge) for
the period
    
    
    9,082,747
    
    
    
    (6,540,230
    )
    
    
    2,542,517Ending balance
    
    
    16,255,964
    
    
    
    (30,302,827
    )
    
    
    (14,046,863
    )


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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States
Generally Accepted Accounting Principles,
continued:

n) Discontinued operations

In October of 2001, the FASB issued SFAS No. 144 which is effective for fiscal
years beginning after December 15, 2001. SFAS No. 144 establishes accounting
and reporting standards for the impairment and disposal of long-lived assets
and discontinued operations. The Company adopted SFAS No. 144 in 2002. All
prior year reporting periods have been restated to reflect the adoption. The
application of this statement resulted in the classification, and separate
financial presentation of certain entities as discontinued operations, the
results of which are not included in continuing operations. There was no
impairment of assets related to discontinued operations, as their fair value
exceeded their carrying value. Fair values used in these calculations has been
determined by using the estimated sales prices.

In 2002 the Company committed plans to dispose the 60% equity participation it
held in the consolidated subsidiary, Infraestructura Dos Mil S.A. It was
accounted for as discontinued operations in accordance with SFAS No. 144 and,
accordingly, amounts in reconciliation of net income to US GAAP and the
additional disclosure notes required under US GAAP for all periods shown,
reflect discontinued accounting.

The major classes of discontinued consolidated assets, consolidated liabilities
and minority interest included in the Chilean GAAP Endesa-Chile consolidated
Balance Sheet are as follows:

As of December 31,2001
    
    2002ThCh$
    
    ThCh$Assets:Cash
    
    
    543,989
    
    
    
    190,065Account receivable, net
    
    
    7,276,944
    
    
    
    14,769,412Other current assets
    
    
    2,556,811
    
    
    
    35,355,119Property, plant and
equipment, net
    
    
    177,536,030
    
    
    
    168,496,330Intangibles
    
    
    21,445
    
    
    
    34,420Other assets
    
    
    2,517,470
    
    
    
    18,055,721Total assets of
discontinued operations
    
    
    190,452,689
    
    
    
    236,901,067Liabilities:Current liabilities
    
    
    122,970,123
    
    
    
    74,178,107Long term liabilities
    
    
    2,621,183
    
    
    
    97,156,269Income taxes payable
(including deferred)
    
    
    536,942
    
    
    
    835,078Minority interest
    
    
    734,927
    
    
    
    729,136Total liabilities and
minority interest of
discontinued operations
    
    
    126,863,175
    
    
    
    172,898,590


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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

The major classes of consolidated revenues and expenses included in the Chilean
GAAP Endesa-Chile consolidated Income Statement are as follows:

Years Ended December 31,2000
    
    2001
    
    2002ThCh$
    
    ThCh$
    
    ThCh$Sales
    
    
    15,081,812
    
    
    
    20,150,123
    
    
    
    20,202,007Costs of sales
    
    
    (8,689,379
    )
    
    
    (10,457,778
    )
    
    
    (9,961,732
    )Gross profit
    
    
    6,392,433
    
    
    
    9,692,345
    
    
    
    10,240,275Administrative and
selling expenses
    
    
    (985,710
    )
    
    
    (1,291,432
    )
    
    
    (1,309,638
    )Operating income
    
    
    5,406,723
    
    
    
    8,400,913
    
    
    
    8,930,637Non operating
(loss) income
    
    
    (4,836,751
    )
    
    
    (7,003,803
    )
    
    
    (7,501,002
    )Income before taxes
and minority
interest
    
    
    569,972
    
    
    
    1,397,110
    
    
    
    1,429,635Income tax
    
    
    155,745
    
    
    
    (605,137
    )
    
    
    (972,455
    )Minority interest
    
    
    (292,239
    )
    
    
    (317,798
    )
    
    
    (181,890
    )Net income for the
year
    
    
    433,478
    
    
    
    474,175
    
    
    
    275,290


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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States
Generally Accepted Accounting Principles,
continued:

o) Goodwill and intangible assets

As discussed in paragraph g), Endesa-Chile adopted SFAS 142, which requires
companies to stop amortizing goodwill and certain intangible assets with an
indefinite useful life. Instead, FAS 142 requires that goodwill and intangible
assets deemed to have an indefinite useful life be reviewed for impairment upon
adoption of SFAS 142, effective January 1, 2002 and annually thereafter. Under
SFAS 142, goodwill impairment is deemed to exist if the net book value of a
reporting unit exceeds its estimated fair value. The Companys reporting units
are at the operating subsidiary level. Impairment is recorded based on an
estimate of future discounted cash flows, as compared to current carrying
amounts.

In 2002 Endesa-Chile has recognized an impairment of goodwill under US GAAP of
ThCh$131,751,926 net of tax of ThCh$0 and net of minority interest of
ThCh$7,686,450. In calculating the impairment charge, the fair value of the
impaired reporting units underlying the segments were estimated using
discounted cash flow methodology. The goodwill impairment of ThCh$139,438,376
is associated entirely with goodwill associated with investments in Argentina
and Brazil. The impairment reflects the decline in the Companys revenues and
forecasted cash flows in their Argentina and Brazilian subsidiaries and the
increase in inflation and interest rates and decreasing expectations of the
currencies in Argentina and Brazil.

A summary of the changes in the Companys goodwill under U.S. GAAP during the
year ended December 31, 2002, by country of operation is as follows:

Goodwill under U.S. GAAPCumulativeTranslation
    
    
    
    
    
    December 31,January 1, 2002
    
    Acquisitions
    
    Adjustment
    
    Impairment
    
    2002ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$
    
    ThCh$Chile
    
    
    1,488,196
    
    
    
    3,271,309
    
    
    
    
    
    
    
    
    
    
    
    4,759,505Argentina
    
    
    35,571,640
    
    
    
    
    
    
    
    2,329,992
    
    
    
    (37,901,632
    )
    
    
    Brazil
    
    
    95,294,807
    
    
    
    
    
    
    
    6,241,937
    
    
    
    (101,536,744
    )
    
    
    Peru
    
    
    19,962,227
    
    
    
    
    
    
    
    1,307,449
    
    
    
    
    
    
    
    21,269,676Colombia
    
    
    27,174,022
    
    
    
    
    
    
    
    1,779,344
    
    
    
    
    
    
    
    28,953,366Total
    
    
    179,490,892
    
    
    
    3,271,309
    
    
    
    11,658,722
    
    
    
    (139,438,376
    )
    
    
    54,982,547


The Companys intangible assets were ThCh$ 30,585,405 and ThCh$ 32,010,352 and
related accumulated amortization were ThCh$ 4,461,821 and ThCh$ 5,349,240 as of
December 31, 2001 and 2002, respectively. There is no difference between
Chilean and U.S. GAAP in the amortization of intangible assets because all of
the Companys intangible assets are subject to amortization, since they relate
to finite contracts or concessions.

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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States
Generally Accepted Accounting Principles,
continued:

p) Recent accounting pronouncements

In January 2003 the Chilean Association of Accountants issued Technical
Bulletin No. 72, Combinación de Negocios Inversiones Permanentes y
Consolidación de Estados Financieros. This standard complements or replaces
existing accounting literature for business combinations under Chilean GAAP,
and requires all acquisitions initiated after January 1, 2003 to be accounted
for using the purchase method based on fair values of assets acquired and
liabilities assumed. In addition, in exceptional cases the pooling-of-interest
method may be used in reorganizations between related parties or for those
transactions, where there is no clear acquirer. Technical Bulletin No. 72
continues to require the amortization of goodwill, and specifies the
requirement for an impairment test. Notwithstanding any future transactions,
the adoption of Technical Bulletin No. 72 is not expected to have a significant
effect on the results of operations, financial position or cash flows of the
Company.

In June 2001 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143). This standard requires that under US GAAP
obligations associated with the retirement of tangible long-lived assets be
recorded as liabilities when those obligations are incurred, with the amount of
the liability initially measured at fair value. Upon initially recognizing a
liability for an asset retirement obligation, an entity must capitalize the
cost by recognizing an increase in the carrying amount of the related
long-lived asset. Over time, this liability is accreted to its present value,
and the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
The Company is required to adopt SFAS No. 143 effective January 1, 2003. The
Company expects that the adoption of this statement will not result in a
difference between Chilean GAAP and US GAAP in future periods, however the
Company is still assessing the impact.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). SFAS No.
146 requires that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred, not when it is planned. The Company is required to
adopt the provisions of SFAS No. 146 for exit or
disposal activities that are initiated after December 31, 2002 and does not
expect the adoption to have a material impact on the Companys results of
operations or financial position.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities-an interpretation of ARB 51, to expand upon and
strengthen existing accounting guidance that addresses when a company should
include in its financial statements the assets, liabilities and activities of
another entity. Many variable interest entities have commonly been referred to
as special-purpose entities or off-balance sheet structures, but the guidance
applies to a larger population of entities. In general, a variable interest
entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with
voting rights or (b) has equity investors that do not provide sufficient
financial resources for the entity to support its activities. The Company must
apply Interpretation No. 46 immediately to variable interest entities created
after January 31, 2003 and apply it to existing variable interest entities in
the first fiscal year or interim period beginning after June 15, 2003. The
Company does not expect the interpretation to have a material impact on the
Companys results of operation or financial position.

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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). The Interpretation will
significantly change current practice in the accounting for, and disclosure of,
guarantees. In general, the Interpretation applies to contracts or
indemnification agreements that contingently require the guarantor to make
payments to the guaranteed party based on changes in an underlying that is
related to an asset, liability, or an equity security of the guaranteed party.
Guarantees meeting the characteristics described in the Interpretation, are
required to be initially recorded at fair value, which is different from the
general current practice of recording a liability only when a loss is probable
and reasonably estimable, as those terms are defined in FASB Statement No. 5,
Accounting for Contingencies. The Interpretation also requires a guarantor to
make significant new disclosures for virtually all guarantees even when the
likelihood of the guarantors having to make payments under the guarantee is
remote. The Interpretations disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. The Interpretations initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002, irrespective of the guarantors fiscal
year-end. The Company has implemented FIN 45 during December 31, 2002, noting
no adjustments to US GAAP were necessary as the fair values of all direct and
indirect guarantees were zero, see Note 28 for a detail of the Companys
guarantees.

On January 23, 2003, the FASB 95 Emerging Issues Taskforce issued Issue 00-21
Issue Revenue Arrangements with Multiple Deliverables. This Issue addresses
certain aspects of the accounting by a vendor for arrangements under which it
will perform multiple revenue-generating activities. Specifically, this Issue
addresses how to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting. The Issue requires,
that revenue arrangements with multiple deliverables should be divided into
separate units of accounting if the deliverables in the arrangement meet
certain
criteria, arrangement consideration should be allocated among the separate
units of accounting based on their relative fair values, and applicable revenue
recognition criteria should be considered separately for separate units of
accounting. The guidance in this Issue is effective for revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. Alternatively,
entities may elect to report the change in accounting as a cumulative-effect
adjustment. The Company is currently assessing the impact of adopting this new
guidance.

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Endesa-Chile S.A. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
Translation of financial statements originally issued in Spanish
(Restated for general price-level changes and expressed in thousands of constant
Chilean pesos as of December 31, 2002, except as stated)

34. Differences between Chilean and United States
Generally Accepted Accounting Principles,
continued:

q) Investments in related companies

The following tables show combined summarized financial information of the
related companies accounted for using the equity method. All amounts are in
thousands of constant Chilean pesos of December 31, 2002 purchasing power.

The condensed information shown here has been combined from Cía. de
Interconexión Energética S.A., Compania de Energía del Mercosur S.A., Gas
Atacama Generación Ltda., Gasoducto Atacama Argentina Ltda. and Gasoducto
Atacama Chile Ltda. individual financial statements prepared in accordance with
Chilean GAAP. For the overall effect on the financial statements of
Endesa-Chile of the application of U.S. GAAP to the financial statements of
these companies, see paragraph (u) above.

2002ThCh$Current assets
    
    
    154,551,801Non-current assets
    
    
    935,515,175Total assets
    
    
    1,090,066,976Current liabilities
    
    
    138,742,653Non-current liabilities
    
    
    637,437,639Total liabilities
    
    
    776,180,292Net sales
    
    
    267,811,501Gross profit
    
    
    72,830,446Net income (loss)
    
    
    14,291,172Endesa-Chiles participation in net income
    
    
    6,511,576


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Item 19. Exhibits

Exhibit
    
    Description1.1
    
    By-laws (Estatutos) of Empresa Nacional de Electricidad S.A., as amended
(incorporated by reference to Empresa Nacional de Electricidad S.A. Annual
Report on Form 20-F for the year ended December 31, 2001 filed with the
Securities and Exchange Commission on July 1, 2002)1.2
    
    By-laws (Estatutos) of Empresa Nacional de Electricidad S.A., as amended
(English translation) (incorporated by reference to Empresa Nacional de
Electricidad S.A. Annual Report on Form 20-F for the year ended December 31,
2001 filed with the Securities and Exchange Commission on July 1, 2002)4.1
    
    Credit Agreement among Endesa-Chile, Banco Bilbao Vizcaya Argentaria, S.A.,
Citigroup Global Markets Inc., Dresdner Kleinwort Wasserstein Securities LLC,
Santander Central Hispano Investment Securities Inc., various lenders and
Citibank N.A., as administrative agent, dated May 12, 2003 (incorporated by
reference to Empresa Nacional de Electricidad S.A. Annual Report on Form 20-F
for the year ended December 31, 2002 filed with the Securities and Exchange
Commission on June 30, 2003)8.1
    
    List of Subsidiaries (incorporated by reference to Empresa Nacional de
Electricidad S.A. Annual Report on Form 20-F for the year ended December 31,
2002 filed with the Securities and Exchange Commission on June 30, 2003)99.1
    
    Section 302 Certification of the Chief Executive Officer.99.2
    
    Section 302 Certification of Chief Financial Officer.99.3
    
    Section 906 Certifications of Chief Executive Officer and Chief Financial Officer


We will furnish to the Securities and Exchange Commission, upon request,
copies of any unfiled instruments that define the rights of holders of
long-term debt of Empresa Nacional de Electricidad S.A.



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SIGNATURES

The registrant certifies that it meets all of the requirements for filing
on Form 20-F/A and that it has duly caused and authorized the undersigned to
sign this amendment to the 2002 annual report on its behalf.

EMPRESA NACIONAL DE ELECTRICIDAD S.A.By:
    
    /s/ Hector LópezName:
    
    Hector LópezTitle:
    
    Chief Executive Officer


Date: February 25, 2004